AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
dated as of
October 26, 2000
among
FLOWERS INDUSTRIES, INC.,
▇▇▇▇▇▇▇ COMPANY
and
KANSAS MERGER SUBSIDIARY, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.....................................................2
Section 1.01. Definitions.....................................2
ARTICLE 2 THE TRANSACTION.................................................6
Section 2.01. The Spin-Off....................................6
Section 2.02. The Merger......................................6
Section 2.03. Conversion of Shares............................7
Section 2.04. Surrender and Payment...........................7
Section 2.05. Dissenting Shares...............................9
Section 2.06. Equity Compensation Arrangements;
Share Equivalents...............................9
Section 2.07. Adjustments.....................................9
Section 2.08. Withholding Rights.............................10
Section 2.09. Lost Certificates..............................10
Section 2.10. Associated Rights..............................10
Section 2.11. Calculation of Adjustment Amount...............10
ARTICLE 3 THE SURVIVING CORPORATION......................................10
Section 3.01. Articles of Incorporation......................10
Section 3.02. Bylaws.........................................11
Section 3.03. Directors and Officers.........................11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................11
Section 4.01. Corporate Existence and Power..................11
Section 4.02. Corporate Authorization........................12
Section 4.03. Governmental Authorization.....................12
Section 4.04. Non-Contravention..............................12
Section 4.05. Capitalization.................................13
Section 4.06. SEC Filings....................................14
Section 4.07. Financial Statements...........................14
Section 4.08. Disclosure Documents...........................15
Section 4.09. Absence of Certain Changes.....................16
Section 4.10. No Undisclosed Material Liabilities............17
Section 4.11. Compliance with Laws and Court Orders..........18
Section 4.12. Litigation.....................................18
Section 4.13. Finders' Fees..................................18
Section 4.14. Opinion of Financial Advisers..................18
Section 4.15. Taxes..........................................18
Section 4.16. Employee Benefit Plans.........................20
Section 4.17. Environmental Matters..........................22
Section 4.18. Antitakeover Statute and Rights Agreement......23
Section 4.19. Insurance......................................24
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Section 4.20. Certain Contracts; Indemnities; Indebtedness...24
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT.......................25
Section 5.01. Corporate Existence and Power..................25
Section 5.02. Corporate Authorization........................25
Section 5.03. Governmental Authorization.....................25
Section 5.04. Non-Contravention..............................25
Section 5.05. Disclosure Documents...........................26
Section 5.06. Finders' Fees..................................26
Section 5.07. Adequate Funds.................................26
ARTICLE 6 COVENANTS OF THE COMPANY.......................................26
Section 6.01. Conduct of the Company.........................26
Section 6.02. Shareholder Meeting; SEC Filings...............29
Section 6.03. Access to Information..........................29
Section 6.04. No Solicitation................................30
Section 6.05. Third Party Standstill Agreements..............32
Section 6.06. Rights Agreement...............................32
Section 6.07. Spin-Off.......................................33
ARTICLE 7 COVENANTS OF PARENT............................................33
Section 7.01. Obligations of Merger Subsidiary...............33
Section 7.02. Director and Officer Liability.................33
ARTICLE 8 COVENANTS OF PARENT AND THE COMPANY............................34
Section 8.01. Reasonable Efforts.............................34
Section 8.02. Certain Filings................................35
Section 8.03. Public Announcement............................36
Section 8.04. Further Assurances.............................36
Section 8.05. Notices of Certain Events......................36
ARTICLE 9 CONDITIONS TO THE MERGER.......................................36
Section 9.01. Conditions to Obligations of Each Party........36
Section 9.02. Conditions to the Obligations of Parent
and Merger Subsidiary..........................37
Section 9.03. Conditions to the Obligations of the Company...38
ARTICLE 10 TERMINATION....................................................38
Section 10.01. Termination....................................38
Section 10.02. Effect of Termination..........................39
ARTICLE 11 MISCELLANEOUS..................................................40
Section 11.01. Notices........................................40
Section 11.02. Survival of Representations and Warranties;
Indemnification................................41
Section 11.03. Amendments; No Waivers.........................41
Section 11.04. Expenses.......................................41
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Section 11.05. Successors and Assigns.........................42
Section 11.06. Governing Law..................................43
Section 11.07. Jurisdiction...................................43
Section 11.08. Waiver of Jury Trial...........................43
Section 11.09. Counterparts; Effectiveness; Benefit...........43
Section 11.10. Entire Agreement...............................43
Section 11.11. Captions.......................................43
Section 11.12. Severability...................................43
Section 11.13. Specific Performance...........................44
ANNEX A Distribution Agreement
SCHEDULE I Per Share Adjustment Amount
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AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER dated as of October 26,
2000, (this "Agreement") among Flowers Industries, Inc., a Georgia corporation
(the "Company"), ▇▇▇▇▇▇▇ Company, a Delaware corporation ("Parent"), and Kansas
Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Subsidiary").
WHEREAS, prior to the Effective Time (as defined below), the assets of the
Company will consist of (i) 100% of the shares of Common Stock of Flowers Foods,
Inc., a Georgia corporation ("Spinco") and (ii) 46,197,466 shares of common
stock, $0.01 par value of Keebler Foods Company, a Delaware corporation ("ELF"),
representing a majority of the outstanding voting power of ELF on a fully
diluted basis (the "ELF Shares") and the liabilities of the Company will consist
of certain of the Company's debt;
WHEREAS, the Company and Spinco are simultaneously herewith entering into a
Distribution Agreement (the "Distribution Agreement") in the form of Annex A
hereto pursuant to which all of the outstanding shares of Spinco common stock
will be distributed to the Company's shareholders (the "Distribution"), and to
effect the various transactions contemplated thereby and, with the exception of
this Agreement, by the other Transaction Agreements (as defined below) provided
that all conditions precedent to the Distribution set forth in the Distribution
Agreement have been satisfied, immediately prior to the Effective Time (all such
transactions being referred to collectively as the "Spin-Off");
WHEREAS, (i) Parent, FK Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Company ("Newco") and ELF have entered into an
Agreement and Plan of Merger dated the date hereof (the "ELF Merger Agreement")
pursuant to which Newco will merge with and into ELF (the "ELF Merger") on the
terms and conditions set forth therein; (ii) Parent and the Company have entered
into a Voting Agreement (the "ELF Voting Agreement") pursuant to which the
Company has agreed to execute a written consent with respect to the ELF Shares
in favor of the approval of the ELF Merger and adoption of the ELF Merger
Agreement; and (iii) in the ELF Merger, each share of Common Stock of ELF, other
than the ELF Shares and any Common Stock of ELF held by ELF or Parent, will be
converted into the right to receive $42.00 in cash;
WHEREAS, the respective Boards of Directors of Parent, Merger Subsidiary
and the Company have approved this Agreement, and deem it advisable and in the
best interests of their respective shareholders to consummate the merger of
Merger Subsidiary with and into the Company on the terms and conditions set
forth herein (the "Merger;" the Spin-Off, the Merger and the other transactions
contemplated by the Transaction Agreements sometimes being hereinafter
collectively referred to as the "Transaction");
WHEREAS, the Company, Parent and Merger Subsidiary desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and the Distribution Agreement (this Agreement, the Distribution
Agreement and the other agreements
attached hereto or thereto sometimes being hereinafter collectively referred to
as the "Transaction Agreements");
WHEREAS, the Merger will occur only after and conditioned upon the
Spin-Off; and
WHEREAS, for federal income Tax (as defined below) purposes, it is intended
that the Transaction will be treated at the Company's shareholder level as an
integrated transaction in redemption and disposition of the Company's
outstanding capital stock.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 DEFINITIONS.
(a) The following terms, as used herein, have the following meanings:
"Adjustment Amount" has the meaning ascribed to that term in Schedule I.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person
except that ELF shall not be considered an Affiliate of the Company for purposes
of Section 4.16.
"Antitrust Division" means the Antitrust Division of the United States
Department of Justice.
"Benefit Arrangement" means any employment, severance or similar contract
or arrangement (oral or written) providing for compensation, bonus,
profit-sharing, stock option, or other stock-related rights or other forms of
incentive or deferred compensation, perquisites, vacation benefits, insurance
coverage (including any self-insured arrangements), health or medical benefits,
disability benefits, worker's compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical or life insurance or other benefits) that
on or after January 1, 1994 (i) is not and was not an Employee Plan, (ii) is or
was entered into, maintained, administered or contributed to, as the case may
be, by the Company or any of its Affiliates and (iii) is not an Employee
Arrangement (as defined in the ELF Merger Agreement).
"Business Day" means a day other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Code" means the Internal Revenue Code of 1986.
"Company Balance Sheet" means the consolidated balance sheet of the Company
as of January 1, 2000 and the footnotes thereto set forth in the Company 10-K.
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"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended January 1, 2000.
"Controlled Group Liability" means any and all liabilities (i) under Title
IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections 412 and 4971
of the Code, (iv) as a result of a failure to comply with the continuation
coverage requirements of Section 601 et seq. of ERISA and Section 4980B of the
Code and (v) under corresponding or similar provisions of foreign laws or
regulations, other than such liabilities that arise solely out of, or relate
solely to, the Employee Arrangements listed in the Company Disclosure Schedule.
"Delaware Law" means the General Corporation Law of the State of Delaware.
"Employee Arrangement" means any Benefit Arrangement or Employee Plan.
"Employee Plan" means any "employee benefit plan," as defined in Section
3(3) of ERISA, that on or after January 1, 1994 (i) is or was subject to any
provision of ERISA, (ii) is or was maintained, administered or contributed to by
the Company or any of its Affiliates and (iii) is not an Employee Arrangement
(as defined in the ELF Merger Agreement).
"Environmental Claims" means any written, or to the Company's knowledge,
threatened claim, demand, or notice to or other suit, action, proceeding,
investigation of the Company or any of its Subsidiaries by any person alleging
any potential liability (including potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages, or
penalties) arising out of, based on, or resulting from the presence, or Release
into the environment, of any Hazardous Substance at any location, whether or not
owned, leased, operated or used by the Company or any of its Subsidiaries.
"Environmental Laws" means in each case as in effect on the date hereof all
Laws of any Governmental Entity or agreements with any Governmental Authority or
other third party relating to human health, safety or the environment, including
relating to emissions, discharges, Releases or threatened Releases of Hazardous
Substances, or otherwise relating to the manufacture, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport or
handling of Hazardous Substances, including the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act and the Occupational Safety and Health Act.
"Environmental Permits" means all permits, licenses, certificates or
approvals necessary for the operation of the Company as currently conducted to
comply with all applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"FTC" means the United States Federal Trade Commission.
"Georgia Law" means the Georgia Business Corporation Code.
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"Governmental Entity" means any federal, state, local or foreign government
or any court, tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency, domestic, foreign or
supranational.
"Hazardous Substance" means (i) chemicals, pollutants, contaminants,
hazardous wastes, toxic substances, and oil and petroleum products, (ii) any
substance that is or contains friable asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls, petroleum or petroleum-derived substances
or wastes, radon gas or related materials, (iii) any substance that requires
removal or remediation under any Environmental Law, or is defined, listed or
identified as a "hazardous waste" or "hazardous substance" thereunder, or (iv)
any substance that is toxic, explosive, corrosive, flammable, radioactive, or
otherwise hazardous.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976.
"Law" means any applicable federal, state, local or foreign law, statute,
common law, ordinance, directive, rule, regulation, judgment, order, injunction,
decree, arbitration award, agency requirement, license or permit of any
Governmental Entity.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien, any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on the financial condition, business, assets, or results of
operations of such Person and its Subsidiaries, taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
3(37) of ERISA.
"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"Per Share Adjustment Amount" has the meaning ascribed to that term in
Schedule I.
"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.
"Releases" means any releasing, disposing, discharging, injecting,
spilling, leaking, pumping, dumping, emitting, escaping, emptying, migration,
transporting, placing, including into or upon, any land, soil, surface water,
ground water or air, or otherwise entering into the environment, that is not in
compliance with Environmental Laws.
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"Rights" means the preferred stock purchase rights issued pursuant to the
terms of the Rights Agreement.
"Rights Agreement" means the agreement dated as of April 2, 1999 between
the Company and First Union National Bank, as Rights Agent.
"SEC" means the Securities and Exchange Commission.
"Share Equivalent" means any stock option, warrant, performance share or
right of conversion issued pursuant to a stock option, compensatory plan, or
similar arrangements.
"Shares" means the shares of common stock, $0.625 par value, of the
Company.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person. For purposes of
this Agreement, except in the context of references in Sections 4.07(a), and
4.07(b) to the Company and its Subsidiaries, ELF shall not be deemed to be a
Subsidiary of the Company.
"Title IV Plan" means a plan subject to Title IV of ERISA, other than any
Multiemployer Plan.
"Withdrawal Liability" means liability to or with respect to a
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title
IV of ERISA.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
Any reference to "including" or "include" means "including, without
limitation" or "include, without limitation."
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Acquisition Agreement.................................... 6.04
Adverse Recommendation Change............................ 6.04
Arbitrator............................................... 2.11
Certificates............................................. 2.04
Company Disclosure Schedule.............................. Article 4
Company Proxy Statement.................................. 4.08
Company SEC Documents.................................... 4.06
Company Securities....................................... 4.05
Company Shareholder Meeting.............................. 6.02
Confidentiality Agreement................................ 6.03
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Distribution............................................. Recitals
Distribution Agreement................................... Recitals
Effective Time........................................... 2.02
ELF...................................................... Recitals
ELF Merger............................................... Recitals
ELF Merger Agreement..................................... Recitals
ELF Shares............................................... Recitals
ELF Voting Agreement..................................... Recitals
Exchange Agent........................................... 2.04
Excluded Employee........................................ 4.09
GAAP..................................................... 4.07
Indemnified Person....................................... 7.03
IRS...................................................... 4.15
Merger................................................... Recitals
Merger Consideration..................................... 2.03
Newco.................................................... Recitals
Notice of Superior Proposal.............................. 6.04
Parent................................................... Recitals
Preferred Shares......................................... 4.05
Registration Statement .................................. 4.08
Series A Preferred Stock................................. 4.05
Spinco................................................... Recitals
Superior Proposal........................................ 6.04
Surviving Corporation.................................... 2.02
Takeover Proposal........................................ 6.04
Tax or Taxes............................................. 4.15
Tax Return............................................... 4.15
Taxing Authority......................................... 4.15
Transaction.............................................. Recitals
Transaction Agreements................................... Recitals
ARTICLE 2
THE TRANSACTION
Section 2.01. THE SPIN-OFF. Provided that all conditions precedent to the
Spin-Off set forth in the Distribution Agreement have been satisfied, prior to
the Effective Time, the Company will cause each Person that is intended to be a
party to any Transaction Agreement (other than the Merger Agreement) to enter
into each such Transaction Agreement, and, on the terms and subject to the
conditions of the Transaction Agreements, immediately prior to the Effective
Time, the Company shall effect, and cause Spinco to effect, the Spin-Off.
Section 2.02. THE MERGER.
(a) At the Effective Time, Merger Subsidiary shall be merged with and into
the Company in accordance with Delaware Law and Georgia Law, whereupon the
separate exis-
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tence of Merger Subsidiary shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file a certificate of merger with each of the Delaware Secretary
of State and the Georgia Secretary of State and make all other filings or
recordings required by Delaware Law and Georgia Law in connection with the
Merger. The Merger shall become effective at such time (the "Effective Time") as
the certificates of merger are duly filed with the Georgia Secretary of State
and Delaware Secretary of State or at such later time as is specified in the
certificates of merger provided that the Effective Time shall not occur unless
and until the Spin-Off shall have occurred.
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, powers, privileges and franchises and be subject to all
of the obligations, liabilities, restrictions and disabilities of the Company
and Merger Subsidiary, all as provided under Georgia Law.
Section 2.03. CONVERSION OF SHARES.
(a) At the Effective Time:
(i) except as otherwise provided in Section 2.03(a)(ii) or Section
2.05, each Share outstanding immediately prior to the Effective Time other
than any Shares that are Share Equivalents, together with the associated
Right, shall be converted into the right to receive an amount equal to (1)
$42.00 multiplied by 46,197,466, divided by (2) the number of Shares issued
and outstanding immediately prior to the Effective Time, less (3) the Per
Share Adjustment Amount, in cash per share, without interest (the "Merger
Consideration");
(ii) each Share held by the Company as treasury stock or owned by
Parent or any of its Subsidiaries immediately prior to the Effective Time
shall be canceled, and no payment shall be made with respect thereto; and
(iii) each share of common stock of Merger Subsidiary outstanding
immediately prior to the Effective Time shall be converted into and become
one share of common stock of the Surviving Corporation with the same
rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation.
(b) The Merger and the Spin-Off shall be effected such that the shares of
Spinco to be distributed in the Spin-Off and the Merger Consideration are
distributed or paid, as the case may be, only to the same holders of Shares
provided that the Spin-Off shall occur prior to the Merger.
Section 2.04. SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Parent shall appoint an agent (the
"Exchange Agent") reasonably acceptable to the Company for the purpose of
exchanging certificates repre-
7
senting Shares (the "Certificates") for the Merger Consideration. Promptly after
the Effective Time, Parent will cause to be deposited with the Exchange Agent
the Merger Consideration to be paid in respect of the Shares converted pursuant
to Section 2.03(a)(i). Promptly after the Effective Time, Parent will send, or
will cause the Exchange Agent to send, to each holder of record of Shares at the
Effective Time a letter of transmittal and instructions (which shall specify
that the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) for use in such
exchange.
(b) Each holder of Shares that have been converted into the right to
receive the Merger Consideration pursuant to Section 2.03(a)(i) will be entitled
to receive, upon surrender to the Exchange Agent of a Certificate, together with
a properly completed letter of transmittal, and all other documents the Exchange
Agent may reasonably require, the Merger Consideration payable for each Share
represented by such Certificate. Until so surrendered, each such Certificate
shall represent after the Effective Time for all purposes only the right to
receive such Merger Consideration. No interest shall be paid or will accrue on
the Merger Consideration payable pursuant to the provisions of this Article 2.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition to such payment that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such Certificate or establish to the satisfaction of Parent
that such tax has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the Company will be
closed and there shall be no further registration or transfers of Shares. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
provided for, and in accordance with the procedures set forth, in this Article
2.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.04(a) (and any interest or other income earned
thereon) that remains unclaimed by the holders of Shares six months after the
Effective Time shall be returned to Parent, upon demand, and any such holder who
has not exchanged Shares for the Merger Consideration in accordance with this
Section 2.04 prior to that time shall thereafter look only to Parent for payment
of the Merger Consideration in respect of such Shares without any interest
thereon. Notwithstanding the foregoing, Parent shall not be liable to any holder
of Shares for any amount paid to a public official pursuant to applicable
abandoned property, escheat or similar Laws. Any amounts remaining unclaimed by
holders of Shares three years after the Effective Time (or such earlier date
immediately prior to such time when the amounts would otherwise escheat to or
become property of any Governmental Entity) shall become, to the extent
permitted by applicable Law, the property of Parent free and clear of any claims
or interest of any Person previously entitled thereto.
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(f) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.04(a) to pay for Shares for which appraisal rights
have been requested shall be returned to Parent, upon demand.
Section 2.05. DISSENTING SHARES. Notwithstanding Section 2.03, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with Georgia Law shall not be
converted into a right to receive the Merger Consideration, unless such holder
fails to perfect, withdraws or otherwise loses its right to appraisal. If, after
the Effective Time, such holder fails to perfect, withdraws or loses its right
to appraisal, such Shares shall be treated as if they had been converted as of
the Effective Time into a right to receive the Merger Consideration. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of Shares. Except as required by applicable Law or with the prior
written consent of Parent, the Company shall not make any payment with respect
to, or settle or offer to settle, any such demands. The exercise of appraisal
rights under Georgia Law whether or not perfected shall not affect any holder's
right to receive a pro-rata share of the Spin-Off.
Section 2.06. EQUITY COMPENSATION ARRANGEMENTS; SHARE EQUIVALENTS.
(a) At or immediately prior to the Effective Time, each Share Equivalent
outstanding under any stock option or equity compensation plan or arrangement of
the Company, whether or not vested or exercisable, shall be canceled, and the
Company shall pay each holder of any such Share Equivalent which shall have been
granted or issued under the 1989 Executive Stock Incentive Plan at or promptly
after the Effective Time for each such Share Equivalent an amount in cash
determined by multiplying (i) the excess, if any, of the Change in Control Price
(as defined in the 1989 Executive Stock Incentive Plan) per Share over the
applicable exercise price of such Share Equivalent, if any, by (ii) the number
of Shares such holder could have purchased (assuming full vesting of all Share
Equivalents) had such holder exercised or converted such Share Equivalent into
Shares immediately prior to the Effective Time.
(b) Prior to the Effective Time, the Company shall (i) obtain any consents
from holders of Share Equivalents granted under the Company's stock option or
equity compensation plans or arrangements and (ii) make any amendments to the
terms of such stock option or compensation plans or arrangements that, in the
case of either clauses (i) or (ii), the Company deems reasonably necessary to
give effect to the transactions contemplated by Section 2.06(a). Notwithstanding
any other provision of this Section, payment may be withheld in respect of any
such plans or arrangements until such necessary consents are obtained, and the
Company shall withhold from such payments all amounts required by applicable Law
or regulation to be withheld for taxes or otherwise.
Section 2.07. ADJUSTMENTS. If, during the period between the date of this
Agreement and the Effective Time, any change in the outstanding Shares shall
occur, including by reason of any reclassification, recapitalization, stock
split or combination, exchange or readjustment of Shares, or stock dividend
thereon (but excluding the Spin-Off) with a record date during such period, the
Merger Consideration and any other amounts payable pursuant to Section
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2.06 shall be appropriately adjusted to provide to the holders of Shares the
same economic effect as contemplated by this Agreement prior to such event.
Section 2.08. WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise
payable to any Person pursuant to this Article 2 such amounts as it is required
to deduct and withhold with respect to the making of such payment under any
provision of federal, state, local or foreign tax Law. If the Surviving
Corporation or Parent, as the case may be, so withholds amounts, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the Shares in respect of which the Surviving Corporation or Parent, as
the case may be, made such deduction and withholding.
Section 2.09. LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond, in such
reasonable amount as the Surviving Corporation may direct, as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
Section 2.10. ASSOCIATED RIGHTS. References in this Agreement to Shares
shall include, unless the context requires otherwise, the associated Rights.
Section 2.11. CALCULATION OF ADJUSTED AMOUNT. At least 15 Business Days
prior to the Effective Time, the Company shall prepare in good faith and deliver
to Parent an estimate of the Adjustment Amount, calculated in accordance with
Schedule I. The Company and Parent agree to negotiate in good faith and to use
reasonable best efforts to agree on the Adjustment Amount at least 10 Business
Days prior to the Effective Time. If the Company and Parent agree on the amount
of the Adjustment Amount, then the Adjustment Amount shall equal such agreed
amount. In the event that the Company and Parent do not agree on the Adjustment
Amount at least 10 Business Days prior to the Effective Time, the parties may
jointly engage ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, or the parties may mutually agree to
engage another nationally recognized investment banking firm or accounting firm
(the "Arbitrator"), to calculate the Adjustment Amount. If the Adjustment Amount
is not mutually agreed by the Company and Parent, at least two Business Days
prior to the Effective Time, the Arbitrator shall calculate the Adjustment
Amount in accordance with Schedule I and shall deliver such amount to the
Company and Parent, and the Adjustment Amount shall equal the amount so
calculated and delivered. The fees and expenses of the Arbitrator shall be
shared equally between Spinco and Parent.
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01. ARTICLES OF INCORPORATION. The articles of incorporation of
the Company in effect at the Effective Time shall be the articles of
incorporation of the Surviving Corporation until amended in accordance with
applicable Law, provided that, at the Effective
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Time, Article First of such articles of incorporation shall be amended to read
as follows: "The name of the Corporation is Keebler Holding Corp."
Section 3.02. BYLAWS. The bylaws of Merger Subsidiary in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable Law.
Section 3.03. DIRECTORS AND OFFICERS. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable Law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation and (ii) the officers of
Merger Subsidiary at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or subsections of the
disclosure schedule delivered by the Company to Parent on or prior to the date
hereof (the "Company Disclosure Schedule") the Company represents and warrants
to Parent that:
Section 4.01. CORPORATE EXISTENCE AND POWER.
(a) The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Georgia and has all corporate
powers and all governmental licenses, authorizations, permits, consents and
approvals required to carry on its business as now conducted, except for those
licenses, authorizations, permits, consents and approvals the absence of which
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where such qualification is necessary, except for those jurisdictions where
failure to be so qualified would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company. The
Company has heretofore made available to Parent true and complete copies of the
articles of incorporation and bylaws of the Company as currently in effect.
(b) Spinco is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Georgia and has all corporate powers and
all governmental licenses, authorizations, permits, consents and approvals
required to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
materially impair, delay or prevent the ability of Spinco to consummate the
transactions contemplated by the Transaction Agreements. Spinco is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not materially impair,
delay or prevent the ability of Spinco to consummate the transactions
contemplated by the Transaction Agreements. Spinco has heretofore made available
to Parent true and complete copies of the articles of incorporation and bylaws
of Spinco as currently in effect.
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Section 4.02. CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by the Company and Spinco of
the Transaction Agreements and the consummation by the Company and Spinco of the
transactions contemplated by such Transaction Agreements are within the
Company's and Spinco's corporate powers and, except for the affirmative vote of
the holders of a majority of the outstanding Shares in connection with the
consummation of the Merger, have been duly authorized by all necessary corporate
action on the part of the Company and will be duly authorized by all necessary
corporate action on the part of Spinco prior to the Effective Time. The
affirmative vote of the holders of a majority of the outstanding Shares is the
only vote of the holders of any of the Company's capital stock necessary in
connection with the consummation of the Merger. Each Transaction Agreement to
which the Company or Spinco is or will be a party is or when executed by such
party, will constitute, a valid and binding agreement of such party, each
enforceable in accordance with its terms.
(b) The Company's Board of Directors has (i) determined that the
Transaction Agreements, including this Agreement and the transactions
contemplated hereby, taken as a whole, are fair to and in the best interests of
the Company's shareholders, (ii) declared advisable and approved the Transaction
Agreements and the transactions contemplated hereby and thereby and (iii)
resolved (subject to Section 6.04(c)) to recommend approval and adoption of this
Agreement and the Merger by its shareholders. Prior to the Effective Time,
Spinco's Board of Directors will have approved the Transaction Agreements and
the transactions contemplated hereby and thereby.
Section 4.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company and Spinco of the Transaction Agreements and the
consummation by the Company and Spinco of the transactions contemplated hereby
and thereby require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the filing of certificates of merger with
respect to the Merger with the Delaware Secretary of State and the Georgia
Secretary of State, (ii) compliance with any applicable requirements of the HSR
Act, (iii) compliance with any applicable requirements of the 1933 Act, the 1934
Act and any other applicable securities or takeover laws, (iv) the filing of
listing applications with respect to the Spinco shares to be distributed in the
Spin-Off, and (v) any actions or filings the absence of which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company or materially impair, delay or prevent the ability
of the Company or Spinco to consummate the transactions contemplated by the
Transaction Agreements.
Section 4.04. NON-CONTRAVENTION. The execution, delivery and performance by
each of the Company and Spinco of the Transaction Agreements to which each is a
party and the consummation of the transactions contemplated hereby and thereby
do not and will not (i) contravene, conflict with, or result in any violation or
breach of any provision of the articles of incorporation or bylaws of the
Company or Spinco, (ii) contravene, conflict with, or result in a violation or
breach of any provision of any Law, (iii) require any consent or other action by
any Person under, constitute (with or without notice or lapse of time or both) a
default under, or cause or permit the termination, cancellation, acceleration or
other change of any right or obligation or the loss of any benefit to which the
Company or Spinco is entitled under, any provision of any agreement or other
instrument binding upon the Company or Spinco or their respective
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properties, or any license, franchise, permit, certificate, approval or other
similar authorization affecting, or relating in any way to, the assets or
business of the Company or Spinco or (iv) result in the creation or imposition
of any Lien on any asset of the Company or Spinco, except, in the case of
clauses (ii), (iii) and (iv), for such matters as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company or materially impair, delay or prevent the consummation of the
transactions contemplated by the Transaction Agreements by the Company or
Spinco.
Section 4.05. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 350,000,000
Shares, par value $0.625 per share and 249,523 shares of preferred stock, par
value $100.00 per share (the "Preferred Shares"), of which 100,000 shares are
designated Series A Junior Participating Cumulative Preferred Stock ("Series A
Preferred Stock"). As of October 25, 2000, there were: 100,085,442 Shares
(excluding 2,728,794 Share Equivalents payable in cash or Shares) outstanding
and 442,451 Shares held in the Company's treasury. The Company has no shares of
Series A Preferred Stock outstanding nor any Shares or Series A Preferred Stock
reserved for or otherwise subject to issuance, except that as of October 25,
2000 there were (i) 12,350,000 Shares reserved for issuance pursuant to those
Employee Plans and Benefit Arrangements listed in Section 4.16 of the Company's
Disclosure Schedule and (ii) 10,467 shares of Series A Preferred Stock reserved
for issuance pursuant to the Rights Agreement. All shares of capital stock of
the Company outstanding have been duly authorized and validly issued and are
fully paid and nonassessable. Section 4.05 of the Company Disclosure Schedule
sets forth a complete and accurate list of all outstanding Share Equivalents by
grantee (together with the exercise prices therefor). All Shares issuable upon
exercise of Share Equivalents have been duly authorized and, when issued in
accordance with the terms thereof, will be validly issued and will be fully paid
and nonassessable.
(b) Except as set forth in this Section 4.05 and for changes since October
25, 2000 resulting from the exercise of Share Equivalents outstanding on such
date, there are no outstanding (i) shares of capital stock or equity, debt or
other securities of the Company, (ii) securities of the Company or any other
issuer convertible into or exchangeable for shares of capital stock, equity,
debt or other securities of the Company or (iii) options or other rights to
acquire from the Company or any of its Affiliates or other obligation of the
Company or any of its Affiliates to issue any capital stock, equity, debt or
other securities or securities convertible into or exchangeable for capital
stock or voting equity, debt or other securities of the Company (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the Company to (i)
repurchase, redeem or otherwise acquire any of the Company Securities, (ii) to
register any Company Securities under the 1933 Act or any state securities law,
(iii) to grant preemptive or antidilutive rights with respect to any Company
Securities or (iv) to grant any stock options (either upon the exercise of any
option or otherwise).
(c) Immediately following the Effective Time, the Company will not own any
equity, debt or other securities of any Person other than ELF.
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Section 4.06. SEC FILINGS.
(a) The Company has made available to Parent (i) the Company's annual
reports on Form 10-K for its fiscal years ended January 1, 2000 , January 2,
1999, and January 3, 1998, (ii) its quarterly reports on Form 10-Q for its
fiscal quarters ended April 22, 2000 and July 15, 2000, (iii) its proxy
statements relating to meetings of the shareholders of the Company held since
January 3, 1998 and (iv) all of its other reports, statements, schedules and
registration statements filed with the SEC since January 3, 1998 (the documents
referred to in this Section 4.06(a), collectively, the "Company SEC Documents").
(b) As of its filing date, each Company SEC Document complied as to form in
all material respects with the applicable requirements of the 1933 Act and the
1934 Act, as the case may be.
(c) As of its filing date each Company SEC Document, including each
amendment or supplement thereto, filed pursuant to the 1934 Act did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) Each Company SEC Document that is a registration statement, as amended
or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date
such statement or amendment became effective, did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
Section 4.07. FINANCIAL STATEMENTS.
(a) The audited consolidated financial statements and unaudited
consolidated interim financial statements (including the related notes) of the
Company included in the Company SEC Documents fairly present in all material
respects, in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis (except as may be indicated in
the notes thereto), the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and their consolidated results
of operations and cash flows for the periods then ended (subject to normal
year-end adjustments, that are not expected to be material in amount in the case
of any unaudited interim financial statements except for any non-recurring
non-cash changes, which may be required relating to impaired assets).
(b) Section 4.07(b) of the Company Disclosure Schedule contains the
unaudited pro forma consolidated balance sheet of Spinco and its Subsidiaries as
of July 15, 2000, together with the related unaudited pro forma consolidated
statement of income for the six-month period then ended, and the unaudited pro
forma consolidated statement of income of Spinco and its Subsidiaries for the
year ended January 1, 2000. Such statements present information as if the
Spin-Off had occurred (on the terms and subject to the conditions set forth in
the Transaction Agreements) as of July 15, 2000 or, with respect to the income
statements, as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) as of the beginning of the
period presented. Such statements are based on, and
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should be read in conjunction with, the historical consolidated financial
statements included in the Company SEC Documents. Such balance sheet fairly
presents in all material respects the consolidated financial position of Spinco
and its Subsidiaries as of its date, as if the Spin-Off had occurred (on the
terms and subject to the conditions set forth in the Transaction Agreements) on
such date, and each such consolidated statement of income, fairly presents in
all material respects the results of operations of Spinco and its Subsidiaries
for the periods set forth therein, as if the Spin-Off had occurred (on the terms
and subject to the conditions set forth in the Transaction Agreements) as of the
beginning of such period (subject to notes and normal year-end adjustments that
are not expected to be material in amount). The accounts reflected in the
unaudited pro forma consolidated financial statements referred to in this
subsection have been prepared in accordance with GAAP on a basis consistent with
the historical audited consolidated financial statements of the Company and its
Subsidiaries (including Spinco and its Subsidiaries) and were prepared in
accordance with the requirements of SEC Regulation S-X as it relates to pro
forma financial statements.
(c) Section 4.07(c)(i) of the Company Disclosure Schedule contains the
unaudited pro forma consolidated balance sheet of the Company and ELF as of July
15, 2000, together with the related unaudited pro forma consolidated statement
of income, for the six-month period then ended, and the unaudited pro forma
consolidated statement of income of the Company and ELF for the year ended
January 1, 2000. Such statements present information as if the Spin-Off had
occurred (on the terms and subject to the conditions set forth in the
Transaction Agreements) as of July 15, 2000 or, with respect to the income
statements, as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) as of the beginning of the
period presented. Such statements are based on, and should be read in
conjunction with, the historical consolidated financial statements included in
the Company SEC Documents. Such balance sheet fairly presents in all material
respects the consolidated financial position of the Company and ELF as of its
date, as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) on such date, and each such
consolidated statement of income fairly presents in all material respects the
results of operations of the Company and ELF for the periods set forth therein,
as if the Spin-Off had occurred (on the terms and subject to the conditions set
forth in the Transaction Agreements) as of the beginning of such period (subject
to notes and normal year-end adjustments that are not expected to be material in
amount). The accounts reflected in the unaudited pro forma financial statements
referred to in this subsection have been prepared in accordance with GAAP on a
basis consistent with the historical audited consolidated financial statements
of the Company and its Subsidiaries (including Spinco and its Subsidiaries) and
were prepared in accordance with the requirements of SEC Regulation S-X as it
relates to pro forma financial statements. Except for liabilities or obligations
of the Company under the Transaction Agreements as set forth in Section
4.07(c)(ii) of the Company Disclosure Schedule, the balance sheet referred to in
this subsection does not reflect any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) of the Company and
immediately following the Effective Time, the Company and its Subsidiaries will
not have any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise).
Section 4.08. DISCLOSURE DOCUMENTS. The proxy statement of the Company to
be filed with the SEC in connection with the Merger (the "Company Proxy
Statement"), the registration statement on Form 10, Form S-1 or Form S-4
relating to the Spin-Off (the "Registration
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Statement") and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the 1934
Act and the 1933 Act. At the time the Company Proxy Statement or any amendment
or supplement thereto is first mailed to shareholders of the Company, and at the
time such shareholders vote on adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, and the Registration
Statement at the time it becomes effective and at the time the Registration
Statement is mailed to stockholders of the Company, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 4.08 will not apply to statements or omissions
included in the Company Proxy Statement or the Registration Statement based upon
information furnished to the Company by Parent specifically for use therein.
Section 4.09. ABSENCE OF CERTAIN CHANGES. Except (i) as disclosed in the
Company SEC Documents filed after January 1, 2000 and prior to the date hereof,
or (ii) as expressly contemplated by the Transaction Agreements or (iii) as
disclosed in Section 4.09 of the Company Disclosure Schedule, since January 1,
2000, the business of the Company has been conducted in the ordinary course
consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or facts
that, either individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on the Company;
(b) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company that has had or
would reasonably be expected to have a Material Adverse Effect on the Company;
(c) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company (other
than quarterly cash dividends on the Shares on customary record and payment
dates in an amount not greater than $0.1325 per Share per quarter), or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of, or other ownership interests in,
the Company;
(d) any amendment of any material term of any outstanding security of the
Company or any amendment of the Company's Articles of Incorporation or By-Laws;
(e) any incurrence, assumption or guarantee by the Company of any
indebtedness for borrowed money other than borrowings made in the ordinary
course of business and in amounts and on terms consistent with past practices
under the Company's revolving credit agreement;
(f) any creation or other incurrence by the Company of any Lien on any
material asset other than in the ordinary course of business consistent with
past practices and other than those that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company;
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(g) any making of any material loan, advance or capital contributions to or
investment in any Person not wholly-owned, directly or indirectly, by the
Company, other than immaterial amounts in the ordinary course of business
consistent with past practices;
(h) any change in any method of accounting, method of tax accounting or
accounting principles or practice by the Company, except for any such change
which is required by reason of a concurrent change in GAAP or Regulation S-X
under the 1934 Act;
(i) any (i) grant of any bonus, severance or termination pay or award under
a long term incentive plan to (or amendment to any existing arrangement with)
any director, officer or (to the extent material in the aggregate) employees of
the Company, (ii) establishment, adoption or amendment (except as required by
applicable law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement or other benefit plan or arrangement covering any director,
officer or employee of the Company, (iii) increase in compensation, bonus or
other benefits payable to any director, or executive officer of the Company
(other than changes made applicable to Company employees generally); or (iv)
other than in the ordinary course of business, consistent with past practices,
increase in compensation bonus or other benefits payable to any employee of the
Company not described in clause (iii);
(j) any material labor dispute, other than routine individual grievances,
or any activity or proceeding by a labor union or representative thereof to
organize any employees of the Company, or any material lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to such
employees;
(k) any agreement to do any of the foregoing;
provided, however, that the limitations of this Section 4.09 shall not apply to
any actions taken in respect of (i) any individual who, after giving effect to
the Spin-Off, will be an executive officer, director or employee of Spinco or
any of its Subsidiaries (an "Excluded Employee") or (ii) any other individual so
long as, in any such instance, any liabilities resulting from such actions are
the responsibility of Spinco or any of its Subsidiaries, do not result in any
direct or indirect obligations or liabilities on the part of the Company and
such actions do not and would not have a Material Adverse Effect on the Company
or materially impair, delay or prevent the consummation of the transactions
contemplated by the Transaction Agreements.
Section 4.10. NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities
or obligations of the Company or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities or obligations disclosed in the Company Balance Sheet or in
the notes thereto or in the Company SEC Documents filed prior to the date
hereof;
(b) liabilities or obligations incurred in the ordinary course of business
consistent with past practice that would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company;
(c) liabilities or obligations under the Transaction Agreements, or in
connection with the transactions contemplated hereby or thereby; and
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(d) liabilities or obligations disclosed in the Company Disclosure
Schedule.
Section 4.11. COMPLIANCE WITH LAWS AND COURT ORDERS. Neither the Company
nor Spinco or any of their respective Subsidiaries nor any of their respective
properties is in violation of, or has since January 1, 2000 violated, any
applicable Law, except for violations that have not had and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company or materially impair, delay or prevent the consummation of the
transactions contemplated by the Transaction Agreements. The Company and Spinco
are in compliance with the terms of all required governmental licenses,
authorizations, permits, consents and approvals, except where the failure to so
comply would not , individually or in the aggregate, have a Material Adverse
Effect on the Company or materially impair, delay or prevent the consummation of
the transactions contemplated by the Transaction Agreements.
Section 4.12. LITIGATION. Except as disclosed in Section 4.12 of the
Company Disclosure Schedule, there is no action, suit, investigation or
proceeding pending, or, to the knowledge of the Company, threatened, against the
Company, or against Spinco or any of its their respective Subsidiaries before
any court or arbitrator or before or by any Governmental Entity, that, if
determined or resolved adversely, would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
materially impair, delay or prevent the consummation of the transactions
contemplated by the Transaction Agreements. Neither the Company nor Spinco is
subject to any outstanding order, writ, injunction or decree that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company or materially impair, delay or prevent the consummation of
the transactions contemplated by the Transaction Agreements.
Section 4.13. FINDERS' FEES. Except for UBS Warburg LLC and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& Co. Incorporated, copies of whose engagement agreements have been provided to
Parent, there is no investment banker, broker, finder or other intermediary that
has been retained by or is authorized to act on behalf of the Company in
connection with the transactions contemplated by the Transaction Agreements.
Section 4.14. OPINION OF FINANCIAL ADVISERS. The Company has received an
opinion of each of UBS Warburg LLC and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated each
dated as of the date of this Agreement and each to the effect that, as of the
date of such opinion, the Merger Consideration to be received by the Company's
shareholders is fair from a financial point of view. Complete and correct signed
copies of such opinions will be delivered to Parent as soon as practicable after
the date of this Agreement.
Section 4.15. TAXES. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company:
(a) The Company and each of its Subsidiaries has timely filed (or has had
timely filed on its behalf) or will timely file or cause to be timely filed all
Tax Returns required by applicable Law to be filed by it prior to or as of the
Effective Time, and all such Tax Returns are, or will be at the time of filing,
true and complete in all respects.
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(b) The Company and each of its Subsidiaries has timely paid (or has had
timely paid on its behalf), or, where payment is not yet due, has established
(or has had established on its behalf and for its sole benefit and recourse) or
(with respect to new Taxes for periods, or portions thereof, beginning after the
date hereof) will establish or cause to be established in accordance with GAAP
on or before the Effective Time, an adequate accrual for the payment of, all
Taxes and interest due with respect to any period or portion thereof ending
prior to or as of the Effective Time.
(c) The federal income Tax Returns filed with respect to the Company have
been examined and settled with the Internal Revenue Service (the "IRS") (or the
applicable statutes of limitation for the assessment of federal income Taxes for
such periods have expired) for all years through fiscal year 1995.
(d) There are no Liens or encumbrances for Taxes on any of the assets of
the Company, other than those for taxes not yet due and payable. Neither the
Company nor any of its Subsidiaries is a party to any Tax sharing or
indemnification agreement.
(e) The Company and each of its Subsidiaries has complied with all
applicable Laws, rules and regulations relating to the reporting, payment and
withholding of Taxes.
(f) Except as set forth in Section 4.15 of the Company Disclosure Schedule,
no federal, state, local or foreign audits or administrative proceedings are
pending with regard to any Taxes or Tax Return of the Company and the Company
has not received a written notice of any proposed audit or proceeding regarding
any pending audit or proceeding.
(g) Neither the Company nor any of its Subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation" within the meaning of
Section 355(a)(1)(A) of the Code in a distribution of stock intended to qualify
for tax-free treatment under Section 355 of the Code (A) in the two years prior
to the date of this Agreement (nor will it constitute such a corporation in the
two years prior to the date of the Effective Time) or (B) in a distribution
which otherwise constitutes part of a "plan" or "series of related transactions"
within the meaning of Section 355(e) of the Code in conjunction with the Merger.
(h) "Tax" or "Taxes" shall mean (i) any and all taxes, charges, fees,
levies or other assessments, including income, gross receipts, excise, real or
personal property, sales, withholding, social security, retirement,
unemployment, occupation, use, goods and services, service use, license, value
added, capital, net worth, payroll, profits, withholding, franchise, transfer
and recording taxes, fees and charges, and any other taxes, assessment or
similar charges imposed by the IRS or any taxing authority (whether domestic or
foreign including any state, county, local or foreign government or any
subdivision or taxing agency thereof (including a United States possession)) (a
"Taxing Authority"), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest whether
paid or received, fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies or other
assessments, (ii) any liability for the payment of any amount of the type
described in clause (i) as a result of being or having been, before the
Effective Time, a member of an affiliated, consolidated, combined or unitary
group, or a party to any agreement or arrangement, as a result of which
liability of the Company and each
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of its subsidiaries to a Taxing Authority is determined or taken into account
with reference to the liability of any other Person (including, e.g., liability
under Treasury Regulation 1.1502-6 or similar liability under any other Law),
and (iii) any liability with respect to the payment of any amount of the type
described in (i) or (ii) as a result of any existing express or implied
obligation (including, but not limited to, an indemnification obligation). "Tax
Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any Taxing Authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
Section 4.16. EMPLOYEE BENEFIT PLANS. Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company:
(a) Section 4.16 of the Company Disclosure Schedule includes the name of,
and the Company has made available to Parent copies of each material Employee
Plan (and, if applicable, related trust agreements) and all amendments thereto
and written interpretations thereof together with the most recent annual report
(Form 5500 including, if applicable, Schedule B thereto) and actuarial valuation
report prepared in connection with any such Employee Plan. Section 4.16 of the
Company Disclosure Schedule identifies each such Employee Plan that is (i) a
Multiemployer Plan, (ii) a Title IV Plan or (iii) maintained in connection with
any trust described in Section 501(c)(9) of the Code.
(b) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received from the IRS a favorable determination letter
stating that the Employee Plan is so qualified; the Company is not aware of any
facts or circumstances which would jeopardize the qualified status of the
Employee Plan if not cured; each trust created under any Employee Plan has been
determined by the IRS to be exempt from tax under Section 501(a) of the Code as
of and since its creation. The Company has made available to Parent the most
recent determination letter of the Internal Revenue Service relating to each
such Employee Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including ERISA and the
Code.
(c) Section 4.16 of the Company Disclosure Schedule includes the name of,
and the Company has made available to Parent copies or descriptions of, each
Benefit Arrangement (and, if applicable, related trust agreements) and all
amendments thereto and summary plan descriptions thereof, if applicable. Each
such Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable statutes,
orders, rules and regulations and has been maintained in good standing with
applicable regulatory authorities.
(d) There has been no failure of a group health plan (as defined in Section
5000(b)(1) of the Code) to meet the requirements of Code Sections 4980B(f), 9801
or 9802 with respect to a qualified beneficiary (as defined in Section 4980B(g))
or other individual. Neither the Company nor any of its ERISA Affiliates has
contributed to a nonconforming group health plan (as defined in Section 5000(c))
and neither the Company nor any ERISA Affiliate of
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the Company has incurred a tax under Section 5000(a) that is or could become a
liability of the Company.
(e) No Title IV Plan has or has incurred an accumulated funding deficiency
within the meaning of Section 302 of ERISA or Section 412 of the Code, nor has
any waiver of the minimum funding standards of Section 302 of ERISA and Section
412 of the Code been requested of or granted by the IRS with respect to any
Title IV Plan, nor has any lien in favor of any Title IV Plan arisen under
Section 412(n) of the Code or Section 302(f) of ERISA.
(f) There does not now exist, nor, to the Company's knowledge, do any
circumstances exist that could result in, any Controlled Group Liability that
would be a liability of the Company or any of its ERISA Affiliates following the
Effective Time. None of the Company and its ERISA Affiliates has incurred any
Withdrawal Liability that has not been satisfied in full. With respect to each
Employee Plan that is a Multiemployer Plan, none of the Company and its ERISA
Affiliates has received any notification, nor has reasonable cause to believe,
that any such Employee Plan is in reorganization, has been terminated, is
insolvent, or may reasonably be expected to be in reorganization, to be
insolvent, or to be terminated. If the Company and its ERISA Affiliates were to
experience a complete withdrawal from all such Multiemployer Plans, the total
withdrawal liability would not exceed the amount set forth in Section 4.16(f) of
the Company Disclosure Schedule. The transactions contemplated by this
Agreement, including the Transaction, will not result in partial or complete
withdrawal from any such Multiemployer Plan.
(g) All material contributions required to be made to any Employee
Arrangement or any trust or other arrangement funding any Employee Arrangement
by applicable Law or regulation or by any plan document or other contractual
undertaking, and all material premiums due or payable with respect to insurance
policies funding any Employee Arrangement, for any period have been timely made
or paid in full.
(h) With respect to each Employee Plan that is a Title IV Plan: (i) no
reportable event within the meaning of Section 4043(c) of ERISA for which the
30-day notice requirement has not been waived and for which a prior notice
requirement exists has occurred, and the consummation of the transactions
contemplated by this Agreement, including the Transaction, will not result in
the occurrence of any such reportable event; (ii) all premiums to the Pension
Benefit Guaranty Corporation ("PBGC") have been timely paid in full; (iii) no
material liability (other than for premiums to the PBGC) under Title IV of ERISA
has been or is expected to be incurred by the Company or any of its ERISA
Affiliates; (iv) the unfunded current liability of each such Employee Plan does
not exceed the amount set forth in Section 4.16(h) of the Company Disclosure
Schedule for such Plan, based on the assumptions used for the most recent
actuarial valuation of such Plans, a copy of which has been made available to
Parent; and (v) the PBGC has not instituted proceedings to terminate any such
Employee Plan and, to the Company's knowledge, no condition exists that presents
a risk that such proceedings will be instituted or which would constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such Employee Plan.
(i) The Company Disclosure Schedule sets forth: (i) an accurate and
complete list of each material Employee Arrangement under which the execution
and delivery of this
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Agreement or the Transaction Agreements or the consummation of the transactions
contemplated hereby, including the Transaction, could (either alone or in
conjunction with any other event such as termination of employment) result in,
cause the accelerated vesting, funding or delivery of, or increase the amount or
value of, any payment or benefit to any employee, officer or director of the
Company or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries could be liable, or would limit the right of the Company or any of
its Subsidiaries to amend, merge, terminate or receive a reversion of assets
from any material Employee Arrangement or related trust; (ii) the aggregate
liabilities of the Company and its Subsidiaries with respect to bonuses and
other incentive compensation in connection with or as a result of the
consummation of the transactions contemplated hereby, including the Transaction,
(iii) the aggregate liabilities of the Company and its ERISA Affiliates,
together with any corresponding assets held in any grantor trust of the Company
and its ERISA Affiliates, pursuant to each Employee Arrangement (other than
Employee Plans that are qualified under Section 401(a) of the Code) providing
any supplemental or excess retirement benefits or other deferred compensation
(whether elective or non-elective), in each case determined as of the date set
forth in the Company Disclosure Schedule, and (iv) the estimated maximum amount
of the "excess parachute payments" within the meaning of Section 280G of the
Code that could become payable by the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement or the Transaction
Agreements and the consummation of the transactions contemplated hereby,
including the Transaction. No outstanding options to purchase Shares granted to
any current or former employee or director of the Company or any of its ERISA
Affiliates contain any provision that would entitle the holder to receive any
cash payment with respect thereto in connection with the consummation of the
transactions contemplated hereby except as provided for in Section 2.06 hereof.
(j) There are no pending or threatened claims (other than claims for
benefits in the ordinary course), investigations, lawsuits or arbitrations which
have been asserted or instituted, and, to the Company's knowledge, no set of
circumstances exists which may give rise to a claim or lawsuits, against the
Employee Arrangements, any fiduciaries thereof with respect to their duties to
such Employee Arrangements or the assets of any of the trusts under any of such
Employee Arrangements which could result in any liability of the Company or any
of its ERISA Affiliates to the PBGC, the Department of Treasury, the Department
of Labor, or any other U.S. or foreign governmental authority, or to any of such
Employee Arrangements, any participant in any such Employee Arrangement, or any
other party. Without limiting the generality of the foregoing, neither the
Company nor any of its ERISA Affiliates has any actual or contingent liability
under any such Employee Arrangement or under any applicable Law or regulation
for pay or benefits incurred as a result of corporate restructuring, downsizing,
layoffs or similar events that has not been fully satisfied or adequately
reserved for in the audited consolidated financial statements (including the
related notes) and unaudited consolidated financial statements (including the
related notes) of the Company included in the Company SEC Documents.
Section 4.17. ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Company SEC Documents or as set forth in
Section 4.17 of the Company Disclosure Schedule, except where noncompliance,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on the
-22-
Company, the Company is in compliance with all applicable Environmental Laws and
Environmental Permits.
(b) Except as disclosed in the Company SEC Documents or as disclosed in
Section 4.17 of the Company Disclosure Schedule, there are no written (or, to
the knowledge of the Company, other) Environmental Claims pending or, to the
knowledge; of the Company threatened, against the Company that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect
on the Company.
(c) The Company has made available to Parent all material information,
including such studies, analyses and test results, in the possession, custody or
control of or otherwise known and available to the Company or its Subsidiaries
relating to the environmental conditions on, under or about any of the
properties or assets owned, leased, or operated by the Company at any time or
for which the Company is responsible under any Environmental Law.
(d) Except as disclosed in the Company SEC Documents or as disclosed in
Section 4.17 of the Company Disclosure Schedule, prior to and during the period
of ownership or operation by the Company, in each case to the knowledge of the
Company, no Hazardous Substance was generated, treated, stored, disposed of,
used, handled or manufactured at, or transported, shipped or disposed of from,
currently or previously owned or leased properties that could result in
Liability for the Company or its Subsidiaries that would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company and there were no conditions or Releases of Hazardous Substance in, on,
under or affecting any currently or previously owned or leased properties that
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(e) Except as disclosed in the Company SEC Documents, or as set forth in
Section 4.17 of the Company Disclosure Schedule, none of the Company or its
Subsidiaries in each case has received from any Governmental Entity or other
third party any written (or, to the knowledge of the Company, other) notice that
the Company or its predecessors is or may be a potentially responsible party in
respect of or may otherwise bear liability for any actual or threatened Release
of Hazardous Substance at any site or facility that is, has been or would be
listed on the National Priorities List, the Comprehensive Environmental
Response, Compensation and Liability Information System or any similar or
analogous federal, state, provincial, territorial, municipal, county, local or
other domestic or foreign list, schedule, inventory or database of Hazardous
Substance sites or facilities, except where such notice or the circumstances
referred to therein would not, individually or in aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
Section 4.18. ANTITAKEOVER STATUTE AND RIGHTS AGREEMENT.
(a) No "fair price," "interested shareholder," "business combination," or
similar antitakeover statute or regulation enacted under Georgia or other Law
applicable to the Company is applicable to the transactions contemplated by the
Merger and the Transaction Agreements.
-23-
(b) The Board of Directors of the Company has approved an amendment to the
Rights Agreement which is, and at the Effective Time shall be, effective, and
has taken all other action necessary to render the Rights inapplicable to the
Merger, this Agreement and the transactions contemplated hereby. The Company has
delivered to Parent a true and correct copy of the Rights Agreement in effect as
of the execution and delivery of this Agreement, including a copy of such
amendment.
Section 4.19. INSURANCE. Section 4.19 of the Company Disclosure Schedule
contains a complete and accurate list in all material respects of all policies
of directors' and officers' liability insurance and fiduciary insurance owned or
held by, or the premiums and the brokerage fees of which are paid by, the
Company. The Company, Spinco and Spinco's Subsidiaries are covered by valid and
currently effective insurance policies issued in favor of the Company or Spinco
or Spinco's Subsidiaries, respectively, that are customary and appropriate under
the circumstances. All such policies are in full force and effect, all premiums
due thereon have been paid, and the Company has complied with the provisions of
such policies.
Section 4.20. CERTAIN CONTRACTS; INDEMNITIES; INDEBTEDNESS.
(a) Except for assets or properties to be transferred to Spinco or its
Subsidiaries pursuant to the Transaction Agreements, none of Spinco or any of
its Subsidiaries presently uses in the conduct of its business any assets or
properties, whether tangible, intangible or mixed, which are also utilized by
the Company (after giving pro-forma effect to the Spin-Off), and, other than the
contracts, arrangements or understandings which are set forth in Section 4.20(a)
of the Company Disclosure Schedule, which in each instance are ordinary course
commercial arrangements on arms-length terms, none of Spinco or any of its
Subsidiaries is presently directly or indirectly a party to any contract,
arrangement or understanding with the Company (other than the Transaction
Agreements). After giving effect to the Spin-Off, the Company will include all
of the Company's direct or indirect right, title and interest in and to (i) the
ELF Shares, and (ii) all assets reflected on the unaudited pro forma
consolidated balance sheet of the Company and ELF as of July 15, 2000 referred
to in Section 4.07(c) of this Agreement. The termination of all contracts,
arrangements and understandings between the Company on the one hand and Spinco
and its Subsidiaries on the other hand, to the extent contemplated by the
Distribution Agreement would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The unaudited pro forma consolidated
balance sheet of the Company and ELF as of July 15, 2000 referred to in Section
4.07(c) of this Agreement reflects all assets of the Company principally used in
the business of the Company as of July 15, 2000, other than assets or properties
of the Company that will be transferred to Spinco or its Subsidiaries.
(b) Except as set forth in Section 4.20(b) of the Company Disclosure
Schedule, there are no outstanding claims for indemnification against the
Company or any of its Subsidiaries under any written contract, agreement or
understanding or, to the knowledge of the Company, under any oral contract,
agreement or understanding.
(c) Except (i) as set forth in Section 4.20(c) of the Company Disclosure
Schedule and (ii) as expressly contemplated by the Transaction Agreements
immediately following the Effective Time, the Company will not be party to any
oral or written contract, agreement or understanding.
-24-
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
Section 5.01. CORPORATE EXISTENCE AND POWER. Each of Parent and Merger
Subsidiary is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not reasonably be expected to materially impair, delay or
prevent the ability of Parent and Merger Subsidiary to consummate the
transactions contemplated by the Transaction Agreements. Since the date of its
incorporation, Merger Subsidiary has not engaged in any activities other than in
connection with or as contemplated by this Agreement or in connection with
arranging any financing required to consummate the transactions contemplated by
the Merger or the Transaction Agreements.
Section 5.02. CORPORATE AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by Parent and Merger Subsidiary and constitutes a
valid and binding agreement of each of Parent and Merger Subsidiary, enforceable
against it in accordance with its terms.
Section 5.03. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby require no action by or in respect of, or filing with, any Governmental
Entity, other than (i) the filing of certificates of merger with respect to the
Merger with the Delaware Secretary of State and the Georgia Secretary of State,
(ii) compliance with any applicable requirements of the HSR Act , (iii)
compliance with any applicable requirements of the 1933 Act, the 1934 Act and
any other applicable securities or takeover laws, whether state or foreign and
(iv) any actions or filings the absence of which would not reasonably be
expected to materially impair, delay or prevent the ability of Parent and Merger
Subsidiary to consummate the transactions contemplated by the Transaction
Agreements.
Section 5.04. NON-CONTRAVENTION. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby do not and will
not (i) contravene, conflict with, or result in any violation or breach of any
provision of the certificate of incorporation or bylaws of Parent or Merger
Subsidiary, (ii) contravene, conflict with, or result in any violation or breach
of any provision of any Law or (iii) require any consent or other action by any
Person under, constitute (with or without notice or lapse of time or both) a
default under, or cause or permit the termination, cancellation, acceleration or
other change of any right or obligation or the loss of any benefit to which
Parent or Merger Subsidiary is entitled under, any provision of any agreement or
other instrument binding upon Parent or Merger Subsidiary, except, in the case
of clauses (ii) and (iii), for such matters as would not reasonably be expected
to materially impair,
-25-
delay or prevent the consummation of the transactions contemplated by the
Transaction Agreements.
Section 5.05. DISCLOSURE DOCUMENTS. The information with respect to Parent
and any of its Subsidiaries that Parent furnishes to the Company specifically
for use in the Company Proxy Statement will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading at the time such Company Proxy Statement, or any
amendment or supplement thereto, is first mailed to shareholders of the Company
and the time such shareholders vote on adoption of this Agreement.
Section 5.06. FINDERS' FEES. There is no investment banker, broker, finder
or other intermediary that has been retained by or is authorized to act on
behalf of Parent which might be entitled to any fee or commission from the
Company upon consummation of the transactions contemplated by this Agreement.
Section 5.07. ADEQUATE FUNDS. Parent has commitment letters in customary
form from nationally-recognized lending institutions for and will have at the
Effective Time sufficient funds for the payment of the aggregate Merger
Consideration and to perform its obligations under the Transaction Agreements
and under the ELF Merger Agreement.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
Section 6.01. CONDUCT OF THE COMPANY. From the date hereof until the
Effective Time, the Company shall conduct its business in the ordinary course
consistent with past practices and shall use its reasonable best efforts to
preserve intact its business organizations and relationships with third parties
and to keep available the services of its present officers and employees.
Without limiting the generality of the foregoing, except with the prior written
consent of Parent (which shall not be unreasonably withheld) as provided by this
Agreement, the Transaction Agreements, or as set forth in Section 6.01 the
Company Disclosure Schedule, from the date hereof until the Effective Time, the
Company shall not:
(a) declare, set aside or pay any dividend or other distribution with
respect to any share of its capital stock, other than quarterly cash dividends
on customary record and payment dates on the Shares not to exceed $0.1325 per
Share per quarter;
(b) repurchase, redeem or otherwise acquire or offer to acquire any shares
of capital stock or other securities of, or other ownership interests in, the
Company;
(c) issue, deliver, pledge, encumber or sell any Shares, or any securities
convertible into Shares, or any Share Equivalents or other rights, warrants or
options to acquire any Shares, other than issuances of shares pursuant to Share
Equivalents that are outstanding on the date hereof;
-26-
(d) amend its Articles of Incorporation or By-Laws or other comparable
organizational documents or amend any material terms of the outstanding
securities of the Company;
(e) merge or consolidate with any other Person, make any investment in any
other Person, including any joint venture, or acquire the stock or assets or
rights of any other Person other than (i) pursuant to existing contracts or
commitments as set forth in the Company Disclosure Schedule, (ii) in each case
in the ordinary course of business consistent with past practices, purchases of
raw materials, services and items used or consumed in the manufacturing process,
or (iii) capital expenditures made consistent with the Company's capital
expenditure program, in an amount not to exceed $40 million in the aggregate for
2000 and $38.5 million in the aggregate for 2001;
(f) incur any indebtedness (whether or not reflected on the Company Balance
Sheet) for borrowed money, guarantee any such indebtedness, enter into any new
or amend existing facilities relating to indebtedness, issue or sell any debt
securities or warrants or other rights to acquire any debt securities or
guarantee any debt securities, other than any indebtedness incurred in the
ordinary course of business consistent with past practices under the Company's
revolving credit agreement;
(g) except as required under Section 2.06 or by applicable Law, or as may
be mutually agreed upon between Parent and the Company, enter into or adopt any
new, or amend any existing, Employee Plan or Benefit Arrangement, or materially
change any actuarial or other assumption used to calculate funding obligations
with respect to any Employee Plan or Benefit Arrangement, or change the manner
in which contributions to any pension plan are made or the basis on which such
contributions are determined, except for amendments or changes in the ordinary
course of business consistent with past practices solely to reflect any
administrative or other non-substantive changes to any Benefit Plan or Employee
Arrangement and which do not increase the liability of the Company therefor;
(h) except to the extent required by written employment agreements existing
on the date of this Agreement, or by applicable Law, increase the compensation
payable or to become payable to its directors, officers or employees (excluding
(i) raises for hourly employees of the Company in the ordinary course consistent
with past practice and (ii) raises in the ordinary course consistent with past
practice for salaried employees scheduled to be effective January 1, 2000) or
pay any benefit or amount to any such person that is not otherwise required by
an Employee Plan or Benefit Arrangement as in effect on the date of this
Agreement;
(i) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets (including
securitizations) except pursuant to the ELF Merger and except for transactions
involving immaterial properties or assets that are in the ordinary course of
business consistent with past practices;
(j) make any tax election that has, or fail to make any tax election which
failure would have, individually or in the aggregate, a material effect on the
tax liability or tax attributes of the Company or settle or compromise any
material income tax liability of the
-27-
Company or file any Tax Return (other than in a manner consistent with past
practice) or change any method of Tax accounting;
(k) take any action to cause ELF to pay any dividend or make any
distribution to its stockholders other than the payment of quarterly cash
dividends on customary record and payment dates not to exceed $0.1125 per share
of ELF Common Stock per quarter and the special dividend as permitted by Section
6.06 of the ELF Merger Agreement;
(l) (i) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
for the Company or (ii) enter into any material agreement or exercise any
discretion providing for acceleration of any material payment or performance as
a result of a change of control of the Company or take any action which would
give rise to any liability or obligation of the Company following the Effective
Time for which the Company will not be indemnified by Spinco under the
Distribution Agreement;
(m) engage in or allow any transfer of assets or liabilities or other
transactions between the Company, on the one hand, and Spinco and any of its
Subsidiaries, on the other hand, except (i) payments in the ordinary course of
its business consistent with past practice or (ii) as expressly contemplated by
the Transaction Agreements to occur prior to the Effective Time;
(n) sell, assign, encumber, pledge, hypothecate or otherwise dispose of any
of the ELF Shares or any interest therein or enter into any voting agreement or
grant any proxy or consent with respect thereto, except for the ELF Voting
Agreement;
(o) renew any collective bargaining agreement or enter into any new
collective bargaining agreement;
(p) renew or enter into any non-compete, exclusivity or similar material
agreement that would restrict or limit the operations of the Company, or, after
the Effective Time, of Parent;
(q) renew, enter into, amend or waive any right under any material contract
with or loan to any Affiliate of the Company, other than as expressly
contemplated by the Transaction Agreements;
(r) make any loan, advance or capital contributions to or investment in any
Person, other than immaterial amounts in the ordinary course of business
consistent with past practices;
(s) enter into, modify or amend in any material respect, or terminate any
contract filed as an exhibit to any Company SEC Document or any other contract
to which the Company is a party which is or would be required to be filed as an
exhibit to the Company SEC Documents;
(t) settle or compromise any material litigation, or waive, release or
assign any material claims;
-28-
(u) adopt any change, other than as required by the SEC or by GAAP, in its
accounting policies, procedures or practices; or
(v) agree or commit to do any of the foregoing.
The parties agree that the provisions of Section 6.01, shall apply to
Spinco and its Subsidiaries as well as to the Company; provided, however, that
Parent agrees to grant its approval to any of the foregoing actions involving
solely Spinco or its Subsidiaries so long as such action would not (x) give rise
to any liability or obligation on the part of the Company following the
Effective Time, (y) adversely affect the credit quality or financial strength of
the parties which will indemnify the Company after the Effective Time pursuant
to the Distribution Agreement or (z) interfere with the timely consummation of
the Merger. Subject to the foregoing, the Company agrees to use its best efforts
to operate the business of Spinco and its Subsidiaries in a manner that
minimizes the liabilities incurred within the Company.
Section 6.02. SHAREHOLDER MEETING; SEC FILINGS. The Company shall cause a
meeting of its shareholders (the "Company Shareholder Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval and adoption of this Agreement and the Merger. In connection with
such meeting and the transactions contemplated by the Transaction Agreements,
the Company will (i) promptly prepare and file with the SEC, use its best
efforts to have cleared or declared effective by the SEC, as the case may be,
and thereafter mail to its shareholders as promptly as practicable the Company
Proxy Statement and the Registration Statement and any amendments or supplements
thereto and all other proxy materials for such meeting, (ii) use its reasonable
best efforts (including postponing or adjourning the Company Shareholder Meeting
to solicit additional proxies) to obtain the necessary approvals by its
shareholders of this Agreement and the transactions contemplated hereby and
(iii) otherwise comply with all legal requirements applicable to such meeting.
The Company shall provide Parent and its legal counsel with sufficient
opportunity to comment upon the form and substance of the Company Proxy
Statement (including any amendments or supplements thereto) prior to filing such
with the SEC and the Company shall use its reasonable efforts to incorporate
Parent's reasonable comments into the Company Proxy Statement (including any
amendments or supplements thereto). The Company shall provide to Parent copies
of any comments received from the SEC in connection therewith and shall consult
with Parent in responding to the SEC. Subject to Section 6.04, the Company Proxy
Statement shall contain the unqualified recommendation of the Board of Directors
of the Company that its shareholders vote in favor of the approval and adoption
of this Agreement and the Merger.
Section 6.03. ACCESS TO INFORMATION. From the date hereof until the
Effective Time and subject to applicable Law and the Confidentiality Agreement
dated as of July 24, 2000 between the Company and Parent (the "Confidentiality
Agreement"), the Company shall (i) give Parent, its counsel, financial advisors,
auditors, lenders and other authorized representatives reasonable access to the
offices, properties, books and records of the Company, (ii) furnish to Parent,
its counsel, financial advisors, auditors and other authorized representatives
such financial, operating data and other information as such Persons may
reasonably request, (iii) instruct its employees, counsel, financial advisors,
auditors and other authorized representatives of the Company to cooperate with
Parent in its investigation of the Company and (iv) promptly advise Parent
orally and in writing of any fact or circumstances reasonably likely to have a
Material
-29-
Adverse Effect on the Company or to cause a condition contained in Article 9 not
to be satisfied. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Company and Spinco and its Subsidiaries. No information or knowledge
obtained by Parent in any investigation pursuant to this Section shall affect or
be deemed to modify any representation or warranty made by the Company
hereunder.
Without limiting the generality of the foregoing, as soon as reasonably
practicable after the date hereof, the Company shall provide to Parent a copy of
the most recent statement of withdrawal liability that it or any of its
Affiliates has obtained from each Employee Plan that is a Multiemployer Plan
and, to the extent that such a statement has not yet been obtained for any such
Employee Plan, or to the extent such a statement has been obtained but reflects
withdrawal liability as of a date earlier than July 1, 2000 with respect to any
such Employee Plan, the Company shall use, and shall cause its Affiliates to
use, its reasonable best efforts to obtain a current withdrawal liability
statement from such Employee Plan and provide it to Parent.
Section 6.04. NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of its Subsidiaries to,
or authorize or permit any director, officer or employee of the Company or any
of its Subsidiaries or any investment banker, attorney, accountant or other
advisor or representative of the Company or any of its Subsidiaries to, directly
or indirectly, (i) solicit, initiate, negotiate or encourage, or take any other
action knowingly to facilitate, any Takeover Proposal (as defined below) or (ii)
enter into, continue or otherwise participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, any Takeover Proposal, in each case other
than a Takeover Proposal made by Parent; provided, however, that at any time
prior to obtaining approval of the Company's shareholders as contemplated by
Section 6.02 hereof, the Board of Directors of the Company may, in response to a
bona fide written Takeover Proposal that such Board of Directors reasonably
determines in good faith is reasonably likely to result in an Adverse
Recommendation Change (as defined below) or, after consultation with its
independent financial advisors, constitutes a Superior Proposal (as defined
below), and which Takeover Proposal was unsolicited and did not otherwise result
from a breach of this Section 6.04, (x) furnish information with respect to the
Company and its Subsidiaries to the person making such Takeover Proposal (and
its representatives) pursuant to a confidentiality agreement with terms not more
favorable to such person than the Confidentiality Agreement, provided that all
such information is provided on a prior or substantially concurrent basis to
Parent, and (y) participate in discussions or negotiations with the person
making such Takeover Proposal (and its representatives) regarding such Takeover
Proposal, provided that the Company shall have delivered to Parent prior written
notice advising Parent that it intends to participate in such discussions or
negotiations. The Company will immediately cease all existing activities,
discussions and negotiations with any parties conducted heretofore with respect
to any Takeover Proposal and request the return of all confidential information
regarding the Company and ELF provided to any such parties prior to the date
hereof pursuant to the terms of any confidentiality agreements or otherwise.
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to, or that is reasonably likely to lead to, any direct or
indirect acquisition, in one
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transaction or a series of transactions, including any merger, consolidation,
tender offer, exchange offer, binding share exchange, business combination,
recapitalization, liquidation, dissolution, joint venture, purchase or similar
transaction, of (A) assets or businesses that constitute or represent 20% or
more of the total revenue, operating income or assets of the Company and its
Subsidiaries, taken as a whole, (B) 20% or more of the outstanding shares of the
Company's common stock or capital stock of, or other equity or voting interests
in, any of the Company's Subsidiaries directly or indirectly holding the assets
or businesses referred to in clause (A) above or (C) any or all of the ELF
Shares.
(b) Neither the Board of Directors of the Company nor any committee thereof
shall (i) withdraw (or modify in a manner adverse to Parent or Merger
Subsidiary) or propose publicly to withdraw (or modify in a manner adverse to
Parent or Merger Subsidiary) the recommendation or declaration of advisability
by such Board of Directors or any such committee of this Agreement or the
Merger, provided, that in the event that prior to the approval of the Merger by
the shareholders of the Company, the Board of Directors of the Company receives
a Superior Proposal (as determined in accordance with Section 6.04(b)) that is
unsolicited and did not result from a breach of Section 6.04(a), the Board of
Directors of the Company may, if it believes in good faith such action is
required under Georgia law to avoid a breach of its fiduciary duties, after
receipt of advice from its outside legal counsel, withdraw or modify in a manner
adverse to Parent or Merger Subsidiary the recommendation or declaration of
advisability of this Agreement or the Merger (each such action being referred to
herein as an "Adverse Recommendation Change"), (ii) adopt or approve, or
recommend or propose publicly to adopt or approve, or recommend any Takeover
Proposal, or withdraw its approval of the Merger, or propose publicly to
withdraw its approval of the Merger, (iii) cause or permit the Company to enter
into any letter of intent, memorandum of understanding, agreement in principle,
acquisition agreement, merger agreement, option agreement, joint venture
agreement, partnership agreement or other agreement (each, an "Acquisition
Agreement") constituting or related to, or which is intended to or is reasonably
likely to lead to, any Takeover Proposal (other than a confidentiality agreement
referred to in Section 6.04(a)) or (iv) agree or resolve to take any of the
actions prohibited by clauses (i), (ii) or (iii) of this sentence; and provided,
however, that the Company shall not exercise its right to make an Adverse
Recommendation Change until after the fifth Business Day following Parent's
receipt of written notice (a "Notice of Superior Proposal") from the Company
advising Parent that the Board of Directors of the Company has received a
Superior Proposal and specifying the terms and conditions of the Superior
Proposal and identifying the Person making such Superior Proposal (it being
understood and agreed that any amendment to the price or any other material term
of a Superior Proposal shall require a new Notice of Superior Proposal and a new
five Business Day period). Any such Adverse Recommendation Change shall not
change the approval by the Board of Directors of the Company of the Merger and
this Agreement under Georgia law or for purposes of causing any state takeover
statute or other state law to be inapplicable to the transactions contemplated
hereby, including the Merger. The Company shall submit this Agreement to its
shareholders at a duly held meeting of shareholders even if the Board of
Directors of the Company shall have made an Adverse Recommendation Change.
Nothing in this Section 6.04 shall (x) permit the Company to terminate this
Agreement, (y) permit the Company to enter into any agreement with respect to
any Takeover Proposal or (z) affect any other obligation of the Company under
this Agreement.
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The term "Superior Proposal" means any bona fide binding written offer not
solicited by or on behalf of the Company or any of its Subsidiaries made by a
third party that, if consummated, would result in such third party (or in the
case of a direct merger between such third party and the Company, the
shareholders of such third party) acquiring, directly or indirectly, (i) more
than 50% of the voting power of the Company's common stock, (ii) all or
substantially all the assets of the Company and its Subsidiaries or (iii) all or
substantially all of the ELF Shares, taken as a whole, for consideration
consisting of cash and/or securities that the Board of Directors of the Company
determines in its reasonable good faith judgment (after consultation with a
financial advisor of nationally recognized reputation) to be superior from a
financial point of view to the shareholders of the Company, taking into account,
among other things, any changes to the terms of this Agreement proposed by
Parent in response to such Superior Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 6.04, the Company promptly shall advise Parent in
writing of any request for information that the Company reasonably believes
could lead to or contemplates a Takeover Proposal or of any Takeover Proposal
together with a copy of such Takeover Proposal, or any inquiry the Company
reasonably believes could lead to any Takeover Proposal.
(d) Nothing contained in this Section 6.04 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its shareholders a
position contemplated by Rule 14e-2(a) promulgated under the 1934 Act or (ii)
making a disclosure to the Company's shareholders if outside legal counsel
advises that failure so to disclose would be inconsistent with applicable Law;
provided, however, that in no event shall the Company or its Board of Directors
or any committee thereof take, agree or resolve to take any action prohibited by
Section 6.04(b)(i) or 6.04(b)(ii).
Section 6.05. THIRD PARTY STANDSTILL AGREEMENTS. During the period
from the date of this Agreement until the Effective Time or earlier termination
of this Agreement, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement relating to the making
of a Takeover Proposal to which it is a party (other than any involving Parent
or its Subsidiaries). During such period, the Company agrees to use all
reasonable efforts to enforce, to the fullest extent permitted under applicable
Law, the provisions of any such agreements, including seeking injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
Section 6.06. RIGHTS AGREEMENTS. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
4.18(b))reasonably requested in writing by Parent in order to render the Rights
inapplicable to the transactions contemplated by this Agreement. Except as
provided with respect to the transactions contemplated by this Agreement and the
Transaction Agreements, the Board of Directors of the Company shall not, without
the prior written consent of Parent, (a) amend the Rights Agreement or (b) take
any action with respect to, or make any determinations under, the Rights
Agreement, including a redemption of the Rights or any action to facilitate a
Takeover Proposal.
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Section 6.07. SPIN-OFF.
(a) The Company shall use its best efforts to satisfy the conditions to the
Spin-Off set forth in Section 3.02 of the Distribution Agreement and shall
effect the Spin-Off if such conditions have been satisfied. The Company shall
cause Spinco to comply with its obligations under the Distribution Agreement.
Notwithstanding anything in this Section 6.07 to the contrary, the parties
acknowledge and agree that this Section 6.07 shall not require the Company or
Spinco, to waive any condition to the Spin-Off set forth in Section 3.02 of the
Distribution Agreement. At or prior to the Spin-Off, the Company shall take
those actions required by Section 3.02 of the Distribution Agreement to be taken
at or prior to the Spin-Off.
(b) The Company shall keep Parent informed on a regular basis concerning
the developments in the transactions contemplated by the Transaction Agreements
and the means by which such transactions are effected and, subject to any
existing agreements as to the means of effecting the transactions that are
reflected in the Distribution Agreement, the Company shall give reasonable
consideration to Parent's views on the means by which such transactions are
effected.
ARTICLE 7
COVENANTS OF PARENT
Parent agrees that:
Section 7.01. OBLIGATIONS OF MERGER SUBSIDIARY. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement.
Section 7.02. DIRECTOR AND OFFICER LIABILITY. Parent shall cause the
Surviving Corporation, and the Surviving Corporation hereby agrees, to do the
following:
(a) For six years after the Effective Time, the Surviving Corporation shall
indemnify and hold harmless each present officer and director of the Company
(each an "Indemnified Person") to the fullest extent permitted by Georgia Law or
any other applicable laws or provided under the Company's articles of
incorporation and bylaws in effect on the date hereof in respect of its decision
to vote for the approval of the ELF Merger and the implementation of such
decision, provided that such indemnification shall be subject to any limitation
imposed from time to time under applicable law.
(b) The Surviving Corporation shall be entitled to control the defense of
any action, suit, investigation or proceeding with counsel of its own choosing
reasonably acceptable to the Indemnified Person and the Indemnified Person shall
cooperate in the defense thereof. The Surviving Corporation shall not be liable
for the fees, costs or expenses of any other counsel for an Indemnified Person,
other than local counsel, unless a conflict of interest shall be caused thereby
in which case the Surviving Corporation shall pay the fees, costs and expenses
of one additional counsel of the Indemnified Person's choosing but reasonably
acceptable to the Surviving Corporation, provided that the Surviving Corporation
shall not be liable for (i) the fees of more than one counsel for all
Indemnified Persons or (ii) any settlement effected without its written consent
(which consent shall not be unreasonably withheld).
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(c) For six years after the Effective Time, the Surviving Corporation shall
provide officers' and directors' liability insurance in respect of acts or
omissions occurring prior to the Effective Time covering each such Indemnified
Person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less favorable
than those of such policy in effect on the date hereof; provided if the
aggregate annual premiums for such insurance at any time during such period
shall exceed 200% of the per annum rate of premium and brokerage costs paid by
the Company as of the date hereof for such insurance, then the Surviving
Corporation shall provide only such coverage as shall then be available at an
annual premium equal to 200% of such rate.
(d) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 7.02.
(e) The rights of each Indemnified Person under this Section 7.02 shall be
in addition to any rights such Person may have under the articles of
incorporation or bylaws of the Company or any of its Subsidiaries, under Georgia
Law or any other applicable laws or under any agreement of any Indemnified
Person with the Company. These rights shall survive consummation of the Merger
and are intended to benefit, and shall be enforceable by, each Indemnified
Person.
(f) Notwithstanding any provision of this Section 7.02 to the contrary, to
the extent any obligation is also a Spinco Group Liability (as defined in the
Distribution Agreement) such matter shall be addressed as a Spinco Group
Liability pursuant to the Distribution Agreement rather than this Section 7.02.
In the event of a conflict between the Distribution Agreement and this Section
7.02 with respect to the subject matter of Section 7.02(a), this Section 7.02
shall govern.
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
Section 8.01. REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement, the Company and
Parent will use their reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, and to assist and cooperate with the
other parties in doing all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement. In furtherance and not in limitation of the foregoing, each of
Parent and the Company agrees (i) to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as reasonably practicable after the
date hereof and to supply as promptly as reasonably practicable
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any additional information and documentary material that may be requested by the
FTC or the Antitrust Division or any other Governmental Entity pursuant to the
HSR Act and (ii) to use reasonable efforts to cause the expiration or
termination of the applicable waiting periods under the HSR Act (and to obtain
the necessary approvals under any foreign laws, rules or regulations) as soon as
reasonably practicable; provided, that Parent shall not be required to agree,
and the Company shall not agree without Parent's consent, to waive any rights or
to accept any limitation on its operations or to dispose of any assets in
connection with obtaining any such consent or authorization, but at Parent's
written request the Company shall agree to any such waiver, limitation or
disposal, which agreement may, at the Company's option, be conditioned upon and
effective only as of the Effective Time. Each party shall: (1) promptly notify
the other party of any communication from the FTC, the Antitrust Division or any
State Attorney General or any other Governmental Entity, and subject to
applicable Law, permit the other party to review in advance any proposed written
communication to any of the foregoing and to accept all reasonable additions,
deletions or changes suggested in connection therewith; (2) with respect to this
Transaction not agree to participate in any substantive meetings or discussions
with any Governmental Entity in respect of any filings, investigations, or
inquiry concerning the transactions contemplated by this Agreement unless it
consults with the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to attend and
participate thereat; and (3) with respect to this Transaction furnish the other
party's counsel, subject to appropriate confidentiality procedures, with copies
of all correspondence, filings, and communications (and memoranda setting forth
the substance thereof) between them and their respective representatives and any
Governmental Entity or their respective staffs.
(b) In connection with obtaining financing in connection with the
transactions contemplated by this Agreement, at the reasonable request of
Parent, the Company (i) agrees to enter into such agreements, agrees to use
reasonable best efforts to deliver such officers certificates and opinions as
are customary in a financing and as are, in the good faith determination of the
persons executing such officers' certificates or opinions, accurate, and agrees
to pledge, grant security interests in, and otherwise grant liens on, its assets
pursuant to such agreements as may be reasonably requested, provided that no
obligation of the Company under any such agreement, pledge, or grant shall be
effective until the Effective Time; provided, that, all expenses, liabilities or
costs of the Company incurred in connection herewith shall be the responsibility
of Parent and any obligations entered into in connection herewith are terminated
in the event this Agreement is terminated in accordance with its terms and (ii)
with reasonable assurances of confidentiality acceptable to the Company will
provide to the lenders specified by Parent financial and other information in
the Company's possession with respect to the Company, Spinco, the Merger and the
Transaction, will make the Company's senior officers and financial and
accounting personnel reasonably available to assist such lenders, and otherwise
will cooperate in connection with the consummation of such financing.
Section 8.02. CERTAIN FILINGS. The Company and Parent shall cooperate with
one another and use their reasonable best efforts (i) in connection with the
preparation of the Company Proxy Statement and the Registration Statement, (ii)
in determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by the Merger
and the Transaction Agreements and (iii) in taking such actions or making any
such filings, furnishing information
-35-
required in connection therewith or with the Company Proxy Statement and
Registration Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 8.03. PUBLIC ANNOUNCEMENT. The initial press release concerning
this Agreement and the Transaction shall be a joint release. Thereafter Parent
and the Company will consult with each other before issuing any press release or
making any public statement with respect to this Agreement or the transactions
contemplated hereby and, except as may be required by applicable Law or any
listing agreement with any national securities exchange, will not issue any such
press release or make any such public statement prior to such consultation.
Section 8.04. FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.05. NOTICES OF CERTAIN EVENTS. Each of the Company and Parent
shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any notice or other communication from any Governmental Entity in
connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced or,
to its knowledge, threatened against, relating to or involving or otherwise
affecting the Company, Parent, Spinco or any of their respective Subsidiaries
that relate to the consummation of the transactions contemplated by the Merger
or the Transaction Agreements.
ARTICLE 9
CONDITIONS TO THE MERGER
Section 9.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of
the Company, Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have been
approved and adopted by the shareholders of the Company in accordance with
Georgia Law;
(b) no federal, state or foreign statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which has the effect of making the Merger or
the transactions contemplated hereby illegal
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or otherwise prohibiting the consummation of the Merger or the transactions
contemplated hereby;
(c) any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated; and
(d) the Distribution (as defined in the Distribution Agreement) shall have
been consummated in accordance with the terms and subject to the conditions set
forth in the Distribution Agreement.
Section 9.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER
SUBSIDIARY. The obligations of Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time;
(b) the representations and warranties of the Company contained in Section
4.05 shall be true in all respects (except for any de minimis inaccuracy) both
when made and as of the Effective Time as though made at and as of the Effective
Time, and all other representations and warranties of the Company contained in
this Agreement and in any certificate or other writing delivered by the Company
pursuant hereto, disregarding all qualifications and exceptions contained
therein relating to materiality or Material Adverse Effect or any similar
standard or qualification, shall be true when made and at and as of the
Effective Time as if made at and as of such time (or, if given as of a specific
date, at and as of such date) with only such exceptions as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
on the Company;
(c) Parent shall have received a certificate signed by an executive officer
of the Company to the foregoing effect;
(d) all consents and approvals of any Governmental Entity required in
connection with the consummation of the transactions contemplated by the
Transaction Agreements shall have been obtained, except for such consents or
approvals which, if not obtained, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or a
Material Adverse Effect on Parent or result in criminal liability or material
fines;
(e) as of immediately prior to the Effective Time, holders of no more than
10% of the outstanding Shares shall have taken actions to assert appraisal
rights under Georgia Law; and
(f) the ELF Merger Agreement shall have been approved and adopted by the
stockholders of ELF in accordance with Delaware Law whether by consent or
otherwise and all other conditions to consummation of the ELF Merger (other than
the consummation of the Merger), shall have been satisfied or, to the extent
permitted, waived.
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Section 9.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to consummate the Merger are subject to the satisfaction of the
following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Effective Time;
(b) the representations and warranties of Parent and Merger Subsidiary
contained in this Agreement and in any certificate or other writing delivered by
Parent or Merger Subsidiary pursuant hereto, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect
or any similar standard or qualification, shall be true when made and at and as
of the Effective Time as if made at and as of such time (or, if given as of a
specific date, at and as of such date) with only such exceptions as would not
reasonably be expected to materially impair, delay or prevent the ability of
Parent and Merger Subsidiary to consummate the transactions contemplated by this
Agreement; and
(c) the Company shall have received a certificate signed by an executive
officer of Parent and Merger Subsidiary to the foregoing effect.
ARTICLE 10
TERMINATION
Section 10.01. TERMINATION. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the shareholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before June 30, 2001,
provided that the right to terminate this Agreement pursuant to this
Section 10.01(b)(i) shall not be available to any party whose breach of any
provision of this Agreement results in the failure of the Merger to be
consummated by such time;
(ii) there shall be any Law or regulation that makes consummation of
the Merger illegal or otherwise prohibited or any judgment, injunction,
order or decree of any Governmental Entity having competent jurisdiction
enjoining Company or Parent from consummating the Merger is entered and
such judgment, injunction, order or decree shall have become final and
nonappealable; or
(iii) this Agreement shall not have been approved and adopted in
accordance with Georgia Law by the Company's shareholders by reason of the
failure to obtain the required vote at a duly held meeting of shareholders
(including any adjournment thereto);
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(c) by Parent, if
(i) the Board of Directors of the Company shall have failed to
recommend or shall have withdrawn, or modified in a manner adverse to
Parent, its approval or recommendation of this Agreement or the Merger,
shall have approved or recommended a Superior Proposal, or shall have
resolved to do any of the foregoing;
(ii) the Company shall have (1) failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by it
under this Agreement, such that the conditions set forth in Sections
9.02(a) or 9.02(c) cannot be satisfied or (2) breached any of its
representations or warranties such that the conditions set forth in
Sections 9.02(b) or 9.02(c) cannot be satisfied, which failure under clause
(1) or (2) shall not be cured within 15 Business Days of notice from Parent
(or such longer period during which the Company exercises reasonable best
efforts to cure and reasonably expects to accomplish such cure); or
(iii) the ELF Voting Agreement or the ELF Merger Agreement is
terminated for any reason, or the Company is in breach of or fails to
perform its obligations thereunder, or the ELF Merger Agreement is
consummated pursuant to the proviso to Section 9.01(d) of such Agreement;
(d) by the Company, if Parent or Merger Subsidiary shall have (i) failed to
perform in any material respect any obligation or to comply in any material
respect with any agreement or covenant of Parent or Merger Subsidiary to be
performed or complied with by it under this Agreement such that the condition
set forth in Section 9.03(a) cannot be satisfied or (ii) breached any of such
party's representations or warranties contained in this Agreement such that the
condition set forth in Section 9.03(b) cannot be satisfied, which failure or
breach described in such clause (i) or (ii) shall not be cured within 15
Business Days of notice from the Company (or such longer period during which
Parent exercises reasonable best efforts to cure and reasonably expects to
accomplish such cure).
The party desiring to terminate this Agreement pursuant to this Section 10.01
(other than pursuant to Section 10.01(a)) shall give notice of such termination
to the other party.
Section 10.02. EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any shareholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto, provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance of
the obligations of the other party or (ii) failure of either party to perform a
covenant hereof, such party shall be fully liable for any and all liabilities
and damages incurred or suffered by the other party as a result of such failure.
The provisions of Sections 11.04, 11.06, 11.07, 11.08 and this Section 10.02
shall survive any termination hereof pursuant to Section 10.01.
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ARTICLE 11
MISCELLANEOUS
Section 11.01. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Parent or Merger Subsidiary, to:
▇▇▇▇▇▇▇ Company
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to:
Flowers Industries, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such no-
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▇▇▇▇, request or communication shall be deemed not to have been received until
the next succeeding Business Day in the place of receipt.
Section 11.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
The representations and warranties contained in Article 4 and in any certificate
or other writing delivered pursuant to Section 9.02(c) shall survive the
Effective Time for a period of two years (or, in the case of the representations
and warranties contained in Section 4.15, until the expiration of the applicable
statutes of limitations), and Spinco shall indemnify and hold harmless Parent,
its Affiliates (including the Company) and their respective directors, officers,
employees, controlling persons, agents and representatives and their successors
and assigns (collectively, the "Parent Indemnitees") from and against all
Damages (as defined in the Distribution Agreement) asserted against or incurred
or suffered by any Parent Indemnitee in any way, directly or indirectly arising
out of, relating to or resulting from the failure of any representation or
warranty of the Company contained in this Agreement to have been true and
correct when made or as of the Effective Time (or at and as of such different
date or period specified for such representation and warranty) as though such
representation and warranty were made at and as of the Effective Time (or such
different date or period) without giving effect to any materiality or Material
Adverse Effect or knowledge qualification. The procedures set forth in Sections
4.05 and 4.06 of the Distribution Agreement shall apply to any claims made by
any Parent Indemnitee under this Section 11.02.
Section 11.03. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived prior to the
Effective Time if, but only if, such amendment or waiver is in writing and is
signed, in the case of an amendment, by each party to this Agreement or, in the
case of a waiver, by each party against whom the waiver is to be effective,
provided that, after the adoption of this Agreement by the shareholders of the
Company and without their further approval, no such amendment or waiver shall
reduce the amount or change the kind of consideration to be received in exchange
for the Shares.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by Law.
Section 11.04. EXPENSES.
(a) Except as otherwise provided in this Section, all costs and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense.
(b) If:
(i) Parent shall terminate this Agreement pursuant to Section
10.01(c)(i);
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(ii) either the Company or Parent shall terminate this Agreement
pursuant to Section 10.01(b)(iii) and prior to the Company Shareholder
Meeting a third party or the Company shall have publicly announced a
Takeover Proposal or a Takeover Proposal shall have been made known to
the Company (other than a Takeover Proposal by Parent);
(iii) either Parent or the Company shall terminate this Agreement
pursuant to Section 10.01(b)(i) and prior to June 30, 2001 a third
party or the Company shall have publicly announced a Takeover
Proposal, or a Takeover Proposal shall have been made known to the
Company (other than a Takeover Proposal by Parent); or
(iv) Parent is entitled to receive, or has received, a payment
from ELF pursuant to Section 11.04(b) of the ELF Merger Agreement and
(A) the conditions set forth in Section 9.02 of this Agreement have
been satisfied, (B) Parent has not (1) failed to perform in any
material respect any obligation or to comply in any material respect
with any agreement or covenant of Parent to be performed or complied
with by it under this Agreement or (2) breached any of its
representations or warranties contained in this Agreement such that
this Agreement may be terminated by the Company pursuant to Section
10.01(d) hereof and (C) ELF has not (1) failed to perform in any
material respect any obligation or to comply in any material respect
with any agreement or covenant of ELF to be performed or complied with
by it under the ELF Merger Agreement or (2) breached any of its
representations or warranties such that the ELF Merger Agreement has
been or may be terminated pursuant to Section 10.01(d) thereof;
then, in the case of a termination by the Company pursuant to clause (ii) or
(iii), the Company shall pay to Parent (by wire transfer of immediately
available funds not later than the date of termination or, in the case of
termination by Parent pursuant to clause (i), (ii) or (iii), one Business Day
after such termination of this Agreement or, in the case of clause (iv), on the
date such payment is, or was, due from ELF) an amount equal to $58.2 million.
Notwithstanding the preceding provisions of this Section 11.04(b), such amount
shall not be paid to Parent if the ELF Merger shall have been consummated. The
Company shall be entitled to deduct and withhold from any payments made to
Parent under this Section 11.04(b) such amounts as may be required to be
deducted or withheld therefrom under the Code or under any applicable provisions
of state or local tax Law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for purposes of this Section 11.04(b) as
having been paid to Parent.
Section 11.05. SUCCESSORS AND ASSIGNS. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Parent or Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of its Affiliates and the corresponding obligations, the right to enter
into the transactions contemplated by this Agreement, but no such transfer or
assignment will relieve Parent or Merger Subsidiary of its obligations
hereunder.
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Section 11.06. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law of the State of Delaware, without regard to
the conflicts of law rules of such state.
Section 11.07. JURISDICTION. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal court located in the State of Delaware or any Delaware state court,
and each of the parties hereby consents to the jurisdiction of such courts (and
of the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by Law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on such party as provided in Section 11.01 shall be deemed effective service of
process on such party.
Section 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 11.09. COUNTERPARTS; EFFECTIVENESS; BENEFIT. 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 when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Sections 2.03, 2.06, 7.02 and 11.02, no provision of this
Agreement is intended to confer any rights, benefits, remedies, obligations, or
liabilities hereunder upon any Person other than the parties hereto and their
respective successors and assigns.
Section 11.10. ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement.
Section 11.11. CAPTIONS. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 11.12. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of
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the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
Section 11.13. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled (without posting a bond or similar indemnity) to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any federal court located in
the State of Delaware or any Delaware state court, in addition to any other
remedy to which they are entitled at law or in equity.
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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 above written.
FLOWERS INDUSTRIES, INC.
By: /s/ G.A. ▇▇▇▇▇▇▇▇
---------------------------------------
Name:
Title:
▇▇▇▇▇▇▇ COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
---------------------------------------
Name:
Title:
KANSAS MERGER SUBSIDIARY, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name:
Title:
FLOWERS FOODS, INC. (for purposes of
Section 11.02 only)
By:/s/ G.A. ▇▇▇▇▇▇▇▇
---------------------------------------
Name:
Title:
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SCHEDULE I
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Capitalized terms used but not defined in paragraphs (a) or (c) of
this Schedule I shall have the meanings ascribed to them in the Agreement and
Plan of Restructuring and Merger to which this Schedule I is attached (the
"AGREEMENT").
(a) "PER SHARE ADJUSTMENT AMOUNT" shall mean an amount equal to the
Adjustment Amount divided by the Outstanding Shares (as defined below).
"ADJUSTMENT AMOUNT" shall mean an amount, reasonably estimated, equal to the sum
of the following items (each, an "ITEM"):
1. All advisory fees and expenses payable by the Company in connection
with the transactions contemplated by the Agreement or the other
Transaction Agreements, to the extent such fees and expenses exceed
$16 million;
2. All Liabilities (as defined in the Distribution Agreement) payable by
the Company under the Company's 1989 Executive Stock Incentive Plan,
1982 Incentive Stock Option Plan, Non-Employee Director Stock Option
Plan or any other compensation plan, program or arrangement of the
Company, including as set forth on Section 4.16(i) of the Company
Disclosure Schedule as a result of the transactions contemplated by
the Agreement or the Distribution Agreement;
3. The principal amount of all Company Debt (as defined in the
Distribution Agreement) plus the principal amount of any other debt or
similar obligations of the Company immediately prior to the
Distribution (as defined in the Distribution Agreement) to the extent
such debt is not expressly assumed by Spinco in accordance with the
terms of such debt or similar obligations or otherwise refinanced,
prepaid or satisfied by Spinco, including, without limitation, if
applicable, the Company's 7.15% Debentures due 2028 and the Loan
Facility Agreement by and among the Company, Suntrust Bank, Atlanta
and each of the participants party thereto, dated as of November 5,
1999, and all other agreements referenced in section 4.04(1) of the
Company Disclosure Schedule;
4. Accrued interest on all amounts referred to in Item 3, in each case,
as of the Effective Time;
5. All costs and expenses related to the immediate retirement of any
amount referred to in Item 3 (other than, to the extent not assumed by
Spinco and to the extent not declared due and payable, the Company's
7.15% Debentures due 2028), including, without limitation, prepayment
penalties, and make-whole and gross-up provisions;
6. The Tax Amount (as defined below); and
7. The aggregate amount necessary to satisfy all Liabilities (as defined
in the Distribution Agreement) of the Company and its Affiliates
pursuant to the Agreements listed as items
(a) through (l) of Section 4.04(2) of the Company Disclosure Schedule.
(b) The parties acknowledge and agree that the Adjustment Amount
constitutes a Spinco Group Liability (as defined in the Distribution Agreement).
In the event that an Item, that has been conclusively determined in accordance
with the procedure set forth in Article 4 of the Distribution Agreement, exceeds
or is less than the amount reflected in the Adjustment Amount for such Item, the
Company or Spinco, as the case may be, shall be entitled to indemnification from
the other for such excess amount or deficiency, as applicable, pursuant to such
Article 4.
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(c) For purposes of this Schedule I, the following terms shall have
the following meanings:
"ESTIMATED GAIN" shall mean the excess, if any, of (I) the sum of (a)
the Estimated 311(b) Gain, (b) the amount of any deferred intercompany income or
gain within the meaning of Treasury Regulation Section 1.1502-13 that is
Reasonably Expected By The Accountants to be required to be taken into account
as a result of the Transaction (or any transaction undertaken in anticipation
thereof) and the amount of any excess loss account Reasonably Expected By The
Accountants to be required to be taken into income under Treasury Regulation
Section 1.1502-19 as a result of the Transaction (or any transaction undertaken
in anticipation thereof) and (c) the amount of any other income or gain of the
Company or any of its Subsidiaries that is Reasonably Expected By The
Accountants to be required to be recognized for federal income Tax purposes
(including pursuant to Code Section 355(e) and (f)) as a result of the
Transaction (or any transaction undertaken in anticipation thereof) over (II)
the amount of any net operating loss (in excess of the amount of any income or
gain of the Company or any of its Subsidiaries for the Pre-Closing Period, other
than the income or gain set forth in clause (I) above) of the Company or any of
its Subsidiaries arising in the Pre-Closing Period that is Reasonably Expected
By The Accountants to be allowable (without restriction or limitation) under
federal income Tax law to offset the income or gain set forth in clause (I)
above for the taxable period of the Company ending on the date of the Merger.
"ESTIMATED 311(B) GAIN" shall mean the excess, if any, of (a) the sum
of (i) the product of the number of shares of Spinco stock outstanding on the
Distribution Date after the Distribution and the Spinco Stock Price and (ii) the
product of (A) the number of Share Equivalents or other equity-based derivatives
in Spinco outstanding on the date of the Distribution after the Distribution and
(B) the excess, if any, of the Spinco Stock Price over the exercise price of
such Share Equivalents or derivatives over (b) the federal income Tax basis
(other than any basis in respect of which loss is Reasonably Expected By The
Accountants to be disallowed under Treasury Regulation Section 1.1502-20), as
Reasonably Expected By The Accountants, of the Company in the stock of Spinco
(provided that such basis shall have been reduced by the amount, as Reasonably
Expected By The Accountants, of any liability for federal income Tax purposes
(or any capital lease obligation) of the Company that is assumed by Spinco or
any Subsidiary of Spinco, or to which assets received by Spinco or any
Subsidiary of Spinco are taken subject to).
"EXCHANGE" shall mean the New York Stock Exchange or such other
national securities exchange or automated quotation system of a registered
securities association as the Spinco stock is to be traded on.
"OUTSTANDING SHARES" shall mean the number of Shares issued and
outstanding immediately prior to the Effective Time, excluding all Shares
constituting Restricted Stock Awards pursuant to the 1989 Executive Stock
Incentive Plan.
"PRE-CLOSING PERIOD" shall mean the taxable periods (or portions
thereof) ending, with respect to the Company, on or prior to the date of the
Distribution.
"RATE" shall mean the sum of the highest federal income Tax rate
applicable to corporations under the Code on the date of the Distribution and
four percent.
"REASONABLY EXPECTED BY THE ACCOUNTANTS" shall mean that the
taxpayer's position is "more likely than not" to prevail under the Code, as
mutually agreed by (a) accountants designated by the Company and (b) at the
election of the Company, either
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▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇, or a Big Five accounting firm mutually
selected by the Company and Parent.
"RELEVANT DATE" shall mean the date of the Distribution, or if Spinco
stock is not traded on the Exchange on such date, then the first date
following the date of the Distribution on which the Spinco stock is so traded.
"SPINCO STOCK PRICE" shall mean the average of the high and the low
trading prices on the Relevant Date of Spinco stock on the Exchange, as reported
in The Wall Street Journal.
"TAX AMOUNT" shall mean the product of the Rate and the Estimated
Gain.
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