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25. What is the status of the litigations against the Company arising from the pentaborane (Hanover Ind;ustrial Air Park, Ashland, Virginia) accident? Background: On February 25, 1982, an accident occurred at the Hanover Industrial Air Park in Ashland, Virginia. A-Line Technical Service, Inc., a hazardous waste contractor retained by the Company, was engaged in the process of decontaminating and preparing for disposal certain chemicals and containers. Approximately 20 people, including rescue workers, were injured, three of them seriously, and one of the three (who happened to the the president of A-Line) died the following week. The container involved in the accidient apparently contained pentaborane, a highly toxic and flammable substance used in rocket fuel. This container was one of 21 small cylinders found underneath the Deepwater Terminal Road property of the Company in Richmond. The Company acquired that property in 1978 from Texaco, Inc. and uses i~t for laboratory and office facilities. No manufacturing is done at that location. Texaco had, through a subsidiary, operated a rocket fuel research facility on the site during the 1960's. Texaco made no disclosure of buried chemicals at the time of the Company's acquisition of the property. The Company first became aware of the possible existence of chemical dump sites in 1979 when it was preparing to do excavation work on the site and certain former employees of Texaco suggested checking into the matter. When asked, Texaco responded with information that proved to be incomplete and inaccurate. The first group of cylinders was discovered in late 1980. In addition to the cylinders, a variety of other small containers of variou~s substances was found. Although the total quantity of materials was small, their identities were not immediately known. Philip Morris therefore took precautions to see that the materials were properly identified; and disposed of. Those precautions included notification of appropriate federal and state authorities and retention of qualified hazardous waste management firms. All of the materials were removed to the premises of Environmental Laboratories in Ashland for analysis, and it was there that the accidlent occured.

The Company contracted with A-Line in January 1981 to decontaminate the cylinders and prepare them for disposal and to pack the other chemicals in. drums for disposal. Pending Litigation: There are now a total of eighteen separate actions against the Company. The first filed action (~) is set in the Federal District Court, Richmond, before Judge Merhige. The trial date is scheduled for September 24, 1984. The second matter filed in the Federal District Court (Anderson) has been settled. The issue, of allocation of payment and liability (as between the Company,. Texaco, Inc., A-Line Industries Inc., and Environmental Laboratories~ Inc.) has yet to be determined. There are sixteen actions filed in the state court, Hanover County, Virginia. Twelve actions have been brought by members of the Ashcake and Ashland Rescue Squads. These claims name the Company, Texaco, A-Lome. and Environmemtal Labs as defendants. The allegations are substantially the same ~n each case; each rescue worker claims $i million compensatory and $3 million punitive damages. There are four other state court actions for personal injuries and property damage, namely: (a) Charles Ramsey, action by a state emergency response officer who was sent to the scene of the accident to investigate, claiming $I00,000 in compensatory damages and $200,000 in punitive damages; (b) Hubert Mentz, action by the owner of Environmental Equipment which operates adjacent to Environmental Labs, claiming $250,000 for personal compensatory damages, $15,000 for business interruption and $250,000 for punitive damages; (c) Edward J. Sawyer, action by a general partner of Ed Sawyer Associates who operated a campground near the area of the accident, claiming his business was rendered inoperative for a period of time after the accident and further claiming $50,000 compensatory damages and $2 million punitive damages; and (d) Ronald B. Flournoy, action by a visitor to the office of Hubert C. Mentz (a business adjacent to Environmental Labs)at the time of the accident, claiming $i million for compensatory damages and $3 million for pun,itive damages. The Company believes it has substantial factual and legal defenses and is fully insured.

26. What is the Company's plant safety record? What active programs does the Company have to promote safety, accident prevention? Is the Company complying with the Occupational Safety and Health Act (OSHA)? The Company has active programs to promote safety all of its plants. It is our policy to attempt to meet or exceed OSHA requirements in all respects.

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I. To what extent did the strong dollar in 1983 hurt our business? What effect will this factor have in: 1984? The strong posi~tion of the dollar in the world currency market in 198'3 caused a reduction of Philip Morris International's revenues and operating profit. We are unable to estimate the effect of the dollar on 1984 earnings. 2. Do you expect that the Company's debt-to-equity ratio will continue to decline? How would the financing of a major acquisition in 1984 or 1985 affect this ratio? The Company's total debt at December 31, 1983 was $3.1 billion, a $671 million decrease from a year earlier. At year-end 1983, the Company's debt-to-equity ratio was .76 to I., compared to 1.02 to i at December 31, 1982. The decrease was mainly attributable to increased earnings for 1983 coupled with a reduction in capital expenditures and working capital. It is not our policy to make specific projections concerning future debt-to-equity levels.

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i. To what extent did the strong dollar in 1983 hurt our business? What effect will this factor have in 19847 The strong position of the dollar in the world currency market in 1983 caused a reduction of Philip Morris International's revenues and operating profit. We are unable to estimate the effect of the dollar on 1984 earnings. 2. Do you expect that the Company's debt-to-equity ratio will continue to decline? How would the financing of a major acquisition in 1984 or 1985 affect this ratio? The Company's total debt at December 31, 1983 was $3.1 billion, a $671 million decrease from a year earlier. At year-end 1983, the Company's debt-to-equity ratio was .76 to i., compared to 1.02 to I at December 31, 1982. The decrease was mainly attributable to increased earnings for 1983 coupled with a reduction in capital expenditures and working capital. It is not our policy to make specific projections concerning future debt-to-equity levels.

3. What foreign currency exposure does the Company have as a result of the Swiss Franc and Deutsche Mark denominated financings in 1981 and 19827 Nhat safeguards has the Company taken Co protect itself against losses from foreign currency fluctuations? Have forward exchange contracts been entered into? Are ocher hedging techniques used? Does the Company maintain any funds in foreign countries for exchange speculation? These issues are in effect hedged by our large Swiss Franc and Deutsche Mark assets. We also buy and sell forward contracts. A portion of such issues has been purchased by the Company on the open market from, time to time. Does the Company plan to issue new equity? We have no plans for an equity issue.

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