EX-10.20






Exhibit 10.20




 





TAX MATTERS AGREEMENT




by and between




The Procter & Gamble Company,




The Folgers Coffee Company,




and




The J.M. Smucker Company




Dated November 6, 2008




 






 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page
	 

	 	ARTICLE I	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	DEFINITIONS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.01

	 	Definition of Terms
	 	 	2	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE II	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	ALLOCATION OF TAXES	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.01

	 	Ordinary Course Taxes
	 	 	7	 
	Section 2.02

	 	Transaction Taxes
	 	 	8	 
	Section 2.03

	 	Transfer Taxes
	 	 	10	 
	Section 2.04

	 	Entitlement to Tax Attributes
	 	 	10	 
	Section 2.05

	 	Additional Costs
	 	 	10	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE III 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	TAX RETURN FILING AND PAYMENT OBLIGATIONS 	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.01

	 	Tax Return Preparation and Filing
	 	 	11	 
	Section 3.02

	 	Treatment of Transactions
	 	 	12	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE IV	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	TAX-FREE TREATMENT OF DISTRIBUTION & RELATED TRANSACTIONS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.01

	 	Representations
	 	 	12	 
	Section 4.02

	 	Covenants
	 	 	13	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE V	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	TAX CONTESTS; INDEMNIFICATION; COOPERATION	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.01

	 	Notice
	 	 	16	 
	Section 5.02

	 	Control of Tax Contests
	 	 	16	 
	Section 5.03

	 	Indemnification Payments
	 	 	17	 
	Section 5.04

	 	Interest on Late Payments
	 	 	17	 
	Section 5.05

	 	Treatment of Indemnity Payments
	 	 	17	 
	Section 5.06

	 	Cooperation
	 	 	18	 
	Section 5.07

	 	Confidentiality
	 	 	19	 






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	 	 	 	 	Page
	 

	 	ARTICLE VI	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	DISPUTE RESOLUTION	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6.01

	 	Tax Disputes
	 	 	19	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE VII	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 7.01

	 	Authorization
	 	 	20	 
	Section 7.02

	 	Expenses
	 	 	20	 
	Section 7.03

	 	Entire Agreement
	 	 	20	 
	Section 7.04

	 	Governing Law
	 	 	20	 
	Section 7.05

	 	Notice
	 	 	20	 
	Section 7.06

	 	Priority of Agreements
	 	 	21	 
	Section 7.07

	 	Amendments and Waivers
	 	 	21	 
	Section 7.08

	 	Termination
	 	 	22	 
	Section 7.09

	 	No Third Party Beneficiaries
	 	 	22	 
	Section 7.10

	 	Assignability
	 	 	22	 
	Section 7.11

	 	Enforcement
	 	 	22	 
	Section 7.12

	 	Survival
	 	 	22	 
	Section 7.13

	 	Construction
	 	 	22	 
	Section 7.14

	 	Severability
	 	 	23	 
	Section 7.15

	 	Counterparts
	 	 	23	 







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TAX MATTERS AGREEMENT




          THIS TAX MATTERS AGREEMENT (this “Agreement”) is made and entered into as of November
6, 2008 by and between The Procter & Gamble Company, an Ohio corporation (“P&G”), The
Folgers Coffee Company, a Delaware corporation and, as of the date hereof, a wholly owned
Subsidiary of P&G (“Folgers”), and The J.M. Smucker Company, an Ohio corporation (“RMT
Partner”) (collectively, the “Companies”).



          WHEREAS, as of the date hereof, P&G is the common parent of an affiliated group of
corporations, including Folgers, which has elected to file certain Tax Returns on an affiliated,
consolidated, combined or unitary group basis;



          WHEREAS, the Board of Directors of P&G has determined that it would be appropriate and
desirable to completely separate the Coffee Business from P&G;



          WHEREAS, the Boards of Directors of P&G, Folgers, RMT Partner and its wholly owned direct
subsidiary (“Merger Sub”) have each approved and declared advisable the merger, immediately
following the Distribution, of Merger Sub with and into Folgers with Folgers as the surviving
entity (the “Merger”);



          WHEREAS, P&G, Folgers and RMT Partner have entered into the (i) Separation Agreement pursuant
to which P&G shall effect the Folgers Transfer on the Business Transfer Date, and (ii) Transaction
Agreement pursuant to which the parties will effect the Merger;



          WHEREAS, in connection with the Folgers Transfer, P&G shall effect the (i) One-Step Spin-Off,
or (ii) Exchange Offer and, if necessary, the Clean-Up Spin-Off;



          WHEREAS, in connection with the Folgers Transfer and the Distribution, P&G intends to effect
the Parent Cash Distribution;



          WHEREAS, the Companies intend that the Folgers Transfer and Distribution qualify as a
“reorganization” under Code Section 368(a) with respect to which no gain or loss is recognized
under Code Sections 361 and 355;



          WHEREAS, the Companies intend that the Merger qualify as a “reorganization” under Code Section
368(a) with respect to which the Folgers shareholders recognize no gain or loss;



          WHEREAS, as a result of and upon the Distribution, Folgers will cease to be a member of the
P&G affiliated group within the meaning of Code Section 1504(a); and



          WHEREAS, the Companies desire to allocate the Tax responsibilities, liabilities and benefits
of certain transactions and to provide for certain other Tax matters.



 









 





          NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the
Companies (each on behalf of itself, each of its Subsidiaries, as of the Closing Date, and its
future Subsidiaries) hereby agree as follows:



ARTICLE I




DEFINITIONS




          Section 1.01 Definition of Terms.
The following terms shall have the following meanings (such meanings to apply equally to both
the singular and the plural forms of the terms defined). Unless otherwise stated, all Section
references are to this Agreement. Any capitalized terms used herein and not otherwise defined
shall have the meaning given to such term in the Separation Agreement or the Transaction Agreement.



          “Active Trade or Business” means the active conduct (determined in accordance with
Code Section 355(b)) of the business conducted by the Folgers Group members. For these purposes,
members shall include only those members that are part of Folgers’ “separate affiliated group”
within the meaning of Code Section 355(b)(3)(B).



          “Additional Costs” means liabilities, damages, penalties, judgments, assessments,
losses, costs and expenses (including reasonable attorneys’ and accountants’ fees and expenses),
whether arising under strict liability or otherwise, in each case, arising out of or incident to
the imposition, assessment or assertion of any Tax or adjustment against a party with respect to an
amount for which such party is entitled to indemnification under this Agreement.



          “Adjustment Request” means any formal or informal claim or request for a Refund filed
with any Taxing Authority.



          “Agreement” has the meaning set forth in the recitals.



          “Applicable Penalty Standard” means the standard under applicable law for avoiding the
imposition of penalties on the taxpayer and/or the tax return preparer.



          “Articles PLR” has the meaning set forth in Section 5.06.



          “Capital Stock” means (i) all classes or series of outstanding capital stock of an
issuer for U.S. federal income Tax purposes, including common stock and all other instruments
treated as outstanding equity in the issuer for U.S. federal income Tax purposes, and (ii) all
options, warrants and other rights to acquire such capital stock.



          “Closing Date” means the date on which the Distribution and the Merger are
consummated.



          “Companies”
has the meaning set forth in the recitals. 

          “Covered Compensation Arrangement” has the meaning set forth in Section 4.02(b)(i).






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          “Distribution” means the distribution by P&G of 100% of the Folgers Common Stock
pursuant to the One-Step Spin-Off or, alternatively, the Exchange Offer and any Clean-Up Spin-Off.



          “Equity Compensation Opinion” means an opinion obtained by the RMT Group (at its sole
expense), in form and substance reasonably satisfactory to P&G, providing that (i) the issuance of
RMT Partner or Folgers options, restricted stock and/or deferred stock units, as the case may be,
to a Safe Harbor VIII Person or an RMT Partner retirement plan (or other eligible retirement plan
under Safe Harbor IX in Treasury Regulation Section 1.355-7(d)), as applicable, would not affect
the Tax-Free Treatment; and (ii) the shares of RMT Partner or Folgers Capital Stock issued upon the
exercise or vesting of the options, restricted stock and/or deferred stock units described in
clause (i) above would satisfy the requirements of Safe Harbor VIII or Safe Harbor IX of Treasury
Regulation Section 1.355-7(d), as applicable. Any Equity Compensation Opinion shall be delivered
by nationally recognized U.S. tax counsel acceptable to P&G.



          “Final Determination” means the final resolution of any Tax liability for any Tax
period by or as a result of (i) a final and unappealable decision, judgment, decree or other order
by any court of competent jurisdiction, (ii) a final settlement with the Internal Revenue Service,
a closing agreement or accepted offer in compromise under Code Sections 7121 or 7122, or a
comparable arrangement under the laws of another jurisdiction, (iii) any allowance of a Refund in
respect of an overpayment of Tax, but only after the expiration of all periods during which such
amount may be recovered by the jurisdiction imposing such Tax, or (iv) any other final disposition,
including by reason of the expiration of the applicable statute of limitations.



          “Folgers” has the meaning set forth in the recitals.



          “Folgers Capital Stock” means (i) all classes or series of outstanding capital stock
of Folgers for U.S. federal income Tax purposes, including common stock and all other instruments
treated as outstanding equity in Folgers for U.S. federal income Tax purposes, and (ii) all
options, warrants and other rights to acquire such capital stock.



          “Folgers Group” means Folgers and each of its Subsidiaries, including any corporations
that would be members of an affiliated group if they were includible corporations under Code
Section 1504(b) (in each case, including any successors thereof).



          “Folgers Group Taxes” means (i) any Tax imposed on or payable by the Folgers Group or
any member thereof for a Tax period beginning after the Closing Date, (ii) any Tax imposed on or
payable by the Folgers Group or any member thereof for the portion of a Straddle Period beginning
after the Closing Date (other than any such Tax payable by reason of membership in any affiliated,
consolidated, combined or unitary group at any time on or prior to the Closing Date, including by
reason of Treasury Regulation Section 1.1502-6), and (iii) any Taxes attributable to any
transaction or event of the RMT Group (or any member thereof) occurring outside the ordinary course
of business on the Closing Date after the Distribution, including, in each case, any relevant Tax
liabilities arising from a Final Determination.



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          “Folgers Separate Return” means any Tax Return (other than a Joint Return) that
includes any Folgers Group member (including any consolidated, combined or unitary Tax Return).



          “Indemnitee” has the meaning set forth in Section 5.01.



          “Indemnifying Party” has the meaning set forth in Section 5.01.



          “IRS” means the Internal Revenue Service.



          “Joint Return” means any Tax Return that includes at least one P&G Group member and at
least one Folgers Group member.



          “Merger” has the meaning set forth in the recitals.



          “Merger Disqualification” means the failure of the Merger to qualify as a tax-free
reorganization under Code Section 368(a) or a similar provision of state or local law, other than
any such failure that is attributable to P&G’s breach of any representation, warranty or covenant
in the Transaction Documents (including the P&G Representation Letter) or Folgers’ breach, prior to
the Distribution, of any representation, warranty or covenant in the Transactions Documents.



          “Merger Sub” has the meaning set forth in the recitals.



          “P&G” has the meaning set forth in the recitals.



          “P&G Group” means P&G and each of its Subsidiaries, including any corporations that
would be members of an affiliated group if they were includible corporations under Code
Section 1504(b) (in each case, including any successors thereof), but excluding any entity that is
a member of the Folgers Group.



          “P&G Group Taxes” means (i) any Tax imposed on or payable by the P&G Group or any
member thereof for any Tax period, and (ii) any Pre-Closing Tax imposed on or payable by the
Folgers Group or any member thereof, including, in each case, any relevant Tax liabilities arising
from a Final Determination.



          “P&G Representation Letter” means the representation letters executed by P&G in
connection with the delivery of the Tax Opinion.



          “P&G Tax Assets” has the meaning set forth in Section 2.04.



          “Penalty Objection” means a non-preparing party’s good faith, written determination
that a position taken by a preparing party on a draft Folgers Separate Return subject to
Section 3.01(b) would not satisfy the Applicable Penalty Standard.



          “Permitted P&G Information” has the meaning set forth in Section 5.06.



          “PLR” means a private letter ruling requested or obtained from the IRS.



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          “Post-Distribution Period” means the portion of the Closing Date after the completion
of the Distribution and any date thereafter.



          “Pre-Closing Period” means any Tax period ending on or before the Closing Date, and,
except for purposes of Article III and
Article V, the portion of any Straddle Period ending on or
before the Closing Date.



          “Pre-Closing Taxes” means Taxes imposed (i) in, or allocable to, a Pre-Closing Period
(other than any Tax described in clause (iii) of Folgers Group Taxes), or (ii) by reason of being a
member of any affiliated, consolidated, combined or unitary group at any time on or prior to the
Closing Date, including by reason of Treasury Regulation Section 1.1502-6.



          “Refund” means any cash refund of Taxes or reduction of Taxes by means of credit,
offset or otherwise, together with any interest received thereon.



          “Restricted Period” means the period commencing upon the Closing Date and ending at
the close of business on the first day following the second anniversary of the Closing Date.



          “RMT Group” means the RMT Partner Group and, with respect to any period after the
Distribution, the Folgers Group (in each case, including any successors thereof).



          “RMT Issue” has the meaning set forth in Section 5.02.



          “RMT Partner” has the meaning set forth in the recitals.



          “RMT Partner Capital Stock” means (i) all classes or series of outstanding capital
stock of RMT Partner for U.S. federal income Tax purposes, including common stock and all other
instruments treated as outstanding equity in RMT Partner for U.S. federal income Tax purposes, and
(ii) all options, warrants and other rights to acquire such capital stock.



          “RMT Partner Group” means RMT Partner and each of its Subsidiaries (in each case,
including any successors thereof), other than any members of the Folgers Group.



          “RMT Partner Representation Letter” means the representation letters executed by RMT
Partner in connection with the (i) Tax Opinion and (ii) delivery of the opinion referred to in
Section 6.02(d) of the Transaction Agreement.



          “RMT Partner Section 355(e) Event” means any event(s) involving RMT Partner Capital
Stock or any assets of RMT Partner or any of its Affiliates which cause the Distribution to be a
taxable event to P&G as a result of the application of Code Section 355(e) or a similar provision
of state or local Tax law. For the avoidance of doubt, an event involving RMT Partner Capital
Stock or any assets of RMT Partner or any of its Affiliates shall include, without limitation,
(x) the application of the provisions of Article Fourth, Division II, Section 2 of the Amended
Articles of Incorporation of RMT Partner as in effect as of the date hereof, (y) the special
dividend payable by RMT Partner pursuant to Section 5.02(c) of the Transaction Agreement, and
(z) the Merger.



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          “Ruling” means a PLR, in form and substance reasonably satisfactory to P&G, providing
that the completion of a proposed action by the RMT Group (or any member thereof) prohibited by
Section 4.02(b) or (c) would not affect the Tax-Free Treatment.



          “Safe Harbor VIII Person” means an RMT Partner or Folgers employee, independent
contractor, director or other Person permitted to receive RMT Partner or Folgers Capital Stock
under Safe Harbor VIII in Treasury Regulation Section 1.355-7(d).



          “Separation Agreement” means the Separation Agreement, as may be amended from time to
time, among P&G, Folgers and RMT Partner, dated June 4, 2008.



          “Straddle Period” means a Tax period beginning on or before and ending after the
Closing Date.



          “Tax” or “Taxes” shall mean all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by a federal, state,
municipal, governmental, territorial, local, foreign or other body, and without limiting the
generality of the foregoing, shall include net income, gross income, gross receipts, sales, use,
value added, ad valorem, transfer, recording, franchise, profits, license, lease, service, service
use, payroll, wage, withholding, employment, unemployment insurance, workers compensation, social
security, excise, severance, stamp, business license, business organization, occupation, premium,
property, environmental, windfall profits, customs, duties, alternative minimum, estimated or other
taxes, fees, premiums, assessments or charges of any kind whatever imposed or collected by any
governmental entity or political subdivision thereof, together with any related interest and any
penalties, additions to such tax or additional amounts imposed with respect thereto by such
governmental entity or political subdivision.



          “Tax Advisor” has the meaning set forth in Section 6.01.



          “Tax Attributes” means net operating losses, investment credits, foreign Tax credits,
excess charitable contributions, general business credits, or any other loss, deduction, credit or
item that could reduce a Tax liability.



          “Tax Contest” means an audit, review, examination or any other administrative or
judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative
or judicial review of any Adjustment Request).



          “Tax Dispute” means any dispute arising in connection with this Agreement.



          “Tax-Free Treatment” means (i) the Folgers Transfer and Distribution, taken together,
qualifying as a transaction (x) that is described in Code Sections 355(a) and 368(a)(1)(D), (y) in
which the Folgers Common Stock distributed is “qualified property” under Code Section 361(c), and
(z) in which the shareholders of P&G recognize no income or gain for U.S. federal income Tax
purposes under Code Section 355 (except to the extent of any cash received in lieu of fractional
shares of Folgers Common Stock); (ii) the Merger qualifying as a reorganization under Code
Section 368(a), in which the Folgers shareholders recognize no income or gain for U.S. federal
income Tax purposes (except to the extent of any cash received in lieu of fractional shares of RMT
Partner Common Stock); and (iii) the Parent Cash



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Distribution qualifying as money transferred to P&G creditors and/or shareholders under Code
Section 361(b).



          “Tax Opinion” means the opinion obtained by P&G with respect to the Folgers Transfer,
Distribution, Merger and Parent Cash Distribution.



          “Tax Return” means any return, filing, report, questionnaire, information statement,
claim for Refund, or other document required or permitted to be filed, including any amendments
thereto, for any Tax period with any Taxing Authority.



          “Taxing Authority” means any governmental authority imposing Taxes.



          “Transaction Document” means any document executed by P&G, Folgers and/or RMT Partner,
as the case may be, in connection with the Transactions, including this Agreement, the Separation
Agreement and the Transaction Agreement.



          “Transaction Taxes” means (i) all Taxes of any P&G Group or Folgers Group member, as
the case may be, resulting from, or arising in connection with, the failure of any of the Folgers
Transfer, Distribution, Merger and Parent Cash Distribution to qualify for Tax-Free Treatment, and
(ii) all corresponding state and local income and franchise Taxes.



          “Transactions” means the Folgers Transfer, Distribution, Merger and Parent Cash
Distribution, in each case, as contemplated by the Separation Agreement and/or Transaction
Agreement.



          “Transfer Taxes” means any stamp, sales, use, gross receipts, value added, goods and
services, harmonized sales, land transfer or other transfer Taxes imposed in connection with the
Transactions. For the avoidance of doubt, Transfer Taxes shall not include any income or franchise
Taxes payable in connection with the Transactions.



          “Unqualified Opinion” means an opinion obtained by RMT Partner or Folgers (at its sole
expense), in form and substance reasonably satisfactory to P&G providing that the completion of a
proposed action by the RMT Partner Group or Folgers Group (or, in each case, any member thereof)
prohibited by Section 4.02(b) or (c) below would not affect the Tax-Free Treatment. Any
Unqualified Opinion shall be delivered by nationally recognized U.S. tax counsel acceptable to P&G.



ARTICLE II




ALLOCATION OF TAXES




          Section 2.01 Ordinary Course Taxes.
(a) Except as provided in Sections 2.02 and 2.03 below, P&G shall indemnify each RMT Group
member against, and hold it harmless from, all P&G Group Taxes.



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          (b) Except as provided in Sections 2.02 and 2.03 below, each RMT Group member, jointly and
severally, shall indemnify each P&G Group member against, and hold it harmless from, all Folgers
Group Taxes.



          (c) If, with respect to any Folgers Group Tax, the P&G Group (or any member thereof) receives
(or realizes) a Refund, it shall remit to Folgers, within 30 days, the amount of such Refund net of
any Taxes incurred by the P&G Group (or any member thereof) in connection with the Refund.



          (d) Except as provided in Section 2.01(e) below, if, with respect to any P&G Group Tax, the
RMT Group (or any member thereof) receives (or realizes) a Refund, it shall remit to P&G, within 30
days, the amount of such Refund net of any Taxes incurred by the RMT Group (or any member thereof)
in connection with the Refund.



          (e) RMT Partner shall cause the Folgers Group, except to the extent not permitted by law, to
elect to forego carrybacks of any net operating losses, capital losses, credits or other Tax
benefits of the Folgers Group to a Pre-Closing Period. If the P&G Group (or any member thereof)
receives (or realizes) a Refund as a result of any carryback permitted by the previous sentence, it
shall remit to Folgers, within 30 days, the amount of such Refund net of any Taxes incurred by the
P&G Group (or any member thereof) in connection with the Refund; provided, however, that, if a
Taxing Authority subsequently reduces or disallows such Refund, the RMT Group shall, within 5 days
of the reduction or disallowance, return the amount previously remitted to Folgers, plus interest
at the rate determined under applicable Tax law.



          (f) Each Folgers Group member shall, unless prohibited by applicable law, close its taxable
year on the Closing Date. If applicable law does not permit a Folgers Group member to close its
taxable year on the Closing Date or in any case in which a Tax is assessed with respect to a
Straddle Period, the Taxes, if any, attributable to a Straddle Period shall be allocated (i) to the
period up to and including the Closing Date, on the one hand, and (ii) to the period subsequent to
the Closing Date, on the other hand, by means of a closing of the books and records of the Folgers
Group member as of the close of the Closing Date, provided that exemptions, allowances or
deductions that are calculated on an annual basis (including depreciation and amortization
deductions) and Taxes that are assessed on a periodic basis (such as real and personal property
taxes) shall be allocated between the period ending on the Closing Date and the period after the
Closing Date in proportion to the number of days in each such period.



          Section 2.02 Transaction Taxes.
(a) Except as otherwise provided in Section 2.02(c) below, each RMT Group member, jointly and
severally, shall indemnify each P&G Group member against, and hold it harmless from, any
Transaction Taxes attributable to:




     (i) any inaccurate representation of fact, plan or intent made by RMT Partner in
Section 4.01 of this Agreement or in the RMT Partner Representation Letter;




     (ii) any action or omission by Folgers or any of its Affiliates in the
Post-Distribution Period or by RMT Partner or any of its Affiliates,
in each case, that is inconsistent with any covenant made by any Folgers Group member or RMT Partner



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Group
member in any Transaction Document other than any action or omission that was taken or
omitted in reliance upon any representation, warranty or covenant made by P&G in this
Agreement or the P&G Representation Letter to the extent such representation or warranty is
incorrect or such covenant was breached, in whole or in relevant part;




     (iii) any other action or omission by Folgers or any of its Affiliates in the
Post-Distribution Period or by RMT Partner or any of its Affiliates, in each case, other
than any action or omission (x) contemplated under any Transaction Document, or (y) that was
taken or omitted in reliance upon any representation, warranty or covenant made by P&G in
this Agreement or the P&G Representation Letter to the extent such representation or
warranty is incorrect or such covenant was breached, in whole or in relevant part; or




     (iv) a Merger Disqualification.



          (b) Except as otherwise provided in Section 2.02(c) below, P&G shall indemnify each RMT Group
member against, and hold it harmless from, any Transaction Taxes attributable to:




     (i) any inaccurate representation of fact, plan or intent made by P&G in Section 4.01
of this Agreement or in the P&G Representation Letter;




     (ii) any action or omission by P&G or any of its Affiliates that is inconsistent with
any covenant made by any P&G Group member in any Transaction Document other than any action
or omission that was taken or omitted in reliance upon any representation, warranty or
covenant made by RMT Partner in this Agreement or the RMT Partner Representation Letter to
the extent such representation or warranty is incorrect or such covenant was breached, in
whole or in relevant part; or




     (iii) any other action or omission by P&G or any of its Affiliates, other than any
action or omission (x) contemplated under any Transaction Document, or (y) that was taken or
omitted in reliance upon any representation, warranty or covenant made by RMT Partner in
this Agreement or the RMT Partner Representation Letter to the extent such representation or
warranty is incorrect or such covenant was breached, in whole or in relevant part.



          (c) Except with respect to liability for Taxes incurred with respect to an RMT Partner
Section 355(e) Event, liability for any Transaction Taxes described in both Section 2.02(a) and
Section 2.02(b) above shall be shared by P&G and the RMT Group according to relative fault.
Notwithstanding anything to the contrary contained in this Agreement, each RMT Group member,
jointly and severally, shall indemnify each P&G Group member against, and hold it harmless from,
any Transaction Taxes attributable to an RMT Partner Section 355(e) Event, except for any such
event that would not have been so taxable but for P&G’s breach of (i) Section 4.01(a)(iii) and/or
(ii) the last sentence of Section 4.02(a), provided that, upon such taxable event, P&G’s breach of
Section 4.01(a)(iii) and/or the last sentence of Section 4.02(a) shall be the last item(s) taken
into account in determining whether



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the Distribution is a taxable event under Code Section 355(e) or any similar provision of
state or local law.



          (d) P&G shall indemnify each RMT Group member against, and hold it harmless from, any
Transaction Taxes with respect to which neither party is liable under Section 2.02(a) or 2.02(b)
above.



          (e) The party liable for any Transaction Taxes shall be entitled to any Refund of such
Transaction Taxes, and, if another party receives (or realizes) any such Refund, it shall remit the
amount of such Refund net of any Taxes incurred by such party (or any member of its group) in
connection with the Refund, within 30 days, to the party entitled to it under this Agreement.



          Section 2.03 Transfer Taxes.
The RMT Group and the P&G Group shall each be liable for one-half of any Transfer Taxes. The
parties shall cooperate in good faith to minimize the amount of any Transfer Taxes and obtain any
Refunds thereof. If the RMT Group or the P&G Group receives a Refund of any Transfer Taxes, such
group shall remit, within 30 days, one-half of the Refund to other group net of Taxes incurred by
the recipient group in connection with the Refund.



          Section 2.04 Entitlement to Tax Attributes.
The P&G Group shall be entitled to any Tax Attributes of the Folgers Group (or any member
thereof) relating to (i) the exercise of compensatory stock options issued on or prior to the
Closing Date with respect to Parent Common Stock, and (ii) any items allocated to the Folgers Group
(or any member thereof) from any Pre-Closing Period that carry over to any Tax period ending after
the Closing Date (clauses (i)-(ii), collectively, the “P&G Tax Assets”). The P&G Group
shall, to the extent permitted by law, claim on the applicable P&G Group Tax Return any Tax
Attributes described in clause (i) above. In connection therewith, the RMT Group will be required
to make a payment to P&G in the event the RMT Group (or any member thereof) actually utilizes any
P&G Tax Assets to reduce its Tax liability. The amount of any such payment shall equal the overall
net reduction in Tax liability realized as a result of utilizing the relevant P&G Tax Assets,
taking into account the net effect of all federal, state and local Taxes, and shall be made within
30 days after the RMT Group (or any member thereof), as the case may be, realizes such reduction in
Tax liability by way of a Refund or otherwise. To the extent any P&G Tax Assets are subsequently
increased for any reason, the RMT Group will pay P&G for the benefit of any such increase in a
manner consistent with this provision. To the extent, following a Final Determination, the RMT
Group (or any member thereof) is unable to utilize a P&G Tax Asset to reduce its Tax liability,
then P&G shall repay to Folgers or RMT Partner any amount previously paid to P&G with respect to
such P&G Tax Asset, plus interest (at the rate determined under applicable Tax law) from the date
of payment to P&G through the date of P&G’s repayment.



          Section 2.05 Additional Costs.
Each party shall be entitled to indemnification for Additional Costs related to any indemnity
payment under this Agreement.



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ARTICLE III




TAX RETURN FILING AND PAYMENT OBLIGATIONS




          Section 3.01 Tax Return Preparation and Filing.
(a) P&G shall (i) prepare and file, or shall cause to be prepared and filed, all Joint
Returns, and (ii) subject to Section 3.01(b), prepare all Folgers Separate Returns and any related
documents or statements required (or permitted) to be filed by any Folgers Group member for a
Pre-Closing Period, and shall pay, or cause to be paid, all Taxes shown to be due and payable on
such Tax Returns, other than any Folgers Group Taxes. RMT Partner shall prepare and file, or shall
cause to be prepared and filed, subject to Section 3.01(b), all Folgers Separate Returns and any
related documents or statements required (or permitted) to be filed by any Folgers Group member for
a Straddle Period, and shall pay, or cause to be paid, all Taxes shown to be due and payable on
such Tax Returns, other than any P&G Group Taxes. Except as provided in Section 2.01(f),
Section 3.01(b) or Section 3.02, the party required to prepare a return pursuant to this
Section 3.01(a) shall determine, with respect to such return: (i) the manner in which such Tax
Return shall be prepared and filed, including the manner in which any item of income, gain, loss,
deduction or credit shall be reported thereon and the allocation of items, (ii) whether any
extensions of time to file any such Tax Return will be requested or any amended Tax Return will be
filed, and (iii) the elections that will be made on any such Tax Return; provided, however, that,
in the absence of a change in law or circumstances requiring the contrary, Folgers Separate Returns
and the portion of any Joint Return relating to a member of the Folgers Group shall be prepared,
where applicable, on a basis consistent with the Folgers Group’s elections, accounting methods,
conventions and principles of taxation used for the most recent Tax periods for which Tax Returns
of the Folgers Group involving similar matters have been filed.



          (b) The party that is required to prepare a Folgers Separate Return pursuant to
Section 3.01(a) shall submit to the other party a draft of any such Folgers Separate Return
required to be filed after the Closing Date at least 30 days prior to the due date (taking into
account any applicable extensions) for filing such Tax Return. The non-preparing party shall be
deemed to have agreed to the applicable Tax Return, as prepared by the preparing party, unless the
non-preparing party delivers a Penalty Objection to the preparing party within 10 days of delivery
of such Tax Return. If the non-preparing party delivers to the preparing party a timely Penalty
Objection, the parties shall negotiate in good faith to resolve all disputed issues. If the
parties are unable to resolve all disputed issues within the following 10-day period, they shall
submit the remaining disputed issues to the Tax Advisor for resolution at least 5 days prior to the
due date for filing the applicable Tax Return (including extensions). The preparing party’s return
positions with respect to the disputed issues shall be upheld except for any such positions that
the Tax Advisor concludes do not satisfy the Applicable Penalty Standard. The non-preparing party
shall be liable for all fees and expenses of the Tax Advisor incurred under this Section 3.01(b);
provided, however, that the preparing party shall be liable for all such fees and expenses incurred
with respect to any Tax Return for which the Tax Advisor concludes a preparing party return
position did not satisfy the Applicable Penalty Standard. With respect to any Tax Return for a
Straddle Period, P&G will pay to RMT Partner its allocable share of the
Tax liability, as finally determined under this Section 3.01(b), at least 3 days prior to the
due date for filing the applicable Tax Return.



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          (c) RMT Partner shall not cause or permit any Folgers Group member to file any amended Tax
Return with respect to a Pre-Closing Period (other than any amendment to effect a carryback of a
post-Closing Tax Attribute, which carryback the relevant Folgers Group member is not permitted
under applicable law to elect to forego) without the prior written consent of P&G, which consent
may be withheld in P&G’s sole discretion.



          (d) Except as required by any Transaction Document, RMT Partner shall not cause or permit any
Folgers Group member to take any action on the Closing Date other than in the ordinary course of
business, including the sale of any assets, distribution of any dividend or making of any Tax
election.



          Section 3.02 Treatment of Transactions.
The parties shall report the Transactions for all Tax purposes in a manner consistent with the
Tax Opinion, unless, and then only to the extent, an alternative position is required pursuant to a
Final Determination. Subject to Section 3.01(b), and except in the case of a Folgers Separate
Return for a Straddle Period, P&G shall determine the Tax reporting of any issue relating to the
Transactions that is not covered by the Tax Opinion.



ARTICLE IV




TAX-FREE TREATMENT OF DISTRIBUTION & RELATED TRANSACTIONS




          Section 4.01 Representations.
(a) P&G represents and warrants that, as of the Effective Time, (i) the Transaction Documents
are true, correct and complete in all material respects, and P&G knows of no other facts that could
cause any Transaction to fail to qualify for Tax-Free Treatment, (ii) it has no plan or intention
to take any action inconsistent with the P&G Representation Letter or any covenant of any P&G Group
member set forth in any Transaction Document, and (iii) no pre-Distribution acquisition or sale of
P&G Capital Stock by P&G or any of its Affiliates will be part of a plan (or series of related
transactions), within the meaning of Code Section 355(e)(2)(A)(ii) and Treasury Regulation
Section 1.355-7(b), that includes the Distribution.



          (b) Folgers and RMT Partner each represents and warrants that, as of the Effective Time,
(i) all statements in the Transaction Documents by or about the Folgers Group or the RMT Partner
Group, any member thereof or the Coffee Business are true, correct and complete in all material
respects, and neither Folgers nor RMT Partner knows of any other facts that could cause any
Transaction to fail to qualify for Tax-Free Treatment, and (ii) it has no plan or intention to take
any action inconsistent with the RMT Partner Representation Letter or any covenant of any Folgers
Group or RMT Partner Group member set forth in any Transaction Document.



          (c) Each of P&G, Folgers and RMT Partner represents and warrants that, as of the Effective
Time, neither it nor any Affiliate thereof (or any officers or directors acting on its behalf, or
any Person acting with the implicit or explicit permission of any such officers or directors) had
any agreement, understanding, arrangement or substantial negotiations, as defined in Treasury
Regulation Section 1.355-7(h), during the preceding two-year period pursuant to which any Person
would (directly or indirectly) acquire, or have the right to acquire, Folgers



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Capital Stock, except
as contemplated by the Transaction Documents. RMT Partner further represents and warrants that,
immediately before the Effective Time, the amount of shares of RMT Partner stock treated as
outstanding for purposes of Code Section 355(e) will not exceed 55,896,243 shares. For the
avoidance of doubt, any RMT Partner stock, RMT Partner restricted stock, options to acquire RMT
Partner stock, RMT Partner deferred stock units and any other RMT Partner equity-based compensation
outstanding immediately before the Effective Time shall be treated as vested or exercised, as the
case may be, and the resulting RMT Partner stock shall be treated as outstanding stock for purposes
of the calculation in the immediately preceding sentence.



          (d) For the avoidance of doubt, the indemnification obligations of the parties with respect to
Taxes shall be determined without regard to any representation or warranty made by Folgers.



          Section 4.02 Covenants.
(a) During the Restricted Period, (i) neither P&G nor any of its Affiliates (or any officers
or directors acting on behalf of P&G or any of its Subsidiaries, or any Person acting with the
implicit or explicit permission of any such officers or directors) shall take or fail to take any
action if such action (or the failure to take such action) would (x) be inconsistent with any
material, information, covenant, representation or statement made by P&G or any of its Affiliates
in the P&G Representation Letter or in any Transaction Document, or (y) prevent, or be reasonably
likely to prevent, any Transaction from qualifying for Tax-Free Treatment; and (ii) none of
Folgers, RMT Partner or any of their Affiliates (or any officers or directors acting on behalf of
Folgers, RMT Partner or their Subsidiaries, or any Person acting with the implicit or explicit
permission of any such officers or directors) shall take or fail to take any action if such action
(or the failure to take such action) would (x) be inconsistent with any material, information,
covenant, representation or statement made by Folgers, RMT Partner or any of their Affiliates in
the RMT Partner Representation Letter or in any Transaction Document, or (y) prevent, or be
reasonably likely to prevent, any Transaction from qualifying for Tax-Free Treatment. P&G further
acknowledges and agrees that, after the Merger and through the completion of the Restricted Period,
neither P&G nor any of its Affiliates shall acquire or transfer any RMT Partner Capital Stock or
Folgers Capital Stock, other than any transfers by P&G or any Affiliate thereof of not more than
2,850,000 shares of RMT Partner Common Stock received in the Merger.



          (b) Without limiting the generality of the foregoing, during the Restricted Period, subject to
Section 4.02(d), none of Folgers, RMT Partner or any of their Affiliates (or any officers or
directors acting on behalf of Folgers, RMT Partner or their Subsidiaries, or any Person acting with
the implicit or explicit permission of any such officers or directors) shall:




     (i) enter into any agreement, understanding, arrangement or substantial negotiations,
as defined in Treasury Regulation Section 1.355-7(h), pursuant to which any Person would
(directly or indirectly) acquire, or have the right to acquire, RMT Partner Capital Stock or
Folgers Capital Stock. For these purposes, an acquisition of RMT Partner Capital Stock or
Folgers Capital Stock, as applicable, shall include, without limitation, any
recapitalization, repurchase or redemption of RMT Partner Capital Stock or Folgers Capital
Stock, any issuance of such Capital Stock (including any nonvoting stock) or an instrument
exchangeable or convertible into such Capital Stock (whether



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pursuant to an exercise of
stock options, as a result of a capital contribution to RMT Partner or Folgers, as
applicable, or otherwise), any option grant, any amendment to the certificate of
incorporation (or other organizational document) of RMT Partner or Folgers, as applicable,
or any other action (whether effected through a shareholder vote or otherwise) affecting the
voting rights of Capital Stock (including through the conversion of any such Capital Stock
into another class of such Capital Stock); provided,
however, that (u) Folgers shall be
permitted to issue Capital Stock to RMT Partner; (v) vesting of any RMT Partner Capital
Stock issued pursuant to Section 5.02(c)(iv) of the Transaction Agreement, or vesting of any
restricted stock or deferred stock units that a Safe Harbor VIII Person is entitled to
receive (or would be entitled to receive upon achieving the relevant hurdles in existence)
as of the Effective Time shall not be treated as an acquisition of RMT Partner Capital Stock
for purposes of this Section 4.02(b)(i); (w) RMT Partner shall be permitted to issue Capital
Stock to a Safe Harbor VIII Person pursuant to the exercise of an option to acquire Capital
Stock that was granted at or prior to the Effective Time; (x) after P&G’s receipt and
acceptance of, and solely to the extent consistent with, an Equity Compensation Opinion, RMT
Partner or Folgers, as applicable, may issue RMT Partner or Folgers options, restricted
stock and/or deferred stock units and the shares of RMT Partner or Folgers Capital Stock
issued upon the exercise or vesting, as applicable, of such options, restricted stock and/or
deferred stock units, and any such shares shall not be treated as an acquisition of RMT
Partner Capital Stock or Folgers Capital Stock, as applicable,
provided that the RMT Group
shall deliver an Equity Compensation Opinion to P&G prior to the issuance of any RMT Partner
or Folgers options, restricted stock and/or deferred stock units after the Merger pursuant
to an employee stock purchase agreement, equity compensation agreement, retirement plan or
other compensation arrangement that is described in the opinion (such arrangement, the
“Covered Compensation Arrangement”), and the RMT Group may rely on an Equity
Compensation Opinion for all issuances under the Covered Compensation Arrangement until the
earlier of (i) any amendment of the Covered Compensation Arrangement, or (ii) a change in
applicable Tax law; (y) subject to compliance with Section 4.02(d), RMT Partner may redeem,
retire, repurchase or otherwise acquire RMT Partner Capital Stock in a manner that complies
with the requirements of Revenue Procedure 96-30 (as in effect prior to the release of
Revenue Procedure 2003-48), except that the maximum amount of RMT Partner Capital Stock
permitted to be repurchased under this clause (y) shall be reduced by the amount of any
Folgers Capital Stock treated as retained for U.S. federal income Tax purposes by P&G or any
of its Affiliates after the Transactions; and (z) RMT Partner may adopt a shareholder rights
plan (and issue Capital Stock in accordance therewith) that is described in or is similar to
the shareholder rights plan described in IRS Revenue Ruling 90-11 (for this purpose a
shareholder rights plan will be considered
similar to the plan described in IRS Revenue Ruling 90-11 only if the principal purpose
for the adoption of the plan providing for such rights is to establish a mechanism by which
a publicly held corporation can, in the future, provide shareholders with rights to purchase
stock at substantially less than fair market value as a means of responding to unsolicited
offers to acquire the corporation);




     (ii) merge or consolidate RMT Partner or Folgers with any other Person, or liquidate or
partially liquidate RMT Partner or Folgers;



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     (iii) cause or permit RMT Partner or Folgers to be treated as other than a corporation
for U.S. federal income Tax purposes; or




     (iv) discontinue, sell, transfer or cease to maintain the Active Trade or Business, or
engage in any transaction that could result in Folgers ceasing to be a company whose
separate affiliated group, as defined in Code
Section 355(b)(3)(B), is so engaged; provided,
however, that, after the Merger, the Folgers Group shall be permitted to sell, transfer or
otherwise dispose of (x) inventory in the ordinary course of business, and (y) up to 20% of
its non-inventory assets (determined based on the fair market value of the Folgers Group’s
assets immediately before the Closing Date) in the aggregate and use the proceeds from any
such dispositions described in this clause (y) to repay debt or fund capital requirements
for business activities or for other bona fide corporate business purposes.



          (c) To the extent that as a result of a subsequent amendment to the Code and/or the Treasury
Regulations, any action or a failure to take any action by a P&G Group member or an RMT Group
member could affect any Transaction’s qualification for Tax-Free Treatment, then the covenants
contained in Section 4.02(a)(i)(y) and in Section 4.02(a)(ii)(y) shall automatically be deemed to
incorporate by reference such actions and the failure to take such actions, and the RMT Group shall
comply with the requirements of the relevant amendment through the end of the Restricted Period;
provided, however, that, for the avoidance of doubt, no such action or failure to take any such
action before the date the relevant amendment is enacted shall constitute a breach of such Sections
to the extent such actions or failure to take such actions would not have otherwise constituted a
breach of such Sections before such date.



          (d) For the avoidance of doubt, neither the RMT Group nor any of its Affiliates shall take any
action prohibited by the foregoing subparagraphs (b) or (c), unless (i) P&G receives prior written
notice describing the proposed action in reasonable detail, and (ii) the RMT Group delivers to P&G
(x) an Unqualified Opinion and P&G, in its reasonable discretion, which discretion shall be
exercised in good faith solely to preserve the Tax-Free Treatment, provides its written consent
permitting the proposed action, or (y) a Ruling. Notwithstanding the foregoing, if the RMT Group,
either before or contemporaneously with the Closing, files an Articles PLR or a Ruling regarding
the effect of RMT Partner equity-based compensation on the Distribution’s qualification under Code
Section 355(e), none of the RMT Group or any of its Affiliates shall have any communication
(including telephonic) with the IRS in connection with the Transactions until more than 6 months
after the Closing Date, provided, that, if a PLR request was not submitted, either before or
contemporaneously with the Closing, the RMT Group shall be permitted to file one Ruling request
under this Section 4.02(d) during
the first six months after the Closing Date. P&G’s obligation to cooperate in connection with
the RMT Group’s delivery of an Unqualified Opinion or Ruling is as expressly set forth in
Section 5.06(b) below. For the avoidance of doubt, the P&G Group’s right to indemnification for
Transaction Taxes shall be determined without regard to whether the RMT Group satisfies any or all
of the requirements of this Section 4.02(d).



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ARTICLE V




TAX CONTESTS; INDEMNIFICATION; COOPERATION




          Section 5.01 Notice.
Within 30 days after a party (the “Indemnitee”) becomes aware of the existence of a
Tax Contest that may give rise to an indemnification claim by it against another party under this
Agreement (each such party, an “Indemnifying Party”), the Indemnitee shall promptly notify
the Indemnifying Parties of the Tax Contest, and thereafter shall promptly forward or make
available to the Indemnifying Parties copies of all notices and communications with a Taxing
Authority solely to the extent relating to such Tax Contest;
provided, however, that any delay on
the part of the Indemnitee in notifying the Indemnifying Parties shall not relieve the Indemnifying
Parties from any obligation hereunder unless (and then solely to the extent) the Indemnifying
Parties are actually prejudiced thereby.



          Section 5.02 Control of Tax Contests.
P&G shall have the right to (i) contest, compromise or settle any adjustment or deficiency
proposed or asserted with respect to any Tax liability of a P&G Group member or a Folgers Group
member for a Pre-Closing Period or with respect to a Joint Return, and (ii) file, prosecute,
compromise or settle any Adjustment Request (and determine the manner in which any Refund shall be
received) with respect to any Tax for such period or return; provided, however, that (a) in the
case of a Folgers Separate Return, the RMT Group shall have the right to actively participate in
any action set forth in clauses (i) and (ii) above if such action could result in any Folgers Group
Taxes or any Transaction Taxes with respect to which the RMT Group has previously acknowledged its
liability in writing and P&G shall not settle or compromise any such contest without RMT Partner’s
written consent, which consent may not be unreasonably withheld, delayed or conditioned; and (b) in
the case of a Joint Return, to the extent such Tax Contest solely relates to Transaction Taxes with
respect to which the RMT Group could be liable under Section 2.02(a) (an “RMT Issue”), P&G
shall reasonably consult with the RMT Group with respect to P&G’s defense and control of such Tax
Contest, including through the following: (x) P&G shall keep RMT Partner fully informed, in all
material respects, regarding the progress of the prosecution or defense of such Tax Contest,
(y) P&G shall promptly provide RMT Partner with copies of any correspondence received from any
Taxing Authority in connection with such Tax Contest, and (z) P&G shall provide RMT Partner with
drafts of any correspondence from P&G to any Taxing Authority in connection with such Tax Contest
and shall provide RMT Partner with a reasonable opportunity to comment on such correspondence;
provided, further, that, if the RMT Group acknowledges its liability in writing for all the
Transaction Taxes that would be owed to a Taxing Authority in the event of an adverse determination
with respect to the RMT Issue, P&G shall not settle or compromise any such contest without RMT
Partner’s written
consent, which consent may not be unreasonably withheld, delayed or
conditioned; provided,
further, however, that if RMT Partner withholds its consent to a settlement or compromise described
in the prior proviso, RMT Partner shall be liable for any Transaction Taxes resulting from a Final
Determination to the extent the basis for the Final Determination is such that the RMT Group would
have liability for the applicable Transaction Taxes under this Agreement, or if the Final
Determination fails to clearly articulate the basis for liability such that it is not reasonably
ascertainable which party would be liable for the Transaction Taxes under this Agreement. P&G and
RMT Partner shall use their reasonable best efforts to ensure that the Final Determination clearly
provides the basis for such determination. RMT Partner shall have the right to (I) contest,
compromise or settle any



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adjustment or deficiency proposed or asserted with respect to any Tax
liability included in any Folgers Separate Return for a Straddle Period, and (II) file, prosecute,
compromise or settle any Adjustment Request (and determine the manner in which any Refund shall be
received) with respect to any Tax for such period; provided, however, that P&G shall have the right
to actively participate in any action set forth in clauses (I) and (II) above if such action could
result in any P&G Group Taxes or any Transaction Taxes with respect to which the P&G Group has
previously acknowledged its liability in writing and RMT Partner shall not settle or compromise any
such contest without P&G’s written consent, which consent may not be unreasonably withheld, delayed
or conditioned.



          Section 5.03 Indemnification Payments.
An Indemnitee shall be entitled to make a claim for payment pursuant to this Agreement at the
time the Indemnitee determines that it is entitled to such payment. The Indemnitee shall provide
to the Indemnifying Parties notice of such claim within 10 days of the date on which it first
determines that it is entitled to claim such payment, including a description of such claim and a
detailed calculation of the amount of the indemnification payment
that is claimed; provided,
however, that any delay on the part of the Indemnitee in notifying the Indemnifying Parties shall
not relieve the Indemnifying Parties from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Parties are actually prejudiced thereby. Unless the Indemnifying Parties
reasonably dispute their liability for, or the amount of, an indemnity payment, such parties shall
make the claimed payment to the Indemnitee within 10 days after receiving notice of (i) the
Indemnitee’s payment of a Tax for which the Indemnifying Parties are liable under this Agreement,
or (ii) a Final Determination which results in the Indemnifying Parties becoming obligated to make
a payment to the Indemnitee under this Agreement.



          Section 5.04 Interest on Late Payments.
With respect to any indemnification payment (including any disputed payment that is ultimately
required to be paid) not made by the due date for payment set forth in this Agreement, interest
shall accrue at an annual rate equal to (i) the prime lending rate at Citibank N.A. (or its
successor or another major money center commercial bank agreed to by the parties) in effect on the
applicable payment due date, plus (ii) 3%.



          Section 5.05 Treatment of Indemnity Payments.
Except for any payment of interest under Section 5.04 and in the absence of a Final
Determination to the contrary, any amount payable with respect to any Tax under this Agreement
shall be treated as occurring immediately prior to the Transactions, as an inter-company
distribution or a contribution to capital, as the case may be. Notwithstanding the foregoing, the
amount of any indemnity payment under this Agreement shall be (i) decreased to take into account
any Tax benefit actually realized by the Indemnitee (or an Affiliate thereof) arising from the
incurrence or payment of the relevant indemnified item, and (ii) increased to take into account any
Tax cost actually incurred by the Indemnitee (or an Affiliate thereof) arising from the receipt of
the relevant indemnity payment. Any indemnity payment will initially be made without regard to
this Section 5.05 and will be reduced or increased to reflect any applicable Tax benefit or Tax
cost, as the case may be, within 30 days after the Indemnitee (or an Affiliate thereof) actually
realizes such Tax benefit or incurs such Tax cost by way of a Refund, an increase in Taxes or
otherwise. In the event of a Final Determination relating to the Indemnitee’s (or its Affiliate’s)
incurrence or payment of an indemnified item and/or receipt of an indemnity payment pursuant



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to
this Section 5.05, the Indemnitee will, within 30 days of such Final Determination, provide the
other parties with notice thereof and supporting documentation addressing, in reasonable detail,
the amount of any reduction or increase in Taxes of the Indemnitee (or its Affiliate) resulting
from such Final Determination, and the parties will promptly make any payments necessary to reflect
the relevant reduction or increase in Tax liability.



          Section 5.06 Cooperation.
(a) Pursuant to this Agreement, each member of the P&G Group and the RMT Group shall, subject
to Section 5.06(b) below, cooperate fully with all reasonable requests from the other parties in
connection with the preparation and filing of Tax Returns and Adjustment Requests, the resolution
of Tax Contests and any other matters covered herein. If any parties fail to comply with any of
their obligations set forth in this Section 5.06(a), and such failure results in the imposition of
additional Taxes, the nonperforming parties shall be liable for such additional Taxes.



          (b) In connection with the foregoing, P&G shall, at RMT Partner’s sole expense, reasonably
cooperate with RMT Partner, upon its written request, in connection with obtaining (i) a PLR
regarding the application of Code Section 355(e) to (x) the provisions of Article Fourth,
Division II, Section 2 of the Amended Articles of Incorporation of RMT Partner as in effect as of
the date hereof, and (y) at RMT Partner’s option, the special dividend payable by RMT Partner
pursuant to Section 5.02(c) of the Transaction Agreement (collectively, the
“Articles PLR”); (ii) a Ruling; (iii) an insurance policy to be issued to RMT Partner that
insures risk relating to the application of Code Section 355(e) to the Distribution; and/or (iv) a
Safe Harbor Opinion or Unqualified Opinion; provided,
however, that P&G’s cooperation (x) in the
case of an Articles PLR or a Ruling, shall be limited solely to the delivery by P&G, in a form and
in substance satisfactory to P&G, of P&G’s consent to the use of P&G’s and its Affiliates names in
the applicable PLR request and a representation substantially to the effect that the Folgers
Transfer and the Distribution, taken together, qualify as a transaction described in Code
Sections 355(a) and 368(a)(1)(D), apart from the issue that is the subject of the applicable PLR
request (the information required under this clause (x), the “Permitted P&G Information”);
and (y) in the case of clauses (iii) and (iv), shall include providing any information,
submissions,
representations and covenants reasonably requested by a recipient that has previously executed
with P&G an appropriate confidentiality agreement, in form and substance satisfactory to P&G and
that permits reliance by P&G; provided, further,
however, that P&G’s cooperation under clauses (i)
through (iv) above (including through the provision of information, submissions, representations or
covenants) shall not affect the P&G Group’s indemnity obligation for Taxes under this Agreement,
decrease in any respect the RMT Group’s indemnity obligation for Taxes under this Agreement, or
cause any member of the P&G Group to have any liability to any third party, including any insurance
company described in clause (iii) above. RMT Partner further acknowledges and agrees that, in the
case of an Articles PLR or a Ruling, RMT Partner shall immediately notify P&G if the IRS seeks any
non-publicly available information regarding P&G or any of its Affiliates, and RMT Partner shall
not provide any such information to the IRS without P&G’s consent, which consent can be withheld or
provided in P&G’s sole and absolute discretion. RMT Partner shall promptly withdraw any such PLR
request (and immediately notify P&G in writing of such withdrawal) if P&G does not affirmatively
consent to provide the requested information within 48 hours of RMT Partner’s notification to P&G
regarding the request therefor. RMT Partner shall provide to P&G, for its review and approval
prior to filing, a copy of any Articles PLR or Ruling request and any other submissions made to the
IRS in



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connection therewith, and RMT Partner shall provide to P&G a copy of any PLR obtained in
connection with such request.



          Section 5.07 Confidentiality.
Any information or documents provided under this Agreement shall be kept confidential by the
recipient parties, except as may otherwise be necessary in connection with the filing of any Tax
Return or the resolution of any Tax Contest. In addition, if P&G, Folgers or RMT Partner
determines that providing such information could be commercially detrimental, violate any law or
agreement or waive any privilege, the parties shall use their reasonable best efforts to permit
compliance with the obligations under this Agreement in a manner that avoids any such harm or
consequence.



ARTICLE VI




DISPUTE RESOLUTION




          Section 6.01 Tax Disputes.
The parties shall endeavor, and shall cause their respective Affiliates to endeavor, to
resolve in good faith all disputes arising in connection with this Agreement. The parties shall
negotiate in good faith to resolve any Tax Dispute within
30 days, provided that any dispute with
respect to a Folgers Separate Return subject to Section 3.01(b) shall be resolved as set forth
therein. Upon written notice by a party after such 30-day period, the matter will be referred to a
U.S. tax counsel or other tax advisor of recognized national standing (the “Tax Advisor”)
that will be jointly chosen by P&G and RMT Partner;
provided, however, that, if P&G and RMT Partner
do not agree on the selection of the Tax Advisor after 5 days of good faith negotiation, their
respective U.S. tax counsel or other advisors of recognized national standing shall select a
mutually acceptable Tax Advisor within the following 10-day period. The Tax Advisor may, in its
discretion, obtain the services of any third party necessary to assist it in
resolving the dispute. The Tax Advisor shall furnish written notice to the Companies of its
resolution of the dispute as soon as practicable, but in any event no later than 90 days after
acceptance of the matter for resolution. Any such resolution by the Tax Advisor shall be binding
on the parties, and the parties shall take, or cause to be taken, any action necessary to implement
such resolution. All fees and expenses of the Tax Advisor shall be shared equally by P&G and the
RMT Group. If the parties are unable to find a Tax Advisor willing to adjudicate the dispute in
question and whom the parties, acting in good faith find acceptable, then the dispute will be
submitted for mediation in a manner consistent with Article VI of the Separation Agreement, and, if
the dispute is not resolved in mediation (or if the parties are unable to agree on a mediator), any
party will have the right to begin arbitration in a manner consistent with Article VI of the
Separation Agreement, provided that only an arbitrator that qualifies as a Tax Advisor shall be
selected. If any dispute regarding the preparation of a Tax Return is not resolved before the due
date for filing such return, the return shall be filed in the manner deemed correct by the party
responsible for filing the return without prejudice to the rights and obligations of the parties
hereunder, provided that the preparing party shall file an amended Tax Return, within 10 days after
the completion of the process set forth in this Section 6.01, reflecting any changes made in
connection with such process.



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ARTICLE VII




MISCELLANEOUS




          Section 7.01 Authorization.
Each party hereby represents and warrants that it has the power and authority to execute,
deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary
corporate action on the part of such party, that this Agreement constitutes a legal, valid and
binding obligation of such party, and that the execution, delivery and performance of this
Agreement by such party does not contravene or conflict with any provision of law or of its charter
or bylaws or any agreement, instrument or order binding on such party.



          Section 7.02 Expenses.
Except as otherwise provided in this Agreement, the Transaction Agreement or any Other RMT
Agreement, each party will bear its own expenses in connection with the matters addressed herein.



          Section 7.03 Entire Agreement.
This Agreement, the Transaction Agreement and the Other RMT Agreements, including any related
annexes, schedules and exhibits, as well as any other agreements and documents referred to herein
and therein, will together constitute the entire agreement between the parties with respect to the
subject matter hereof and thereof and will supersede all prior negotiations, agreements and
understandings of the parties of any nature, whether oral or written, with respect to such subject
matter.



          Section 7.04 Governing Law.
The validity, interpretation and enforcement of this Agreement will be governed by the laws of
the State of Ohio, other than the choice of law provisions thereof.



          Section 7.05 Notice.
Any notice, demand, claim or other communication under this Agreement will be in writing and
will be deemed to have been given (i) on delivery if delivered personally; (ii) on the date on
which delivery thereof is guaranteed by the carrier if delivered by a national courier guaranteeing
delivery within a fixed number of days of sending; or (iii) on the date of transmission thereof if
delivery is confirmed, but, in each case, only if addressed to the parties in the following manner
at the following addresses or facsimile numbers (or at the other address or other number as a party
may specify by notice to the other):



          If to P&G:



The Procter & Gamble Company

One Procter & Gamble Plaza

Cincinnati, Ohio 45202

Attention: Timothy McDonald, Vice President, Finance & Accounting-Taxes

Facsimile: 513-945-8044

E-mail: mcdonald.tm@pg.com




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          with a copy to:



Cadwalader, Wickersham & Taft LLP

One World Financial Center

New York, NY 10281

Attention: Linda Z. Swartz, Esq.

Facsimile: 212-504-6666

E-mail: Linda.Swartz@cwt.com




          If to RMT Partner or Folgers:



The J.M. Smucker Company

One Strawberry Lane

Orrville, Ohio 44667

Attention: M. Ann Harlan, Vice President, General Counsel and Secretary

Facsimile: 330-684-3026

E-mail: ann.harlan@jmsmucker.com




          with a copy to:



Calfee, Halter & Griswold LLP

1400 KeyBank Center

800 Superior Avenue

Cleveland, Ohio 44114

Attention: John J. Jenkins, Esq. and Michael F. Marhofer, Esq.

Facsimile: 216-241-0816

Email: jjenkins@calfee.com and mmarhofer@calfee.com



Any notice to P&G, Folgers or RMT Partner will be deemed notice to all members of the P&G Group,
the Folgers Group or the RMT Partner Group, as the case may be.




          Section 7.06 Priority of Agreements.
If there is a conflict between any provision of this Agreement and a provision in any of the
Other RMT Agreements, the provision of this Agreement will control unless specifically provided
otherwise in this Agreement or in the applicable Other RMT Agreement.



          Section 7.07 Amendments and Waivers.
(a) This Agreement may be amended and any provision of this
Agreement may be waived, provided
that any such amendment or waiver will be binding upon a party only if such amendment or waiver is
set forth in a writing executed by such party. No course of dealing between or among any Persons
having any interest in this Agreement will be deemed effective to modify, amend or discharge any
part of this Agreement or any rights or obligations of any party hereto under or by reason of this
Agreement.



          (b) No delay or failure in exercising any right, power or remedy hereunder will affect or
operate as a waiver thereof; nor will any single or partial exercise thereof or any



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abandonment or
discontinuance of steps to enforce such a right, power or remedy preclude any further exercise
thereof or of any other right, power or remedy. The rights and remedies hereunder are cumulative
and not exclusive of any rights or remedies that any party hereto would otherwise have. Any
waiver, permit, consent or approval of any kind or character of any breach or default under this
Agreement or any such waiver of any provision of this Agreement must satisfy the conditions set
forth in this Section 7.07(b) and will be effective only to the extent in such writing specifically
set forth.



          Section 7.08 Termination.
This Agreement shall automatically terminate, without further action by any party hereto, upon
the termination of the Transaction Agreement if such termination occurs prior to the Merger. If
terminated, no party will have any liability of any kind to the other parties or any other Person
on account of the termination or otherwise with respect to this Agreement.



          Section 7.09 No Third Party Beneficiaries.
Except as otherwise provided in the indemnification provisions contained herein, this
Agreement is solely for the benefit of the parties hereto and does not confer on third parties
(including any employees of any member of the P&G Group, the Folgers Group or the RMT Partner
Group) any remedy, claim, reimbursement, claim of action or other right in addition to those
existing without reference to this Agreement.



          Section 7.10 Assignability.
No party will assign its rights or delegate its duties under this Agreement without the
written consent of the other parties, except that any party may assign its rights or delegate its
duties under this Agreement to a member of its group, provided that such assigning member agrees in
writing to be bound by the terms and conditions contained in this
Agreement, and provided further
that the assignment or delegation will not relieve any party of its indemnification obligations in
the event of a breach of this Agreement. Except as provided in the preceding sentence, any
attempted assignment or delegation will be void. Upon the Effective Time, Folgers, as the
surviving corporation in the Merger, will continue to have all of the rights, and be subject to all
of the obligations, ascribed to Folgers under this Agreement.



          Section 7.11 Enforcement.
The parties acknowledge that irreparable damage would occur to P&G, Folgers and RMT Partner in
the event that any provision of this Agreement is not performed in accordance with its specific
terms or is otherwise breached. The parties agree that P&G, Folgers and RMT Partner shall be
entitled to injunctive relief to prevent any breach of this Agreement and to enforce specifically
the terms and provisions hereof, such remedy being in addition to any other remedy to which a party
may be entitled at law or in equity.



          Section 7.12 Survival.
All Sections of this Agreement shall be unconditional and absolute and shall remain in effect
without limitation as to time (except to the extent any Sections expressly provide for an earlier
date, in which case, as of such date).



          Section 7.13 Construction.
The descriptive headings herein are inserted for convenience of reference only and are not
intended to be a substantive part of or to affect the meaning or interpretation of this Agreement.
Reference to any agreement, document, or instrument means such agreement, document, or instrument
as amended or otherwise modified



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from time to time in accordance with the terms thereof, and if
applicable hereof. The use of the words “include” or “including” in this Agreement will be by way
of example rather than by limitation. The use of the words “or,” “either” or “any” will not be
exclusive. The parties have participated jointly in the negotiation and drafting of this
Agreement, and the parties acknowledge that, in the event an ambiguity or question of intent or
interpretation arises, this Agreement will be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof will arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Except as otherwise expressly
provided elsewhere in this Agreement, the Transaction Agreement or any Other RMT Agreement, any
provision herein which contemplates the agreement, approval or
consent of, or exercise of any right of, a party, such party may give or withhold such
agreement, approval or consent, or exercise such right, in its sole and absolute discretion, the
parties hereto hereby expressly disclaiming any implied duty of good faith and fair dealing or
similar concept.



          Section 7.14 Severability.
The parties agree that (i) the provisions of this Agreement shall be severable in the event
that for any reason whatsoever any of the provisions hereof are invalid, void or otherwise
unenforceable, (ii) any such invalid, void or otherwise unenforceable provisions shall be replaced
by other provisions which are as similar as possible in terms to such invalid, void or otherwise
unenforceable provisions but are valid and enforceable, and (iii) the remaining provisions shall
remain valid and enforceable to the fullest extent permitted by applicable law.



          Section 7.15 Counterparts.
This Agreement may be executed in multiple counterparts (any one of which need not contain the
signatures of more than one party), each of which will be deemed to be an original but all of which
taken together will constitute one and the same agreement. This Agreement, and any amendments
hereto, to the extent signed and delivered by means of a facsimile machine or other electronic
transmission, will be treated in all manner and respects as an original agreement and will be
considered to have the same binding legal effects as if it were the original signed version thereof
delivered in person. At the request of any party, the other parties will re-execute original forms
thereof and deliver them to the requesting party. No party will raise the use of a facsimile
machine or other electronic means to deliver a signature or the fact that any signature was
transmitted or communicated through the use of facsimile machine or other electronic means as a
defense to the formation of a Contract and each such party forever waives any such defense.



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          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the respective
officers as of the date set forth above.



	 	 	 	 	 
	 	The Procter & Gamble Company,

 	 
	 	By:  	/s/ Jon R. Moeller
 	 
	 	 	Name:  	Jon R. Moeller 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 
	 	The Folgers Coffee Company,

 	 
	 	By:  	/s/ Jon R. Moeller
 	 
	 	 	Name:  	Jon R. Moeller 	 
	 	 	Title:  	Vice President & Treasurer 	 
	 
	 	The J.M. Smucker Company,

 	 
	 	By:  	/s/ Richard K. Smucker
 	 
	 	 	Name:  	Richard K. Smucker 	 
	 	 	Title:  	Executive Chairman, President, and
Co-CEO