EXHIBIT 10.01
ANTI-CONTRABAND AND ANTI-COUNTERFEIT AGREEMENT AND GENERAL RELEASE
dated as of
July 9, 2004
among
PHILIP MORRIS INTERNATIONAL INC.,
PHILIP MORRIS PRODUCTS INC.,
PHILIP MORRIS DUTY FREE INC., and
PHILIP MORRIS WORLD TRADE SARL
THE EUROPEAN COMMUNITY
REPRESENTED BY THE EUROPEAN COMMISSION
AND
EACH MEMBER STATE LISTED ON
THE SIGNATURE PAGES HERETO
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions..................................................3
ARTICLE 2
PHILIP MORRIS INTERNATIONAL'S SALES AND DISTRIBUTION PRACTICES
Section 2.01. EC Compliance Procedures....................................11
Section 2.02. Certification of Compliance with EC
Compliance Protocols......................................11
ARTICLE 3
ANTI-CONTRABAND AND ANTI-COUNTERFEIT INITIATIVES
Section 3.01. Anti-Contraband and Anti-Counterfeit Initiatives............13
Section 3.02. Support for Anti-Contraband and
Anti-Counterfeit Initiatives..............................13
ARTICLE 4
ANTI-CONTRABAND AND ANTI-COUNTERFEIT COOPERATION
Section 4.01. Contraband and Counterfeit Seizures.........................14
ARTICLE 5
TRACKING AND TRACING
Section 5.01. Tracking and Tracing Protocols..............................22
Section 5.02. Certification of Compliance with Tracking
and Tracing Protocols.....................................23
ARTICLE 6
REVIEW OF AGREEMENT
Section 6.01. Annual Meetings.............................................23
ARTICLE 7
FULFILLMENT OF OBLIGATIONS AND OBJECTIVES
Section 7.01. Promotion of Public Policy..................................23
Section 7.02. Respect for Obligations.....................................23
Section 7.03. Agreement Consistent with EC and Applicable National Laws...24
Section 7.04. The Parties' Intentions.....................................24
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.01. Mutual Representations......................................24
ARTICLE 9
RELEASE AND DISMISSAL OF CLAIMS
Section 9.01. Release.....................................................25
Section 9.02. Dismissal Of Claims.........................................26
ARTICLE 10
SETOFF
Section 10.01. Right of Setoff............................................26
Section 10.02. No Other Effect............................................29
ARTICLE 11
TERMINATION
Section 11.01. Termination................................................30
Section 11.02. Subsequent Agreement.......................................31
ARTICLE 12
DISPUTE RESOLUTION
Section 12.01. The Role of the European Court of First Instance
and the European Court of Justice........................31
Section 12.02. Dispute Resolution for Claims Brought
Under the Terms of the Agreement.........................34
ARTICLE 13
MISCELLANEOUS
Section 13.01 . Notices...................................................35
Section 13.02 . Waivers...................................................35
Section 13.03 . Expenses..................................................35
Section 13.04 . Nature of Payments........................................35
Section 13.05 . Successors and Assigns....................................35
Section 13.06 . Legality and Severability.................................36
Section 13.07 . Counterparts; Effectiveness; Third Party
Beneficiaries...........................................36
Section 13.08 . Entire Agreement..........................................36
Section 13.09 . Captions..................................................37
Section 13.10 . Designated EC Representative..............................37
Section 13.11 . Amendments................................................37
Section 13.12 . Authorship................................................37
Section 13.13 . Use of Information Provided by Philip Morris
International...........................................37
Section 13.14 . Equal Treatment Provision.................................37
Section 13.15 . Additional Participating Member States....................38
Section 13.16 . Use of the Agreement......................................38
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Attachments, Exhibits & Schedules
Appendix A Fiscal Compliance Policy
Appendix B EC Compliance Protocols
Appendix C Philip Morris International's Monetary Contributions
Appendix D Tracking and Tracing Protocols
Appendix E Schedule of Applicable Taxes and Duties
Appendix F Factors for Establishing Counterfeit Philip Morris Cigarettes
Appendix G List of Designated States
Appendix H Form of Dismissals
Appendix I List of Philip Morris Trademarks
Appendix J List of Arbitrators
Appendix K Amendments to the Baseline Amount and Article 4
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ANTI-CONTRABAND AND ANTI-COUNTERFEIT
AGREEMENT AND GENERAL RELEASE
This Anti-Contraband and Anti-Counterfeit Agreement and General Release
dated as of July 9, 2004, (this "Agreement") is made by and among the European
Community (the "EC") represented by the European Commission, the Member States
of the EC that have executed a copy of this Agreement and become parties hereto
(the "Participating Member States", and together with the EC, "the Relevant
Administrations") and Philip Morris International Inc., Philip Morris Products
Inc., Philip Morris Duty Free Inc. and Philip Morris World Trade SARL
(collectively with the Relevant Administrations, "the Parties").
W I T N E S S E T H :
(1) WHEREAS, the smuggling of Cigarettes, both authentic and counterfeit,
results in great economic loss and causes other various harms to the Relevant
Administrations;
(2) WHEREAS, the Relevant Administrations are fully committed to combat the
illegal introduction of both authentic and counterfeit Cigarettes into the
Territory of the Member States;
(3) WHEREAS, Philip Morris International is committed to take commercially
reasonable steps as a manufacturer of Cigarettes to promote the Parties' joint
objective that Philip Morris Cigarettes be sold, distributed, stored, and
shipped in accordance with all applicable fiscal and legal requirements, and, in
particular, sold at retail in accordance with all applicable tax and duty laws
in the intended retail market;
(4) WHEREAS, while the smuggling of certain authentic brands of Cigarettes
other than Philip Morris brands continues in significant quantities, for the
last few years the incidence of bulk quantities of Contraband Philip Morris
Cigarettes in the Member States has been greatly reduced, and during the same
time period, there has been an increase in Cigarette counterfeiting activity
such that currently, there is a growing threat to the Relevant Administrations'
finances from the illegal importation and introduction of Counterfeit Philip
Morris Cigarettes;
(5) WHEREAS, the Member States and Philip Morris International have a
mutual interest in (1) eliminating the illegal importation, distribution and
sale of Cigarettes and any related illegal activity, (2) ensuring the collection
of applicable taxes and duties on Cigarettes sold or distributed in the
Territory of the Member States, including, without limitation, those that will
be remitted wholly or in part to the EC by the Member States, (3) protecting
lawful competition in the sale of Cigarettes, (4) protecting the Trademark
rights of legitimate Cigarette
manufacturers, and (5) preventing citizens of the Member States from being
misled about the source and quality of the Cigarettes they purchase; and whereas
the EC has an interest in the foregoing insofar as they affect the interests of
the EC and the achievement of the EC's objectives;
(6) WHEREAS, by virtue of Article 3 and Article 23 of the EC Treaty, the EC
is competent for matters relating to customs duties on the import and export of
goods in Member States, and by virtue of Part 5, Title II of the EC Treaty, the
European Commission is obligated to ensure the orderly collection of the EC's
own resources;
(7) WHEREAS, combating fraud and other illegal activities affecting the
financial interests of the EC, including those resulting from the illegal
Cigarette trade within the Territory of the Member States, is an obligation of
the EC and Member States under Article 280 of the EC Treaty;
(8) WHEREAS, pursuant to Article 10 of the EC Treaty, the Member States
shall take all appropriate measures, whether general or particular, to ensure
fulfillment of the obligations arising out of the EC Treaty or resulting from
action taken by the institutions of the EC and shall facilitate achievement of
the objectives of the EC's tasks;
(9) WHEREAS, the EC and Member States, each within their respective
competences and subject to budgetary constraints, intend to continue and improve
their efforts to combat the smuggling of authentic and Counterfeit Cigarettes
and the illegal importation and introduction of said Cigarettes into the
Territory of the Member States;
(10) WHEREAS, it is in the best interest of Philip Morris International for
there to be an end to the illegal importation of Contraband and Counterfeit
Cigarettes into the Territory of the Member States and the counterfeiting of
Philip Morris Cigarettes;
(11) WHEREAS, Philip Morris International agrees to provide all reasonable
assistance, both direct and indirect, as set forth herein, to the EC and the
Member States in the fight against Contraband and Counterfeit Cigarettes,
including in part, monetary payments;
(12) WHEREAS, the EC and certain Member States commenced a civil action in
the United States District Court for the Eastern District of New York, entitled
European Community, et al. v. RJR Nabisco, et al., under Civil Action No.
01-CV-5188 (NGG), asserting various claims for damages, costs and equitable
relief, based in part on alleged sales of Philip Morris Cigarettes in the
Territory of the Member States in violation of applicable laws (such action, the
"Civil Action");
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(13) WHEREAS, the Civil Action has been dismissed by the United States
District Court (as to some of the claims with prejudice and as to others without
prejudice) and is currently the subject of an appeal (such appeal, together with
the Civil Action, the "Litigation");
(14) WHEREAS, pursuant to the mutual rights and obligations in this
Agreement, the Parties agree that it is in the public interest, will further
advance their objectives, and will facilitate the achievement of their goals to
swiftly resolve, finally and fully, in an amicable and cooperative manner
without any admission of liability, all matters between the Parties that relate
to the alleged conduct, acts or omissions that were asserted or could have been
asserted in the Litigation and any alleged Losses (as hereinafter defined)
caused by such conduct, acts, or omissions;
(15) WHEREAS, the Parties acknowledge and agree to take all appropriate
measures (1) to ensure fulfillment of their obligations under this Agreement,
(2) to facilitate the achievement of the objectives of the Agreement, and (3) to
abstain from any measures that could jeopardize the attainment of the objectives
of this Agreement;
NOW, THEREFORE, in consideration of the mutual obligations described
herein, the sufficiency of which is hereby acknowledged, the Parties, acting by
and through their authorized agents, hereby memorialize and agree as follows:
Article 1
DEFINITIONS
Section 1.01. Definitions.
The following terms, as used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other legally related
Person directly controlling, controlled by, or under common control with, such
other Person. For purposes of this definition, "control", when used with respect
to any Person, means the power to choose the Board of Directors and/or establish
the policies of such Person, whether through the ownership of voting securities
or contract, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning ascribed to it in the preamble of this
Agreement.
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"Anti-Contraband and Anti-Counterfeit Initiatives" shall have the meaning
ascribed to it in Section 3.01 of this Agreement.
"Applicant" shall have the meaning ascribed to it in the EC Compliance
Protocols, attached as Appendix B to this Agreement.
"Approved Contractor" means a Contractor approved by Philip Morris
International in accordance with the EC Compliance Protocols, attached as
Appendix B to this Agreement.
"Arbitrator(s)" shall have the meaning ascribed to it in Section 12.02(a)
of this Agreement.
"Audit Order" shall have the meaning ascribed to it in Section 2.02(d) of
this Agreement.
"Baseline Amount" means 90 million Cigarettes, which is half of the total
combined Contraband Philip Morris Cigarettes seized by the Member States who
were Member States on January 1, 2004, during the calendar years ended December
31, 2001, and December 31, 2002, but does not include seizures of less than five
Master Cases of Philip Morris Cigarettes. The Baseline Amount may be amended
pursuant to Section 4.01(s) and (t) of this Agreement.
"Blocked Contractor" means a former Approved Contractor who is no longer
authorized by Philip Morris International to conduct business relating to the
sale, distribution, storage, or shipment of Philip Morris Cigarettes in or
through the Territory of the Member States or any Designated State.
"Carton" or "Bundle" or "Outer" means a package containing 10 Packs of
Cigarettes (approximately 200 Cigarettes total) and includes all input materials
used in the assembly of such container such as cardboard, plastic wrap and tear
tapes.
"Certification of Compliance" shall have the meaning ascribed to it in
Section 2.02(a) of this Agreement.
"Cigarette" means any product that contains tobacco and is intended to be
burned or heated under ordinary conditions of use and includes, without
limitation, any "roll-your-own" tobacco which, because of its appearance, type,
packaging, or labeling is suitable for use and likely to be offered to, or
purchased by, consumers as tobacco for making cigarettes. For the purposes of
this Agreement, 0.0325 ounces of "roll-your-own" tobacco shall be considered the
equivalent of one individual Cigarette.
"Civil Action" shall have the meaning ascribed to it in the recitals of
this Agreement.
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"Compliance Order" shall have the meaning ascribed to it in Section 2.02(d)
of this Agreement.
"Contraband Cigarettes" means Cigarettes that have been imported into,
distributed in, or sold in, the Territory of a Member State, or were en route to
the Territory of a Member State for sale in that Member State, in violation of
the applicable tax, duty or other fiscal laws of that Member State or the EC,
but, for purposes of this Agreement, shall exclude Counterfeit Cigarettes.
"Contraband Philip Morris Cigarettes" means Philip Morris Cigarettes that
have been imported into, distributed in, or sold in, the Territory of a Member
State, or were en route to the Territory of a Member State for sale in that
Member State, in violation of the applicable tax, duty or other fiscal laws of
that Member State or the EC, but, for purposes of this Agreement, shall exclude
Counterfeit Philip Morris Cigarettes.
"Contractor" means a First Purchaser or any warehouser, shipper or freight
forwarder engaged by Philip Morris International in connection with the storage
or shipment of Philip Morris Cigarettes in or through the Territory of the
Member States or a Designated State.
"Counterfeit Cigarettes" means Cigarettes bearing a Trademark of a
Cigarette manufacturer that are manufactured by a third party without the
consent of that Cigarette manufacturer, but shall in no event include (i)
Cigarettes manufactured by the Trademark holder or any affiliate thereof,
regardless of the actual or intended market of distribution, (ii) Cigarettes
bearing a Trademark of a Cigarette manufacturer using tobacco either produced by
or sold by that Cigarette manufacturer, or (iii) Cigarettes bearing a Trademark
of a Cigarette manufacturer that are packaged in genuine packaging of that
Cigarette Manufacturer, including genuine cartons and packs of that Cigarette
manufacturer.
"Counterfeit Philip Morris Cigarettes" means Cigarettes bearing a Philip
Morris Trademark that are manufactured by a third party without the consent of
Philip Morris, but shall in no event include (i) Cigarettes manufactured by
Philip Morris or any affiliate thereof, regardless of the actual or intended
market of distribution, (ii) Cigarettes bearing a Trademark of Philip Morris
using tobacco either produced by or sold by Philip Morris, or (iii) Cigarettes
bearing a Trademark of Philip Morris that are packaged in genuine Philip Morris
packaging, including genuine Philip Morris cartons and packs.
"Designated State" means any state listed in the Designated State List
attached as Appendix G, which may be amended in accordance with the procedure
therein.
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"Due Diligence" means a reasonable state-of-the-art investigation conducted
by Philip Morris International before the commencement of a business
relationship with a Person relating to the sale, distribution, storage, or
shipment of Philip Morris Cigarettes in or through the Territory of the Member
States or any Designated State, as described in the EC Compliance Protocols,
attached as Appendix B to this Agreement.
"Due Diligence Information" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix B to this Agreement.
"EC" shall have the meaning ascribed to it in the preamble of this
Agreement.
"EC Compliance Protocols" shall have the meaning ascribed to it in Section
2.01 of this Agreement.
"EC Treaty" shall have the meaning ascribed to it in Section 7.03 of this
Agreement.
"Execution Date" means the later of (i) the date on which the signatures to
this Agreement of all the Relevant Administrations who are Plaintiffs in the
Litigation have been delivered to Philip Morris International; or (ii) the date
on which the signature to this Agreement of Philip Morris International has been
delivered to the EC.
"Expiration Date" means the 12th anniversary of the Execution Date.
"First Purchaser" means any Person, other than an Affiliate of Philip
Morris International, to whom Philip Morris International directly sells a
quantity of Philip Morris Cigarettes in excess of 2,500 Master Cases annually
for sale, distribution or consumption within or into the Territory of one or
more of the Member States or any Designated State, and such Person's Affiliates.
"Fiscal Compliance Coordinator" shall have the meaning ascribed to it in
the EC Compliance Protocols, attached as Appendix B to this Agreement.
"Fiscal Compliance Policy" shall have the meaning ascribed to it in Section
2.01 of this Agreement.
"Follow-up Due Diligence" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix B to this Agreement.
"Future Cooperation Agreement" shall have the meaning ascribed to it in
Section 13.14 of this Agreement.
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"Identification Markings" means codes and markings on Philip Morris
Cigarette packaging placed on that packaging by Philip Morris International or
its authorized agents, which correspond to information regarding those
Cigarettes as set forth in the Tracking and Tracing Protocols, attached as
Appendix D to this Agreement.
"Initial Participating Member States" means the Participating Member States
that have executed a copy of the Agreement on or prior to the Execution Date.
"Intended Market of Retail Sale" means the market which Philip Morris
International intends as the market of either domestic retail or duty-free
retail sale for Philip Morris Cigarettes when Philip Morris International sells
such Cigarettes to a First Purchaser.
"International Compliance Policy" shall have the meaning ascribed to it in
the EC Compliance Protocols, attached as Appendix B to this Agreement.
"Litigation" shall have the meaning ascribed to it in recitals (12) and
(13) of this Agreement.
"Losses" means the monetary and non-monetary losses and other injuries
alleged to have been sustained as a result of the sale, distribution, storage,
or shipment of Contraband Philip Morris Cigarettes before the Execution Date, or
for Subsequent Participating Member States, their respective Signature Dates,
including any and all monetary and non-monetary losses and injuries claimed or
described by the EC and the Member States in paragraphs 39 through 40 of the
Complaint dated August 3, 2001, filed in the Case entitled European Community,
et al. v. RJR Nabisco, et al., case number 01-CV-5188 (NGG) .
"Market of Interest" shall have the meaning ascribed to it in Protocol 6 of
Appendix D to this Agreement.
"Master Case" means a case containing 10,000 Cigarettes.
"Member States" means States that are members of the European Union.
"Money Laundering" means conduct in violation of 18 U.S.C. ss.ss. 1956 or
1957 or the comparable provisions under the laws of the EC or the Member States.
"New Member State" means any Member State which, having submitted to the
Council of the European Union an application for membership of the European
Union and said application having been granted and the State having acceded to
the Treaty on European Union, has joined the European Union after January 1,
2004.
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"Non-Participating Member States" means the Member States that are not a
Party to this Agreement.
"Notice of Interest" shall have the meaning ascribed to it in Protocol 6
Appendix D to of this Agreement.
"OLAF" means the Anti-Fraud Office of the European Commission or any
successor thereof.
"Pack" means a small package containing approximately 20 cigarettes and
includes all input materials used in the assembly of such container such as
cardboard, aluminum foil or metallized papers, plastic wrappings, tax stamps,
and tear tapes.
"Participating Member States" shall have the meaning ascribed to it in the
Preamble of this Agreement.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Philip Morris Cigarettes" means Cigarettes manufactured by Philip Morris
or any of its Affiliates that manufacture Cigarettes, or Cigarettes manufactured
by licensees and bearing Philip Morris Trademarks as set forth in Appendix I.
"Philip Morris" means Altria Group, Inc., f/k/a Philip Morris Companies
Inc., and all of its current and former Affiliates, direct and indirect
subsidiaries along with their direct and indirect subsidiaries, and/or any
successors thereto, as well as all current and former employees, directors,
officers, and servants, including outside attorneys.
"Philip Morris International" means Philip Morris International Inc. and
its controlled subsidiaries, including without limitation Philip Morris Products
Inc., Philip Morris Duty Free Inc. and Philip Morris World Trade SARL.
"Released Claims" shall have the meaning ascribed to it in Section 9.01(b)
of this Agreement.
"Released Persons" shall have the meaning ascribed to it in Section 9.01(a)
of this Agreement.
"Releasing Persons" shall have the meaning ascribed to it in Section
9.01(a) of this Agreement.
8
"Relevant Administrations" shall have the meaning ascribed to it in the
Preamble of this Agreement.
"Relevant Law" shall have the meaning ascribed to it in Section 13.06(a) of
this Agreement.
"Reporting System" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix B to this Agreement.
"Representatives of the Relevant Administrations" means OLAF or other
authorized representatives duly designated by the Relevant Administrations.
"Request for Termination" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix B to this Agreement.
"Retail Demand" means the estimated demand for Philip Morris Cigarettes in
a particular market to be sold at retail in that market in accordance with all
applicable tax, duty or other fiscal laws.
"Sales Plan" shall have the meaning ascribed to it in the EC Compliance
Protocols, attached as Appendix B to this Agreement.
"seizure" means a seizure from a single individual or entity (or in certain
specific instances, multiple individuals or entities if shown to be acting in
concert with one another), in a single location (or in certain specific
instances, multiple locations in close proximity if shown to be part of the same
scheme), at a single point in time, (or in certain specific instances, multiple
points in time in close proximity if shown to be part of the same scheme).
"Signature Date" means, for each Initial Participating Member State the
Execution Date and for each Subsequent Participating Member State, the date on
which that Participating Member State executed a copy of the Agreement.
"Sold by a Retailer" means (i) the sale of Cigarettes by an authorized
retailer to a customer in which all applicable Member State excise and VAT taxes
on the retail price in the location of sale have been paid or accounted for in
the sale price, or (ii) sales to a customer that has ordered 50 packs of
Cigarettes or less through the use of the Internet or other means whereby the
seller is not in the physical presence of the customer when the sale is made.
"Statement of Non-Compliance" shall have the meaning ascribed to it in
Section 2.02(b) of this Agreement.
"Subsequent Participating Member States" means the Participating Member
States that have executed a copy of the Agreement after the Execution Date.
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"Subsequent Purchaser" means any Person and such Person's Affiliates, other
than an Affiliate of Philip Morris, who acquires more than 1,000 Master Cases of
Philip Morris Cigarettes annually from sources other than Philip Morris
International.
"Sufficient Evidence" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix B to this Agreement.
"Supplemental Payments" means the payments by Philip Morris International
that are to be made, without regard to fault, in accordance with Section 4.01(f)
and 4.01(g) of this Agreement, to compensate the Relevant Administrations for
their lost taxes and duties and other costs, as well as to provide a source of
additional funding for anti-contraband enforcement, in the event of a seizure of
Contraband Philip Morris Cigarettes.
"Territory of the Member States" means the customs territory of the EC, as
defined in Article 3 of Council Regulation (EEC) No. 2913/92 establishing the
Community Customs Code, including, for the avoidance of doubt, the free zones,
free ports and duty-free areas physically situated therein as well as the Aland
Islands.
"Territory of a Non-Participating Member State" means the territory of a
Non-Participating Member State, as defined in Article 3 of Council Regulation
(EEC) No. 2913/92 establishing the Community Customs Code, including, for the
avoidance of doubt, the free zones, free ports and duty-free areas physically
situated therein.
"Territory of a Participating Member State" means the territory of a
Participating Member State, as defined in Article 3 of Council Regulation (EEC)
No. 2913/92 establishing the Community Customs Code, including, for the
avoidance of doubt, the free zones, free ports and duty-free areas physically
situated therein, as well as the Aland Islands.
"Tracking and Tracing Protocols" shall have the meaning ascribed to it in
Section 5.01 of this Agreement, and are attached as Appendix D to this
Agreement.
"Termination Order" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix B to this Agreement.
"Trademark" means a brand name (alone or in conjunction with any other
word), logo, symbol, or any other indicia of product identification.
10
"Vice President for Compliance Systems" shall have the meaning ascribed to
it in the EC Compliance Protocols, attached as Appendix B to this Agreement.
"World Wide Duty Free" means the worldwide market in which Philip Morris
Cigarettes are sold by Philip Morris International for resale to retail
consumers entitled to purchase free of domestic taxation.
Article 2
PHILIP MORRIS INTERNATIONAL'S SALES AND DISTRIBUTION PRACTICES
Section 2.01. EC Compliance Procedures.
Philip Morris International has already undertaken as a matter of company
policy to comply with the principles set forth in the Philip Morris Companies
Inc. Policy Statement on Compliance with Fiscal, Trade and Anti-Money Laundering
Laws dated September 13, 1999 (the "Fiscal Compliance Policy"), a copy of which
is attached as Appendix A to this Agreement. In addition to the provisions in
Appendix A, Philip Morris International agrees to adopt, implement, and be bound
by protocols, approved with the EC, regarding the sale, distribution, storage,
and shipment of Philip Morris Cigarettes in and through the Territory of the
Member States or any Designated State (the "EC Compliance Protocols"), which are
attached as Appendix B to this Agreement.
Section 2.02. Certification of Compliance with EC Compliance Protocols.
(a) Each year, on the anniversary of the Execution Date, Philip Morris
International shall provide the Relevant Administrations with a report, signed
by the Vice President for Compliance Systems, describing Philip Morris
International's fulfillment of the requirements of (i) the EC Compliance
Protocols, which are set forth in Appendix B of this Agreement, and (ii) the
Tracking and Tracing Protocols, which are set forth in Article 5 and Appendix D
of this Agreement (the "Certification of Compliance").
(b) If, after receipt of any Certification of Compliance, OLAF reasonably
concludes that Philip Morris International is failing to perform its obligations
under the EC Compliance Protocols or the Tracking and Tracing Protocols, it may,
but by no later than 60 days after OLAF has received the Certification of
Compliance, provide Philip Morris International with a statement clearly
describing the areas where OLAF reasonably believes that Philip Morris
International is failing to perform its obligations under the EC Compliance
Protocols or the Tracking and Tracing Protocols, OLAF's reasons for that belief,
and what measures OLAF believes Philip Morris International must take in order
11
to perform its obligations under the EC Compliance Protocols (the "Statement of
Non-Compliance").
(c) OLAF may also provide Philip Morris International with a Statement of
Non-Compliance at any other time it reasonably believes that Philip Morris
International is significantly failing to adhere to the EC Compliance Protocols
or the Tracking and Tracing Protocols and such failure could likely result in a
significant increase in the volume of Contraband Philip Morris Cigarettes.
(d) Within 30 days of receiving a Statement of Non-Compliance, under
subsections (b) or (c) above, Philip Morris International must provide OLAF with
a written response. Thereafter, authorized representatives of Philip Morris
International and the European Commission shall meet and confer and attempt to
resolve in good faith any dispute relating to the Statement of Non-Compliance.
If the dispute has not been resolved within 60 days of Philip Morris
International receiving a Statement of Non-Compliance, the European Commission
may bring the dispute before the Arbitrator in accordance with Section 12.02 of
this Agreement and may seek an order from the Arbitrator requiring Philip Morris
International to bring itself into compliance with the EC Compliance Protocols
or the Tracking and Tracing Protocols, as the case may be, (a "Compliance
Order") and/or an order requiring Philip Morris International to permit OLAF to
conduct an audit of Philip Morris International in order to determine what
Compliance Orders may be required (an "Audit Order").
(e) An Audit Order issued under this Section shall specifically require
Philip Morris International to do the following and only the following:
(i) if OLAF seeks entry into premises, allow OLAF entry to any of its
business premises or business premises of its Affiliates, for the sole
purpose of observing business operations, provided that OLAF provides
Philip Morris International with reasonable notice of where and when it
seeks to do so; and
(ii) if OLAF seeks to review documents, Philip Morris International
shall provide OLAF with specified business records created after the
Execution Date, that OLAF reasonably believes will assist in its
anti-contraband and anti-counterfeit efforts.
(f) In any proceeding brought under Section 2.02(d), the Arbitrator may
issue a Compliance Order or an Audit Order to Philip Morris International only
when it has been proven by the greater weight of the evidence that (i) Philip
Morris International has materially failed to adhere to the EC Compliance
Protocols and/or the Tracking and Tracing Protocols, (ii) such failure was
12
identified by OLAF in its Statement of Non-Compliance, and (iii) such failure
has not been adequately remedied by the time of the arbitration hearing.
Article 3
ANTI-CONTRABAND AND ANTI-COUNTERFEIT INITIATIVES
Section 3.01. Anti-Contraband and Anti-Counterfeit Initiatives.
(a) It is the policy of the EC and the Member States to vigorously combat
the introduction, sale and distribution of Contraband Cigarettes and Counterfeit
Cigarettes within or through the Territory of the Member States. Subject to
budgetary constraints, the EC intends to intensify efforts to curb the
introduction, sale and distribution of Contraband Cigarettes and Counterfeit
Cigarettes; apply appropriate equipment for monitoring and tracking the
introduction, sale, distribution, storage, and shipment of Contraband Cigarettes
and Counterfeit Cigarettes; and continue to train law-enforcement personnel in
how best to detect and seize Contraband Cigarettes and Counterfeit Cigarettes.
Section 3.02. Support for Anti-Contraband and Anti-Counterfeit
Initiatives.
(a) Recognizing that it is in the best interest of Philip Morris
International for there to be an end to the illegal importation and introduction
of Contraband Cigarettes and Counterfeit Cigarettes into the Territory of the
Member States and an end to the counterfeiting of Philip Morris Cigarettes,
Philip Morris International agrees to provide reasonable assistance, both direct
and indirect, to the EC and the Member States in the fight against Contraband
Cigarettes and Counterfeit Cigarettes, as set forth in Section 4.01, Appendix B,
Appendix C, and Appendix D. The monetary payments under this Agreement may serve
as a source of additional funding for anti-contraband and anti-counterfeit
initiatives.
(b) Subject to Article 10 of this Agreement, for any dispute relating to a
payment that has been or will be provided by Philip Morris International in
accordance with this Section 3.02 or Appendix C (Philip Morris International's
Monetary Contributions), the Parties involved in the dispute shall meet and
confer in an attempt to resolve the dispute in good faith. If the dispute has
not been resolved within 60 days of a Party receiving formal notice of such a
dispute, any Party involved in the dispute may refer the dispute to the
Arbitrator(s) in accordance with Section 12.02 of this Agreement.
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Article 4
ANTI-CONTRABAND AND ANTI-COUNTERFEIT COOPERATION
Section 4.01 . Contraband and Counterfeit Seizures.
Subject to the limitations in subsections (k)-(u) below, for seizures of
Cigarettes bearing Philip Morris Trademarks by the Member States after the
Execution Date, the Parties agree to the following procedures:
(a) Within 30 days after notification to OLAF of a seizure by a Member
State of five Master Cases or more of Cigarettes bearing Philip Morris
Trademarks, OLAF may provide Philip Morris International with a notice of
seizure, which shall include:
(i) the date, time and location of the seizure;
(ii) the brand of seized Cigarettes indicated on the packaging and, if
available, any indication of the Intended Market of Retail Sale;
(iii) the quantity of seized Cigarettes;
(iv) any Identification Markings that appear on the Master Cases or
cartons of the seized Cigarettes; and
(v) as to seizures made by the Member States outside the Territory of
the Member States, the basis of the seizing Member State's belief that the
Cigarettes seized were destined for introduction into the Territory of the
Member States.
(b) Philip Morris International shall be permitted to inspect the seized
Cigarettes in the condition they were in at the time of seizure within 30 days
after transmittal of the notice of seizure described in subsection (a) above,
and to select random samples of the seized Cigarettes for examination. The
seizing authority may also select samples which Philip Morris International must
examine.
(c) Within 30 days after the inspection of the seized Cigarettes described
in subsection (b) above, Philip Morris International shall provide a written
response to OLAF stating whether the Cigarettes are Philip Morris Cigarettes or
Counterfeit Philip Morris Cigarettes.
(d) Subject to the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a) above has been delivered reasonably in
accordance with the requirements of subsection (a) above, if the Cigarettes are
determined by Philip Morris International to be Counterfeit Philip Morris
Cigarettes, its response shall include documentation and examination results
demonstrating that conclusion. The determination as to whether Cigarettes are
14
Counterfeit Philip Morris Cigarettes or Philip Morris Cigarettes shall involve a
consideration of the factors set forth in Appendix F to this Agreement, which
shall be amended by agreement between the Parties as new technologies and
techniques are developed.
(e) Subject to the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a) above has been delivered reasonably in
accordance with the requirements of subsection (a) above, if the seized
Cigarettes are Contraband Philip Morris Cigarettes manufactured after January 1,
2004, Philip Morris International's response shall include as much information
as is available to it concerning:
(i) the place of manufacture of the seized Cigarettes;
(ii) the date of manufacture of the seized Cigarettes;
(iii) the country of intended destination for the seized Cigarettes;
(iv) any intervening warehousing and shipping;
(v) the identity of the First Purchaser of the seized Cigarettes;
(vi) the identity of any known Subsequent Purchaser of the seized
Cigarettes;
(vii) invoices to the First Purchaser that relate to the seized
Cigarettes; and
(viii) payment records from the First Purchaser for any Cigarettes
seized.
(f) Subject to the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a) above has been delivered reasonably in
accordance with the requirements of subsection (a) above, for seizures of
Contraband Philip Morris Cigarettes by an Initial Participating Member State
after the Execution Date or by a Subsequent Participating Member State after its
Signature Date, the response of Philip Morris International shall also include a
Supplemental Payment calculated as follows:
(i) Philip Morris International shall make a Supplemental Payment to
compensate the EC and the Participating Member State by which the
Cigarettes were seized for their lost taxes and duties and other costs, in
an amount equal to 100% of the taxes and duties that would have been
assessed had the seized Contraband Philip Morris Cigarettes been legally
distributed for retail sale in the Participating Member State by
15
which the Cigarettes were seized as set forth in Appendix E, which shall be
updated by the Relevant Administrations upon notice to Philip Morris
International as applicable taxes and duties change, less any amount of
taxes and duties already paid to the EC or any Member State(s) in relation
to those Contraband Philip Morris Cigarettes; and
(ii) If the Contraband Philip Morris Cigarettes seized, when added to
the number of Contraband Philip Morris Cigarettes already seized in the
same calendar year in the Member States that were Member States on January
1, 2004, results in a total number that exceeds the Baseline Amount, Philip
Morris International's Supplemental Payment shall include an additional
amount equal to four times the amount under subsection (f)(i), which shall
compensate the EC and the Participating Member State by which the
Cigarettes were seized for any costs not compensated by the amount under
subsection (f)(i) and which may provide the EC and the Participating Member
State by which the Cigarettes were seized with a source of additional
funding for anti-contraband and anti-counterfeit efforts.
(g) Subject to the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a) above has been delivered reasonably in
accordance with the requirements of subsection (a) above, for seizures of
Contraband Philip Morris Cigarettes after the Execution Date by a
Non-Participating Member State, the response of Philip Morris International
shall also include a Supplemental Payment calculated as follows:
(i) Philip Morris International shall make a Supplemental Payment to
compensate the EC for any lost taxes and duties and other costs, in an
amount equal to 100% of the taxes and duties that would have been remitted
to the EC in respect of such seized Contraband Philip Morris Cigarettes had
such Cigarettes been legally distributed for retail sale in the
Non-Participating Member State by which the Cigarettes were seized as set
forth in Appendix E, less the EC's share of any amount of taxes and duties
already paid to the EC or any Member State(s) in relation to those
Contraband Philip Morris Cigarettes, and
(ii) If the Contraband Philip Morris Cigarettes seized, when added to
the number of Contraband Philip Morris Cigarettes already seized in the
same calendar year in the Member States that were Member States on January
1, 2004, results in a total number that exceeds the Baseline Amount, Philip
Morris International's Supplemental Payment shall include an additional
amount equal to four times the amount under subsection (g)(i), which shall
compensate the EC for any costs not compensated by the amount under
subsection (g)(i) and which may
16
provide the EC with a source of additional funding for anti-contraband and
anti-counterfeit efforts.
(h) For the Supplemental Payments to be made pursuant to subsections (f)
and (g) above, it shall not be incumbent on the Relevant Administrations to
establish fault on the part of Philip Morris International and such payments, if
due, shall be made even though Philip Morris International shall have complied
in all respects with its obligations under this Agreement relating to
anti-contraband efforts and initiatives.
(i) The Parties recognize and understand that the mere fact of seizure of
Contraband Philip Morris Cigarettes at any point in the distribution chain does
not, in and of itself, automatically implicate Philip Morris International, or
the First Purchaser to whom the seized Philip Morris Cigarettes were originally
sold, as a violator of any applicable tax or duty laws.
(j) OLAF or any Participating Member State may sample and test seized
Cigarettes at any time. If OLAF disputes the determination made by Philip Morris
International as to whether the seized goods are Counterfeit Philip Morris
Cigarettes or Contraband Philip Morris Cigarettes, OLAF shall reply in writing
to Philip Morris International detailing the basis for the dispute within 60
days after receiving the response referred to in Section 4.01(c), and thereafter
Philip Morris International and OLAF shall meet and confer and attempt to
resolve the dispute in good faith. If the dispute cannot be resolved within 30
days of Philip Morris International receiving OLAF's reply, the samples in
dispute shall be submitted to an independent laboratory or facility for
examination to determine whether the Cigarettes are Counterfeit Philip Morris
Cigarettes or Contraband Philip Morris Cigarettes in accordance with the factors
set forth in Appendix F to this Agreement. The determination of the selected
independent laboratory or facility as to whether the Cigarettes are Contraband
Philip Morris Cigarettes or Counterfeit Philip Morris Cigarettes shall be final
and binding on the Parties. The costs of the laboratory or facility's services
shall be paid by the non-prevailing Party. The independent laboratory or
facility shall be designated by mutual agreement of the Parties on the Execution
Date. If a dispute arises with respect to the selection of the independent
laboratory or facility, such dispute shall be settled by the Arbitrator in
accordance with Section 12.02 of the Agreement.
(k) Notwithstanding any other provision in this Section 4.01 to the
contrary, Philip Morris International shall have no obligation to make
Supplemental Payments pursuant to subsections (f) and (g) above, and Contraband
Philip Morris Cigarettes shall not be included in the calculations to determine
the amount of any Supplemental Payment described in subsections (f) and (g)
above, where:
17
(i) the notice of seizure described in subsection (a) above has not
been delivered reasonably in accordance with the requirements of subsection
(a) above;
(ii) Philip Morris International has not been permitted to inspect the
seized Cigarettes in substantial accordance with the requirements of
subsection (b) above, or the seizing authority has determined that the
seized Cigarettes are not Contraband Philip Morris Cigarettes as evidenced
by the release of the seized Cigarettes;
(iii) the total volume of Contraband Philip Morris Cigarettes seized
in the particular seizure was less than five Master Cases of cigarettes
after exclusion of any amount excluded by the seizing authority or a court
pursuant to Article 8 of Directive 92/12 by virtue of having been acquired
in another Member State for "own use" and transported by the purchaser;
(iv) the Contraband Philip Morris Cigarettes were manufactured prior
to January 1, 2004;
(v) the Contraband Philip Morris Cigarettes were stolen by a third
party and Philip Morris International can reasonably demonstrate that such
theft has occurred;
(vi) the Contraband Philip Morris Cigarettes were seized by a Member
State outside of the Territory of the Member States and the greater weight
of the evidence demonstrates that the Cigarettes seized were not destined
for introduction into the Territory of the Member States; or
(vii) the Contraband Philip Morris Cigarettes were seized by a Member
State and Philip Morris International can reasonably demonstrate that such
Contraband Philip Morris Cigarettes were sold, distributed, stored, and
shipped in accordance with all applicable fiscal and legal requirements of
the EC and a Member State, or were Sold by a Retailer.
(l) For any dispute relating to (i) application of the provisions in
subsection (k) above, (ii) the amount, if any, of a payment to be made under
subsections (f) and (g) above, or (iii) the determination of the appropriate
Member State by which the Cigarettes were seized, the Parties involved in the
dispute shall meet and confer in an attempt to resolve the dispute in good
faith. If the dispute has not been resolved within 60 days of a Party receiving
formal notice of such a dispute, any Party involved in the dispute may refer the
dispute to the Arbitrator for settlement in accordance with the provisions of
Section 12.02 of this Agreement.
18
(m) If a Member State or the EC accepts a Supplemental Payment in regard to
a particular seizure of Philip Morris Cigarettes and later collects duties or
taxes or the monetary equivalent from Philip Morris in regard to that particular
seizure, the Member State or the EC shall promptly refund to Philip Morris
International the amount of the Supplemental Payment that had been paid equal to
the duty and taxes or the monetary equivalent collected or paid as well as any
corresponding portion of the amounts, if any, paid under subsections (f)(ii) or
(g)(ii).
(n) If a Member State or the EC accepts a Supplemental Payment in regard to
a particular seizure of Philip Morris Cigarettes and it is later found that
duties and taxes or the monetary equivalent had already been paid with regard to
that particular seizure, the Member State or the EC shall promptly refund to
Philip Morris International the amount of the Supplemental Payment that had been
paid equal to the duty and taxes or the monetary equivalent collected or paid as
well as any corresponding portion of the amounts paid, if any, under subsections
(f)(ii) or (g)(ii).
(o) Notwithstanding any other provision in this Agreement, other than
subsections (p), (t), and (u) below, for seizures of Contraband Philip Morris
Cigarettes in a New Member State,
(i) in the first year following that New Member State's accession to
the European Union, no Supplemental Payment shall be payable by Philip
Morris International and any such seizures shall not be counted against the
Baseline Amount for the purpose of any other calculation under subsections
(f) or (g) above.
(ii) Notwithstanding subsections (iii) and (iv) below, after
adjustment of the Baseline Amount in accordance with subsection (s) below,
Supplemental Payments shall be payable by Philip Morris International under
subsections (f)(i), and/or (f)(ii) in the case of a Subsequent
Participating Member State as applicable, or, (g)(i), and/or (g)(ii) in the
case of a Non-Participating Member State as applicable, and such seizures
shall be counted against the Baseline Amount for the purpose of any other
calculation under subsections (f) or (g) above, beginning in the year
following the year in which the incidence of Contraband Cigarettes and
Counterfeit Cigarettes in that New Member State is determined to be less
than 2% of the total market for Cigarettes in that New Member State.
(iii) in each of the second, third, fourth and fifth years following
that New Member State's accession to the European Union, in the event that
a New Member State does not satisfy subsection (ii) above, a Supplemental
Payment shall be payable by Philip Morris International
19
only under subsections (f)(i) in the case of a Subsequent Participating
Member State as applicable and/or (g)(i) in the case of a Non-Participating
Member State as applicable, and only if in that year:
(A) the incidence of Contraband Cigarettes and Counterfeit
Cigarettes in that New Member State is determined to be:
(1) 12% or less (for the second year following accession);
(2) 10% or less (for the third year following accession);
(3) 7% or less (for the fourth year following accession);
(4) 5% or less (for the fifth year following accession);
of the total market for Cigarettes in that New Member State; or
(B) the incidence of Contraband Cigarettes and Counterfeit
Cigarettes in that New Member State is determined to be more than the
thresholds set forth in subsection (A) above, but the incidence of
Contraband Philip Morris Cigarettes divided by the total incidence of
Contraband Cigarettes and Counterfeit Cigarettes in that New Member
State, expressed as a percentage, is greater than 70% of (x) the total
tax-paid retail sales of Philip Morris Cigarettes divided by (y) the
total tax-paid retail Cigarette sales in that New Member State,
expressed as a percentage.
(iv) from the sixth year following a New Member State's accession to
the European Union, Supplemental Payments shall be payable by Philip Morris
International and any such seizures shall be counted against the Baseline
Amount for the purpose of any other calculation under subsections (f) or
(g) above, only if the incidence of Contraband Cigarettes and Counterfeit
Cigarettes as a percentage of the total market for Cigarettes in that New
Member State has been determined to be less than or equal to the incidence
of Contraband and Counterfeit Cigarettes in the Initial Participating
Member States as a percentage of the total market for Cigarettes in the
Initial Participating Member States, in the fifth year following the New
Member State's accession as determined pursuant to subsection (q).
20
(p) In addition to the limitations on Supplemental Payments set forth in
subsection (o) above, for the first five years following a New Member State's
accession to European Union, if Contraband Philip Morris Cigarettes are seized
in a New Member State and the amount of those Contraband Philip Morris
Cigarettes when added to the number of Contraband Philip Morris Cigarettes
already seized in the same calendar year in all the New Member States that
joined the European Union in the same year as the seizing New Member State,
results in a total number that exceeds the Baseline Amount as of January 1,
2004, Philip Morris International shall have no obligation to make Supplemental
Payments for that seizure. In relation to any New Member State that joins the
European Union after January 1, 2007, the Parties shall agree on a method for
determining how this subsection (p) shall operate.
(q) For the purposes of subsections (o) and (p) above, the incidence of
Contraband Cigarettes and Counterfeit Cigarettes in any New Member State and in
the Initial Participating Member States in accordance with subsection (o)(iv)
above shall be determined by a methodology agreed to by the Parties.
(r) If a Member State or any subdivision thereof sells or resells, or
authorizes the sale or resale of, seized Contraband Philip Morris Cigarettes no
Supplemental Payment is due in relation to such Cigarettes and, if paid, any
such Supplemental Payment shall be refunded.
(s) If a New Member State, upon or after accession to the European Union,
joins the Agreement and becomes eligible for Supplemental Payments under
subsection (f)(ii), Philip Morris International and the European Commission
shall, with regard to the factors set forth in Appendix K, meet and confer as to
when and how the Baseline Amount shall be amended or recalculated. If no
agreement is reached, the Arbitrator, pursuant to Section 12.02 of this
Agreement, shall determine the appropriate amendment to, or recalculation of,
the Baseline Amount, with due regard to the factors set forth in Appendix K. No
payments shall be made under subsection (f)(ii), however, until an amended
Baseline Amount shall have been established.
(t) If at any time, a Party asserts that there is a serious persisting
problem concerning Contraband Cigarettes or Counterfeit Cigarettes entering into
a New Member State, which could bring about serious imbalances in the
application of the Agreement, Philip Morris International and the EC shall meet
and discuss as soon as reasonably possible any appropriate measures to ensure
the continued functioning of the Agreement, including, if necessary, amendment
or suspension of Philip Morris International's obligations under Article 4 as to
that New Member State. If no agreement is reached, the Arbitrator, pursuant to
Section 12.02 of this Agreement, shall determine the appropriate amendment or
relief, with due regard to the factors set forth in Appendix K.
21
(u) If at any time, a Party asserts that there is a serious persisting
problem concerning seizures of Contraband Philip Morris Cigarettes in a
Participating Member State who was a Member State on January 1, 2004, which
could bring about serious imbalances in the application of the Agreement, Philip
Morris International and the European Community shall meet and discuss as soon
as reasonably possible any appropriate measures to insure the continuing
functioning of the Agreement, including, if necessary, amendment of Philip
Morris International's obligations under Article 4 as to that Member State. If
no agreement is reached, the Arbitrator, pursuant to Section 12.02 of this
Agreement, shall determine the appropriate amendment or relief, with due regard
to the factors set forth in Appendix K.
For purposes of this Section, it shall be presumed that a serious
persisting problem exists if Philip Morris International can reasonably
demonstrate that:
(i) For a substantial period of time, seizures in a Member State
significantly exceed the seizures by that Member State in 2003 so as to
materially deviate from the expectations of the Parties, and
(ii) More than fifty percent of the seized Cigarettes for which
Supplemental Payments are made are Cigarettes which were sold at retail and
the applicable taxes on the retail price of the Cigarettes were paid in
either a New Member State of the European Community or a non-Member State
outside the European Community.
If the increase in the incidence of Contraband Philip Morris Cigarettes in the
aforesaid Member State is substantially attributable to a failure on the part of
Philip Morris International to adhere to the terms of this Agreement, and/or its
failure to sell Cigarettes into a market consistent with legitimate Retail
Demand in that market, amendment of Article 4 obligations is not appropriate.
Article 5
TRACKING AND TRACING
Section 5.01. Tracking and Tracing Protocols.
Consistent with its Fiscal Compliance Policy and applicable packaging laws,
Philip Morris International agrees to adopt, implement, maintain and be bound by
the commercially reasonable practices and procedures with respect to the
tracking and tracing of shipments of Philip Morris Cigarettes after the
Execution Date as set forth in the "Tracking and Tracing Protocols" attached as
Appendix D.
22
Section 5.02. Certification of Compliance with Tracking and Tracing
Protocols.
(a) Each year, on the anniversary of the Execution Date, Philip Morris
International shall provide the Relevant Administrations with a report, signed
by the Vice President for Compliance Systems, describing Philip Morris
International's compliance with the requirements of the Tracking and Tracing
Protocols. Such certification shall be part of the annual Certification of
Compliance and shall be governed by the procedures set forth in Section 2.02 of
this Agreement.
Article 6
REVIEW OF AGREEMENT
Section 6.01. Annual Meetings.
At least once per year, the authorized representatives of Philip Morris
International and the European Commission shall meet to confer and assess the
functioning of the Agreement and its Protocols. At that meeting, Philip Morris
International and the European Commission may each present any suggestions they
may have to improve the functioning of the Agreement. Subject to Relevant Law,
the European Commission and Philip Morris International may communicate to each
other concerns relating to any Party's activities in connection with their
commitments and obligations under the Agreement.
Article 7
FULFILLMENT OF OBLIGATIONS AND OBJECTIVES
Section 7.01. Promotion of Public Policy.
The Parties to this Agreement hereby acknowledge and agree that this
Agreement is designed to provide meaningful assistance to the Participating
Member States and the EC in curtailing the smuggling and illegal distribution of
Cigarettes into and within the Territory of the Member States.
Section 7.02. Respect for Obligations.
The Parties hereby acknowledge and agree to take all appropriate measures:
(1) to ensure fulfillment of their obligations under this Agreement, (2) to
facilitate the achievement of the objectives of the Agreement, and (3) to
abstain from any measures that would jeopardize the attainment of the objectives
of this Agreement.
23
Section 7.03. Agreement Consistent with EC and Applicable National Laws.
The Parties to this Agreement hereby acknowledge and agree that compliance
with the terms of this Agreement is consistent with EC and applicable national
laws, and with the provisions of the Treaty Establishing the European Community
(the "EC Treaty"), and will contribute to achieving the objectives of the EC
Treaty.
Section 7.04. The Parties' Intentions.
The mutual intention of the Parties is that this Agreement will swiftly,
finally and fully resolve in an amicable and cooperative manner, without any
admission of liability, all matters in which or in respect of which the
following persons seek or might seek redress for alleged Losses: (i) the
Parties; (ii) the political subdivisions of the Participating Member States;
(iii) instrumentalities and agencies of (i) and (ii); and (iv) successors and
assignees of all of the foregoing (collectively "Resolved Matters"). The
Parties' mutual intention is that all Parties and Released Persons be relieved
of the threat of claims, actions, suits, assessments, or proceedings in any
forum against them that seeks redress for any Resolved Matters.
Article 8
REPRESENTATIONS AND WARRANTIES
Section 8.01. Mutual Representations.
(a) Each of the Relevant Administrations hereby represents and warrants to
Philip Morris International, and Philip Morris International hereby represents
and warrants to each of the Relevant Administrations that:
(i) the execution, delivery and performance of this Agreement by such
Party is within its governmental or corporate powers, as the case may be,
and has been duly authorized by all necessary action on its part;
(ii) the Person executing this Agreement on behalf of such Party has
the full right and authority to do so; and
(iii) this Agreement constitutes a valid and binding agreement of such
Party, enforceable in accordance with its terms.
24
Article 9
RELEASE AND DISMISSAL OF CLAIMS
Section 9.01 . Release.
(a) The provisions of Sections 9.01(a), (b), and (c) shall inure to the
benefit of Philip Morris (the "Released Persons") and, consistent with Relevant
Law, be binding upon each of (i) the Relevant Administrations; (ii) their
respective political subdivisions; (iii) instrumentalities and agencies of (i)
and (ii); and (iv) successors and assignees of all of the foregoing
(collectively, the "Releasing Persons"). The release provided for in this
Section 9.01 shall cover companies acquired by or merged into Philip Morris
subsequent to the Execution Date, but only if the company's aggregate EC market
share was not in excess of 2% in 2002.
(b) On the Signature Date of the Agreement for each Releasing Person, such
Releasing Person agrees to and shall, without any further action on the part of
such Releasing Person, absolutely and unconditionally fully release and forever
discharge the Released Persons, to the fullest extent permitted by law, from any
and all civil claims, charges, demands, damages, subpoenas, discovery requests,
actions, suits, causes of action, liabilities, costs, expenses and attorneys'
fees, including without limitation, all civil claims that may be allowable to
the Releasing Persons within criminal proceedings in the form of restitution,
disgorgement, forfeiture, punitive damages, or otherwise, for conduct prior to
the Signature Date wherever arising and of whatever nature, whether known or
unknown, suspected or unsuspected, accrued or unaccrued, asserted or unasserted,
foreseen or unforeseen, with respect to, that result from, arise out of, or
relate to the allegations, or the alleged acts (or omissions) forming the basis
of the allegations, that were raised or asserted, or could have been raised or
asserted, in the Litigation (collectively, the "Released Claims"), regardless of
the legal theory or purported basis of legal duty or liability on which such
Released Claims are, or could be, raised or asserted.
(c) The provisions of Sections 9.01(a), (b), and (c) (as well as the other
provisions of this Agreement) are a result of a compromise of disputed claims
and defenses, and Released Persons shall not be deemed to have admitted any of
the allegations asserted in the Litigation.
(d) On the Execution Date of the Agreement, each Released Person agrees to
and shall, without any further action on the part of such Released Person,
absolutely and unconditionally fully release and forever discharge the Releasing
Persons and their attorneys, to the fullest extent permitted by law, from any
and all civil claims, charges, demands, actions, suits, causes of action,
liabilities, costs, expenses, fees, and attorneys' fees, including without
limitation, all civil claims for compensation or monetary damages sought in
civil
25
proceedings in the form of restitution, disgorgement, forfeiture, punitive
damages, or otherwise for conduct prior to the Execution Date wherever arising
and of whatever nature, whether known or unknown, suspected or unsuspected,
accrued or unaccrued, asserted or unasserted, foreseen or unforeseen, that
result from, arise out of or relate to the Litigation, regardless of the legal
theory or purported basis of legal duty or liability on which such claims are,
or could be, asserted.
Section 9.02. Dismissal Of Claims.
The Parties shall promptly seek and obtain dismissal with prejudice and
without costs of all pending actions and/or appeals, as they relate to Philip
Morris, and to the extent that they are related to the matters at issue in the
Litigation, including any proceeding by Philip Morris International before the
European Court of First Instance or the European Court of Justice. The Parties
shall jointly submit a form of a Stipulation of Dismissal with Prejudice and
without costs to the relevant court or courts which will be substantially in the
form annexed as Appendix H to this Agreement.
Article 10
SETOFF
Section 10.01. Right of Setoff
(a) In addition to its rights and obligations under Article 7 and the
releases set forth in Article 9 of this Agreement, Philip Morris International
shall have the right to set off against any and all amounts otherwise due and
payable to the Relevant Administrations under this Agreement, the amount of any
damage, loss, liability, tax, custom duty, expense or non-criminal penalty
actually incurred, payable or suffered by Philip Morris with respect to,
resulting from, or arising out of, actions, suits, or proceedings, other than
the Litigation (whether civil proceedings, administrative proceedings, tax
proceedings, or civil claims made within criminal proceedings) brought against
Philip Morris by (i) the EC, (ii) any Member State, (iii) the political
subdivisions of any Member State; (iv) instrumentalities and agencies of (i),
(ii), and (iii); and (v) successors and assignees of all of the foregoing, which
seek redress as a result of the sale, distribution, storage, or shipment of
Contraband Philip Morris Cigarettes before the Execution Date or, for Subsequent
Participating Member States, their respective Signature Dates.
(b) Upon any Party learning of (i) the existence of any actual claim,
action, suit, or proceeding, or (ii) any threatened claim that would require
disclosure under Financial Accounting Standard Board Statement No. 5, that may
result in Philip Morris International having a right to setoff under this
Section
26
10.01, that Party shall provide each other Party, to the fullest extent
permitted by law, with prompt notice of the existence of such claim, action,
suit, or proceeding.
(c) Upon learning of the existence of (i) any actual claim, action, suit,
or proceeding, or (ii) any threatened claim that would require disclosure under
Financial Accounting Standard Board Statement No. 5, that may result in Philip
Morris International having a right to setoff under this Section 10.01, Philip
Morris International may, upon giving the EC 30 days notice, begin paying any
funds which are due to the Relevant Administrations under this Agreement into an
interest-bearing escrow account, up to the amount claimed, or if no specific
amount is claimed, the amount at issue, in such actions or proceedings, rather
than paying such funds directly to the Relevant Administrations. Payment of
funds into escrow by Philip Morris International pursuant to this subsection (c)
above shall not be deemed a breach of this Agreement.
(d) In each instance where Philip Morris International pays funds into
escrow as set forth in Section 10.01(c), Philip Morris International and the EC
shall make a good faith effort to agree as to whether utilization of the escrow
account provided for in subsection (c) above is appropriate. If they have not
agreed within 60 days after notice was provided pursuant to subsection (b)
above, the EC shall have the right to make application to the Arbitrator(s), as
described below in Section 12.02, to challenge the applicability of subsection
(c) above. In order for such a challenge to be upheld by the Arbitrator(s), the
EC must demonstrate that Philip Morris International does not have a reasonable
basis to support its belief that it is incurring, or may incur, damage, loss,
liability or expense that may be eligible for setoff pursuant to subsection (a)
above. If the Arbitrator(s) determines that Philip Morris International does not
have a reasonable basis to place the aforesaid funds into the escrow account,
the Arbitrator(s) shall order that such funds together with accrued interest be
released from the escrow account within 30 days and paid to the Relevant
Administrations pursuant to this Agreement.
(e) Before exercising any right to setoff pursuant to subsection (a) above
either by ceasing to make payments due to the Relevant Administrations or by
claiming amounts held in escrow, Philip Morris International shall provide at
least 30 days notice to the European Commission of its intention to do so. Upon
receipt of such notice, Philip Morris International and the European Commission
shall immediately make a good faith effort to agree as to whether setoff is
appropriate and, if so, what the amount of the setoff should be. If Philip
Morris International and the European Commission have not agreed within 60 days
of notice being received by the European Commission, either Party may make an
application to the Arbitrator in accordance with Section 12.02 to determine
whether a right of setoff exists pursuant to this Section 10.01. In order to
establish any right of setoff, Philip Morris International must demonstrate by
the greater weight of the evidence that (i) Philip Morris has incurred or
suffered
27
damage, loss, liability or expense that is eligible for setoff pursuant
to subsection (a) above; and (ii) the amount so incurred or suffered. This
subsection (e) does not in any way affect the rights of Philip Morris
International to pay funds into escrow in accordance with subsection (c) above.
Upon a ruling by the Arbitrator(s) that Philip Morris International has failed
to establish a right of setoff, all funds owed to the Relevant Administrations
under the terms of the Agreement that were the subject of dispute together with
accrued interest, shall promptly be paid over to the Relevant Administrations.
Upon a ruling by the Arbitrator(s) that Philip Morris International has
established a right of setoff, Philip Morris International shall be entitled to
recover such funds from escrow and/or set off against future payments in
accordance with the Arbitrator's(s') ruling.
(f) Claims in Excess of Amount Available for Setoff. If a claim, action,
suit, proceeding, assessment or demand has been made that would, if successful,
entitle Philip Morris International to exercise its right to setoff under
Article 10 and either (1) the amount of the claim, action, suit, proceeding,
assessment or demand is likely to exceed the total amount available for setoff
or escrow under Article 10, or (2) the claim, action, suit, proceeding,
assessment or demand has been brought within two years of the Execution Date and
the amount of the claim, action, suit, proceeding, assessment or demand is
likely to exceed (euro) 200 million; and, despite the good-faith and expeditious
efforts of Philip Morris to defeat the claim action, suit, proceeding,
assessment or demand, including invoking the releases provided for by this
Agreement if applicable:
(i) the claim action, suit, proceeding, assessment or demand has not
been dismissed, withdrawn, or reduced below the applicable threshold in (1)
or (2) above, within one year after the court or tribunal has received full
and complete arguments from the parties to the dispute as to whether the
claim, action, suit, proceeding, assessment or demand should be dismissed
because its assertion contravenes the provisions of this Agreement or
otherwise, or
(ii) the claim, action, suit, proceeding, assessment or demand has
been sustained by the court or tribunal after considering arguments by
Philip Morris International that the claim, action, suit, proceeding,
assessment or demand should be dismissed because its assertion contravenes
the provisions of this Agreement or otherwise, and
(iii) Philip Morris can demonstrate that, as a result of the ongoing
claim, burdens have been imposed on it or it is otherwise prejudiced by
virtue of such claim.
then (A) as to any such claim, action, suit, proceeding,
assessment or demand that is within the scope of Article 9, Philip
28
Morris International shall be discharged of its obligations to pay any
amounts payable (i) under Appendix C to the Member State that brought
the action, suit, proceeding, assessment or demand, (ii) under Article
4 of this Agreement to that Member State, and (iii) to the EC for its
share of any Supplemental Payment for seizures by that Member State.
In the event that the aforesaid claim, action, suit, proceeding,
assessment, or demand is eventually dismissed or otherwise resolved
for an amount below the applicable threshold set forth in (1) and (2)
above, Philip Morris International's obligations to the Member State
under Appendix C and to the Member State and the EC under Article 4
shall resume prospectively; and
(B) as to any such claim, action, suit, proceeding, assessment or
demand that is not within the scope of Article 9, Philip Morris
International shall be discharged of its obligations to pay (i) 50% of
the amounts payable to all the Relevant Administrations under Appendix
C, (ii) amounts payable under Article 4 of the Agreement to the Member
State that brought the claim, action, suit, proceeding, assessment or
demand, as well that Member State's share of any payments payable
under Appendix C of this Agreement; and (iii) amounts payable to the
EC for its share of any Supplemental Payments for any seizures by that
Member State. In the event that the aforesaid claim, action, suit,
proceeding, assessment or demand is eventually dismissed or otherwise
resolved for an amount below the applicable threshold set forth in (1)
and (2) above, Philip Morris International's obligations to the
Relevant Administrations under Appendix C and to the Member State and
the EC under Article 4 shall resume prospectively.
(iv) For the purposes of subsections (A) and (B) above, the term
"Member State" that brought the action, suit, proceeding, assessment or
demand shall include (i) the Member State; (ii) the political subdivisions
of that Member State; (iii) instrumentalities or agencies of (i) or (ii);
and (iv) successors and assignees of all of the foregoing.
Section 10.02. No Other Effect.
Subject to Article 11, nothing in this article shall reduce or otherwise
affect the other duties of Released Persons to any Releasing Person or the
requirements of Relevant Law, nor shall it reduce or otherwise affect the duty
of the participating Released Person's obligations under this Agreement, which
shall continue in full force and effect during and after any dispute resolution
proceedings.
29
Article 11
TERMINATION
Section 11.01. Termination.
(a) This Agreement shall terminate upon the Expiration Date unless
terminated earlier by subsections (b) through (g) of this Section.
(b) The Parties agree that pursuant to this Agreement each Party and all
Released Persons shall have adequate remedies to protect them against any claims
or demands which are (i) asserted against them in contravention of Article 9, or
(ii) subject to setoff under the provisions of Article 10. Accordingly, a Party
shall have the right to terminate this Agreement if, despite their good-faith
efforts, the Parties are unable to agree upon substitute provisions,
adjustments, or modifications to the Agreement so as to restore those remedies.
A Party shall have the right to terminate this Agreement under the circumstances
and in the manner set forth in subsections (c) through (g), inclusive, below.
(c) A Party shall have the right to terminate this Agreement if:
(i) A claim, action, suit, proceeding, assessment or demand that
would, if successful, entitle Philip Morris International to exercise its
right to setoff under Article 10 has been made by a Participating Member
State in which the sales of Philip Morris Cigarettes are equivalent to or
are more than 10 percent of the Philip Morris Cigarettes sold in the
Territory of the Member States as of January 1, 2004, and a court in that
Participating Member State, or the European Court of Justice, has issued a
final and unappealable judgment that invalidates or renders unenforceable a
material provision of Article 9 or Article 10, or there is a legislative,
executive or administrative action with the same effect in that
Participating Member State; or
(ii) Claims, actions, suits, proceedings, assessments or demands that
would, if successful, entitle Philip Morris International to exercise its
right to setoff under Article 10 have been made by Participating Member
States in which collectively the sales of Philip Morris Cigarettes are
equivalent to or are more than 10 percent of the Philip Morris Cigarettes
sold in the Territory of the Member States as of January 1, 2004, and the
European Court of Justice has, or courts in those Participating Member
States have, issued final and unappealable judgments that invalidate or
render unenforceable a material provision of Article 9 or Article 10, or
there are legislative, executive, or administrative actions with the same
effect in those Participating Member States.
30
(d) For the purposes of subsection (c) above, the term "Participating
Member State" shall include (i) the Participating Member State; (ii) the
political subdivisions of that Participating Member State; (iii)
instrumentalities or agencies of (i) or (ii); and (iv) successors and assignees
of all of the foregoing.
(e) A Party that seeks to terminate the Agreement must first submit a
notice of termination to the other Parties, setting out the basis for
termination. Such termination shall become effective 120 days from receipt of
notice unless another Party challenges the notice of termination pursuant to
Section 12.02 of this Agreement.
(f) In the event that an arbitration proceeding is invoked pursuant to
subsection (e) above, if the Arbitrator(s) determines that there is a basis for
termination, the Agreement shall terminate in its entirety unless the
precipitating cause of the termination is clearly confined in its application to
a particular Member State or particular Member States, in which case, the
Arbitrator(s) shall determine the scope of the termination in the absence of an
agreement by the remaining Parties.
(g) If the Agreement is terminated before the Expiration Date in accordance
with the provisions set forth above in subsection (c), a new agreement shall
take its place without any further action being necessary by the Parties, such
agreement remaining in effect until the Expiration Date, consisting of (1) the
Parties' rights and obligations under Articles 7, 9 and 12 of this Agreement,
(2) the Parties' rights and obligations in effect on the date of termination of
the Agreement under Article 2 and Appendix B of this Agreement, and (3) the
Parties' rights and obligations in effect on the date of termination of the
Agreement under Article 5 and Appendix D of this Agreement. All other provisions
of the Agreement shall be terminated.
Section 11.02. Subsequent Agreement.
It is the intention of the Parties, if feasible, to extend the duration of
this Agreement beyond the Expiration Date. Accordingly, beginning no later than
two years prior to the Expiration Date, if this Agreement has not been
terminated earlier in accordance with its terms, the representatives of the
Parties shall meet and attempt in good faith to reach another agreement between
the Parties covering the same subject matter addressed herein.
Article 12
DISPUTE RESOLUTION
Section 12.01. The Role of the European Court of First Instance and the
European Court of Justice.
31
(a) Arbitration Clause for Articles 7 and 9. In the absence of prior
agreement, any claim, action, suit, proceeding or dispute between the Parties,
between a Party and a Released Person or a Releasing Person, or between a
Released Person and a Releasing Person, arising out of or relating to any
breach, clarification or enforcement of Article 7 or 9 of this Agreement
relating to the sale, distribution, storage or shipment of Contraband Cigarettes
before the Execution Date or, for Subsequent Participating Member States, their
respective Signature Dates, shall be brought exclusively before the European
Court of First Instance pursuant to Article 238 of the EC Treaty. Each of the
Parties hereby agrees, on its behalf and on behalf of the Released Persons or
the Releasing Persons (as the case may be), that this Section 12.01 constitutes
and is intended to be an arbitration clause for the purposes of Article 238 of
the EC Treaty, and irrevocably consents to the jurisdiction of the European
Court of First Instance in relation to any such dispute, and irrevocably waives,
to the fullest extent permitted by law, any objection that it may now or
hereafter have to the reference of such dispute to the European Court of First
Instance or that any such dispute has been brought in an inconvenient forum.
Process in any proceeding brought before the European Court of First Instance
pursuant to Article 238 of the EC Treaty may be served on any Party anywhere in
the world, whether within or without the jurisdiction of the European Court of
First Instance. The applicable law to interpret this Agreement shall be the law
of the State of New York, without giving effect to choice of law or conflict of
law doctrine. The European Court of First Instance shall in its determination of
any dispute concerning this Agreement, have regard to, inter alia, its own case
law, and that of the European Court of Justice, on the interpretation of the EC
Treaty and EC Law.
(b) Referral of matters to the European Court of First Instance or the
European Court of Justice. In the event that a claim, suit, action, assessment,
proceeding or demand (in this Section 12.01(b) hereinafter, "claim") is brought
against Philip Morris relating to the sale, distribution, storage, or shipment
of Contraband Cigarettes before the Execution Date before any court or tribunal
of the Member States (including the courts and tribunals of political
subdivisions of the Member States) the Parties agree to follow the following
procedures:
(i) the European Commission may be given notice of the claim by Philip
Morris International;
(ii) As soon as reasonably possible after receiving notice of the
claim, the European Commission agrees to: (a) consider whether the claim is
within the scope of the Arbitration clause of Section 12.01(a) of this
Agreement; (b) if it considers this to be the case, prepare a statement of
position in admissible form that the claim concerns, in whole or in part, a
matter covered by and subject to this Agreement and to the Arbitration
clause in Section 12.01(a) and that the Agreement provides that disputes
regarding the application of Articles 7 and 9 of this Agreement to such
32
claims should be brought exclusively before the Court of First Instance
pursuant to Article 238 of the EC Treaty, the Agreement provides that if
such claims are brought before any court or tribunal of the Member States
(including a court or tribunal of the political subdivisions of the Member
States), such proceeding should be suspended and referred or transferred to
the European Court of First Instance pursuant to Article 238 of the EC
Treaty, and the Agreement provides that to the extent that any Party is
prevented from so transferring, all questions concerning the interpretation
of any provision of Community Law that is necessary to enable such court to
give judgment, be referred to the European Court of Justice under Article
234 of the EC Treaty and (c) provide said statement of position to all
relevant Parties for use by any Party in a motion filed pursuant to Section
12.01(a) and, submit it to the competent authority of the Relevant Member
State with a request that it be submitted to the appropriate court;
(iii) If the European Commission concludes that a claim, is not a
matter covered by and subject to this Agreement or is not one to which the
Arbitration clause of Section 12.01(a) applies, and any Party disagrees
with that conclusion, or the European Commission does not render the
aforesaid statement of position within sixty (60) days of the notice set
forth herein, any Party may demand Arbitration pursuant to Section 12.02 of
this Agreement. If the Arbitrators rule that the claim is within the scope
of the Arbitration clause of Section 12.01(a), the European Commission
agrees to (a) prepare a statement in admissible form that states that (i)
the Arbitrator(s) have ruled that the claim is within the scope of the
Arbitration clause of Section 12.01(a) of this Agreement, and (ii) the
Agreement provides that disputes regarding the application of Articles 7
and 9 of this Agreement to such claims should be brought exclusively before
the Court of First Instance pursuant to Article 238 of the EC Treaty, the
Agreement provides that if such disputes are brought before any court or
tribunal of the Member States (including a court or tribunal of the
political subdivisions of the Member States), such proceeding should be
suspended and referred or transferred to the European Court of First
Instance pursuant to Article 238 of the EC Treaty, and the Agreement
provides that to the extent that any Party is prevented from so
transferring, all questions concerning the interpretation of any provision
of Community Law that is necessary to enable such court to give judgment,
be referred to the European Court of Justice under Article 234 of the EC
Treaty, and (b) provide said statement to all relevant Parties for use by
any Party in a motion filed pursuant to Section 12.01(a) and, submit it to
the competent authority of the Relevant Member State with a request that it
be submitted to the appropriate court;
(iv) Subject to Relevant Law, the Participating Member States, as well
as their political subdivisions, instrumentalities, agencies,
33
successors and assigns, agree that they will not oppose a motion filed
pursuant to Section 12.01(a).
Section 12.02. Dispute Resolution for Claims Brought Under the Terms
of the Agreement.
(a) Arbitration Clause. Subject to Section 12.01, any dispute between
the Parties arising out of or relating to this Agreement or any breach,
clarification or enforcement of any provision of this Agreement or any
conduct contemplated herein shall be brought exclusively before, and
decided pursuant to the UNCITRAL Rules by the arbitrator who is at the top
of the list attached to this Agreement as Appendix J (the "Arbitrator"). If
the Arbitrator is unable to hear the Parties' dispute within 60 days of
reference, upon demand by any Party to the dispute, the
next-highest-listed-arbitrator in Appendix J shall be deemed to be the
Arbitrator for the purposes of that dispute. Should the Arbitrator be
permanently unable to hear the Parties' disputes, the next-highest-listed
arbitrator in Appendix J shall be deemed to be the Arbitrator for the
purposes of the Agreement. The Parties may add to, remove from, or reorder
the list of arbitrators in Appendix J at any time by mutual agreement in
writing.
(b) The arbitration proceedings shall be conducted in the English
language in Brussels, unless otherwise agreed by the Parties to the
dispute. Consistent with Relevant Law, and any applicable law governing
Philip Morris' disclosure obligations the arbitration proceedings shall be
confidential to the extent possible, and the Parties shall not disclose the
nature or scope of the proceedings, or any information obtained in or
arising out of the proceedings, to any third party. No amicus curiae or
"friend of the court" briefs may be filed in the proceedings. The
Arbitrator(s) shall provide the rules of the proceedings and shall issue a
written opinion stating the reasons for the relief granted. The arbitration
proceedings, and the enforcement of any arbitral order or award, or an
action to compel arbitration, shall be governed by the substantive laws of
the State of New York without regard to choice of law doctrine. The Parties
agree that the orders, decisions, and awards of the Arbitrator(s) shall be
exclusively enforceable in the New York State Supreme Court (New York
County), and any action to compel arbitration shall be commenced in New
York State Supreme Court (New York County). The Party seeking to compel
arbitration, or to enforce the orders, decisions, and awards of the
Arbitrator(s), shall, at the time of the commencement of the action or
proceeding, request assignment of the action or proceeding to the
Commercial Division, Supreme Court of the State of New York (New York
County). The final judgment of the New York State Supreme Court may be
enforced by any Party in any court possessing personal and subject matter
jurisdiction.
34
(c) Notwithstanding the foregoing, for any dispute between the Parties
involving Article 3, Section 4.01(t) and (u), Article 11, Section 12.01(b),
and any dispute involving Article 10 where the amount in dispute exceeds 20
percent of the "Base Payment" in Appendix C, any Party shall, upon request,
have the right to have the dispute settled by a three-person arbitration
panel with the Arbitrator acting as chairperson and one arbitrator to be
selected by the Philip Morris International Party or Parties to the dispute
and one arbitrator to be selected by the Relevant Administration Party or
Parties to the dispute.
Article 13
MISCELLANEOUS
Section 13.01. Notices.
All notices, requests and other communications to any Party hereunder shall
be in writing (including facsimile transmission) and shall be given to the
Director of OLAF and the General Counsel of Philip Morris International.
Section 13.02. Waivers.
No provision of this Agreement may be waived unless such waiver is in
writing and is signed by the Party against whom the waiver is to be effective.
Section 13.03. Expenses.
All costs and expenses incurred in connection with this Agreement or the
Litigation shall be paid by the Party incurring such cost or expense.
Section 13.04. Nature of Payments.
The Parties agree that no part of any of the payments made pursuant to this
Agreement is being paid as (or in settlement of actual or potential claims for)
fines or penalties, civil or criminal, or enhanced, multiple or punitive damage
awards. Nor does any part of such payments represent the cost of a tangible or
intangible asset or other future benefit.
Section 13.05. Successors and Assigns.
Except as provided for in Section 9.01(a) of this Agreement, the provisions
of this Agreement, including the obligations set forth herein, shall be binding
upon and inure to the benefit of the Parties hereto and their respective
successors and assigns.
35
Section 13.06. Legality and Severability.
(a) All obligations under this Agreement are subject to the relevant laws,
statutes, ordinances, rules, regulations or other provisions having the force or
effect of law of the EC and/or any Member State, which are in effect in each
Member State as of its Signature Date, or are enacted or amended by the EC or a
Member State after its Signature Date ("Relevant Law"), and without prejudice to
the rights of the Parties under Article 11, the Parties agree that to the extent
that any obligation of any Party under this Agreement would violate Relevant
Law, the Party shall be excused from performing such obligation only to the
extent that performance would violate such law and shall not incur any liability
as a result thereof.
(b) Without prejudice to the rights of the Parties under Article 11, in the
event that any provision of this Agreement, or the application thereof, becomes
or is declared by a court or tribunal of competent jurisdiction to be illegal,
void or unenforceable, or there is a legislative, executive or administrative
action with the same effect in a Participating Member State, the remainder of
this Agreement shall continue in full force and effect and the application of
such provision to other Persons or circumstances shall be interpreted so as to
reasonably effectuate the intent of the Parties hereto. The Parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
intent and purpose of such void or unenforceable provision.
Section 13.07. Counterparts; Effectiveness; Third Party Beneficiaries.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective on
the Execution Date. No provision of this Agreement is intended to confer upon
any Person other than the Parties and the Persons identified in Article 9 any
rights or remedies hereunder.
Section 13.08. Entire Agreement.
This Agreement, including the Appendixes, constitutes the entire agreement
between the Parties with respect to the subject matter hereof and supersedes all
prior drafts of this Agreement and any prior understandings reached between the
Parties during negotiation of this Agreement, whether oral or written.
Notwithstanding the foregoing, each of the Parties may rely upon express
representations made in any letter from another Party or their counsel provided
at or near the Execution Date or any Signature Date relating to the Agreement.
36
Section 13.09. Captions.
The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
Section 13.10. Designated EC Representative.
The EC hereby appoints the Director of OLAF as its designated
representative for communications with Philip Morris International relating to
the administration of this Agreement. The designated representative is hereby
given authority by the EC to act on its behalf for the purposes of this
Agreement, including without limitation, giving and receiving notices and
inquiries, and reviewing and approving any documentation or protocols required
to be reviewed or approved under this Agreement.
Section 13.11. Amendments.
Any provision of this Agreement may be amended but only if such amendment
is in writing and is signed by each Party to this Agreement.
Section 13.12. Authorship.
No one Party or group of Parties shall be considered to have been the
author of this Agreement.
Section 13.13. Use of Information Provided by Philip Morris International.
Any information provided to the Relevant Administrations or OLAF pursuant
to the Agreement shall be used only for the purposes of promoting the Parties'
joint objective of combating Cigarette smuggling, Cigarette counterfeiting and
any related Money Laundering. In no case shall any such information be used or
provided to third parties for any other purpose without prior written consent by
Philip Morris International, unless the Relevant Administration is compelled to
disclose the information by judicial or administrative process or by other
requirements of law.
Section 13.14. Equal Treatment Provision.
If, at any time during the operation of this Agreement, the EC enters into
an agreement with another Cigarette manufacturer relating to the same
subject-matter as this Agreement ("Future Cooperation Agreement") on terms
(after due consideration of relevant differences in volume of Cigarettes or
other appropriate factors) more favorable to such Cigarette manufacturer than
the terms of this Agreement, then Philip Morris International may request of the
EC that it receive treatment under this Agreement at least as relatively
favorable as the overall terms
37
provided to the other Cigarette manufacturer. The EC will act in good faith to
consider any such request and may grant such a request if it is consistent with
the intent of this Agreement.
Section 13.15. Additional Participating Member States.
Any Member State may become a Participating Member State by executing a
copy of this Agreement in the appropriate form and delivering a counterpart
thereof to Philip Morris International and the other Parties thereto.
Section 13.16. Use of the Agreement.
This Agreement may be admitted into evidence, without the consent of the
Parties (i) in any proceeding for the purposes of enforcing the terms hereof, or
(ii) if the contemplated use of said document would not be contrary to the
intent of this Agreement, in support of any claim or defense any Party may wish
to raise in any proceeding brought against it. Otherwise, the Agreement may not
be admitted into evidence in any proceeding without the consent of the Parties.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first written above.
38
Philip Morris International Inc.,
Philip Morris Products Inc.,
Philip Morris Duty Free Inc., and
Philip Morris World Trade SARL
By:
-------------------------------------
Andre Calantzopoulos
European Community
The European Commission hereby executes this Agreement on behalf of the European
Community and has the full right and authority to do so;
The execution and performance of this Agreement by the European Commission is
within its powers and has been duly authorized by all necessary action on its
part;
This Agreement constitutes a valid and binding Agreement of the European
Community and is enforceable in accordance with its terms.
- ------------------------------ -----------------------------
Michel Petite Franz-Hermann Bruner
Director General Director General
Legal Service European Anti-Fraud Office
European Commission European Commission
Date:
------------------------
Kingdom of Belgium
The Minister of Finance of the Kingdom of Belgium hereby executes this Agreement
on behalf of the Kingdom of Belgium and has the full right and authority to do
so;
The execution and performance of this Agreement by the Ministry of Finance
of the Kingdom of Belgium is within its governmental powers and has been duly
authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Kingdom of
Belgium and is enforceable in accordance with its terms.
Minister of Finance of the
Kingdom of Belgium
--------------------------
Date:
-----------------------
Republic of Finland
The Minister of Finance of the Republic of Finland hereby executes this
Agreement on behalf of the Republic of Finland and has the full right and
authority to do so;
The execution and performance of this Agreement by the Ministry of Finance of
the Republic of Finland is within its governmental powers and has been duly
authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Republic of
Finland and is enforceable in accordance with its terms.
Minister of Finance of the
Republic of Finland
---------------------------------
Date:
------------------------
French Republic
The Ministry of the Economy, Finance and Industry of the French Republic hereby
executes this Agreement on behalf of the French Republic and has the full right
and authority to do so;
The execution and performance of this Agreement by the Ministry of the Economy,
Finance and Industry of the French Republic is within its governmental powers
and has been duly authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the French
Republic and is enforceable in accordance with its terms.
On behalf of the
Minister of Economy,
Finance and Industry
of the French Republic
--------------------------------
Date:
-----------------------
Federal Republic of Germany
The Ministry of Finance of the Federal Republic of Germany hereby executes this
Agreement on behalf of the Federal Republic of Germany and has the full right
and authority to do so;
The execution and performance of this Agreement by the Ministry of Finance of
the Federal Republic of Germany is within its governmental powers and has been
duly authorised by all necessary action on its part.
This Agreement constitutes a valid and binding Agreement of the Federal Republic
of Germany and is enforceable in accordance with its terms.
On behalf of the Ministry of Finance
of the Federal Republic of Germany
----------------------------
Date:
----------------------
Republic of Greece
The Minister of the Economy and Finance of the Republic of Greece hereby
executes this Agreement on behalf of the Republic of Greece and has the full
right and authority to do so;
The execution and performance of this Agreement by the Ministry of the Economy
and Finance of the Republic of Greece is within its governmental powers and has
been duly authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Republic of
Greece and is enforceable in accordance with its terms.
Minister of the Economy and Finance
for the Republic of Greece
----------------------------
Date:
----------------------
Italian Republic
The Minister of Economy and Finance of the Italian Republic hereby executes this
Agreement on behalf of the Italian Republic and has the full right and authority
to do so;
The execution and performance of this Agreement by the Ministry of Economy and
Finance of the Italian Republic is within its governmental powers and has been
duly authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Italian Republic
and is enforceable in accordance with its terms.
Minister of Economy and Finance
of the Italian Republic
----------------------------------
Date:
----------------------
Grand-Duchy of Luxembourg
The Minister of Finance of the Grand-Duchy of Luxembourg hereby executes this
Agreement on behalf of the Grand-Duchy of Luxembourg and has the full right and
authority to do so;
The execution and performance of this Agreement by the Ministry of Finance of
the Grand-Duchy of Luxembourg, is within its governmental and administrative
powers and has been duly authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Grand-Duchy of
Luxembourg and is enforceable in accordance with its terms.
Minister of Finance of the
Grand-Duchy of Luxembourg
--------------------------------
Date:
----------------------
Kingdom of the Netherlands
The Minister of Finance of the Kingdom of the Netherlands hereby executes this
Agreement on behalf of the Kingdom of the Netherlands and has the full right and
authority to do so;
The execution and performance of this Agreement by the Ministry of Finance of
the Kingdom of the Netherlands is within its governmental powers and has been
duly authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Kingdom of the
Netherlands and is enforceable in accordance with its terms.
Minister of Finance of the
Kingdom of the Netherlands,
----------------------------------
Date:
----------------------
Portuguese Republic
The Minister of State and Finance of the Portuguese Republic hereby executes
this Agreement on behalf of the Portuguese Republic and has the full right and
authority to do so;
The execution and performance of this Agreement by the Ministry of Finance of
the Portuguese Republic is within its governmental powers and has been duly
authorised by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Portuguese
Republic and is enforceable in accordance with its terms.
Minister of State and Finance
of the Portuguese Republic
-----------------------------------
Date:
----------------------
Kingdom of Spain
The Minister of the Economy and Finance of the Kingdom of Spain hereby executes
this Agreement on behalf of the Kingdom of Spain and has the full right and
authority to do so;
The execution and performance of this Agreement by the Minister of the Economy
and Finance of the Kingdom of Spain is within its governmental powers and has
been duly authorized by all necessary action on its part;
This Agreement constitutes a valid and binding Agreement of the Kingdom of Spain
and is enforceable in accordance with its terms.
Minister of the Economy and Finance
of the Kingdom of Spain
- ---------------------------------
Date:
----------------------------
Altria Group, Inc., f/k/a Philip Morris Companies Inc., hereby warrants
that should any of its direct or indirect subsidiaries that are not already
Parties to this Agreement undertake to sell, distribute, ship or store
Cigarettes within or through the Territory of the Member States, or any
Designated State, whether directly or indirectly, Altria Group shall ensure
that such subsidiaries adhere to the terms of this Agreement. Altria Group,
Inc. also warrants that neither it, nor any of its direct or indirect
subsidiaries, shall take any action to avoid or limit the obligations of
Philip Morris International created by this Agreement. Altria Group, Inc.
hereby declares that it has the authority to make the warranties herein
concerning its said subsidiaries.
Altria Group, Inc.
By:
----------------------------------
APPENDIX A
PHILIP MORRIS COMPANIES INC.
POLICY STATEMENT ON COMPLIANCE WITH FISCAL, TRADE AND ANTI-MONEY LAUNDERING LAWS
I. Introduction
Compliance is a key business objective for each and every one of us and goes
hand in hand with the Company's financial and other goals. How we conduct our
business is as important as the financial results we achieve, and no one should
act on the false assumption that business targets are more important than legal
and ethical standards. Our business goals must be achieved within the law and
without jeopardy to our reputation for integrity or how the public perceives the
Company.
Accordingly, Philip Morris Companies Inc. is issuing this policy statement to
all of its operating companies (collectively, "the Company") in order to
standardize procedures related to fiscal, trade and anti-money laundering laws
that apply to the sale of the Company's food, beer and tobacco products.
Included within this policy statement are measures designed to guard against the
diversion of our products into illegal trade channels and against our products
being used by criminals to "launder" the proceeds of crime. This policy
therefore, concerns those laws and regulations that govern:
(i) the payment of import duties, value added tax, excise taxes and other
imposts applicable to our products;
(ii) the handling of payments which we receive from our customers;
(iii) currency reporting and recordkeeping requirements; and
(iv) trade restrictions or prohibitions.
It also includes important "know your customer" guidelines to help us meet our
goal of only doing business with firms that share our high standards of
integrity and business practices. Procedures for reporting suspicious activities
in this area are also set out below. Antitrust and competition laws are covered
by separate policies and compliance programs. As discussed below, this policy
statement reaffirms the Company's commitment to compliance with the laws that
apply to its business as well as the primary responsibility of the operating
companies to implement and continually improve their compliance programs. This
policy statement applies to all domestic and international operating companies
which engage in the sale,
distribution or licensing of any of the Company's products or which collect
payments for such products (although the application of certain laws, for
example, anti-money laundering laws and regulations, may vary among operating
companies).
II. Compliance Programs
Each operating company shall implement a compliance program to give effect to
this policy statement ("Compliance Program"). In developing its Compliance
Program, each operating company's management, working with their legal counsel,
should identify the fiscal, trade and anti-money laundering laws which are
relevant to their businesses; ensure that all appropriate personnel (including
employees in sales, credit, treasury and accounting and other employees who have
contact with customers and other independent contractors) are aware of these
laws as well as Company policy; and implement procedures including appropriate
education and training programs, designed to prevent and detect violations of
the law or Company policy.
The Legal Department of each operating company shall advise its operating
company on the development of a suitable Compliance Program, provide guidance as
to its implementation and monitor adherence to the Compliance Program. For these
purposes, the General Counsel of each operating company shall designate one or
more members of the operating company's Legal Department to act as compliance
coordinators.
III. General Standard of Conduct
As stated in the Business Conduct Policy, the Company expects a high standard of
conduct and personal integrity of all employees. The Business Conduct Policy
also states:
"Conduct that is unlawful or that violates Company policies and procedures will
not be condoned under any circumstances. This includes conduct that occurs in a
country which does not enforce a restriction or a prohibition in its own law or
in which the violation is not subject to public criticism or censure."
Further, the fact that a competitor or other company may appear to be engaged in
an illegal activity apparently without incurring any penalties does not justify
or mean that we can be involved in the same type of activity or condone the
involvement of our customers or anyone associated with the Company. The
operating companies' Compliance Programs should reflect these principles and
standards of conduct.
2
IV. Types of Laws and Procedures to be Covered
Each operating company's Compliance Program should identify the applicable laws
that govern the sales of its products, taking account of jurisdictional and
other issues. At a minimum, however, Compliance Programs should cover the
following substantive areas of law and procedures where relevant:
A. Customs and Fiscal Laws and Regulations
As a general rule, importation of the Company's products is subject to
various customs and fiscal laws and regulations. In particular, physical
importation of products into a country must usually comply with either:
(i) the regulations that specify the import duties, value added tax,
excise tax, and the like that may be payable in relation to our
products; or
(ii) the tax, bonding, or other similar regulations that govern "tax or
duty free" shipments.
Shipments of or trade in products in violation of these types of laws is
usually known as contraband, smuggling or tax evasion. Government agencies
and law enforcement bodies around the world are increasingly concerned by
the incidence of contraband as well as its reported relation in certain
countries to money laundering. The Company's policy in this context is
clear: we will not condone, facilitate, or support contraband or money
laundering and we will cooperate with governments in their efforts in
prevent illegal trade in the products that we manufacture.
B. Receipt of Payments
Criminals often transact business with the cash proceeds of crime or with
negotiable instruments that are the equivalent of cash (e.g., money orders
and travelers checks) and that have been purchased with the cash proceeds
of crime. Criminal schemes also may involve payments by third parties which
may be non-existent or "front" persons or payment in the currency of a
country other than the country in which business is transacted. Under the
laws of the United States and other countries, in certain circumstances,
dealing in criminal proceeds can itself be considered criminal conduct.
In confirmation of our long-standing practices in this area, the operating
companies' Compliance Programs which implement this policy statement should
include the following requirements:
3
(i) acceptable forms of payment are: (a) wire transfer or check, in both
cases from a bank account in the customer's name, (b) cashier's check
or bank draft, in both cases issued by a bank in the country in which
the customer is located and (c) cash, but only where the nature and
scale of a customer's business (e.g., a small retail outlet) are such
that it is not commercially feasible under local conditions for a
customer to use the forms of payment specified in (a) or (b);
(ii) all payments must be made in the same currency as the invoice;
(iii) third party payments are unacceptable;
(iv) any overpayments must be carefully scrutinized; any request to make an
overpayment or that a refund be sent to a third party must be approved
by the Chief Financial Officer and Chief Executive Officer of the
operating company or their designees; and
(v) payments for each invoice or group of invoices due should be made by a
single instrument.
Procedures of individual operating companies may allow for exceptions to
these five requirements to be made on a case-by-case basis but such
exceptions must be approved by the Chief Financial Officer and Chief
Executive Officer of the operating company or their designees. If
exceptions are permitted, the procedures must provide that they should be
granted only in exceptional circumstances and require documentation of the
reasons for granting any exception.
Moreover, each Compliance Program should include reasonable procedures to
identify payments that do not comply with this policy statement or that
merit further inquiry. Because unacceptable or suspicious payments may be
indicative of illegal activity, it is essential that in such cases
inquiries be made to determine the legitimacy of the customer and the
transaction, including the reason for the payment.
C. Currency Reporting and Recordkeeping
For fiscal control or crime prevention purposes, the United States and many
other countries have instituted various currency or other transaction
reporting and recordkeeping requirements relating to domestic and/or
international transactions. Many of these requirements are applicable only
to financial institutions and financial services businesses, but others
apply to businesses
4
generally. In general, they require customers to provide identification and
other information when conducting a transaction involving currency or cash
equivalents over a certain threshold amount (e.g., US$10,000). Each
operating company should take steps to ensure that all such requirements
continue to be observed.
D. Trade Restrictions or Prohibitions
The United Nations and European Union, Switzerland, the United States, and
a number of other jurisdictions periodically impose various export and
trade controls that restrict or prohibit dealings with certain countries,
entities and individuals. Trade restrictions take many forms and can
include:
(i) a ban on exports to a sanctioned country;
(ii) a ban on imports from or dealings in property originating in a
sanctioned country;
(iii) a ban on travel to or from a sanctioned country;
(iv) a ban on new investments in a sanctioned country; or
(v) a ban on financial transactions and dealings involving a sanctioned
country or designated individuals and entities.
The reach of these types of laws varies, but as a general rule they may
restrict the activities of citizens or residents of the sanctioning
jurisdiction, including companies that are incorporated under the laws of
the sanctioning jurisdiction, with regard to the governments, financial
institutions, firms or individuals resident in or officially identified
with the sanctioned country. At present, trade restrictions that are
relevant to consumer products companies (i.e., as opposed to restrictions
dealing with military or other technology) are in force against a number of
countries including the following: Afghanistan, Cuba, Iran, Iraq, Libya,
Myanmar (Burma), North Korea, Sudan and Yugoslavia (Serbia). Each
Compliance Program should be designed to ensure that the operating company
complies with any trade controls or sanctions that may apply to its
activities.
V. Know Your Customer Guidelines
In addition to covering applicable substantive laws, each operating company's
Compliance Program should include guidelines related to selecting and working
with its customers. The following sections highlight certain key elements that
should be included as part of such guidelines, which serve to reinforce Company
policy and compliance efforts.
5
The Company wants to do business only with firms that share our standards of
integrity and honorable business practices. Otherwise, we face the possibility
that even an arms'-length association with third parties who violate the law
might harm our reputation or place the Company or its employees in legal
difficulty. For these and other reasons, managers should carefully assess the
integrity of potential customers before entering into nay business relationship.
A. Customer Selection
In particular, before approving any new customer for any significant volume
of our products, managers should obtain sufficient information about the
customer and the customer's business to satisfy themselves that it is: (i)
an existing legal entity; (ii) creditworthy; and (iii) a reputable
enterprise engaged in a legitimate business. All such checks should be
documented and repeated periodically, including in the event of any change
in control of the customer. The frequency and extent of such checks will
vary according to factors such as the nature and extent of the
relationship, the level of purchases and the geographic areas where that
customer does business. If there are any suspicious circumstances present
or inconsistencies in information additional due diligence should be
undertaken. In any event, however, each operating company's Compliance
Program should require sufficient due diligence to confirm the bona fides
of customers.
All new customers should be advised of the Company's compliance
expectations. Thereafter, Compliance Programs should provide for periodic
reminders of Compliance policy.
Finally, each operating company should establish a procedure for
maintaining appropriate customer records which may include the following
materials:
(i) a customer approval form detailing the products which the customer is
authorized to purchase and the market of intended destination (to be
signed by a designated operating company officer);
(ii) a policy letter regarding fiscal and trade law compliance (to be sent
periodically to remind our customers of our policy);
(iii) due diligence checks (e.g., company search report, details of owners
and principal officers, bank references and other creditworthiness
checks); and
6
(iv) any inquiries from and responses to government agencies regarding the
customer or its business.
B. Sales Only to Approved Customers
Company policy is to restrict product sales to approved customers
commensurate with the legitimate market demand therefore. Accordingly,
there should be no sales to anyone other than approved customers.
Affiliates of approved customers are not themselves approved customers. Any
request to the Company by an existing customer for the supply of our
products to a third party should be handled as a request for new customer
approval.
C. Continued Awareness and Monitoring
On an ongoing basis, managers should maintain a high degree of awareness of
our customers' business practices and be alert to the possibility of
detrimental changes in a customer's business practices, as well as signs of
questionable conduct including suspicious transactions. For example, if a
press report alleges that a customer or a customer's customer is involved
in contraband trade or if a customer's orders suddenly increase
dramatically without any clear justification based on market conditions,
further inquiries may be appropriate. Any indications of possible
violations of this policy statement should be reported in accordance with
Section VII.
D. Dealings With Customers
The Company respects the commercial freedom of its customers and recognizes
that antitrust and competition laws may restrict the extent to which
control can be exercised over resale prices or other conditions under which
our customers resell our products. Consistent with these and other
principles, and in accordance with the Business Conduct Policy, employees
should neither own a substantial interest in a customer or organization
seeking to become a customer unless approved in writing by the Responsible
Officer (as defined in the Business Conduct Policy), nor become involved in
directing or managing a customer's business affairs.
Moreover, in no circumstances should an employee assist any person in any
conduct involving our products that violates fiscal, trade or anti-money
laundering laws and/or regulations, including evasion of applicable taxes
or import duties. Nor should any employee facilitate or participate in any
activity that subverts this policy, including, for example, by agreeing to
interpose an existing or new customer to act as an intermediary purchaser
which will
7
resell our products to another firm that has not been approved as a
customer.
We expect our customers to comply with all applicable laws when they resell
our products; and we expect that our customers will, in turn, in keeping
with applicable laws, seek to ensure that their customers resell our
products in their market of intended destination. We reserve the right to
stop supplying products to any customer shown to have been involved in
contraband sales or distribution of our products. We expect our customers
to do the same in relation to their own customers.
E. Licensees and Contract Manufacturers
We must also continue to exercise careful judgment in selecting those we
allow to use our name or any of our trademarks, including licensees and
contract manufacturers and carry out appropriate due diligence checks to
confirm that such entities are reputable. Just as we should remain alert to
possible changes in a customer's business practices, we must also be aware
of the behavior of our licensees and other business associates.
VI. Government Inquiries
From time to time, the Company may be served with legal process or receive
written or oral requests for information from law enforcement or other
government agencies for records or information about customers or business
associates who may be under investigation or who may be associated with a third
party that is under investigation. As set out in the Philip Morris Companies
Inc. Legal Guide for Employees, it is Company policy to cooperate fully in these
inquires within the confines of applicable privacy and other laws and to respond
to each lawful request in a timely fashion. Any employee who receives such a
request should follow the procedures of the Legal Guide, including immediate
reference to the Legal Department for review.
In keeping with out long-standing policy of supporting government actions
against illegal trading in our products, we are asked from time to time to
assist in tracing the country and date of manufacture of a particular product
and our customer for that product based on markings and other records. Each
operating company should have marking systems which, with related documentation,
will allow us to assist governments with their attempts to identify purchasers
of our products, and the dates and locations of production. Also, any employee
who becomes aware of any attempt to tamper with our products or the packaging of
our products or any attempt to falsify invoices or other import documents should
promptly report this to the Legal Department.
8
VII. Reporting of Suspected Wrongdoing
Any indications of possible violations of this policy statement or the
Compliance Programs or of suspicious activity by customers should be reported
promptly to the Legal Department of the relevant operating company for
appropriate action. Actions which may be appropriate include monitoring a
customer's activity, a possible management decision to suspend or sever the
business relationship in accordance with Company policy and/or a determination
of whether to report the activity to the appropriate government authorities. The
Legal Department of each operating company shall implement a procedure to ensure
that the identify of any person reporting violations of this policy statement or
its Compliance Program or any suspicious activity by customers will be kept
confidential if the reporter of that information so requests.
VIII. Violations
Consistent with the Business Conduct Policy and Legal Guide, any employee who
fails to comply with this policy statement or the Compliance Programs and
policies that have been and will be promulgated by the operating companies may
be subject to disciplinary action, which may include termination and loss of
employment-related benefits. Any suspected violations of fiscal, trade or
anti-money laundering laws by customers, licensees or contract manufacturers
should be reported in accordance with the procedures set out above.
Finally, employees are urged to consider the spirit of this policy statement and
to act accordingly. It is vital that we maintain our commitment both to
observing and abiding by the laws governing our business and to the protection
of our good name and reputation. Any questions regarding this policy statement
should be referred to the Legal Department.
September 13, 1999
9
APPENDIX B -- EC COMPLIANCE PROTOCOLS
PROTOCOL 1
GENERAL STATEMENT OF ANTI-MONEY LAUNDERING / ANTI-SMUGGLING
COMPLIANCE PROTOCOLS
1.01. Definitions. Except as otherwise defined herein, the terms used in
these EC Compliance Protocols are as defined in Article 1 of the Anti-Contraband
and Anti-Counterfeit Agreement and General Release.
1.02. Commitment of Philip Morris International.
(a) Consistent with these Protocols, Philip Morris International reiterates
its ongoing commitment and obligation to comply with all applicable laws,
including those of the EC and the Member States, governing its conduct relating
to:
(i) the payment of import duties, value added tax, excise tax and
other imposts applicable to Cigarettes manufactured or sold by Philip
Morris International;
(ii) the handling of payments which are received from customers,
licensees, and other obligors in respect of Philip Morris Cigarettes;
(iii) currency reporting and record-keeping requirements; and
(iv) trade restrictions or prohibitions.
(b) Conduct that is unlawful or that violates Philip Morris International's
policies and procedures will not be condoned under any circumstances. This
includes conduct that occurs in a country that does not enforce a restriction or
prohibition in its own law or in which the violation is not subject to public
criticism or censure.
(c) After detecting any violation of these Protocols, Philip Morris
International shall make all commercially reasonable efforts to prevent and/or
penalize further similar conduct.
(d) The fact that a competitor or other company may appear to be engaged in
an illegal activity without incurring any penalties does not mean that Philip
Morris International can be involved in such illegal activity or condone the
involvement of its customers or anyone associated with Philip Morris
International in such illegal activity.
1.03. Scope and Purpose of the EC Compliance Protocols.
(a) These EC Compliance Protocols are designed to promote the Parties'
joint objective that Philip Morris Cigarettes be sold, distributed, stored, and
shipped in accordance with all applicable fiscal and legal requirements, and, in
particular, sold at retail in accordance with all applicable tax and duty laws
in the Intended Market of Retail Sale.
(b) These Protocols are designed to achieve the Parties' joint objective of
meaningful cooperation, in particular between Philip Morris International and
OLAF, in eliminating the sales of smuggled and/or counterfeit Cigarettes as well
as any associated Money Laundering. Furthermore, these Protocols are designed to
further the Parties' joint objectives (i) that Philip Morris International
terminate sales of Cigarettes to persons, corporations and/or distributors that
have been found to be unlawfully or knowingly engaged in the distribution of
smuggled products or Money Laundering, (ii) that the Relevant Administrations
are in a better position to investigate and prosecute such persons, and to
prevent and detect such frauds, and (iii) that Philip Morris International be
provided active and effective support for its efforts to deter any act or
practice that favors or facilitates the use of its Cigarettes in smuggling or as
a vehicle to launder illegal proceeds. The information provided by Philip Morris
International to the Relevant Administrations and OLAF pursuant to these
Protocols will contribute to the vigorous pursuit of persons suspected of
illegally smuggling Cigarettes, counterfeiting and Money Laundering throughout
the world.
PROTOCOL 2
KNOW YOUR CUSTOMER
2.01. Conducting Business with Approved Contractors. Beginning 180 days
after the Execution Date, for the sale, distribution, storage, or shipment of
Cigarettes in excess of 2,500 Master Cases of Philip Morris Cigarettes per year
within or into the Territory of one or more of the Member States or any
Designated State, Philip Morris International shall conduct business only with
Approved Contractors.
2.02. Market Demand. Philip Morris International shall sell and distribute
Cigarettes in amounts that are commensurate with the Retail Demand in the
Intended Market of Retail Sale, and Philip Morris International will refuse to
sell Philip Morris Cigarettes in volumes exceeding that amount.
2
2.03. Due Diligence.
(a) Philip Morris International shall undertake Due Diligence with respect
to all of its Contractors, or Persons reasonably likely to be engaged by Philip
Morris International as Contractors (together "Applicants"), in order to satisfy
itself that such Persons are able and committed to honor the objectives and
practices set forth in these EC Compliance Protocols and therefore are eligible
to become Approved Contractors.
(b) As part of its Due Diligence, a representative of Philip Morris
International shall:
(i) meet with a representative of each Applicant;
(ii) visit the Applicant's principal place of operations;
(iii) obtain Due Diligence Information from each Applicant or other
sources;
(iv) assess and verify each Applicant's ability and commitment to
comply with the objectives and procedures of the EC Compliance Protocols to
the extent applicable to it;
(v) assess and verify each Applicant's ability and commitment to
implement its own Know-Your-Customer procedures consistent with these
Protocols and for each Applicant to require the same of its wholesale
cigarette customers, if any; and
(vi) create a report detailing the result of the Due Diligence.
(c) "Due Diligence Information" means the following information, to the
extent that it is reasonably available:
(i) where the Applicant is an individual, information regarding his
or her identity, including but not limited to, full name, business
registration number (if any), date and place of birth, and applicable tax
registration numbers and a copy of their official identification and/or
passport;
(ii) where the Applicant is a corporation or other entity,
information regarding its identity, including but not limited to, full
name, business registration number, date and place of incorporation,
corporate capital, applicable tax registration numbers, copies of its
articles of incorporation or equivalent documents, its corporate
Affiliates, the names of its officers and directors, and the name of any
designated representatives, including but not limited to the
representatives' complete names, and copies of their official
identification and/or passports;
3
(iii) where the Applicant is seeking to become a First Purchaser, a
description of the intended use and Intended Market of Retail Sale of the
Cigarettes to be purchased from Philip Morris International. This "Sales
Plan" shall be required to be updated as needed and will include complete
identification as practicable of the Subsequent Purchasers to whom the
Cigarettes will be sold;
(iv) documentation regarding the number of persons employed by the
Applicant at the date of the request for information;
(v) documentation regarding any criminal offenses, or charges filed
by governmental agencies, against the Applicant or any of its managers,
directors, and/or legal representatives; and
(vi) complete identification of the bank accounts through which the
payments for the Cigarettes sold to the Applicant shall be made, including
but not limited to the complete name and address of the bank, the complete
name and address of the account holder, and all information concerning the
identification of the account. In addition to the foregoing information, if
the bank account to be used to pay Philip Morris International belongs to
an Affiliate of the Applicant, full disclosure of the precise relationship
between the Affiliate and the Applicant (or subsequently, the Approved
Contractor) shall be required to be made to Philip Morris International
prior to the acceptance of any payment from such an Affiliate. This
information shall be required to be updated, as needed, by the Applicant if
the Applicant becomes an Approved Contractor.
(d) If, following its Due Diligence, Philip Morris International is not
satisfied that an Applicant is able and committed to honor the objectives and
practices set forth in these EC Compliance Protocols, Philip Morris
International shall refuse to conduct business with that Applicant.
(e) If, following its Due Diligence, Philip Morris International is
satisfied that an Applicant is able and committed to effectively implement the
objectives and practices set forth in these EC Compliance Protocols, Philip
Morris International will record that fact and that Applicant shall be
considered an "Approved Contractor."
(f) Philip Morris International shall maintain a list of all Approved
Contractors, which shall be updated every 6 months.
(g) "Follow-up Due Diligence" shall be undertaken at least annually for
each Approved Contractor, and shall also be undertaken in cases where Philip
Morris International has been notified by the Approved Contractor of a change in
4
ownership and/or control of the Approved Contractor. Philip Morris International
will require Approved Contractors to promptly notify it of any material change
in their ownership or control.
(h) The following shall constitute Follow-up Due Diligence for Approved
Contractors by Philip Morris International:
(i) reiterating to Approved Contractors their obligations under
these Protocols, and monitoring their continued compliance therewith;
(ii) for Approved Contractors who are First Purchasers, reiterating
that these Protocols require that they may only purchase Philip Morris
Cigarettes for sale or distribution in amounts that are commensurate with
the Retail Demand in the Intended Market of Retail Sale and that Philip
Morris International will refuse to sell them Philip Morris Cigarettes in
volumes exceeding that amount;
(iii) reiterating to Approved Contractors Philip Morris
International's commitment to cooperate with the Relevant Administrations,
including OLAF;
(iv) answering questions Approved Contractors may have regarding
these EC Compliance Protocols; and
(v) providing Approved Contractors with any changes to the EC
Compliance Protocols that may affect their obligations.
(i) If, after completing Follow-up Due Diligence, Philip Morris
International is no longer satisfied that an Approved Contractor is able and
committed to honor the objectives and practices set forth in these EC Compliance
Protocols, Philip Morris International shall refuse to continue conducting
business with that entity and that entity shall cease to be an Approved
Contractor.
2.04. Approved Contractor Records. Philip Morris International shall
maintain files containing its records of Approved Contractors for five years
after creation. These records shall include the following:
(a) Commercial documents relating to the Approved Contractor of a material
nature to this Agreement, including for example invoices, correspondence of a
material nature to and from said Approved Contractor, internal correspondence of
a material nature relating thereto, documentation concerning the reasons any
exception has been granted under Protocol 5.01(b), below, contracts, credit
analysis, cargo manifests, declarations to any relevant authorities, transport
documents, and other shipping documents.
5
(b) documents obtained by Philip Morris International as part of Approved
Contractors' Due Diligence Information;
(c) any inquiries from and responses to government agencies regarding the
Approved Contractor or its business; and
(d) all records relating to payments made by First Purchasers for Philip
Morris Cigarettes.
PROTOCOL 3
APPROVED CONTRACTOR RELATIONS
3.01 . Contracts with Approved Contractors. To the extent permitted by
applicable law, Philip Morris International undertakes to make commercially
reasonable efforts to enter into contractual arrangements with Approved
Contractors within 12 months of the Execution Date that will provide for the
following, as applicable:
(a) Delivery Terms. Delivery terms applicable to sales of Philip Morris
Cigarettes will be specified on the invoice to the First Purchaser using
terminology set out in Incoterms 2000. Passage of risk will transfer to the
First Purchaser in accordance with the applicable Incoterm. For any Philip
Morris Cigarettes that the First Purchaser purchases FCA Antwerp or similar
basis, the First Purchaser shall be required to agree to resell the Philip
Morris Cigarettes using a CIF, CIP, DDU or comparable delivery term to the
Intended Market of Retail Sale, or in the alternative to take other measures
that are designed to ensure delivery of the Philip Morris Cigarettes to their
Intended Market of Retail Sale. Under no circumstances may the First Purchaser
take any action directly or indirectly to interfere with the transportation of
the Philip Morris Cigarettes to the delivery point specified in the invoice or
to the Intended Market of Retail Sale without the specific prior approval of
Philip Morris International.
(b) Packaging. The First Purchaser shall be required to agree that it will
take no action directly or indirectly to alter, remove, or deface any
Identification Markings or any other aspects of the Philip Morris Cigarettes'
packaging.
(c) Legal Compliance. The First Purchaser shall be required to agree to
transport and/or resell the Philip Morris Cigarettes in full compliance with all
applicable laws and regulations, including without limitation (a) any laws or
regulations governing the shipment of the Philip Morris Cigarettes in bond or
under duty suspension and (b) any fiscal or other laws or regulations governing
the importation and resale of the Philip Morris Cigarettes, and (c) any
applicable
6
laws designed to combat the laundering of illegal proceeds. The First Purchaser
shall be required to agree to take no action to promote or facilitate the resale
of the Philip Morris Cigarettes by the First Purchaser's customers or Subsequent
Purchasers in violation of any fiscal, labeling, trade, or other laws or in a
way which would otherwise contravene the First Purchaser's obligations under its
terms and conditions of sale. The First Purchaser shall be required to agree not
to resell the Philip Morris Cigarettes to any Person or entity whom it knows or
has reason to believe to be engaged in any illegal trade. Philip Morris
International shall require the First Purchaser to acknowledge and accept that
Philip Morris International reserves the right to suspend or terminate any and
all commercial relationships with the First Purchaser, and in particular to
suspend any sales and/or shipments of Philip Morris Cigarettes to the First
Purchaser, if the First Purchaser violates its terms and conditions of sale,
including, without limitation, those relating to delivery and/or packaging, or
is otherwise shown to have unlawfully or knowingly engaged in any illegal trade.
(d) Cooperation with Governments. Philip Morris International shall require
the Approved Contractor to acknowledge and accept in writing that Philip Morris
International intends to cooperate with governmental inquiries into any illegal
importation, movement, or sale of Philip Morris Cigarettes. Towards this end,
Philip Morris International shall make commercially reasonable efforts to ensure
the availability of data and documents to the Relevant Administrations as
provided for under the Agreement and these Appendices thereto. The First
Purchaser shall be required to agree in writing to expressly authorize Philip
Morris International to disclose the terms and conditions of any sale of Philip
Morris Cigarettes to the First Purchaser in response to a valid and specific
governmental inquiry in that regard.
3.02 . Investigations by the Relevant Administrations. Philip Morris
International shall strongly encourage its First Purchasers to cooperate with
the Relevant Administrations for the purposes of investigating Cigarette
smuggling and/or the laundering of proceeds arising out of the illegal trade in
Cigarettes.
PROTOCOL 4
TERMINATION OF FIRST PURCHASERS AND SUBSEQUENT PURCHASERS
4.01. Termination of Business Relationships with Approved Contractors.
(a) Philip Morris International shall terminate business relations with,
including the supply of Philip Morris Cigarettes to, any Approved Contractor
upon OLAF providing Philip Morris International with, or Philip Morris
International otherwise coming into possession of, Sufficient Evidence that such
Approved Contractor has, following the Execution Date, unlawfully or knowingly
7
engaged in the sale, distribution, storage, or shipment of Contraband Cigarettes
or any related Money Laundering. Thereafter, such Approved Contractor shall be a
Blocked Contractor.
(b) For the purposes of this Protocol and the Agreement as a whole, only
the following will constitute "Sufficient Evidence":
(i) a criminal conviction in any official court or tribunal for any
offense relating to the sale, distribution, storage, or shipment of
Contraband Cigarettes, or any related Money Laundering; or
(ii) a finding by any official court or tribunal in any civil case of
involvement in the sale, distribution, storage, or shipment of Contraband
Cigarettes, or any related Money Laundering.
(c) In the event that OLAF provides Philip Morris International with, or
Philip Morris International otherwise comes into possession of, Sufficient
Evidence that a Subsequent Purchaser has, following the Execution Date,
unlawfully or knowingly engaged in the sale, distribution, storage, or shipment
of Contraband Cigarettes, Philip Morris International will request the First
Purchaser of Philip Morris Cigarettes that sells Philip Morris Cigarettes to
such Subsequent Purchaser to cease supplying Philip Morris Cigarettes to such
Subsequent Purchaser, if such Subsequent Purchaser is a direct customer of the
First Purchaser. In the event that the First Purchaser refuses to honor such
request, Philip Morris International will cease supplying Philip Morris
Cigarettes to such First Purchaser, who will thereafter be a Blocked Contractor.
If such Subsequent Purchaser is not a direct customer of a First Purchaser, then
Philip Morris International shall request that the First Purchaser make such
commercially reasonable efforts as may be required to terminate its direct
and/or indirect supply of Philip Morris Cigarettes to such Subsequent Purchaser.
In the event that the First Purchaser refuses to take such steps to terminate
its direct and/or indirect supply of Philip Morris Cigarettes to such Subsequent
Purchaser, Philip Morris International will cease supplying Philip Morris
Cigarettes to such First Purchaser, who will thereafter be a Blocked Contractor.
(d) Philip Morris International shall maintain a list of Blocked
Contractors. Unless otherwise agreed to by Philip Morris International and OLAF,
a Blocked Contractor shall remain so designated for 5 years after the
termination of Philip Morris International's business relationship with such
Blocked Contractor and no such Blocked Contractor will be permitted to conduct
business with Philip Morris International or any Affiliates thereof, directly or
indirectly, relating to the purchase, distribution, shipment, or storage of
Philip Morris Cigarettes during that time. After the expiration of the 5-year
period, a Blocked Contractor may reapply to become an Approved Contractor and,
at that time, will be subject to the applicable Due Diligence requirements.
8
4.02. Request for Termination of Business Relationships with Approved
Contractors.
(a) If OLAF believes that an Approved Contractor or Subsequent Purchaser
has, following the Execution Date, unlawfully or knowingly engaged in the sale,
distribution, storage, or shipment of Contraband Cigarettes or Counterfeit
Cigarettes or any related Money Laundering, but does not possess Sufficient
Evidence to support its belief, OLAF may present its evidence to Philip Morris
International as part of a request that Philip Morris International terminate
the supply of Philip Morris Cigarettes to the Approved Contractor or Subsequent
Purchaser (the "Request for Termination").
(b) Within 45 days of receiving a Request for Termination, Philip Morris
International shall provide a response to OLAF reflecting its determination. In
the event that Philip Morris International disagrees with OLAF's conclusions and
rejects the Request for Termination, it shall provide the reasons for that
decision. If in that event OLAF, after considering Philip Morris International's
response, remains of the view that the supply of Philip Morris Cigarettes to the
Approved Contractor and/or Subsequent Purchaser should be terminated, OLAF and
Philip Morris International shall meet and confer in good faith and attempt to
resolve the dispute. If the dispute has not been resolved within 30 days of the
meet and confer, OLAF may bring the dispute before the Arbitrators in accordance
with Article 12.02 of the Agreement and may seek an order from the Arbitrators
requiring Philip Morris International to terminate its business relationship
with the Approved Contractor in question (the "Termination Order"), or, if the
Person that is the subject of the Request for Termination is a Subsequent
Purchaser, that Philip Morris proceed under Protocol 4.01(c) above as if
Sufficient Evidence existed concerning such Subsequent Purchaser.
(c) In any arbitration proceedings brought under Protocol 4.02 hereof, the
Arbitrators may issue a Termination Order to Philip Morris International only
where it has been proven by the greater weight of the evidence that:
(i) the Approved Contractor or Subsequent Purchaser in question has,
following the Execution Date, unlawfully or knowingly engaged in the sale,
distribution, storage, or shipment of Contraband Cigarettes or Counterfeit
Cigarettes or any related Money Laundering;
(ii) five separate seizures of at least 4 million Cigarettes each
have been made of Philip Morris Cigarettes sold to, handled by, or
channeled through the Approved Contractor or Subsequent Purchaser in
question within the previous 12 months, (with a time span from the date of
the first seizure to the fifth seizure of at least 45 days), and such
person
9
has refused to cooperate with lawful requests to do so made by the Relevant
Administration(s) in relation to such seizures;
(iii) any number of seizures have been made of Contraband Philip
Morris Cigarettes sold to, handled by, or channeled through the First
Purchaser or Subsequent Purchaser in the preceding 12 month period which
have totaled more than 25 million Cigarettes, and such person has refused
to cooperate with lawful requests to do so made by the Relevant
Administration(s) in relation to such seizures; or,
(iv) beginning one year after the Execution Date, any number of
seizures have been made of Contraband Philip Morris Cigarettes sold to,
handled by, or channeled through an Approved Contractor (other than a First
Purchaser) in the preceding 12 month period which have totaled more than
500 million Cigarettes, and such person has refused to cooperate with
lawful requests to do so made by the Relevant Administration(s) in relation
to such seizures.
PROTOCOL 5
ACCOUNTABILITY OF PAYMENTS FOR CIGARETTES
5.01. Acceptable Forms of Payment.
(a) Philip Morris International shall adhere to its anti-money laundering
policies, which are designed to ensure that it receives payment for Philip
Morris Cigarettes solely from legal sources. The policies developed by Philip
Morris International to track and monitor all payments made for Cigarettes sold
and/or distributed by Philip Morris International shall include measures
designed to prevent the use of the proceeds of any illegal activity, in any form
whatsoever, as payment for Cigarettes. Specifically, as those policies relate to
transactions with Approved Contractors relating to the sale, storage or
distribution of Philip Morris Cigarettes:
(i) acceptable forms of payment shall be limited to:
(A) wire transfers or checks, in both cases from a bank account
in the name of the Person or Affiliate of such Person with whom Philip
Morris International is transacting,
(B) cashier's checks or bank drafts, in both cases issued by a
bank in the country in which the Person with whom Philip Morris
International is transacting is located; and,
10
(C) cash, but only where the nature and scale of the business of
the Person with whom Philip Morris International is transacting (e.g.,
a small retail outlet) are such that it is not commercially feasible
under local conditions for that Person to use the forms of payment
specified in (A) or (B);
(ii) all payments must be made in the same currency and in the same
amount as the invoice;
(iii) all payments for Philip Morris Cigarettes must be made by the
invoiced customer or an Affiliate of that customer disclosed to Philip
Morris International in accordance with Protocol 2.03(c)(vi);
(iv) payments for each invoice or group of invoices due shall be made
by a single instrument; and,
(v) payment must be made from an account designated by the Approved
Contractor during the Due Diligence process, under Protocol 2.03(c)(vi),
above.
(b) Exceptions to the five requirements set forth above in Protocol 5.01(a)
may be made on a case-by-case basis. Such exceptions must be approved by the
Chief Financial Officer of Philip Morris International, and the reasons for
granting any exception shall be documented.
PROTOCOL 6
DISCLOSURE OF INFORMATION
6.01. Responding to Inquiries. Within 45 days of a written request by
OLAF, Philip Morris International shall provide OLAF with the following:
(i) the list of Approved Contractors and Blocked Contractors as of
the date of the request;
(ii) sales volumes to Approved Contractors after January 1, 2004;
(iii) reasonable estimates of the annual Retail Demand for any
domestic or duty free market in the Member States or any Designated State
for any time period after January 1, 2004 and any domestic or duty free
market if there have been 3 seizures in the Member States of more than 5
Master Cases Contraband Philip Morris Cigarettes within the previous 12
months that had such domestic market as the Intended Market of Retail Sale;
and
11
(iv) information relating to the storage and shipment of Philip
Morris Cigarettes for any market of retail or duty free sale after
January 1, 2004.
6.02. Provision of Information. Subject to applicable data protection and
secrecy laws, within 45 days of a specific written request by OLAF, Philip
Morris International shall provide to OLAF, Due Diligence Information and
Approved Contractor records created after January 1, 2004 relating to activity
occurring after that date.
6.03 . Fast Track Provision of Information. In the event that OLAF or the
Relevant Administrations make a seizure of Contraband Philip Morris Cigarettes,
and OLAF seeks information regarding other Philip Morris Cigarettes that may be
in transit, Philip Morris International agrees to make commercially reasonable
efforts to promptly (i.e. as soon as possible during the next business day)
provide, at OLAF's request, the information listed in 3.03(a) of the Tracking
and Tracing Protocols, to the extent available, for all shipments of Philip
Morris Cigarettes to the same First Purchaser associated with the seized
Contraband Philip Morris Cigarettes for a period encompassing three months prior
to and three months subsequent to the date of shipment of the seized Contraband
Philip Morris Cigarettes.
PROTOCOL 7
CREATION OF A PHILIP MORRIS INTERNATIONAL COMPLIANCE OFFICER
7.01. The Compliance Officer.
(a) Philip Morris International shall create an internal position of
Director for Anti-Contraband and Anti-Money Laundering Compliance (the "Vice
President for Compliance Systems"), who shall report directly to senior
management of Philip Morris International.
(b) The Vice President for Compliance Systems shall have the authority and
be responsible for:
(i) reviewing Philip Morris International's practices relating to
the sale, distribution, storage, and shipment of Philip Morris Cigarettes;
(ii) undertaking and executing any and all of the commitments made
under this Agreement by Philip Morris International;
(iii) overseeing compliance by Philip Morris International with Philip
Morris International's Fiscal Compliance Policy and the Agreement;
12
(iv) developing the education and training programs for employees
relating to the sale, distribution, storage and shipment of Philip Morris
Cigarettes in accordance with Philip Morris International's Fiscal
Compliance Policy and the Agreement, which are provided for in Protocol 11;
and
(v) serving, directly and/or through appropriate staff, as a contact
point for communication between Philip Morris International and the EC, the
Participating Member States and OLAF.
PROTOCOL 8
SHIPMENT TO WAREHOUSES FOR SALE AT LATER DATE AND EARLY WARNING
SYSTEM NOTIFICATION
8.01 . Information on Cigarettes in Customs Warehouses. Philip Morris
International shall, upon receiving a request from OLAF, inform OLAF of
quantities of Philip Morris Cigarettes kept in stock as of the date of the
request, in tax and customs warehouses, in the possession, custody or control of
Philip Morris International in the Territory of the Member States or any
Designated State, under the regime of transit or duty suspension.
8.02 . Early Warning System Notification. With respect to all Philip Morris
Cigarettes manufactured in the Territory of the Member States for export outside
the Territory of the Member States, and/or subject to duty-suspended movement in
transit in the Territory of the Member States, Philip Morris International
agrees to notify customs authorities in the country of departure (electronically
where the appropriate infrastructure exists) at the time of departure from
Philip Morris International. The notification shall include:
(i) the date of the shipment from the last point of Philip Morris
International's physical custody of the Philip Morris Cigarettes;
(ii) details concerning the Philip Morris Cigarettes shipped (brand,
amount, warehouse);
(iii) the intended shipping destination;
(iv) the identity of the Person to whom the Cigarettes are being
shipped;
(v) the mode of transportation, including the identity of the
transporter;
13
(vi) the expected date of arrival of the shipment at the intended
shipping destination; and,
(vii) the Intended Market of Retail Sale.
PROTOCOL 9
DELEGATION OF AUTHORITY
9.01. Delegation of Authority. Substantial discretionary authority
relating to the sale, distribution, storage, and shipment of Philip Morris
Cigarettes, or the establishment of policies and business practices relating
thereto, shall be delegated by Philip Morris International only to Philip Morris
International employees that Philip Morris International reasonably believes,
after the exercise of due diligence, have demonstrated the ability and
commitment to act in full compliance with the terms and principles of these
Protocols.
PROTOCOL 10
PERFORMANCE REVIEWS
10.01. Performance Reviews. Performance reviews, compensation, and
promotions of Philip Morris International's employees whose activities relate to
the sale, distribution, storage, and shipment of Philip Morris Cigarettes shall
take into account such employees' performance in connection with these
Protocols.
PROTOCOL 11
TRAINING PROGRAMS
11.01 . Training Programs. Philip Morris International shall design
training programs for its employees whose activities involve the sale,
distribution, storage, and/or shipment of Philip Morris Cigarettes, or the
establishment of policies and business practices relating thereto. The
curriculum for such training programs shall be notified to OLAF. These employees
shall, at least once a year, either conduct or participate in training programs
designed to educate and inform Philip Morris International's employees about
their compliance obligations under these Protocols, with supplemental training
to be required if necessary, at the discretion of the Vice President for
Compliance Systems. At least once a year, a representative of OLAF shall
participate in the training for Philip Morris International employees as part of
the training programs described in this Protocol.
14
PROTOCOL 12
MONITORING AND AUDITING SYSTEMS
12.01. Development of Monitoring and Auditing Systems. In conjunction with
the Law Department and the Finance Department of Philip Morris International,
the Vice President for Compliance Systems will develop Anti-Contraband and
Anti-Counterfeit Monitoring and Auditing Systems. Fiscal Compliance Coordinators
will be designated for each region, who will be responsible for implementing
these systems in their business units.
PROTOCOL 13
REPORTING OF SUSPICIOUS ACTIVITY
13.01. Reporting Requirements. Philip Morris International agrees to
require that if an employee of Philip Morris International suspects that there
has been a violation of these Protocols by another employee or by an Approved
Contractor, the employee must promptly report the activity to one of the
following Persons: his or her supervisor, the department head, a Fiscal
Compliance Coordinator, the Vice President for Compliance Systems, or the Law
Department of Philip Morris International. To the extent permitted by law, the
identity of the reporting employee will be kept confidential, if requested by
the individual. Philip Morris International shall establish the means so that
these reports may be made anonymously.
13.02. Reporting System. The Vice President for Compliance Systems shall
create, in conjunction with the Law Department and the Finance Department of
Philip Morris International, a Reporting System. Such Reporting System will
allow employees of Philip Morris International to anonymously report, by any
means including email, regular mail, or telephone:
(a) any suspicious transactions, including, but not limited to, any
suspected involvement of Philip Morris International employees or Approved
Contractors in:
(v) the illegal sale, distribution, storage, or shipment of
Contraband Philip Morris Cigarettes;
(vi) any related illegal activity; or
(vii) transactions that do not correspond to ordinary commercial
practices and render Philip Morris Cigarettes vulnerable to diversion into
smuggling channels; or
15
(b) any transaction between Philip Morris International and an Approved
Contractor that is made or attempted in cash, cash equivalents, bearer or
third-party instruments, when the amount of the transaction exceeds Ten Thousand
Dollars ($10,000.00) and the Philip Morris International employee cannot verify
that the transaction has been reported, or when the Philip Morris International
employee has reason to believe or to suspect that a series of transactions has
been structured so as not to trigger the reporting requirement when the
transactions are considered individually, but when taken as a whole would
trigger the reporting requirement.
13.03. The Fiscal Compliance Coordinator. The Fiscal Compliance
Coordinator for each region must be notified promptly of any report of activity
that may violate these Protocols in his or her region. In conjunction with the
Law Department, the Fiscal Compliance Coordinator will review the reported
activity and determine whether further action is warranted. If it is determined
that an employee of Philip Morris International has violated these Protocols,
the Fiscal Compliance Coordinator and the Law Department shall consult with the
management of the relevant business unit involved regarding any disciplinary or
other action to be taken.
13.04. Cooperation of Philip Morris International Employees. Philip Morris
International shall encourage its employees and/or agents to make themselves
available to OLAF for interviews and for the purposes of giving sworn
statements, as reasonably requested and required by OLAF, relating to matters
which are covered by this Agreement that arose after the Execution Date.
PROTOCOL 14
DISTRIBUTION OF PROTOCOLS
14.01. Distribution of Protocols. These Protocols shall be made available
to all Philip Morris International employees on Philip Morris International's
internal website. Also available at the internal website shall be:
(i) easy to understand memoranda explaining the requirements of
these Protocols;
(ii) frequently asked questions and answers relating to these
Protocols; and
(iii) a link to the Reporting System established pursuant to Protocol
13.02.
14.02. Philip Morris International Compliance Policy. No later than 6
months after the Execution Date, Philip Morris International shall revise its
16
written policies which address the sale, distribution, storage, and shipment of
Cigarettes within or into the Territory of the Member States or any Designated
States, and consolidate these policies into one document (the "International
Compliance Policy"). As new situations arise, Philip Morris International shall
make changes and modifications as necessary to the International Compliance
Policy, and shall inform OLAF thereof. In the event of any inconsistency between
the International Compliance Policy and these Protocols, the latter shall
prevail.
14.03. The International Compliance Policy shall be made available to all
Philip Morris International employees on Philip Morris International's internal
website. Also available at the internal website shall be:
(i) frequently asked questions and answers relating to the
International Compliance Policy; and
(ii) a link to the Reporting System.
17
APPENDIX C
Philip Morris International (PMI) agrees to make payments to the Relevant
Administrations in accordance with the provisions below:
1. An amount equal to One Hundred Million Dollars ($100,000,000) shall be
deemed to be the "Base Payment."
2. Within sixty (60) days of the Execution Date, PMI shall make a lump-sum
payment in the amount of 250% of the Base Payment.
3. On the first anniversary of the Execution Date, PMI shall make a payment
equal to 150% of (x) the Base Payment multiplied by (y) the 2004 Adjusted Index
Percentage.
4. On the second anniversary of the Execution Date, PMI shall make a
payment equal to 100% of (x) the Base Payment multiplied by (y) the 2005
Adjusted Index Percentage.
5. On each of the third through twelfth anniversaries of the Execution
Date, PMI shall make a payment equal to 75% of (x) the Base Payment multiplied
by (y) the Adjusted Index Percentage for the previous year.
6. The Adjusted Index Percentage in respect of any given year shall be
calculated using the formula set forth in paragraphs 7 through 10 below.
7. In respect of any year in which a payment is to be made, the "Numerator"
shall be the percentage share of the volume of total cigarette sales in the
preceding year in the domestic markets of the states that were Member States of
the European Union on January 1st, 2004, represented by entity(ies), including
PMI and its Affiliates, that are, at
1
the time of payment, party to this Agreement or an anti-contraband /
anti-counterfeit agreement substantially similar to this Agreement, provided,
however, that if there are other entities that have entered into such similar
agreements, the volumes taken into account for determining the percentage share
of the volume of total cigarette sales in the preceding year in the domestic
markets of the states that were Member States of the European Union on January
1st, 2004, shall be limited to only those of PMI and its Affiliates, and not of
any other entities that have entered into such similar agreements, if the
Adjusted Index Percentage calculated on PMI volume alone would be less than the
2004 Adjusted Index Percentage. The "Denominator" shall be the percentage share
of the volume of total cigarette sales in the year 2004 by PMI and its
Affiliates in the domestic markets of the states that were Member States of the
European Union on January 1st, 2004. An anti-contraband / anti-counterfeit
agreement shall not be deemed substantially similar to the Agreement unless it
has at least three of the following four elements, (i) annual anti-contraband
and anti-counterfeit payments of the type specified in this Appendix C; (ii)
Supplemental Payments of the type specified in Section 4.01 of this Agreement;
(iii) EC Compliance Protocols of the type specified in Appendix B to this
Agreement; and (iv) Tracking and Tracing Protocols of the type specified in
Appendix D to this Agreement.
8. The Index Percentage for any given year is the Numerator divided by the
Denominator, expressed as a percentage.
9. The Adjusted Index Percentage for any given year is derived from the
Index Percentage for that year using the following formula:
2
Index Percentage Adjusted Index Percentage
0- up to but not including 5% 0%
5- up to but not including 15% 12%
15- up to but not including 25% 24%
25- up to but not including 35% 36%
35- up to but not including 45% 68%
45- up to but not including 55% 84%
55- up to but not including 65% 92%
65- up to but not including 75% 96%
75- up to but not including 85% 98%
85- up to but not including 95% 99%
95- up to but not including 115% 100%
115- up to but not including 140% 101%
140- up to but not including 170% 102%
170- up to but not including 200% 103%
200%+ 104%
In any year in which a payment is to be made and the Adjusted Index
Percentage as calculated above is equal to or more than 100%, then for the
purposes of determining the relevant payment, the Adjusted Index Percentage
shall be deemed to be equal (a) to 99% if PMI's latest full calendar year volume
of total cigarette sales in the domestic markets of the states that were Member
States of the European Union on January 1st, 2004 is less than 90% of the same
figure for 2004 yet equal to or greater than 80% of the same figure for 2004; or
(b) to 98% if PMI's latest full calendar year
3
volume of total cigarette sales in the domestic markets of the states that were
Member States of the European Union on January 1st, 2004 is less than 80% of the
same figure for 2004.
10. In the event of an acquisition or divestiture by PMI or any of its
Affiliates subsequent to the Execution Date, the Denominator shall be adjusted
in each year following the year of acquisition or divestiture to reflect what
the Denominator would have been had either (i) the acquired company(s) been
owned by PMI in 2004; or (ii) the divested company(s) had not been owned by PMI
in 2004.
11. The payments in paragraphs (2)-(5) will each be made by a single electronic
wire transfer into an account in the name of the European Community and
maintained for such purpose at Commerzbank Belgium S.A., a bank duly
incorporated under the laws of one of the Member States.
12. If, within thirty days of the date on which a payment is due pursuant to
this Appendix, a claim is asserted which PMI believes in good faith may entitle
it to setoff or escrow pursuant to Article 10 of this Agreement, PMI may delay
payment of the amount claimed, without any penalty, for up to 30 days so as to
comply with the provisions of Section 10.01(c).
13. In the event that, at any time following the fifth anniversary of the
Execution Date, PMI's financial condition shall have substantially deteriorated,
as to give the Relevant Administrations reasonable and substantial doubt as to
PMI's ability to make the payments due on the sixth through twelfth
anniversaries of the Execution Date, the Relevant Administrations shall so
notify PMI, and PMI thereafter shall obtain a bank guarantee or other equivalent
security in favor of the Relevant Administrations for said
4
payments. However, PMI shall not be obligated to obtain a bank guarantee or the
equivalent security if it is commercially impracticable to obtain such bank
guarantee or security.
5
APPENDIX D - TRACKING AND TRACING PROTOCOLS
PROTOCOL 1
GENERAL STATEMENT OF TRACKING AND TRACING
1.01. Scope and Purpose of Protocols.
(a) Philip Morris International recognizes that giving the Relevant
Administrations the effective and timely ability to track and trace sales of
Philip Morris Cigarettes is an important component of its commitment to fight
the trade in Contraband Philip Morris Cigarettes. Philip Morris International is
committed to a continuous process of dialogue and cooperation with the Relevant
Administrations to evaluate and address the trade in Contraband Philip Morris
Cigarettes, and to making commercially reasonable efforts to implement product
tracking and tracing measures that target, and are reasonably likely to provide
the Relevant Administrations with substantial additional assistance in their
efforts to combat, the trade in Contraband Philip Morris Cigarettes.
(b) These Tracking and Tracing Protocols set forth the basic tracking and
tracing procedures that the Parties believe are appropriate in light of existing
market conditions and the current state of Tracking and Tracing technologies,
and describe additional steps which the Parties have identified in order to
combat Contraband Philip Morris Cigarettes during the term of the Agreement.
These provisions, however, do not apply to products which are sold and
distributed for any market in promotional packaging so long as the total volume
of the Cigarettes using that promotional packaging for any market does not
exceed 300 million Cigarettes in any given year. Notwithstanding the immediately
preceding, if the total volume of promotional packaging in the Member States and
the Designated States in any given year exempted from the applicability of the
Tracking and Tracing Protocols by the preceding sentence exceeds one billion
Cigarettes, the European Commission and Philip Morris International shall meet
and confer to reassess the applicability of these Tracking and Tracing Protocols
to promotional packaging, and, unless otherwise agreed at or following that meet
and confer, thereafter, these provisions shall apply to any amount of
promotional packaging in the Member States and the Designated States in any
given year that exceeds one billion Cigarettes and involves a promotional
packaging that itself exceeds twenty million cigarettes.
1.02. Definitions. Except as otherwise stated herein, the terms used in
these Protocols are as defined in Article 1 of the Anti-Contraband and
Anti-Counterfeit Agreement and General Release (the "Agreement").
1.03. Conflict with Other Laws. Nothing in these Protocols shall require
Philip Morris International to act in a way that violates applicable law.
PROTOCOL 2
PACK & CARTON MARKING AND CODING
2.01. Labeling for Intended Market of Retail Sale.
(a) The Parties agree that Philip Morris International shall make
commercially reasonable efforts to mark Packs and/or Cartons of Philip Morris
Cigarettes with markings, codes or other information which permit a
determination of the Intended Market of Retail Sale when such Packs or Cartons
have those markets identified in Exhibit A-1 as the Intended Market of Retail
Sale.
(b) In the event that Philip Morris International begins selling in a new
market not covered by Protocols 2.01(a) or 2.02, Philip Morris International
shall notify the Representatives of the Relevant Administrations as to the
markings that Philip Morris International shall undertake to apply. Such
markings shall meet the requirements contained in Protocol 2.03, below, and
2.01(a), above, and such new market shall be added to the Exhibits of this
Appendix, if applicable.
(c) On the Execution Date, Philip Morris shall provide OLAF with 20 copies
of a manual designed to allow for the determination of the Intended Market of
Retail Sale for all Philip Morris Product marked in accordance with Protocol
2.01(a), above. Philip Morris shall update such manuals and Exhibits A-1 and A-2
as needed.
2.02. Intended Market of Retail Sale: Exceptions.
(a) The Parties further agree that, as an exception to Protocol 2.01, Packs
or Cartons that have as their Intended Market of Retail Sale those markets
identified in Exhibit A-2 shall bear the labeling identified in Exhibit A-2, and
that no additional, market-specific markings or other labeling shall be required
by this Agreement in respect of identifying the Intended Market of Retail Sale.
(b) Philip Morris International may change the labeling of Packs or Cartons
subject to the terms of 2.02(a) at any time so long as the new markings, codes
or other information would permit a determination of the Intended Market of
Retail Sale of such Packs or Cartons. Philip Morris International shall provide
notice of such new labeling to Representatives of the Relevant Administrations
prior to the introduction of any Philip Morris Cigarettes bearing such new
labeling into the retail channel in the Intended Market of Retail Sale, and
immediately upon Philip Morris International becoming aware that any Philip
Morris Cigarettes bearing such new labeling are otherwise no longer under the
control of Philip Morris International.
2.03. Pack and Carton Marking. In addition to the markings required by
Protocol 2.01 and with the exception of the facilities and brands set forth in
2
Exhibit A-3 as of the Execution Date and the exception of Protocol 2.05, Philip
Morris International shall mark all Packs or Cartons with embossed codes or
other markings to allow for the complete identification of:
(a) the date of manufacture of the product,
(b) the manufacturing facility at which the product was manufactured,
(c) the machine of manufacture, and
(d) the production shift during which the product was manufactured.
2.04 . Annual Review. On an annual basis, Philip Morris International and
the Representatives of the Relevant Administrations shall meet to determine
what, if any, additional or improved markings, labeling, codes or scanning shall
be required in general, or which, if any, requirements shall be changed on a
market-by-market basis. Philip Morris International shall provide the
Representatives of the Relevant Administrations with updates, if any, to
Exhibits A-1 and A-2. Philip Morris International agrees to make commercially
reasonable efforts to implement such agreed changes within a reasonable period
of time, and to notify OLAF of the schedule for implementation thereof. Any such
agreement shall be made based on a number of factors, including but not limited
to changes in market dynamics, developments in Tracking and Tracing technology,
changes in national or local labeling requirements, and, if applicable,
increases in Contraband Philip Morris Cigarettes in general or which had as the
Intended Market of Retail Sale the market in question.
2.05 . New Manufacturing Facilities. In the event that Philip Morris
International acquires new manufacturing facilities which would be subject to
Protocol 2.03, Philip Morris International shall make commercially reasonable
efforts to implement the requirements of Protocol 2.03 no later than 12 months
after the acquisition.
PROTOCOL 3
MASTER CASE LABELING AND SCANNING
3.01. Master Case Labeling
(a) To the extent required by the schedule attached as Exhibit B and the
terms of Protocol 3.01(b), and 3.01(c), herein below, Philip Morris
International and/or its Contractors shall mark Master Cases with unique,
machine scannable barcode labels prior to selling those Master Cases to a First
Purchaser. The labels shall contain both the barcode and a human readable
translation (i.e., spelled out in letters and numbers) of the barcode and shall
be affixed to Master Cases with "non-peelable" adhesive. The labels shall permit
Philip Morris International to
3
link the code to product information, including the date of manufacture of the
product, the manufacturing facility at which the product was manufactured, the
machine of manufacture, the production shift during which the product was
manufactured, and, when scanned pursuant to Protocol 3.02, the identification of
the First Purchaser and other information, including, but not limited to, that
information identified in Protocol 3.03.
(b) In the event that the First Purchaser is the sole First Purchaser of
Philip Morris International for the Intended Market of Retail Sale and that
market has Pack or Carton markings satisfying Protocol 2.01, then Philip Morris
International and/or its Contractors need not mark Master Cases sold to that
First Purchaser for that market with unique barcode labels. Markets meeting
these conditions are set forth in Exhibit C-I to these Tracking and Tracing
Protocols.
(c) During the term of the Agreement, Philip Morris International shall
maintain an ongoing program of research and development concerning methods and
technologies for improving the security of Master Case marking. Philip Morris
International shall provide a yearly report to the Representatives of the
Relevant Administrations concerning new technologies for Master Case markings.
In the event that as a result of such research and development, Philip Morris
International identifies suitable technologies for the improvement or
replacement of machine scannable barcode labels with other Master Case marking
technologies that permit unique identification of Master Cases for the purpose
of tracking sales to First Purchasers, Philip Morris International may update
its Master Case Labeling with such technologies, ensuring that at all times
Master Cases required by these Tracking and Tracing Protocols to be marked to
permit their unique identification are so marked in accordance with this
Protocol 3.01, or are marked so as to provide equivalent tracking and tracing
capability.
3.02. Master Case Scanning.
(a) To the extent required by the schedule attached as Exhibit C and
subject to the exception set forth in Protocol 3.02(b), Philip Morris
International and/or its Contractors shall scan Master Cases sold to First
Purchasers in order to record the information reflected in the barcode labels
applied pursuant to Protocol 3.01, and to link that information in a database
with the information described below in Protocol 3.03(a).
(b) Notwithstanding subsection (a), in the event that the First Purchaser
is the sole First Purchaser of Philip Morris International for the Intended
Market of Retail Sale, and that market has Pack or Carton markings satisfying
Protocol 2.01, then Philip Morris International and/or its Contractors need not
physically scan Master Cases sold to that First Purchaser for that market.
Markets meeting these conditions are set forth in Exhibit C-I to these Tracking
and Tracing Protocols.
4
3.03. Database.
(a) Philip Morris International shall make commercially reasonable efforts
to maintain First Purchaser Databases ("First Purchaser Databases") searchable
by customer order or Master Case barcode number for all markets in which it has
implemented Master Case labeling and scanning pursuant to the requirements of
Protocols 3.01 and 3.02. For all shipments of Philip Morris Cigarettes where
Master Case Barcode Labels are scanned pursuant to Protocol 3.02(a) and where
the product shipped is produced 30 days or more after the Execution Date, the
information contained in the First Purchaser Databases shall include:
(i) First Purchaser name and order number,
(ii) shipment date,
(iii) destination of shipment,
(iv) point of departure from the final Philip Morris International
factory or warehouse,
(v) the consignee to whom the product was shipped, and
(vi) the Intended Market of Retail Sale;
provided however that in no event shall the First Purchaser Databases be
required to include any of the foregoing information with respect to shipments
of product produced less than 30 days after the Execution Date.
(b) With respect to all shipments encompassed by Protocol 3.03(a), Philip
Morris International shall maintain any additional records necessary to identify
the sales price and the Intended Market of Retail Sale, including, but not
limited to, the sales invoice, for at least five years.
(c) Electronic records created in the First Purchaser Databases pursuant to
Protocol 3.03(a) shall be kept for at least five years.
(d) OLAF and Philip Morris International shall meet annually in accordance
with Protocol 2.04 to discuss new technologies relating to the First Purchaser
Databases in order to determine whether it is appropriate to expand upon the
information listed in subsection (a) above, or otherwise make changes to the
First Purchaser Databases.
(e) Within 3 months of the implementation of First Purchaser Databases in a
market pursuant to Protocol 3.03(a) and the schedule set forth in Exhibit
C(II)--(III) to these Tracking and Tracing Protocols, Philip Morris
International
5
shall provide the Relevant Administrations through their duly designated
authorized representatives and law enforcement authorities with automated
Query-Only Access ("Query-Only Access") privileges to the data in the First
Purchaser Databases necessary for them to determine from complete barcode level
information, the information in clauses (i) through (vi) of Protocol 3.03(a).
Philip Morris International shall make commercially reasonable efforts to
provide said automated Query-Only Access 24 hours a day, seven days a week.
Philip Morris International may except nights and weekends from this schedule as
needed for the purposes of systems maintenance and updating information. Philip
Morris International shall make commercially reasonable efforts to address any
technical difficulties that may arise.
(f) In the event that Philip Morris International cannot provide the
Relevant Administrations with automated Query-Only Access to its First Purchaser
Databases as provided for by Protocol 3.03(e) due to good faith technical
difficulties, the Relevant Administrations or their duly authorized
representatives may request, via fax, telephone, or any other means, that Philip
Morris International provide First Purchaser Database information to OLAF.
Philip Morris International shall comply with such a request by sending OLAF a
fax or other electronic communication containing the requested First Purchaser
Database information by the close of the next business day at the latest.
(g) The Parties agree that the information contained in the First Purchaser
Databases is highly sensitive and confidential business information.
Accordingly, such information (1) shall be used by the Relevant Administrations
solely for the purposes specified in this Agreement, and for no other purpose,
and (2) subject to the exceptions set forth in this Protocol 3.03(g), shall be
kept secret and confidential and shall not be disclosed to third parties, except
as required by law. Without limiting the generality of the foregoing, the
Parties agree that access to and use of this information shall be governed by
the following terms:
(i) OLAF, on behalf of the Relevant Administrations, shall designate
up to 5 specific services, agencies and/or departments of each of the
Relevant Administrations who shall each have up to 5 authorized members
("Database Designees") who shall have automated Query-Only Access to the
First Purchaser Databases. Only Database Designees shall have active,
password protected access to the First Purchaser Databases on behalf of the
Relevant Administrations. If, for operational reasons, a designated
service, agency or department of the Relevant Administrations requires more
than 5 Database Designees, OLAF will request additional access and
passwords from Philip Morris International for that designated service,
agency or department, and such request shall not be unreasonably refused.
OLAF shall provide Philip Morris International upon request, with a list of
the services, agencies and departments of the Relevant Administrations
whose personnel have been designated as Database
6
Designees, and the number of Database Designees in each service, agency or
department.
(ii) The Database Designees shall query and search the First
Purchaser Databases solely for the purpose of law enforcement inquiries
related to the Parties' mutual goal of combating the trade in Contraband
Philip Morris Cigarettes.
(iii) Prior to making any query, the Database Designee shall verify
that administratively reasonable steps have been taken to ensure that the
Master Case barcode label to be queried is genuine. For the purposes of
making such verification, the Database Designee may query the First
Purchaser Databases only after representing that the barcode label to be
queried was obtained as part of a single seizure of three or more Master
Cases.
(iv) The Database Designees shall not attempt to copy or download the
First Purchaser Databases, such as customer lists, or utilize the database
for any purpose other than that set out in this Agreement.
(v) The Database Designees shall protect the confidentiality of any
information obtained from the First Purchaser Databases.
(vi) The Database Designees shall not disclose to any unauthorized
personnel any passwords or other security features designed to protect the
First Purchaser Databases.
(vii) The Database Designees shall not share information obtained from
the First Purchaser Databases with any third parties or entities except
with duly authorized law enforcement authorities who are actually engaged
in inquiries related to the seizures which led to the specific query, who
have an actual need to know such information, and who shall use such
information only in connection with the relevant ongoing inquiries.
(viii) In the event that the Relevant Administrations need to make
public information obtained from the First Purchaser Databases as part of a
criminal proceeding, or are otherwise legally required to disclose such
information, the Relevant Administrations shall notify Philip Morris
International prior to such disclosure to the extent permitted by law and
make a good faith attempt to provide Philip Morris International an
opportunity to seek a protective order or other appropriate remedy.
(ix) In the event that the Relevant Administrations seek to disclose
information obtained from the First Purchaser Databases under circumstances
not covered by Protocols 3.03(g)(vii) and (g)(viii) above,
7
they may only do so with the written consent of Philip Morris
International, which shall not be unreasonably withheld.
(h) The Parties agree that OLAF is responsible for making all reasonable
efforts to train and inform the Database Designees about the handling and
importance of the secrecy and confidentiality of the passwords, security
features and information contained in the First Purchaser Databases. The Parties
further agree that, in the case of a knowing and willful breach of Protocol
3.03(g) by any Database Designee or duly authorized law enforcement authorities,
or other agent or representatives who receive information pursuant to Protocol
3.03(g), other than a person acquiring the data through compulsory legal
process, Philip Morris International may setoff any demonstrable and significant
loss or damage to it resulting from any claims made against Philip Morris
International as a result of damages sustained as a direct result of the
unauthorized use of passwords, security features or information contained in the
First Purchaser Databases from any Appendix C payments owed to the Relevant
Administrations as provided for in Section 4.01 of the Agreement. The Parties
agree that the mere fact that information provided to the Relevant
Administrations has been made public shall not, in and of itself, constitute
conclusive evidence of a breach of Protocol 3.03(g). Any dispute as to (i)
whether the breach was knowing and willful, (ii) whether Philip Morris
International has suffered demonstrable loss or damage resulting from the
unauthorized use of passwords, security features or information contained in the
First Purchaser Databases, (iii) whether such a loss is significant or de
minimis, or (iv) the amount of such loss or damage, shall be settled by the
Arbitrators in accordance with Section 12.02 of the Agreement.
PROTOCOL 4
SECOND AND SUBSEQUENT LAYER TRACKING
4.01. Purpose of Second or Subsequent Layer Tracking. Philip Morris
International and the Relevant Administrations recognize that in certain
circumstances effective tracking and tracing to prevent the trade of Contraband
Philip Morris Cigarettes can be enhanced when First Purchasers of Philip Morris
International maintain databases that are similar to First Purchaser Databases
regarding their customers ("Second Layer Tracking") and/or their customers'
customers ("Subsequent Layer Tracking"). For this purpose, Philip Morris
International has developed Second Layer Tracking Kits which include a laptop
computer, a scanner, and a database application ("Second Layer Tracking Kits").
4.02 . Deployment of Second and Subsequent Layer Tracking. Philip Morris
International agrees and undertakes to make Second Layer Tracking Kits
reasonably available to any First Purchaser or Subsequent Purchaser where (i)
Philip Morris International and OLAF agree to do so pursuant to Protocol 6.01(f)
8
of these Tracking and Tracing Protocols; (ii) Philip Morris International is
required to do so by the Arbitrators pursuant to Protocol 6.01(g) of these
Tracking and Tracing Protocols; or (iii) a First Purchaser or a Subsequent
Purchaser requests Second Layer Tracking Kits so that it may carry out a
voluntary Second or Subsequent Layer Tracking program consistent with this
Protocol.
4.03. Training by Philip Morris International. Philip Morris International
shall make commercially reasonable efforts to appropriately train all recipients
of Second Layer Tracking Kits. Such training shall cover the appropriate use of
the Second Layer Tracking Kits under these Protocols. However, due to the fact
that Second and Subsequent Layer Tracking involve data being provided by persons
who are not employed by Philip Morris International, the Parties agree that
Second or Subsequent Layer Tracking data entered into the Database by third
parties shall not be a basis for any allegation by the Relevant Administrations
of breach or non-compliance with the requirements of the Agreement or these
Appendices thereto.
4.04. Access to Second Layer Tracking Information. Philip Morris
International agrees and undertakes that participants in any Second or
Subsequent Layer Tracking shall be required to provide any Second or Subsequent
Layer Tracking information collected by the participant to Philip Morris
International. To the extent Philip Morris International receives such
information, it shall maintain the information in the same manner as the First
Purchaser Database. The Relevant Administrations shall be afforded access to any
such Second or Subsequent Layer Tracking information in the same manner and
subject to the same rules and conditions as the First Purchaser Database as
provided for in Protocol 3 of these Tracking and Tracing Protocols.
4.05. Information on Second and Subsequent Layer Tracking Developments.
Philip Morris International agrees to provide OLAF at its written request with
quarterly reports on developments in Second or Subsequent Layer tracking. Such
updates shall include lists of participating First and Subsequent Purchasers,
details on the kits provided, and information and discussion on any issues that
may have arisen during the preceding period.
PROTOCOL 5
NEW MASTER CASE CODING AND SCANNING TECHNOLOGIES
5.01. Research and Development. Philip Morris International and the
Relevant Administrations recognize that research, development and implementation
or enhancement, as appropriate, of new tracking and tracing technologies is an
important component of ensuring the continued effectiveness of Philip Morris
International's tracking and tracing initiatives.
9
5.02. Research of New Master Case Labeling and Scanning Technologies. As
set forth in Protocol 3.01(c), Philip Morris International shall maintain an
ongoing program researching alternative or enhanced methods for marking Master
Cases with machine scannable or human readable (i.e., spelled out in letters and
numbers) codes, and shall meet with representatives of the Relevant
Administrations on an annual basis, in accordance with Protocol 2.04 to
determine if, how and when any new technology should be implemented.
PROTOCOL 6
ADDITIONAL MEASURES
6.01. Notice of Interest
(a) If, during any 12 month period after the Execution Date, OLAF learns of
at least 7 seizures, each totaling at least 4 million Contraband Philip Morris
Cigarettes, that have a particular market as the Intended Market of Retail Sale
(the "Market of Interest"), it may provide Philip Morris International with
information regarding these incidents (a "Notice of Interest"). A Notice of
Interest shall provide historical data for seizures of Philip Morris Cigarettes
that have the Market of Interest as the Intended Market of Retail Sale,
including the number of seizures of such Philip Morris Cigarettes for the
previous twelve months, and for each such seizure OLAF shall make best efforts
to provide:
(i) the date and location of the seizure;
(ii) the brand of seized Cigarettes indicated on the packaging;
(iii) the amount of seized Cigarettes;
(iv) any Identification Markings that appear on the Master Cases or
Cartons of seized cigarettes;
(v) a brief statement outlining the basis for OLAF's belief that the
seized Cigarettes are Contraband Philip Morris Cigarettes as opposed to
Counterfeit Philip Morris Cigarettes; and
(vi) if available, samples of the seized Cigarettes (to the extent
possible), in the condition they were in at the time of seizure, unless
Philip Morris International has already inspected the seizure under Article
4.01(b) of the Agreement.
(b) Promptly upon receiving a Notice of Interest, Philip Morris
International shall conduct an internal review in order to determine whether, on
the basis of the information available to it, it is possible to determine
whether there has been trade in Contraband Philip Morris Cigarettes that have
the Market
10
of Interest as the Intended Market of Retail Sale as outlined in the Notice of
Interest provided to Philip Morris International by OLAF under Protocol 6.01(a)
above, and, if so, the cause and source of such trade, and what measures should
be taken to address that trade.
(c) If OLAF has provided Philip Morris International with samples of the
seized Cigarettes, Philip Morris International shall, as part of the internal
review described in subsection (b) above, examine the samples in order to
determine, in accordance with the factors set forth in Appendix F to this
Agreement, whether the seized Cigarettes are Counterfeit Philip Morris
Cigarettes or Philip Morris Cigarettes.
(d) Within 60 days of receiving a Notice of Interest, Philip Morris
International shall provide a written response to OLAF detailing the findings of
its internal review and, if necessary, the steps it has taken, or will be
taking, to address the issues raised in the Notice of Interest. The response
shall include the findings as to whether the Cigarettes seized are Philip Morris
Cigarettes or Counterfeit Philip Morris Cigarettes and, if Counterfeit Philip
Morris Cigarettes, examination results demonstrating that conclusion. Any
dispute as to whether the Cigarettes are Counterfeit Philip Morris Cigarettes
shall be settled in accordance with Section 4.01(j) of the Agreement.
(e) If OLAF takes issue with the response of Philip Morris International,
it may request in writing that Philip Morris International undertake one or more
of the following measures:
(i) make commercially reasonable efforts to implement Second or
Subsequent Layer Tracking for selected First Purchasers of Philip Morris
Cigarettes that have the Market of Interest as the Intended Market of
Retail Sale;
(ii) request that the First Purchaser who sells to a Subsequent
Purchaser whose products have been the subject of at least two of the
seizures that gave rise to the Notice of Interest, request that such
Subsequent Purchaser implement Second or Subsequent Layer Tracking, if such
Subsequent Purchaser is a direct customer of the First Purchaser. In the
event that the First Purchaser refuses to honor such request, Philip Morris
International will cease supplying Philip Morris Cigarettes to such First
Purchaser, who will thereafter be a Blocked Contractor. If such Subsequent
Purchaser is not a direct customer of a First Purchaser, then Philip Morris
International shall request that the First Purchaser make commercially
reasonable efforts to require that such Subsequent Purchaser implement
Second or Subsequent Layer Tracking. In the event that the First Purchaser
refuses to take such steps, Philip Morris International will
11
cease supplying Philip Morris Cigarettes to such First Purchaser, who will
thereafter be a Blocked Contractor.
(iii) implement new Master Case coding technologies, or accelerate the
schedule for implementation of the labeling and scanning requirements, such
that such implementation occurs as soon as practicable, for relevant sales
of Philip Morris Cigarettes that have the Market of Interest as the
Intended Market of Retail Sale or for relevant First Purchasers of Philip
Morris Cigarettes that have the Market of Interest as the Intended Market
of Retail Sale; or
(iv) remove the Market of Interest from Exhibits C-1 and A-2 (if
applicable), add the Market of Interest to the Exhibits, as appropriate,
and otherwise make such Market of Interest subject to Pack Marking, Master
Case Labeling and Master Case Scanning, according to Protocols 2.01(a),
3.01(a) and 3.02(a), as appropriate, for a period of five years.
(f) Within 30 days of Philip Morris International receiving a written
request from OLAF under subsection (e) above, Philip Morris International and
OLAF shall meet and confer in good faith in order to determine whether any of
the measures set forth in subsection (e) above should be implemented. If the
dispute has not been resolved within 60 days of Philip Morris International
receiving OLAF's written request, such dispute shall be settled by the
Arbitrators in accordance with Section 12.02 of the Agreement.
(g) In any proceeding brought under Protocol 6.01(f) of these Tracking and
Tracing Protocols, the Arbitrators may require Philip Morris International to
implement one or more of the measures set forth in subsection (e) above only
where it has been proven by the greater weight of the evidence that:
(i) in the 12 month period referred to in the Notice of Interest,
there have been at least 7 seizures each totaling at least 4 million
Contraband Philip Morris Cigarettes, that have the Market of Interest as
the Intended Market of Retail Sale;
(ii) measures that Philip Morris International has adopted for Philip
Morris Cigarettes that have the Market of Interest as the Intended Market
of Retail Sale are insufficient to combat the trade in Contraband Philip
Morris Cigarettes that have the Market of Interest as the Intended Market
of Retail Sale;
(iii) the measure(s) to be implemented from subsection (e) above are
achievable through commercially reasonable efforts and are an effective
response to the trade in Contraband Philip Morris Cigarettes that have the
Market of Interest as the Intended Market of Retail Sale;
12
(iv) the implementation of the measure(s) from subsection (e) above
are reasonably likely to materially reduce the amount, or materially
improve the prevention or detection, of Contraband Philip Morris Cigarettes
that have the Market of Interest as the Intended Market of Retail Sale; and
(v) where the measure to be implemented from subsection (e) above is
a new Master Case coding technology, it has been demonstrated that it is,
or would be, effective and its implementation is reasonably targeted at the
elimination, prevention or detection of Contraband Philip Morris Cigarettes
that have the Market of Interest as the Intended Market of Retail Sale.
(h) Nothing in this Protocol 6 shall preclude Philip Morris International
from adopting (either unilaterally or at the request of OLAF or the Relevant
Administrations) the measures set forth in subsection (e) for Cigarettes with a
particular Intended Market of Retail Sale.
PROTOCOL 7
NEW CARTON AND PACK CODING AND SCANNING TECHNOLOGIES
7.01. Research of Carton and/or Pack Coding Technologies.
(a) Philip Morris International shall maintain an ongoing program of
researching, developing, enhancing and implementing technologies for marking
Cartons and/or Packs with unique scannable codes.
(b) During the term of the Agreement, Philip Morris International shall
maintain an ongoing program of research and development concerning methods and
technologies for improving Carton and Pack Coding technologies. Philip Morris
International shall provide a yearly report to the Representatives of the
Relevant Administrations concerning new technologies for Carton and/or Pack
coding.
7.02. Implementation of Carton and/or Pack Coding Technologies. In
recognition of the principles of the Agreement, once Carton and/or Pack Coding
technologies are commercially feasible, Philip Morris International agrees and
undertakes to implement Carton and/or Pack Coding technologies in accordance
with the conditions set forth below. Philip Morris International shall make
commercially reasonable efforts to make modifications to the First Purchaser
Database and Second and Subsequent Layer Tracking databases to include notation
of Carton codes, as appropriate and technically feasible.
13
(a) Philip Morris International shall implement Carton and/or Pack Coding
technologies for Philip Morris Cigarettes that have a market listed under Tier I
Markets in Exhibit D of these Tracking and Tracing protocols as the Intended
Market of Retail Sale, if:
(i) the implementation of Carton and/or Pack Coding for Philip
Morris Cigarettes that have that Tier I market as the Intended Market of
Retail Sale is achievable through commercially reasonable efforts;
(ii) the effectiveness of the Carton and/or Pack Coding technology
has been demonstrated to be appropriate for industrial application; and
(iii) the implementation of Carton and/or Pack Coding is reasonably
likely to significantly reduce the amount of Contraband Philip Morris
Cigarettes that have that Tier I market as the Intended Market of Retail
Sale.
(b) Philip Morris International shall implement Carton and/or Pack Coding
technologies for Philip Morris Cigarettes that have a market listed under Tier
II Markets in Exhibit D of these Tracking and Tracing protocols as the Intended
Market of Retail Sale, if:
(i) in the previous year, there have been at least 7 seizures, each
totaling at least 4 million Contraband Philip Morris Cigarettes, that have
that Tier II market as the Intended Market of Retail Sale;
(ii) measures that Philip Morris International has adopted for Philip
Morris Cigarettes that have that Tier II market as the Intended Market of
Retail Sale are insufficient to combat the trade in Contraband Philip
Morris Cigarettes that have that Tier II market as the Intended Market of
Retail Sale;
(iii) the implementation of Carton and/or Pack Coding is reasonably
targeted at the elimination, prevention and/or detection of Contraband
Philip Morris Cigarettes that have that Tier II market as the Intended
Market of Retail Sale;
(iv) the implementation of Carton and/or Pack Coding is achievable
through commercially reasonable efforts and is an effective response for
Philip Morris Cigarettes that have that Tier II market as the Intended
Market of Retail Sale;
14
(v) the effectiveness of the Carton and/or Pack Coding technology
has been demonstrated to be appropriate for industrial application; and
(vi) the implementation of Carton and/or Pack Coding is reasonably
likely to significantly reduce the amount of Contraband Philip Morris
Cigarettes that have that Tier II market as the Intended Market of Retail
Sale.
(c) Beginning 180 days after the Execution Date, OLAF may provide written
notice to Philip Morris International that either the criteria of subsection (a)
have been met for Philip Morris Cigarettes that have a particular Tier I market
as defined in Exhibit D as the Intended Market of Retail Sale, or the criteria
of subsection (b) have been met for Philip Morris Cigarettes that have a
particular Tier II market as defined in Exhibit D as the Intended Market of
Retail Sale, and request that Philip Morris International implement Carton
and/or Pack Coding for those Philip Morris Cigarettes. If Philip Morris
International disagrees with OLAF's written request, Philip Morris International
and OLAF shall meet and confer in good faith within 30 days of Philip Morris
International receiving such a request from OLAF in order to determine whether
the criteria of subsection (a) or (b) above have been met and whether Carton
and/or Pack Coding should be implemented for Philip Morris Cigarettes that have
the market in question as the Intended Market of Retail Sale. If the dispute
cannot be resolved within 60 days of Philip Morris International receiving
OLAF's written request, such dispute shall be settled by the Arbitrators in
accordance with Section 12.02 of the Agreement and by application of the
criteria set forth in subsections (a) or (b) above as applicable.
(d) Nothing in this Protocol 7 shall preclude Philip Morris International
from adopting (either unilaterally or at the request of OLAF or the Relevant
Administrations) measures set forth in subsections (a) or (b), above, for
Cigarettes with a particular Intended Market of Retail Sale.
15
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
EXHIBIT A-1
MARKETS WITH MARKET-SPECIFIC LABELING
I. In accordance with Section 2.01(a), Philip Morris International shall
make commercially reasonable efforts to mark Packs or Cartons of Philip Morris
Cigarettes that have one of the following domestic markets as the Intended
Market of Retail Sale with markings, codes or other information which permit a
determination that such domestic market is the Intended Market of Retail Sale:
1. *
2. *
3. *
4. *
5. *
6. *
7. *
8. Austria
9. *
10. *
11. Belgium
12. *
13. *
14. *
15. *
16. *
17. *
18. *
19. *
20. *
21. *
22. *
23. *
24. *
25. *
26. *
27. *
28. Cyprus
29. Czech Republic
30. *
31. Denmark
32. *
33. *
34. *
1
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
35. *
36. *
37. *
38. *
39. Estonia
40. Finland
41. France and Monaco
42. *
43. *
44. *
45. Germany
46. Greece
47. *
48. *
49. *
50. *
51. *
52. Hungary
53. *
54. *
55. *
56. Ireland
57. *
58. Italy
59. *
60. *
61. *
62. *
63. *
64. *
65. *
66. *
67. *
68. Latvia
69. *
70. *
71. Lithuania
72. Luxembourg
73. *
74. *
75. *
76. *
77. *
2
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
78. *
79. Malta
80. *
81. *
82. *
83. *
84. *
85. *
86. *
87. *
88. *
89. Netherlands
90. *
91. *
92. *
93. *
94. *
95. *
96. *
97. *
98. *
99. *
100. *
101. Poland
102. Portugal
103. *
104. *
105. *
106. *
107. *
108. *
109. *
110. *
111. *
112. Slovakia
113. Slovenia
114. *
115. Spain
116. Sweden
117. *
118. *
119. *
120. *
3
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
121. *
122. *
123. *
124. *
125. *
126. *
127. United Kingdom
128. *
129. *
130. *
131. *
132. *
EXHIBIT A-2
MARKETS WITHOUT MARKET-SPECIFIC LABELING
I. As described below, the following domestic markets share common labeling
at the Pack and Carton level, so that Packs and Cartons from those domestic
markets do not have unique labeling and shall bear the labeling indicated:
------ -------------------------------------- -------------------------------
Market Labeling
------ -------------------------------------- -------------------------------
1. * *
------ -------------------------------------- -------------------------------
2. * *
------ -------------------------------------- -------------------------------
3. * *
------ -------------------------------------- -------------------------------
4. * *
------ -------------------------------------- -------------------------------
5. * *
------ -------------------------------------- -------------------------------
6. * *
------ -------------------------------------- -------------------------------
7. * *
------ -------------------------------------- -------------------------------
8. * *
------ -------------------------------------- -------------------------------
4
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
------ -------------------------------------- -------------------------------
9. * *
------ -------------------------------------- -------------------------------
10. * *
------ -------------------------------------- -------------------------------
11. * *
------ -------------------------------------- -------------------------------
12. * *
------ -------------------------------------- -------------------------------
13. * *
------ -------------------------------------- -------------------------------
14. * *
------ -------------------------------------- -------------------------------
15. * *
------ -------------------------------------- -------------------------------
16. * *
------ -------------------------------------- -------------------------------
17. * *
------ -------------------------------------- -------------------------------
18. * *
------ -------------------------------------- -------------------------------
19. * *
------ -------------------------------------- -------------------------------
20. * *
------ -------------------------------------- -------------------------------
21. * *
------ -------------------------------------- -------------------------------
22. * *
------ -------------------------------------- -------------------------------
23. * *
------ -------------------------------------- -------------------------------
24. * *
------ -------------------------------------- -------------------------------
25. * *
------ -------------------------------------- -------------------------------
26. * *
------ -------------------------------------- -------------------------------
27. * *
------ -------------------------------------- -------------------------------
5
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
------ -------------------------------------- -------------------------------
28. * *
------ -------------------------------------- -------------------------------
29. * *
------ -------------------------------------- -------------------------------
30. * *
------ -------------------------------------- -------------------------------
31. * *
------ -------------------------------------- -------------------------------
32. * *
------ -------------------------------------- -------------------------------
33. * *
------ -------------------------------------- -------------------------------
34. * *
------ -------------------------------------- -------------------------------
35. * *
------ -------------------------------------- -------------------------------
36. * *
------ -------------------------------------- -------------------------------
37. * *
------ -------------------------------------- -------------------------------
38. * *
------ -------------------------------------- -------------------------------
39. * *
------ -------------------------------------- -------------------------------
40. * *
------ -------------------------------------- -------------------------------
41. * *
------ -------------------------------------- -------------------------------
42. * *
------ -------------------------------------- -------------------------------
43. * *
------ -------------------------------------- -------------------------------
44. * *
------ -------------------------------------- -------------------------------
II. Philip Morris International need not place market-specific labeling on
Packs or Cartons which have the domestic markets listed in Exhibit A-2(I) as the
Intended Market of Retail Sale.
6
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
EXHIBIT A-3
MANUFACTURING CENTERS WITH LIMITED PACK AND CARTON CODING
I. As described below, the following Manufacturing Centers have only
limited Pack and Carton Coding, and are thus excluded from the requirements of
Protocol 2.03 for the products identified below:
- ----- ----------------------- ---------------------- --------------------------
Manufacturing Center Product Manufactured Coding Limitation
- ----- ----------------------- ---------------------- --------------------------
1. * * Production system is not
shift based; therefore
there is no shift
information.
- ----- ----------------------- ---------------------- --------------------------
2. * * No Coding
- ----- ----------------------- ---------------------- --------------------------
3. * * Coding contains factory,
machine number and
week of manufacture
- ----- ----------------------- ---------------------- --------------------------
4. * * Machine No. missing
- ----- ----------------------- ---------------------- --------------------------
5. * * No Coding
- ----- ----------------------- ---------------------- --------------------------
EXHIBIT A-4
DOMESTIC MARKETS IN WHICH PHILIP MORRIS INTERNATIONAL
DOES NOT DO BUSINESS
I. As described below, Philip Morris International does not sell product
with the following domestic markets as the Intended Market of Retail Sale as of
the Execution Date:
1. *
2. *
7
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
3. *
4. *
5. *
6. *
7. *
8. *
9. *
10. *
11. *
12. *
13. *
14. *
15. *
16. *
17. *
18. *
19. *
20. *
21. *
22. *
23. *
24. *
25. *
26. *
27. *
28. *
29. *
30. *
31. *
II. In the event that Philip Morris International begins selling product
with one of the domestic markets listed in Exhibit A-4(I) as the Intended Market
of Retail Sale, Philip Morris International shall follow the procedures set
forth in Protocol 2.01(b).
EXHIBIT A-5
PROCEDURES FOR LABELING DUTY-FREE PACKS AND/OR CARTONS
I. For World Wide Duty Free, * of the Execution Date, Philip Morris
International shall make commercially reasonable efforts to mark
8
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
Packs and/or Cartons of Philip Morris Cigarettes with markings, codes or
other information which permit a determination of the country or region in
which Philip Morris International intends such Cigarettes to be sold
duty-free, in accordance with the following:
A.
*
B.
*
C.
*
D. Nothing in the foregoing shall preclude Philip Morris International from
adopting unique markings, codes, or other information for markets where the
annual sales of Philip Morris Cigarettes to be sold to duty-free consumers are
below the thresholds described above.
9
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
EXHIBIT B
SCHEDULE FOR IMPLEMENTATION OF MASTER CASE BARCODE LABELING
I. Philip Morris International shall make commercially reasonable efforts
to apply barcode labels within thirty days of the Execution Date to all Master
Cases of Cigarettes manufactured by Philip Morris International at its own
facilities for sale by Philip Morris International with Intended Market of
Retail Sale in the following domestic markets:
1. Austria
2. Belgium
3. Denmark
4. Finland
5. France
6. Germany
7. Greece, *
8. Ireland
9. Italy
10. Luxembourg
11. Netherlands
12. Portugal
13. Spain
14. Sweden
15. United Kingdom
II. Philip Morris International shall make commercially reasonable efforts
to apply barcode labels within 12 months of the Execution Date to all Master
Cases of Cigarettes manufactured by Philip Morris International at its own
facilities for sale by Philip Morris International with an Intended Market of
Retail Sale in * markets worldwide * and in the following
domestic markets:
1. *
2. *
3. *
4. *
5. *
6. *
7. *
8. *
9. *
10
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
10. *
11. *
12. *
13. *
14. *
15. *
16. *
17. *
18. *
19. *
20. *
21. *
22. *
23. *
24. *
25. *
26. *
27. *
28. *
29. *
30. *
31. *
32. *
33. *
34. *
35. *
36. *
37. *
38. *
39. *
40. *
41. *
42. *
43. *
44. *
45. *
46. *
47. *
48. *
49. *
50. *
51. *
52. *
11
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
53. *
54. *
55. *
56. *
III. Philip Morris International shall make commercially reasonable efforts
to apply barcode labels within * of the Execution Date to all Master Cases of
Cigarettes manufactured by Philip Morris International for sale by Philip Morris
International worldwide.
IV. Recognizing the particular nature of the relationship between Philip
Morris International and Third Party Manufacturers, the Parties agree that
Philip Morris International shall make commercially reasonable efforts to
implement Master Case barcode labeling within * of the Execution Date for
products such Third Party Manufacturers manufacture for Philip Morris
International.
12
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
EXHIBIT C
SCHEDULE FOR IMPLEMENTATION OF MASTER CASE BARCODE LABEL SCANNING
I. Single First Purchaser Markets
A. For Philip Morris Cigarettes which have the following markets as the
Intended Market of Retail Sale, Philip Morris International sells to a single
First Purchaser and marks the product with Pack or Carton markings satisfying
Protocol 2.01:
1. *
2. *
3. *
4. *
5. *
6. *
7. *
8. *
9. *
10. *
11. *
12. *
13. *
14. *
15. *
16. *
17. *
18. *
19. *
20. *
21. *
22. *
23. *
24. *
25. *
26. *
27. *
28. *
13
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
29. *
30. *
31. *
32. *
33. *
34. *
35. *
36. *
37. *
38. *
39. *
40. *
41. *
42. *
43. *
44. *
45. *
46. *
47. *
48. *
49. *
50. *
51. *
52. *
53. *
54. *
55. *
56. *
57. *
58. *
59. *
60. *
B. Pursuant to Section 3.02(b), Philip Morris International and/or its
Contractors need not scan Master Cases sold to the First Purchaser for the
markets set forth in Exhibit C(I)(A), which shall be updated as needed.
II. Implementation in Tier I Markets
14
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
A. Unless altered by agreement of the Parties at a meeting of Philip Morris
International and the Representatives of the Relevant Administrations, "Tier I
Markets" shall be defined as * * , and the following Philip Morris
International markets:
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 *
9 *
10 *
11 *
12 *
13 *
14
B. Philip Morris International shall make commercially reasonable efforts
to bring all Tier I Markets into compliance with the requirements of Protocol
3.02(a) and (b) within * of the Execution Date.
III. Implementation in Tier II Markets
A. Unless altered by agreement of the Parties at a meeting of Philip Morris
International and the Representatives of the Relevant Administrations, "Tier II
Markets" shall be defined as the following Philip Morris International markets:
15
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
1. *
2. *
3. *
4. *
5. *
6. *
7. *
8. *
9. *
10. *
11. *
12. *
13. *
14. *
15. *
16. *
17. *
18. *
19. *
20. *
21. *
22. *
23. *
24. *
25. *
26. *
27. *
28. *
29. *
30. *
B. With the exception of markets with third party manufacturers, Philip
Morris International shall make commercially reasonable efforts to bring all
Tier II Markets into compliance with the requirements of Protocol 3.02(a) and
(b) within * of the Execution Date.
C. Recognizing the particular nature of the relationship between Philip
Morris International and Third Party Manufacturers, the Parties agree that
Philip Morris International shall make commercially reasonable efforts
16
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
to bring all Tier II Markets into compliance with the requirements of Protocol
3.02(a) and (b) within * of the Execution Date for products such Third Party
Manufacturers manufacture for Philip Morris International.
IV. Non-compliance with Protocol 3.02(a) and (b) Due to Distribution or
Other Changes:
(a) In the event that Philip Morris International effects a change in the
manner of distribution, an acquisition, a sourcing change, or other business
transaction which will have the effect of rendering a market (or markets)
compliant with the requirements of Protocol 3.02(a) and (b) no longer compliant
therewith, or will have the effect of rendering a market exempt from such
requirements no longer exempt, Philip Morris International shall so notify the
Representatives of the Relevant Administrations within 30 days of such change.
In the event that such market (or markets) is within the Territory of a Member
State or a Designated State, Philip Morris International shall make commercially
reasonable efforts to bring such market back into compliance with the
requirements of Protocol 3.02(a) and (b) within 2 years of such change.
(b) Similarly, in the event that Philip Morris International effects a
change in the manner of distribution, an acquisition, a sourcing change, or
other business transaction which will have the effect of making a particular
market (or markets) no longer required to be compliant with the requirements of
Protocol 3.02(a) and (b), then, Philip Morris International shall so notify the
Representatives of the Relevant Administrations and may henceforth treat such
market as exempt from or no longer required to be compliant with such
requirements, as the case may be.
17
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
EXHIBIT D
MARKET GROUPINGS FOR NEW PACK AND CARTON CODING AND SCANNING TECHNOLOGIES
I. Tier I Markets
A. Tier I Markets Defined. With the exception of any market that has a sole
First Purchaser of Philip Morris International for such market and that market
has Pack or Carton markings satisfying Protocol 2.01, and subject to the time
limit set for third party manufacturers in Exhibit D(I)(B), the following
domestic markets are defined as Tier I Markets for the purposes of Protocol 7:
-------- -----------------------------------------------------
1. Austria
-------- -----------------------------------------------------
2. Belgium
-------- -----------------------------------------------------
3. Cyprus
-------- -----------------------------------------------------
4. Czech Republic
-------- -----------------------------------------------------
5. Denmark
-------- -----------------------------------------------------
6. Estonia
-------- -----------------------------------------------------
7. Finland
-------- -----------------------------------------------------
8. France
-------- -----------------------------------------------------
9. Germany
-------- -----------------------------------------------------
10. Greece
-------- -----------------------------------------------------
11. Hungary
-------- -----------------------------------------------------
12. Ireland
-------- -----------------------------------------------------
13. Italy
-------- -----------------------------------------------------
14. Latvia
-------- -----------------------------------------------------
15. Lithuania
-------- -----------------------------------------------------
16. Luxembourg
-------- -----------------------------------------------------
17. Malta
-------- -----------------------------------------------------
18. Netherlands
-------- -----------------------------------------------------
19. Poland
-------- -----------------------------------------------------
20. Portugal
-------- -----------------------------------------------------
21. Slovakia
-------- -----------------------------------------------------
22. Slovenia
-------- -----------------------------------------------------
23. Spain
-------- -----------------------------------------------------
24. Sweden
-------- -----------------------------------------------------
25. United Kingdom
-------- -----------------------------------------------------
B. Recognizing the particular nature of the relationship between Philip
Morris International and Third Party Manufacturers, the Parties agree that, in
determining commercial reasonableness, the time frame for
18
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
implementation of any obligations in Tier I markets imposed pursuant to Protocol
7 shall, in the case of products manufactured for Philip Morris International by
Third Party Manufacturers, be extended for * beyond that otherwise
applicable in the case of products manufactured by Philip Morris International.
II. Tier II Markets
A. Tier II Markets Defined. With the exception of any market that has a
sole First Purchaser of Philip Morris International for such a market and that
market has Pack or Carton markings satisfying Protocol 2.01, and subject to the
time limit set for third party manufacturers in Exhibit D(I)(B), the following
domestic markets are defined as Tier II Markets for the purposes of Protocol 7:
---------- -------------------------------------------------------
1. *
---------- -------------------------------------------------------
2. *
---------- -------------------------------------------------------
3. *
---------- -------------------------------------------------------
4. *
---------- -------------------------------------------------------
5. *
---------- -------------------------------------------------------
6. *
---------- -------------------------------------------------------
7. *
---------- -------------------------------------------------------
8. *
---------- -------------------------------------------------------
9. *
---------- -------------------------------------------------------
10. *
---------- -------------------------------------------------------
11. *
---------- -------------------------------------------------------
12. *
---------- -------------------------------------------------------
13. *
---------- -------------------------------------------------------
14. *
---------- -------------------------------------------------------
15. *
---------- -------------------------------------------------------
16. *
---------- -------------------------------------------------------
17. *
---------- -------------------------------------------------------
18. *
---------- -------------------------------------------------------
19. *
---------- -------------------------------------------------------
20. *
---------- -------------------------------------------------------
21. *
---------- -------------------------------------------------------
22. *
---------- -------------------------------------------------------
B. Recognizing the particular nature of the relationship between Philip
Morris International and Third Party Manufacturers, the Parties agree that, in
determining commercial reasonableness, the time frame for implementation of any
obligations in Tier II markets imposed pursuant to Protocol 7 shall, in the case
of products manufactured for Philip Morris International by Third Party
Manufacturers, be extended for * beyond
19
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
that otherwise applicable in the case of products manufactured by Philip Morris
International.
20
APPENDIX E
----------
----------- ------------- ---------- ---------- ------------ ---------- ----------- ---------- ------------
AT BE DE DK EL ES FI FR IE
- ------------------ ----------- ------------- ---------- ---------- ------------ ---------- ----------- ---------- ------------
VAT 20% 21% 16% 25% 18% 16% 22% 19.6% 19%
- ------------------ ----------- ------------- ---------- ---------- ------------ ---------- ----------- ---------- ------------
SPECIFIC EXCISE 21.38(euro) 18.7474(euro) 61.7(euro) 81.7(euro) 4.2699(euro) 3.91(euro) 15.13(euro) 7.41(euro) 124.94(euro)
per per per per per per per per per
thousand thousand thousand thousand thousand thousand thousand thousand thousand
- ----------------- ----------- ------------- ---------- ---------- ------------ ---------- ----------- ---------- ------------
AD VALOREM 42% 45.84 24.23% 21.22% 53.86% 54% 50% 55.19% 18.46%
EXCISE
- ----------------- ----------- ------------- ---------- ---------- ------------ ---------- ----------- ---------- ------------
CUSTOMS DUTY 57.6% 57.6% 57.6% 57.6% 57.6% 57.6% 57.6% 57.6% 57.6%
- ----------------- ----------- ------------- ---------- ---------- ------------ ---------- ----------- ---------- ------------
---------- ------------- ----------- ----------- ----------- ------------
IT LU NL PT SE UK
- ------------------ ---------- ------------- ----------- ----------- ----------- ------------
VAT 20% 12% 19% 19% 25% 17.5%
- ------------------ ---------- ------------- ----------- ----------- ----------- ------------
SPECIFIC EXCISE 3.86(euro) 11.8914(euro) 53.27(euro) 40.69(euro) 21.96(euro) 154.34(euro)
per per per per per per
thousand thousand thousand thousand thousand thousand
- ----------------- ---------- ------------- ----------- ----------- ----------- ------------
AD VALOREM 54.26% 46.84% 20.51% 23% 39.2% 22%
EXCISE
- ----------------- ---------- ------------- ----------- ----------- ----------- ------------
CUSTOMS DUTY 57.6% 57.6% 57.6% 57.6% 57.6% 57.6%
- ----------------- ---------- ------------- ----------- ----------- ----------- ------------
1. Method to be used for calculation.
For purposes of Supplemental Payments under Art. 4 of the Agreement, the minimum
retail sales price to the public, all taxes included, shall be calculated on any
Philip Morris Cigarettes seized, and the taxes and duties owed under Art. 4 of
the Agreement, if any, shall be calculated on the basis of those that would have
been due had the product been sold at that minimum sales price to the public, in
the Member State of seizure.
The method of calculation of customs duties, excise taxes and V.A.T., as
applicable, for each Member State or the EC shall be the method normally
employed by that Member State or by the EC.
The Parties may agree upon formulas or electronic spreadsheets that implement
the above method.
2. Arbitration
If, on occasion of receipt by a Member State of a Supplemental Payment,
disagreement arises as to the results of these calculations, the relevant
Parties shall meet and confer within 5 days of receipt of the Supplemental
Payment by the Member State, in a good faith attempt to resolve these
differences. If agreement cannot be reached within 10 days thereafter, then the
relevant Parties shall each have recourse to Arbitration under Art. 12.02 of the
Agreement to determine the amounts to be paid under Art. 4 of the Agreement in
that instance.
3. Amendments
The above table and markups shall be updated as modifications are made to the
underlying tax rates, upon any New Member State acceding to the EC or becoming a
party to the Agreement, or at any time as otherwise agreed in writing by the
Parties.
APPENDIX F
FACTORS FOR ESTABLISHING COUNTERFEIT PHILIP MORRIS CIGARETTES
For the purpose of Section 4.01(j) of the Agreement, in determining whether
Cigarettes bearing Philip Morris Trademarks are Counterfeit Philip Morris
Cigarettes, the following factors shall be considered and compared with indicia
of genuine Philip Morris Cigarettes as provided by Philip Morris International
and updated from time to time:
o the look, shape, color, and size of the packaging;
o the materials used in the packaging;
o the size, font, color, language and content of the text appearing on
the packaging;
o the markings, codes, and stamps appearing on the packaging;
o the look, shape, color, and size of the Cigarettes;
o the markings on the Cigarettes;
o the materials used in the Cigarettes paper and filter;
o the nature and quality of the tobacco; and
o all the ingredients of the Cigarettes.
*Material omitted pursuant to a request for confidential treatment
Material filed separately with the Securities Exchange Commission
APPENDIX G
List of Designated States
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
* *
*
*
*
Procedure for Amending Designated States List
OLAF may seek to amend the list of Designated States by adding a State to, or
deleting a State from, the list of Designated States, based upon a reasonable
belief that the addition or deletion of a State from that list is consistent
with the purpose and intent of this Agreement. OLAF shall notify Philip Morris
International of any proposed change to the list. If Philip Morris International
objects to the proposed change, Philip Morris International shall state its
objection in writing within 30 days of receiving the notice. Philip Morris
International and OLAF shall meet and confer within 60 days of Philip Morris
International sending its objection in an attempt to reach agreement on any
changes to the list of Designated States. If Philip Morris International and
OLAF cannot reach agreement, either of them may seek arbitration pursuant to
article 12.02 of this Agreement.
If a State is added to the list of Designated States by agreement between Philip
Morris International and OLAF, Philip Morris International shall have one year
from the date a State is added to the Designated States list in which to comply
with all its obligations pursuant to this Agreement and the Appendices thereto
in connection with that Designated State. If a State is added to the list of
Designated States by the Arbitrator, Philip Morris International shall make
commercially reasonable efforts to comply with its obligations pursuant to this
Agreement and the Appendices in connection with that Designated State within 30
days of the Arbitrator's order to that effect.
JONES DAY
Luc G. Houben* LOUIZALAAN 480 BUS 7 Howard M. Liebman
Thierry Buytaeri AVENUE LOUISE 480. BTE 7 Member of the District
Bernard Amory B-1050 BURSSELS, BELGIUM of Columbia Bar
Alexandra Verheyden*
Mirailia Buydens**
TELEPHONE: 32.(0)2.645.14.11 FACSIMILE: 32.(0)2.645.14.45
Advocten-Avocats
Members of the Bussels Bar
* Members of the New York Bar
** Member of the Paris Bar
The Registrar
Court of Justice of the European Communities,
L-2925 Luxembourg
Subject: Joined Cases C-131/03 P and C-146/03 P, RJ Reynolds et al
---------------------------------------------------------
and Philip Morris International v. Commission
---------------------------------------------
Dear Sir:
We hereby wish to inform you that our client Philip Morris International,
the appellant in the Case C-146/03 P, has decided to withdraw from the present
proceedings.
We look forward to receiving the Order by the President of the Court that
this case has been removed from the Register.
Repectfully submitted,
Eric Morgen de Rivery
ATLANTA BRUSSELS CHICAGO CLEVELAND COLUMBUS DALLAS FRANKFURT HONG KONG
HOUSTON IRVINE LONDON LOS ANGELES MADRID
MENLO PARK MILAN MUMBAI MUNICH NEW DELHI NEW YORK PARIS PITSBURGH
SHANGHAI SINGAPORE SYDNEY TAPPEI TOKYO WASHINGTON
*ASSOCIATE FIRM
APPENDIX I
Country (Market) Brand
- ---------------- -----
AFGHANISTAN BOND STREET
AFGHANISTAN L&M
AFGHANISTAN MARLBORO
AFGHANISTAN Parliament
ALBANIA ASSOS
ALBANIA BOND STREET
ALBANIA L&M
ALBANIA MARLBORO
ALBANIA VIRGINIA SLIMS
Algeria L&M
Algeria MARLBORO
ANDORRA CHESTERFIELD
ANDORRA L&M
ANDORRA LARK
ANDORRA MARLBORO
ANDORRA PHILIP MORRIS
ANDORRA SG
ANGOLA MARLBORO
ARGENTINA BENSON & HEDGES
ARGENTINA CHESTERFIELD
ARGENTINA COLORADO
ARGENTINA FREEPORT
ARGENTINA IMPARCIALES
ARGENTINA L&M
ARGENTINA LE MANS
ARGENTINA MARLBORO
ARGENTINA PARLIAMENT
ARGENTINA PARTICULARES
ARGENTINA PHILIP MORRIS
ARGENTINA VIRGINIA SLIMS
ARGENTINA WILTON
ARMENIA ASSOS
ARMENIA BOND STREET
ARMENIA CHESTERFIELD
ARMENIA L&M
ARMENIA MARLBORO
ARMENIA PARLIAMENT
ARMENIA RED & WHITE
ARUBA MARLBORO
ARUBA NEVADA
ARUBA RICHMOND
AUSTRALIA ALBANY
AUSTRALIA ALPINE
AUSTRALIA CHESTERFIELD
AUSTRALIA FORTUNE
AUSTRALIA LANGHAM VINTAGE
AUSTRALIA LONGBEACH
AUSTRALIA MARLBORO
AUSTRALIA PETER JACKSON
APPENDIX I
Country (Market) Brand
- ---------------- -----
AUSTRALIA SUPER
AUSTRALIA VISCOUNT
AUSTRIA BASIC
AUSTRIA CHESTERFIELD
AUSTRIA EVE
AUSTRIA MARLBORO
AUSTRIA MURATTI
AUSTRIA PHILIP MORRIS
AZERBAIJAN CONGRESS
AZERBAIJAN L&M
AZERBAIJAN MARLBORO
AZERBAIJAN PARLIAMENT
AZORES L&M
AZORES MARLBORO
AZORES PORTUGUES
AZORES RITZ
AZORES SG
AZORES SURF
BAHRAIN L&M
BAHRAIN MARLBORO
BAHRAIN MERIT
BAHRAIN PARLIAMENT
BAHRAIN PHILIP MORRIS
BAHRAIN RED & WHITE
BELARUS BOND STREET
BELARUS L&M
BELARUS MARLBORO
BELARUS PARLIAMENT
BELGIUM ARMADA
BELGIUM Basic
BELGIUM CHESTERFIELD
BELGIUM L&M
BELGIUM MARLBORO
BELGIUM MERIT
BELGIUM MURATTI
BELGIUM NORTH POLE
BELGIUM PHILIP MORRIS
BELGIUM VISA
BELGIUM WELTA
BELGIUM XXL
BENIN BOND STREET
BENIN MARLBORO
BENIN VISA
BOLIVIA BIG BEN
BOLIVIA Chesterfield
BOLIVIA COLORADO
BOLIVIA L&M
BOLIVIA MARLBORO
BOSNIA & HERZEGOVINA BEST
BOSNIA & HERZEGOVINA CLASSIC
APPENDIX I
Country (Market) Brand
- ---------------- -----
BOSNIA & HERZEGOVINA DRINA
BOSNIA & HERZEGOVINA MARLBORO
BOSNIA & HERZEGOVINA MOND
BOSNIA & HERZEGOVINA MORAVA
BOSNIA & HERZEGOVINA VEK
BRAZIL BENSON & HEDGES
BRAZIL CF
BRAZIL CHANCELLOR
BRAZIL DALLAS
BRAZIL GALAXY
BRAZIL L&M
BRAZIL LARK
BRAZIL LUXOR
BRAZIL MARLBORO
BRAZIL MUSTANG
BRAZIL PALACE
BRAZIL PARLIAMENT
BRAZIL SHELTON
BRAZIL Super
BRUNEI ALPINE
BRUNEI L&M
BRUNEI MARLBORO
BRUNEI VIRGINIA SLIMS
BULGARIA MARLBORO
BURKINA FASO BOND STREET
BURKINA FASO MARLBORO
CAMBODIA L&M
CAMBODIA LONGBEACH
CAMBODIA MARLBORO
CAMEROON BOND STREET
CAMEROON MARLBORO
CANARY ISLANDS CHESTERFIELD
CANARY ISLANDS L&M
CANARY ISLANDS LARK
CANARY ISLANDS MARLBORO
CANARY ISLANDS MERIT
CANARY ISLANDS PHILIP MORRIS
CAPE VERDE MARLBORO
CAPE VERDE SG
CARIBBEAN CHESTERFIELD
CARIBBEAN MARLBORO
CARIBBEAN MERIT
CARIBBEAN PARLIAMENT
CARIBBEAN PHILIP MORRIS
CARIBBEAN VIRGINIA SLIMS
CHANNEL ISLANDS MARLBORO
CHILE BOND STREET
CHILE L&M
CHILE MARLBORO
CHILE MLB
APPENDIX I
Country (Market) Brand
- ---------------- -----
CHILE PHILIP MORRIS
CHRISTMAS ISLANDS ALPINE
CHRISTMAS ISLANDS LONGBEACH
CHRISTMAS ISLANDS MARLBORO
CHRISTMAS ISLANDS PETER JACKSON
COCOS (KEELING) ISLAND ALPINE
COCOS (KEELING) ISLAND LONGBEACH
COCOS (KEELING) ISLAND MARLBORO
COCOS (KEELING) ISLAND PETER JACKSON
COLOMBIA L&M
COLOMBIA MARLBORO
CONGO BOND STREET
CONGO MARLBORO
COOK ISLAND LONGBEACH
COOK ISLAND MARLBORO
CORSICA CHESTERFIELD
CORSICA L&M
CORSICA MARLBORO
CORSICA MERIT
CORSICA MURATTI
CORSICA PHILIP MORRIS
COSTA RICA Bond Street
COSTA RICA DERBY
COSTA RICA L & M
COSTA RICA MARLBORO
COSTA RICA Parliament
CROATIA MARLBORO
CZECH REPUBLIC ARTA
CZECH REPUBLIC BAKARA
CZECH REPUBLIC BOND STREET
CZECH REPUBLIC Brand X
CZECH REPUBLIC CHESTERFIELD
CZECH REPUBLIC CLASSIC
CZECH REPUBLIC L&M
CZECH REPUBLIC MARLBORO
CZECH REPUBLIC PETRA
CZECH REPUBLIC PHILIP MORRIS
CZECH REPUBLIC RED & WHITE
CZECH REPUBLIC START
DEM. REP. OF CONGO DOM MARLBORO
DENMARK CHESTERFIELD
DENMARK MARLBORO
DENMARK PHILIP MORRIS
DENMARK SKJOL
DF Australia DF MARLBORO
DF Belgium DF ARMADA
DF Belgium DF WELTA
DF New Zealand DF MARLBORO
DF URUGUAY DF CASINO
DF URUGUAY DF FIESTA
APPENDIX I
Country (Market) Brand
- ---------------- -----
DF URUGUAY DF MARLBORO
DF URUGUAY DF PHILIP MORRIS
DF VENEZUELA DUTY FREE ASTOR
DF VENEZUELA DUTY FREE MARLBORO
DJIBOUTI MARLBORO
DOMINICAN REPUBLIC DOM. DELTA
DOMINICAN REPUBLIC DOM. LIDER
DOMINICAN REPUBLIC DOM. MARLBORO
DOMINICAN REPUBLIC DOM. NACIONAL
DR New Brand F.F.
EAST TIMOR ALPINE
EAST TIMOR MARLBORO
EAST TIMOR PETER JACKSON
ECUADOR BELMONT
ECUADOR L&M
ECUADOR FULL EED
ECUADOR LARK
ECUADOR LIDER
ECUADOR MARLBORO
ECUADOR PARLIAMENT
EGYPT L&M
EGYPT BOND STREET
EGYPT MARLBORO
EGYPT MERIT
EL SALVADOR DIPLOMAT
EL SALVADOR LIDER
EL SALVADOR MARLBORO
EQUATORIAL GUINEA DOM. BOND STREET
EQUATORIAL GUINEA DOM. MARLBORO
ESTONIA BOND STREET
ESTONIA L&M
ESTONIA MARLBORO
ESTONIA NEXT
ESTONIA PHILIP MORRIS
ESTONIA RED & WHITE
ETHIOPIA MARLBORO
FEDERAL REP YUGOSLAVIA L&M
FEDERAL REP YUGOSLAVIA MARLBORO
FIJI ALPINE
FIJI MARLBORO
FIJI LONGBEACH
FINLAND BELMONT
FINLAND CHESTERFIELD
FINLAND L&M
FINLAND MARLBORO
FINLAND MULTIFILTER
FRANCE ARMADA
FRANCE BASIC
FRANCE CHESTERFIELD
FRANCE L&M
APPENDIX I
Country (Market) Brand
- ---------------- -----
FRANCE MARLBORO
FRANCE MERIT
FRANCE MURATTI
FRANCE PHILIP MORRIS
FRANCE SG
FRENCH POLYNESIA CHESTERFIELD
FRENCH POLYNESIA L&M
FRENCH POLYNESIA MARLBORO
FRENCH POLYNESIA LARK
FRENCH POLYNESIA PHILIP MORRIS
GABON MARLBORO
GAMBIA BOND STREET
GAMBIA MARLBORO
GEORGIA BOND STREET AMERICAN
GEORGIA CHESTERFIELD
GEORGIA CONGRESS
GEORGIA L&M
GEORGIA MARLBORO
GEORGIA PARLIAMENT
GERMANY BASIC
GERMANY CHESTERFIELD
GERMANY EVE
GERMANY F 6
GERMANY JUWEL
GERMANY KARO
GERMANY L&M
GERMANY MARLBORO
GERMANY MERIT
GERMANY MULTIFILTER
GERMANY NEXT
GERMANY PARLIAMENT
GERMANY PHILIP MORRIS
GERMANY PM Supreme
GREECE ASSOS
GREECE CHESTERFIELD
GREECE Marlboro
GREECE L&M
GREECE MERIT
GREECE MURATTI
GREECE Old Navy
GREECE PHILIP MORRIS
GREECE President One
GREEK CYPRUS ASSOS
GREEK CYPRUS L&M
GREEK CYPRUS MARLBORO
GREEK CYPRUS PHILIP MORRIS
GREENLAND MARLBORO
GUATEMALA L & M
GUATEMALA DIPLOMAT
GUATEMALA LIDER
APPENDIX I
Country (Market) Brand
- ---------------- -----
GUATEMALA MARLBORO
GUATEMALA RUBIOS
GUINEA ASSOS
GUINEA MARLBORO
GUINEA BISSAU MARLBORO
GUINEA BISSAU VISA
HONDURAS Lider
HONDURAS L&M
HONDURAS MARLBORO
HONG KONG BOND STREET
HONG KONG GOOD COMPANION
HONG KONG MARLBORO
HONG KONG Next
HONG KONG PHILIP MORRIS
HONG KONG SARATOGA
HONG KONG VIRGINIA SLIMS
HONG KONG VSL Ultra Lts
HUNGARY Bond Street
HUNGARY EVE
HUNGARY HELIKON
HUNGARY L&M
HUNGARY MARLBORO
HUNGARY MULTIFILTER
HUNGARY PHILIP MORRIS
ICELAND L&M
ICELAND MARLBORO
ICELAND VIRGINIA SLIMS
INDIA MARLBORO
INDONESIA LONGBEACH
INDONESIA MARLBORO
INDONESIA VIRGINIA SLIMS
Iraq BOND STREET AMERICAN
Iraq L&M
Iraq MARLBORO
IRELAND MARLBORO
IRELAND Marlboro
IRELAND Marlboro
IRELAND To be determined
ISRAEL ASSOS
ISRAEL BOND STREET AMERICAN
ISRAEL EVE
ISRAEL L&M
ISRAEL MARLBORO
ISRAEL NEXT
ISRAEL PARLIAMENT
ISRAEL UNDEFINED [.]
ITALY CHESTERFIELD
ITALY DIANA
ITALY L&M
ITALY LARK
ITALY MARLBORO
ITALY MERCEDES
ITALY MERIT
ITALY MULTIFILTER
ITALY MURATTI
ITALY NORTH POLE
ITALY PHILIP MORRIS
ITALY PHILIP MORRIS SIGNATURE
IVORY COAST BOND STREET
IVORY COAST MARLBORO
JAPAN L&M
JAPAN LARK
JAPAN MARLBORO
JAPAN MERIT
JAPAN NEXT
JAPAN OASIS
JAPAN PARLIAMENT
JAPAN PHILIP MORRIS
JAPAN PM
JAPAN VIRGINIA SLIMS
JAPAN VS
JORDAN L&M
JORDAN MARLBORO
JORDAN PARLIAMENT
KAZAKHSTAN APOLLO SOYUZ
KAZAKHSTAN ASTRA
KAZAKHSTAN BENSON & HEDGES
KAZAKHSTAN BOND STREET
KAZAKHSTAN CAMBRIDGE
KAZAKHSTAN CONGRESS
KAZAKHSTAN KAZAKHSTAN
KAZAKHSTAN L&M
KAZAKHSTAN MARLBORO
KAZAKHSTAN MEDEO
KAZAKHSTAN NEXT
KAZAKHSTAN OPTIMA
KAZAKHSTAN PARLIAMENT
KAZAKHSTAN POLYOT
KAZAKHSTAN PRIMA
KAZAKHSTAN UNDEFINED
KAZAKHSTAN VIRGINIA SLIMS
KIRGHIZSTAN APOLLO SOYUZ
KIRGHIZSTAN BOND STREET
KIRGHIZSTAN CONGRESS FULL FLAVOR
KIRGHIZSTAN L&M
KIRGHIZSTAN MARLBORO
KIRGHIZSTAN PARLIAMENT
KIRIBATI ALPINE
KIRIBATI LONGBEACH
KIRIBATI MARLBORO
APPENDIX I
Country (Market) Brand
- ---------------- -----
KIRIBATI PETER JACKSON
KOREA ELAN SS 100
KOREA L&M
KOREA LARK
KOREA MARLBORO
KOREA PARLIAMENT
KOREA PHILIP MORRIS
KOREA VIRGINIA SLIMS
KOSOVO MARLBORO
KUWAIT L&M
KUWAIT MARLBORO
KUWAIT MERIT
KUWAIT PARLIAMENT
KUWAIT PHILIP MORRIS
KUWAIT RED & WHITE INTERNATIONAL 100 BOX
LAOS L&M
LAOS MARLBORO
LATVIA BOND STREET
LATVIA CHESTERFIELD
LATVIA KLAIPEDA
LATVIA L&M
LATVIA MARLBORO
LATVIA PARLIAMENT
LATVIA PHILIP MORRIS
LATVIA RED & WHITE
LEBANON BOND STREET
LEBANON CHESTERFIELD
LEBANON MARLBORO
LEBANON MERIT
LIBERIA BOND STREET
LIBERIA MARLBORO
LITHUANIA ASTRA
LITHUANIA BOND STREET
LITHUANIA KASTITYS
LITHUANIA KAUNAS
LITHUANIA KLAIPEDA
LITHUANIA L&M
LITHUANIA MARLBORO
LITHUANIA PARLIAMENT
LITHUANIA PHILIP MORRIS
LITHUANIA PRIMA
LITHUANIA RED & WHITE
LUXEMBOURG ARMADA
LUXEMBOURG Basic
LUXEMBOURG CHESTERFIELD
LUXEMBOURG L&M
LUXEMBOURG MARLBORO
LUXEMBOURG MERIT
LUXEMBOURG MURATTI
LUXEMBOURG PHILIP MORRIS
APPENDIX I
Country (Market) Brand
- ---------------- -----
LUXEMBOURG VISA
MACAU BOND STREET
MACAU CHESTERFIELD
MACAU GOOD COMPANION
MACAU MARLBORO
MACAU VIRGINIA SLIMS
MACAU VSL
MACEDONIA MARLBORO
MADEIRA CHESTERFIELD
MADEIRA L&M
MADEIRA MARLBORO
MADEIRA PORTUGUES
MADEIRA SG
Malagasy MARLBORO
MALAYSIA L&M
MALAYSIA MARLBORO
MALDIVES GOOD COMPANION
MALDIVES MARLBORO
MALTA MARLBORO
MAURITANIA CONGRESS
MAURITANIA L&M
MAURITANIA MARLBORO
MAYOTTE CHESTERFIELD ORIGINALS
MAYOTTE MARLBORO
MEXICO BENSON & HEDGES
MEXICO Faros
MEXICO L&M
MEXICO Lider
MEXICO MARLBORO
MEXICO PARLIAMENT
MEXICO Virginia Slims
MICRONESIA OUTER ISL. DOM BENSON & HEDGES
MICRONESIA OUTER ISL. DOM CAMBRIDGE
MICRONESIA OUTER ISL. DOM MARLBORO
MOLDOVA BOND STREET
MOLDOVA L&M
MOLDOVA MARLBORO
MOLDOVA PARLIAMENT
MOLDOVA RED & WHITE
MONGOLIA BOND STREET
MONGOLIA CONGRESS
MONGOLIA L&M
MONGOLIA MARLBORO
MONGOLIA PARLIAMENT
MOROCCO MARLBORO
Namibia MARLBORO
NAURU ALPINE
NAURU LONGBEACH
NAURU MARLBORO
NAURU PETER JACKSON
APPENDIX I
Country (Market) Brand
- ---------------- -----
NEPAL L&M
NEPAL MARLBORO
NETHERLANDS CHESTERFIELD
NETHERLANDS L&M
NETHERLANDS MARLBORO
NETHERLANDS OTHER BRANDS
NETHERLANDS PHILIP MORRIS
NETHERLANDS RUNNER
NEW CALEDONIA MARLBORO
NEW CALEDONIA LONGBEACH
NEW ZEALAND ALPINE
NEW ZEALAND MARLBORO
NEW ZEALAND LONGBEACH
NEW ZEALAND MERIT
NICARAGUA L&M
NICARAGUA LIDER
NICARAGUA MARLBORO
NIGER BOND STREET
NIGER MARLBORO
NIGER VISA
Nigeria BOND STREET
Nigeria MARLBORO
NORFOLK ISLANDS ALPINE
NORFOLK ISLANDS LONGBEACH
NORFOLK ISLANDS MARLBORO
NORFOLK ISLANDS PETER JACKSON
NORWAY L&M
NORWAY MARLBORO
NORWAY MERIT
OMAN L&M
OMAN MARLBORO
OMAN MERIT
OMAN NEXT
OMAN RED & WHITE
PAA BOND STREET AMERICAN
PALESTINE L&M
PALESTINE MARLBORO
PALESTINE PARLIAMENT
PANAMA Bond Street
PANAMA L&M
PANAMA MARLBORO
PANAMA MENTOLADOS
PARAGUAY BENSON & HEDGES
PARAGUAY CHESTERFIELD
PARAGUAY MARLBORO
PARAGUAY PHILIP MORRIS
PERU L&M
PERU MARLBORO
PERU PARLIAMENT
PHILIPPINES BOWLING GOLD
APPENDIX I
Country (Market) Brand
- ---------------- -----
PHILIPPINES MARLBORO
PHILIPPINES L&M
PHILIPPINES MILLER
PHILIPPINES PHILIP MORRIS
PHILIPPINES STORK INTERNATIONAL
PHILIPPINES STORK
POLAND BOND STREET
POLAND CARMEN
POLAND CARO
POLAND CHESTERFIELD
POLAND FAJRANT
POLAND KLUBOWE
POLAND L&M
POLAND Parliament
POLAND MARLBORO
POLAND VIRGINIA SLIMS
POLAND ZEFIR
PORTUGAL AGUIA
PORTUGAL CHESTERFIELD
PORTUGAL DETRO
PORTUGAL DETROIT
PORTUGAL KENTUCKY
PORTUGAL L&M
PORTUGAL MARLBORO
PORTUGAL PM Signature
PORTUGAL PORTUGUES
PORTUGAL RITZ
PORTUGAL SG
PORTUGAL SURF
PRC MARLBORO
QATAR L&M
QATAR MARLBORO
QATAR MERIT
QATAR NEXT
QATAR RED & WHITE
REUNION BASIC
REUNION BOND STREET
REUNION CHESTERFIELD
REUNION MARLBORO
REUNION PHILIP MORRIS
ROMANIA ASSOS
ROMANIA BOND STREET
ROMANIA CALLATIS
ROMANIA CHESTERFIELD
ROMANIA L&M
ROMANIA Mid Price Brand
ROMANIA MARLBORO
ROMANIA PARLIAMENT
ROMANIA PRESIDENT
ROMANIA Virginia Super Slims
APPENDIX I
Country (Market) Brand
- ---------------- -----
ROMANIA RED & WHITE
ROMANIA ZET
RUSSIA APOLLO SOYUZ
RUSSIA BOND STREET
RUSSIA CHESTERFIELD
RUSSIA L&M
RUSSIA MARLBORO
RUSSIA MURATTI
RUSSIA NEXT
RUSSIA OPTIMA
RUSSIA PARLIAMENT
RUSSIA VIRGINIA SLIMS
Salvador L&M
SAN MARINO CHESTERFIELD
SAN MARINO DIANA
SAN MARINO MARLBORO
SAN MARINO MERIT
SAN MARINO MULTIFILTER
SAN MARINO MURATTI
SAN MARINO PHILIP MORRIS
SAUDI ARABIA L&M
SAUDI ARABIA MARLBORO
SAUDI ARABIA MERIT
SAUDI ARABIA PHILIP MORRIS
SAUDI ARABIA RED & WHITE
SAUDI ARABIA VISA
SENEGAL MARLBORO
SERBIA & MONTENEGRO ASSOS
SERBIA & MONTENEGRO BEST
SERBIA & MONTENEGRO CLASSIC
SERBIA & MONTENEGRO DRINA
SERBIA & MONTENEGRO EVE
SERBIA & MONTENEGRO L&M
SERBIA & MONTENEGRO MARLBORO
SERBIA & MONTENEGRO MOND
SERBIA & MONTENEGRO MORAVA
SERBIA & MONTENEGRO VEK
SIERRA LEONE ASSOS
SIERRA LEONE BOND STREET
SIERRA LEONE MARLBORO
SINGAPORE L&M
SINGAPORE MARLBORO
SINGAPORE RAFFLES
SINGAPORE VIRGINIA SLIMS
SINGAPORE VSL
SLOVAK REPUBLIC ARTA
SLOVAK REPUBLIC BOND STREET
SLOVAK REPUBLIC CHESTERFIELD
SLOVAK REPUBLIC L&M
SLOVAK REPUBLIC Petra
APPENDIX I
Country (Market) Brand
- ---------------- -----
SLOVAK REPUBLIC MARLBORO
SLOVAK REPUBLIC RED & WHITE
SLOVAK REPUBLIC START
SLOVENIA BOND STREET
SLOVENIA CHESTERFIELD
SLOVENIA DIANA
SLOVENIA EVE
SLOVENIA L&M
SLOVENIA MARLBORO
SLOVENIA MERIT
SLOVENIA MULTIFILTER
SLOVENIA MURATTI
SLOVENIA PHILIP MORRIS
SOUTH AFRICA CHESTERFIELD
SOUTH AFRICA MARLBORO
SOUTH AFRICA MERIT
Spain L&M
Spain Next
SPAIN MAINLAND CHESTERFIELD
SPAIN MAINLAND L&M
SPAIN MAINLAND LARK
SPAIN MAINLAND MARLBORO
SPAIN MAINLAND MERIT
SPAIN MAINLAND PHILIP MORRIS
SWEDEN BASIC
SWEDEN BOND
SWEDEN CHESTERFIELD
SWEDEN L&M
SWEDEN MARLBORO
SWITZERLAND Brunette
SWITZERLAND ARLETTE
SWITZERLAND CHESTERFIELD
SWITZERLAND L&M
SWITZERLAND FLINT
SWITZERLAND MARLBORO
SWITZERLAND MERIT
SWITZERLAND MURATTI
SWITZERLAND MULTIFILTER
SWITZERLAND NORTH POLE
SWITZERLAND OTHER BRANDS
SWITZERLAND PHILIP MORRIS
SYRIA MARLBORO
SYRIA MERIT
TADJIKISTAN BOND STREET
TADJIKISTAN L&M
TADJIKISTAN MARLBORO
TAIWAN L&M
TAIWAN MARLBORO
TAIWAN LARK
TAIWAN PARLIAMENT
APPENDIX I
Country (Market) Brand
- ---------------- -----
TAIWAN SARATOGA
TAIWAN VIRGINIA SLIMS
THAILAND MARLBORO
THAILAND L&M
The Netherlands BLEND
The Netherlands L&M
TOGO BOND STREET
TOGO MARLBORO
TOGO VISA
TONGA ALPINE
TONGA MARLBORO
TUNISIA MARLBORO
TUNISIA MERIT
TURKEY BOGAZICI
TURKEY CHESTERFIELD
TURKEY L&M
TURKEY LARK
TURKEY MARLBORO
TURKEY MURATTI
TURKEY PARLIAMENT
TURKEY TURKU
TURKISH CYPRUS CHESTERFIELD
TURKISH CYPRUS EVE
TURKISH CYPRUS L&M
TURKISH CYPRUS MARLBORO
TURKISH CYPRUS MURATTI
TURKISH CYPRUS PARLIAMENT
TURKISH CYPRUS PHILIP MORRIS
TURKISH CYPRUS RED & WHITE
TURKMENISTAN BOND STREET
TURKMENISTAN CONGRESS
TURKMENISTAN L&M
TURKMENISTAN MARLBORO
TURKMENISTAN PARLIAMENT
UAE PARLIAMENT
UAE NEXT
UK BASIC
UKRAINE APOLLO SOYUZ
UKRAINE ASTRA
UKRAINE BOND STREET
UKRAINE CHESTERFIELD
UKRAINE KOSMOS
UKRAINE L&M
UKRAINE MARLBORO
UKRAINE NEXT
UKRAINE OPTIMA
UKRAINE PARLIAMENT
UKRAINE VATRA
UKRAINE VIRGINIA SLIMS
UNITED ARAB EMIRATES L&M
APPENDIX I
Country (Market) Brand
- ---------------- -----
UNITED ARAB EMIRATES MARLBORO
UNITED ARAB EMIRATES MERIT
UNITED ARAB EMIRATES PHILIP MORRIS
UNITED ARAB EMIRATES RED & WHITE
UNITED KINGDOM CHESTERFIELD
UNITED KINGDOM MARLBORO
UNITED KINGDOM RAFFLES
URUGUAY CASINO
URUGUAY FIESTA
URUGUAY L&M
URUGUAY GALAXY
URUGUAY MARLBORO
URUGUAY MASTER
URUGUAY PHILIP MORRIS
URUGUAY PREMIER
VANUATU ALPINE
VANUATU LONGBEACH
VANUATU MARLBORO
VANUATU PETER JACKSON
VENEZUELA ASTOR
VENEZUELA Bond
VENEZUELA FORTUNA
VENEZUELA L&M
VENEZUELA LIDO
VENEZUELA MARLBORO
VIETNAM MARLBORO
WEST SAMOA MARLBORO
WWDF ALPINE
WWDF ARLETTE
WWDF ASSOS
WWDF BELMONT
WWDF BENSON & HEDGES
WWDF BOND STREET
WWDF BRUNETTE
WWDF CHESTERFIELD
WWDF DIANA
WWDF EVE
WWDF F 6
WWDF FLINT
WWDF L&M
WWDF LARK
WWDF LONGBEACH
WWDF MARLBORO
WWDF MERCEDES
WWDF MERIT
WWDF MULTIFILTER
WWDF MURATTI
WWDF NEXT
WWDF NORTH POLE
WWDF PARLIAMENT
APPENDIX I
Country (Market) Brand
- ---------------- -----
WWDF PETER JACKSON
WWDF PHILIP MORRIS
WWDF PLAYER'S
WWDF ROTHMANS
WWDF SG
WWDF VIRGINIA SLIMS
YEMEN MARLBORO
APPENDIX J - LIST OF ARBITRATORS
1. Walter van Gerven
Cermarsinstraat 42
B-3012 Wilsele
Belgium
2. Hans Van Houtte
Institute for International Trade Law
Faculty of Law
B-3000 Leuven
Belgium
APPENDIX K
----------
Amending the Baseline Amount
- ----------------------------
The Parties established the Baseline Amount as a reasonable estimate of the
annual quantity of seizures of Contraband Philip Morris Cigarettes they might
expect in the Territory of the Member States as of January 1, 2004. The Parties
recognize, however, that as New Member States join the European Union, as
Non-Participating Member States wish to become Participating Member States, and
as circumstances change with respect to the movement and pricing of Cigarettes
in the Member States, the Baseline Amount may require adjustment so that it
continues to comport with the reasonable expectations of the Parties. In
determining whether to adjust the Baseline Amount, and if so, by what amount,
the following shall be considered:
1) The size of the Philip Morris Cigarette market(s) in the New Member States
whose seizures of Contraband Philip Morris Cigarettes are likely to result
in Supplemental Payments in the following calendar year but whose incidence
of Contraband Philip Morris Cigarettes is not already factored into the
Baseline Amount, as well as the incidence of Contraband Philip Morris
Cigarettes in such New Member States. In determining the size of the market
for Philip Morris Cigarettes and the incidence of Contraband Philip Morris
Cigarettes in the New Member States, the Parties shall take account of and
rely on:
a) Historical seizure data;
b) Available studies and reports of the industry;
c) Philip Morris International data and reports;
d) Reliable published information;
e) Joint studies, if any, conducted by the European Community and Philip
Morris International concerning contraband and counterfeit volumes,
contraband and counterfeit flows, cigarette sales, cigarette seizures,
or other matters reasonably relevant to this Agreement;
f) Reports generated by independent third-party companies retained by
Philip Morris International, in accordance with methodology agreed to
by the Parties, whose business involves in whole or in part the
monitoring of Cigarette sales and distribution; and
g) Available data published by the European Community and the Member
States;
2) The incidence of Contraband Cigarettes and Counterfeit Cigarettes in the
New Member State(s) and the incidence of Contraband and Counterfeit
Cigarettes manufactured by entities other than Philip Morris International,
as measured by one or more independent companies retained by Philip Morris
International; and
3) The situation concerning the maintenance and protection of the European
Community's Customs border as published in official reports and other
reliable sources.
Amending Supplemental Payment Obligations
- -----------------------------------------
The Supplemental Payment regime set forth in Article 4 of the Agreement
reinforces Philip Morris International's commitment to take commercially
reasonable steps as a manufacturer of Cigarettes to promote the Parties' joint
objective that Philip Morris Cigarettes be sold, distributed, stored, and
shipped in accordance with all applicable fiscal and legal requirements, and, in
particular, sold at retail in accordance with all applicable tax and duty laws
in the intended retail market, and in quantities consistent with legitimate
Retail Demand in such intended market. The Parties recognize that there are
factors within the control and factors outside the control of Philip Morris
International and that the Supplemental Payment regime was designed with
reference to a reasonable estimate of the annual quantity of seizures of
Contraband Philip Morris Cigarettes they might expect in the Territory of the
Member States as of January 1, 2004, in light of the substantial efforts of the
Parties in their ongoing fight against the illegal trade in Cigarettes.
The Parties also recognize, however, that as New Member States join the
European Union, as Non-Participating Member States wish to become Participating
Member States, and as circumstances change with respect to the movement and
pricing of Cigarettes in the Member States, problems could arise that might
bring about serious imbalances in the application of the obligations of Philip
Morris International under Article 4 of the Agreement, requiring their possible
amendment so that they continue to comport with the reasonable expectations of
the Parties that the provisions of Article 4 will serve as an incentive for
Philip Morris International to address factors within its control and to comply
with its obligations under this Agreement, but not as a mechanism to increase
Philip Morris International's obligations by virtue of factors outside the
control of Philip Morris International.
In determining whether to amend the provisions of, and the obligations of
Philip Morris International under, Article 4, the Parties shall consider whether
there has been a significant increase in the incidence of Contraband Philip
Morris Cigarettes in any Member State whose seizures of Contraband Philip Morris
Cigarettes are likely to result in Supplemental Payments in the following
calendar year. If there has been a significant increase in such incidence
substantially caused by external factors, as evidenced by the fact that a
substantial portion of the seizures of Philip Morris Contraband Cigarettes are
Cigarettes for which applicable taxes on the retail price have been paid in a
non-Member State, the Parties shall either amend, or provide Philip Morris
International with appropriate relief from the obligations under Article 4.
However, amendment of, or relief from, Supplemental Payment obligations is only
appropriate where (i) the significant increase in the incidence of Contraband
Philip Morris Cigarettes in that Member State is not substantially attributable
to a failure on the part of Philip Morris International to adhere to the terms
of this Agreement, and (ii) Philip Morris International can reasonably
demonstrate that its sales to a pertinent Intended Market of Retail Sale are
consistent with reasonable estimates of legitimate Retail Demand in such
Intended Market of Retail Sale, and such market seems to account for a
meaningful proportion of the increase in such incidence as described above.
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