<PAGE>
AMENDMENT NO. 2
TO
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14a INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Under Rule 14a-12
GENERAL CIGAR HOLDINGS, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
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<S> <C> <C>
/ / No fee required.
/ / Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computer pursuant to Exchange Act Rule 0-11 (set forth in
the amount on which the filing fee is calculated and state
how it was determined):
------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------
/X/ Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount previously paid:
------------------------------------------------------------
(2) Form, Schedule or Registration Statement No:
------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------
</TABLE>
<PAGE>
As filed with the Commission on April 10, 2000
GENERAL CIGAR HOLDINGS, INC.
387 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
(212) 448-3800
Dear Stockholder: April 10, 2000
You are cordially invited to attend a Special Meeting of Stockholders of
General Cigar Holdings, Inc. to be held at the Hotel Inter-Continental New York,
111 East 48th Street, New York, New York in the Whitney Room on Monday, May 8,
2000 at 10:00 a.m., local time.
At the special meeting, we are asking you to consider and vote upon adoption
of a merger agreement providing for the merger of the Company with a subsidiary
of Swedish Match AB, in which you will be entitled to receive $15.25 in cash,
without interest, for each of your shares of common stock of General Cigar, and
a related amendment to the Company's certificate of incorporation. In connection
with the merger, members of the Cullman/Ernst family have agreed to sell to
Swedish Match, immediately prior to the merger, approximately 3.5 million
shares, or approximately one-third of their current holdings, for a price of
$15.00 per share in cash. Following the stock purchase and the merger, General
Cigar will be owned 64% by Swedish Match and 36% by members of the Cullman/Ernst
family, and we will continue to manage the Company. The accompanying proxy
statement provides detailed information about the proposed merger. We encourage
you to read the entire proxy statement, including the appendices, completely and
carefully.
The board, acting on the unanimous recommendation of a special committee of
disinterested directors, has unanimously approved the Merger Agreement and the
related charter amendment. The special committee and the entire board of
directors believe that the terms and provisions of the Merger Agreement and the
proposed merger are fair to you and in your best interest. Therefore, THE BOARD
OF DIRECTORS, BASED ON THE RECOMMENDATION OF THE SPECIAL COMMITTEE, RECOMMENDS
THAT YOU VOTE IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT AND THE APPROVAL
OF THE CHARTER AMENDMENT. In reaching its decision, the board considered, among
other things, the written opinion of Deutsche Banc Alex. Brown through Deutsche
Bank Securities Inc., a registered broker dealer, the special committee's
financial advisor, that, as of January 19, 2000, the $15.25 per share cash
consideration to be received by you in the proposed merger was fair to you from
a financial point of view. The price of $15.25 per share represents a 76.8%
premium to the closing price of the common stock on January 18, 2000 (the day
before the Special Committee reached its recommendation) and a 93.7% premium to
the closing price for the common stock on December 17, 1999, a month prior to
the announcement of the proposed transaction.
Your vote is very important. The proposed merger cannot occur unless, among
other things, the Merger Agreement is adopted and the charter amendment is
approved by the affirmative vote of the holders of a majority of all outstanding
shares of Class A common stock of General Cigar held by the public stockholders.
Whether or not you plan to attend the special meeting, we urge you to sign, date
and promptly return the enclosed proxy card. YOUR FAILURE TO VOTE WILL HAVE THE
SAME EFFECT, AS IF YOU VOTED AGAINST ADOPTION OF THE MERGER AGREEMENT AND
APPROVAL OF THE CHARTER AMENDMENT.
Sincerely,
Edgar M. Cullman, Sr.
CHAIRMAN
OF THE BOARD OF DIRECTORS
Edgar M. Cullman, Jr.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
387 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
(212) 448-3800
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders:
Notice is hereby given that a special meeting of the stockholders of General
Cigar Holdings, Inc. will be held at the Hotel Inter-Continental New York, 111
East 48th Street, New York, New York in the Whitney Room, on May 8, 2000 at
10:00 am, local time, for the following purposes:
- To consider and vote upon the Agreement and Plan of Merger, dated as of
January 19, 2000, by and among Swedish Match AB, SM Merger Corporation and
General Cigar Holdings, Inc., as it may be amended from time to time,
pursuant to which SM Merger Corporation will merge with and into General
Cigar, with General Cigar as the surviving corporation, and stockholders
of General Cigar (other than members of the Cullman/Ernst family) will be
entitled to receive $15.25 in cash, without interest, for each share of
General Cigar's common stock.
- To consider and vote upon an amendment to General Cigar's Certificate of
Incorporation to permit the merger to occur.
- To consider any other matters that may properly be brought before the
special meeting or any adjournment(s) or postponement(s) thereof.
Only stockholders of record at the close of business on April 7, 2000 are
entitled to notice of, and to vote at, the special meeting. During the ten day
period prior to the special meeting, any stockholder may examine a list of
General Cigar's stockholders of record, for any purpose related to the special
meeting, during ordinary business hours at the offices of General Cigar: 387
Park Avenue South, New York, New York 10016.
Stockholders of General Cigar who do not vote in favor of the Merger
Agreement will have the right to seek appraisal of the fair value of their
shares if the merger is completed, but only if they submit a written demand for
such an appraisal prior to the taking of the vote on the Merger Agreement and
they comply with the other Delaware law procedures explained in the accompanying
proxy statement.
The merger and related charter amendment are described in the accompanying
proxy statement, which you are urged to read carefully. A copy of the Agreement
and Plan of Merger is attached as Annex A to the accompanying proxy statement.
By Order of the Board of Directors
A. Ross Wollen
SECRETARY
New York, New York
April 10, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
The Special Meeting (see page 30)....................... 4
Special Factors (see page 8)............................ 4
The Merger Agreement (see page 32)...................... 5
The Voting Agreement (see page 39)...................... 5
The Shareholders' Agreement (see page 39)............... 5
The Stock Purchase Agreement (see page 39).............. 5
The Merger Consideration (see page 32).................. 5
Conditions to the Merger (see page 34).................. 5
Termination of the Merger Agreement (see page 38)....... 5
Acquisition Proposals (see page 37)..................... 5
Appraisal Rights (see page 39).......................... 6
Selected Consolidated Financial Data of the Company..... 6
THE PARTIES................................................. 8
The Company............................................. 8
Swedish Match........................................... 8
SM Merger Corp.......................................... 8
SPECIAL FACTORS............................................. 8
Background of the Merger................................ 8
Recommendation of the Special Committee and Board of
Directors;
Fairness of the Merger.................................. 12
Opinion of Financial Advisor to the Special Committee... 17
Certain Projections..................................... 21
Purpose and Reasons for the Merger...................... 22
Interests of Certain Persons in the Merger; Certain
Relationships.......................................... 23
Retained Equity Interest................................ 23
Directors and Management of the Surviving Corporation... 23
Management Employment Agreements........................ 24
Certain Effects of The Merger........................... 25
Plans For the Company After the Merger.................. 25
Conduct of the Business of the Company if the Merger Is
Not Consummated........................................ 26
Financing of The Merger................................. 26
Regulatory Requirements; Third Party Consents........... 26
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER...... 27
Treatment of Holders of Common Stock other than the
Family................................................. 27
Treatment of the Family................................. 28
Backup Withholding...................................... 29
FEES AND EXPENSES........................................... 29
INFORMATION CONCERNING THE SPECIAL MEETING.................. 30
Time, Place and Date.................................... 30
Purpose of the Special Meeting.......................... 30
Record Date; Voting at the Meeting; Quorum.............. 30
Required Vote........................................... 31
Voting and Revocation of Proxies........................ 31
Action To Be Taken at the Special Meeting............... 31
Proxy Solicitation...................................... 32
</TABLE>
i
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<TABLE>
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PAGE
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PROPOSAL ONE: ADOPTION OF THE MERGER AGREEMENT.............. 32
The Merger Agreement.................................... 32
The Voting Agreement.................................... 39
The Stock Purchase Agreement............................ 39
The Shareholders' Agreement............................. 39
Appraisal Rights........................................ 40
PROPOSAL TWO: APPROVAL OF AMENDMENT TO THE CERTIFICATE OF
INCORPORATION............................................. 43
MARKET FOR THE COMMON STOCK................................. 43
Common Stock Market Price Information; Dividend
Information............................................ 43
Common Stock Purchase Information....................... 44
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 44
DIRECTORS AND MANAGEMENT.................................... 48
The Company............................................. 48
Swedish Match AB and SM Merger Corporation.............. 51
OTHER BUSINESS.............................................. 53
INDEPENDENT ACCOUNTANTS..................................... 53
STOCKHOLDER PROPOSALS....................................... 53
WHERE YOU CAN FIND MORE INFORMATION......................... 54
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 54
AVAILABLE INFORMATION....................................... 55
LIST OF DEFINED TERMS....................................... 56
Index to Financial Schedules................................ F-1
ANNEX A--Agreement and Plan of Merger, dated as of January
19, 2000, by and among Swedish Match AB, SM Merger
Corporation, and General Cigar Holdings, Inc.............. A-1
ANNEX B--Opinion of Deutsche Bank Securities Inc............ B-1
ANNEX C--Opinion of Merrill Lynch........................... C-1
ANNEX D--Section 262 of the General Corporation Law of the
State of Delaware......................................... D-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT IS THE PROPOSED TRANSACTION?
A: Swedish Match will acquire a 64% interest in General Cigar through a stock
purchase and a merger of its wholly owned subsidiary, SM Merger Corporation,
into General Cigar. Members of the Cullman/ Ernst Family, who have had, in
the aggregate, a controlling interest in General Cigar and its predecessors
for many years (the "Family") will sell approximately 3.5 million shares to
Swedish Match for $15.00 per share in cash immediately prior to the merger,
and will hold 36% of the surviving corporation following the stock purchase
and merger. Following the merger, the Family will have certain put rights,
and Swedish Match will have certain call rights, with respect to the
Family's retained equity. To review the Family's put and call rights see
page 39.
Q: WHAT WILL I BE ENTITLED TO RECEIVE IN THE MERGER?
A: Each holder of General Cigar's Class A and Class B shares (other than
members of the Family) (the "Unaffiliated Stockholders") will be entitled to
receive $15.25 per share in cash.
Q: WHY IS THE BOARD OF DIRECTORS RECOMMENDING THAT I VOTE FOR THE MERGER
AGREEMENT AND THE RELATED CHARTER AMENDMENT?
A: The board of directors has determined, based upon the unanimous
recommendation of a special committee of three disinterested directors, that
the terms and provisions of the Merger Agreement and the proposed merger are
fair to and in the best interests of General Cigar's Unaffiliated
Stockholders, and the board of directors has accordingly unanimously
approved the Merger Agreement and related charter amendment required to
permit the merger. To review the background and reasons for the merger in
greater detail, see pages 8 to 11.
Q: SINCE CERTAIN DIRECTORS WILL CONTINUE TO BE STOCKHOLDERS OF GENERAL CIGAR
AFTER THE MERGER, WHAT CONFLICTS OF INTEREST DID THE BOARD OF DIRECTORS HAVE
IN MAKING ITS RECOMMENDATION?
A: Four of the Company's eleven directors have a conflict of interest in
recommending adoption of the Merger Agreement because, as members of the
Family, they will continue to have an equity interest in the Surviving
Corporation. As a result, they will receive the benefits of future earnings,
growth and increased value of General Cigar, and be subject to the risks of
such ownership, while you will no longer receive any such benefit or be
subject to such risks. The board's recommendation is based on the unanimous
recommendation of the special committee, which did not have a conflict of
interest in making the recommendation. To review the factors considered by
the special committee and the board of directors in approving the Merger
Agreement, see pages 12 to 20. To review the interests of the Family
directors in the merger see page 23.
Q: HOW DID THE BOARD OF DIRECTORS DECIDE THAT THE PRICE PER SHARE I WILL RECEIVE
IN THE PROPOSED MERGER IS FAIR TO ME?
A: The board of directors formed the Special Committee to evaluate and
negotiate certain terms of the Merger Agreement with Swedish Match. The
Special Committee independently selected and retained legal and financial
advisors to assist it in the negotiation, and received an opinion from its
financial advisor, Deutsche Banc Alex. Brown, through Deutsche Bank
Securities Inc., a registered broker dealer, that as of its date the $15.25
per share you will receive in the proposed merger is fair to you from a
financial point of view. Both the Special Committee and the entire board of
directors considered this opinion, among other things, in arriving at their
recommendations with respect to the merger. The opinion, and analyses
performed in rendering the opinion, are described on pages 17 to 20 and the
opinion is included as Annex B to this proxy statement.
1
<PAGE>
Q: WHO ARE THE MEMBERS OF THE SPECIAL COMMITTEE?
A: The Special Committee is comprised of three experienced financial
executives: Dan W. Lufkin, Chairman, was a co-founder of Donaldson, Lufkin &
Jenrette and serves on the board of Allen & Co.; Francis T. Vincent, Jr.
held senior executive positions at Columbia Pictures and Coca Cola and is a
director of Time Warner, Inc.; and Thomas C. Israel is Chairman of A.C.
Israel Enterprises, Inc., an investment firm. Each has been a director of
the Company for more than ten years and will have no role in the Surviving
Corporation after the merger.
Q WHAT ARE THE DISADVANTAGES TO ME OF MERGING GENERAL CIGAR WITH SM MERGER
CORPORATION?
A: Following the proposed merger, you will no longer benefit from the earnings
or growth of General Cigar.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A: There are three votes required to approve the merger and the related charter
amendment:
- the affirmative vote of a majority of all outstanding General Cigar common
stock, voting as a single class, with Class B shares having ten votes per
share and Class A shares having one vote per share,
- the affirmative vote of a majority of the outstanding Class A common
stock, voting separately as a class, and
- the affirmative vote of a majority of the outstanding Class B common stock
of General Cigar, voting separately as a class.
The Family has agreed to vote all of their shares of Class B common stock in
favor of the Merger Agreement and the charter amendment, so that two of the
three votes are assured. However, the merger cannot occur without the approval
of the merger and the related charter amendment by the Class A stockholders, and
the Family has agreed to vote the 162 shares of Class A common stock held by
them pro rata in accordance with the vote of the Class A Unaffiliated
Stockholders.
Q: WHAT IF THE STOCKHOLDERS DO NOT APPROVE THE MERGER AGREEMENT AND THE CHARTER
AMENDMENT?
A: The merger will not occur and the Company will continue to operate as a
publicly traded company. In addition, it is unlikely that another
transaction could occur for at least 18 months after termination of the
merger, because the Family has agreed in the Voting Agreement that it will
not vote its common stock in favor of any other transaction for such period.
The Voting Agreement is described on page 39.
Q: WHAT DO I NEED TO DO NOW?
A: Please mark your vote on, sign, date and mail your proxy card in the
enclosed return envelope as soon as possible, so that your shares may be
represented at the special meeting.
Q: WHAT RIGHTS DO I HAVE IF I OPPOSE THE MERGER?
A: Stockholders who oppose the merger may seek appraisal of the fair value of
their shares, but only if they comply with all of the Delaware law
procedures explained on pages 40 to 43 and in Annex C to this proxy
statement.
Q: WHO CAN VOTE ON THE MERGER?
A: All Class A and Class B stockholders of record as of the close of business
on April 7, 2000 will be entitled to notice of, and to vote at, the special
meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares ONLY if you provide instructions on how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares.
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<PAGE>
Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You may change your vote before the special meeting by delivering, or
instructing your broker or other nominee to deliver, a written revocation or
another signed proxy card with a later date to our solicitation agent,
Georgeson Shareholder Communications, Inc., before the special meeting or,
if you hold your shares directly, by attending the special meeting and
voting in person.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, we will send you a transmittal form and
written instructions for exchanging your share certificates for $15.25 per
share.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the merger as quickly as possible. If the
Merger Agreement is adopted and the related charter amendment is approved
and the other conditions to the merger are satisfied, we expect to complete
the merger shortly after the special meeting.
Q: WHAT ARE THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: The cash you receive for your shares generally will be taxable for U.S.
federal income tax purposes and should be taxable as a capital gain. To
review the federal income tax consequences to stockholders in greater
detail, see pages 27 to 29.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE SPECIAL MEETING?
A: We do not expect that any other matters will be voted upon at the special
meeting.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have more questions about the merger or would like additional copies
of this proxy statement, you should contact our solicitation agent,
Georgeson Shareholder Communications, Inc. at (800) 223-2064 or A. Ross
Wollen, General Counsel of General Cigar at (212) 448-3800.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS SELECTED INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO YOU, AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION CONTAINED ELSEWHERE IN THIS PROXY STATEMENT, INCLUDING THE ANNEXES
TO IT, AND IN THE DOCUMENTS INCORPORATED BY REFERENCE. TO UNDERSTAND THE
PROPOSED MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE
PROPOSED MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE PROXY STATEMENT,
INCLUDING THE ANNEXES TO IT, AND THE DOCUMENTS INCORPORATED BY REFERENCE.
THE SPECIAL MEETING (SEE PAGE 30)
A Special Meeting of Stockholders of General Cigar will be held at 10:00
a.m., local time, on Monday, May 8, 2000 at the Hotel Inter-Continental New
York, 111 East 48th Street, New York, New York in the Whitney Room. At the
special meeting, you will be asked to consider and vote on a proposal to adopt
the Merger Agreement and approve the related charter amendment described in this
proxy statement.
Only holders of shares of General Cigar common stock who are holders of
record at the close of business on the record date, April 7, 2000, will be
entitled to notice of, and to vote at, the special meeting. On the record date,
there were 27,039,400 shares of common stock outstanding and entitled to vote
held by approximately 904 stockholders of record, including 13,603,393 shares of
Class A common stock and 13,436,007 shares of Class B common stock.
Each share of Class A common stock is entitled to one vote per share. Each
share of Class B common stock is entitled to ten votes per share. The voting
preference of the Class B common stock is the only difference between the
Class A common stock and the Class B common stock.
There are three votes required to approve the merger and the related charter
amendment. The affirmative vote of a majority of all outstanding General Cigar
common stock is required to adopt the Merger Agreement and approve the related
charter amendment with Class B shares having ten votes per share and Class A
shares having one vote per share. In addition, the affirmative vote of a
majority of the outstanding Class A common stock of General Cigar and the
affirmative vote of a majority of the outstanding Class B common stock of
General Cigar, each voting separately as a class, is required to approve the
merger and the related charter amendment. The Family currently owns
approximately 74% of General Cigar's Class B common stock in the aggregate,
which they have agreed to vote in favor of the Merger Agreement and the charter
amendment. However, the merger cannot occur without the approval of the merger
and the related charter amendment by the Class A stockholders, voting separately
as a class. The Family has agreed to vote the 162 shares Class A common stock
held by them pro rata in accordance with the vote of the Class A Unaffiliated
Stockholders. To review a more detailed description of the interests of the
Family, see page 23.
SPECIAL FACTORS (SEE PAGE 8)
There are a number of factors that you should consider in connection with
voting your shares. They include:
- the background of the merger;
- the factors considered by the special committee and the board of
directors;
- the opinion of the financial advisor to the special committee;
- the recommendation of the special committee and the board of directors;
- the purpose and effect of the merger;
- the interests of certain persons in the merger; and
4
<PAGE>
- the financing of the merger.
These factors, in addition to several other factors to be considered in
connection with the merger, are described in this proxy statement. For a
detailed discussion of each of these factors, see pages 8 to 25.
THE MERGER AGREEMENT (SEE PAGE 32)
THE VOTING AGREEMENT (SEE PAGE 39)
THE SHAREHOLDERS' AGREEMENT (SEE PAGE 39)
THE STOCK PURCHASE AGREEMENT (SEE PAGE 39)
THE MERGER CONSIDERATION (SEE PAGE 32)
If the merger is completed, you will be entitled to receive $15.25 per share
in cash for each share of General Cigar common stock you own, without interest.
CONDITIONS TO THE MERGER (SEE PAGE 34)
A number of conditions must be satisfied before General Cigar, Swedish Match
AB and SM Merger Corporation are obligated to complete the merger, including,
among others, the following:
- there are three votes required to approve the merger and the related
charter amendment. The affirmative vote of a majority of all outstanding
General Cigar common stock is required to adopt the Merger Agreement and
approve the related charter amendment with Class B shares having ten votes
per share and Class A shares having one vote per share. In addition, the
affirmative vote of a majority of the outstanding Class A common stock of
General Cigar and the affirmative vote of a majority of the outstanding
Class B common stock of General Cigar, each voting separately as a class,
is required to approve the merger and the related charter amendment; and
- the absence of any legal or judicial restraints or prohibitions preventing
completion of the merger.
Additional conditions involving compliance with representations, warranties
and covenants must be satisfied by General Cigar or waived by Swedish Match AB
or SM Merger Corporation before either Swedish Match AB or SM Merger Corporation
is obligated to complete the merger.
Additional conditions involving the compliance with representations,
warranties and covenants must be satisfied by Swedish Match AB or SM Merger
Corporation or waived by General Cigar before General Cigar is obligated to
complete the merger.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 38)
General Cigar and Swedish Match may agree at any time (including any time
after the Special Meeting) to terminate the Merger Agreement. In addition,
either General Cigar or Swedish Match may terminate the Merger Agreement without
the agreement of the other party under certain circumstances.
ACQUISITION PROPOSALS (SEE PAGE 37)
In the Merger Agreement, General Cigar agrees not to solicit or encourage
any acquisition proposal for a material portion of General Cigar's assets or for
its common stock, or except under limited circumstances, to engage in any
discussions or provide access to information about General Cigar with respect to
any acquisition proposal for a material portion or more of General Cigar's
assets or for its stock.
5
<PAGE>
The Family has agreed in the Voting Agreement that it will not vote its common
stock in favor of any other transaction for a period of 18 months following any
termination of the merger.
APPRAISAL RIGHTS (SEE PAGE 40)
Unaffiliated Stockholders who do not wish to accept $15.25 per share cash
consideration in the merger have the right under Delaware law to have their
shares appraised by the Delaware Chancery Court. This "right of appraisal" is
subject to a number of restrictions and technical requirements. Generally, in
order to exercise appraisal rights, among other things:
- you must NOT vote in favor of the Merger Agreement; and
- you must make a written demand for appraisal in compliance with Delaware
law BEFORE the vote on the Merger Agreement.
Merely voting against the Merger Agreement will not preserve your right of
appraisal under Delaware law. Annex C to this proxy statement contains the
Delaware statute relating to your right of appraisal. If you hold shares in the
name of a broker or other nominee, you must instruct your nominee to take such
steps. Failure by you or your nominee to follow all of the steps required by
this statute will result in the loss of your right of appraisal.
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
The following table sets forth selected consolidated financial data for
General Cigar and its subsidiaries as of and for each of the three years in the
period ended November 27, 1999. No separate financial information is provided
for Swedish Match AB or SM Merger Corporation. No pro forma data giving effect
to the proposed merger is provided because General Cigar does not believe such
information is material to stockholders in evaluating the proposed merger and
Merger Agreement since (1) the proposed merger consideration by public
stockholders is all cash and (2) if the proposed merger is completed, the public
stockholders will no longer have any equity interest in the Company.
The historical financial data for General Cigar as of and for each of the
three fiscal years in the period ended November 27, 1999 has been derived from
the audited Consolidated Financial Statements of General Cigar and should be
read in conjunction with the Consolidated Financial Statements of General Cigar
and the notes thereto included in General Cigar's Annual Report on Form 10-K for
the fiscal year ended November 27, 1999, as filed with the Commission on
February 25, 2000, and included in this Proxy Statement beginning on page F-1.
6
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
52 WEEKS ENDED
-------------------------------------------
NOVEMBER 29, NOVEMBER 28, NOVEMBER 27,
1997 1998 1999
------------ ------------ -------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $262,833 $271,185 $182,266
Special charges......................................... -- 8,227 --
Operating profit........................................ 59,959 40,139 23,566
Gain on insurance settlement............................ -- 3,753 --
Gain on sale of business................................ -- -- 142,318
Net income.............................................. 36,064 25,815 106,562
Diluted net income per share............................ $ 1.26 $ 0.92 $ 3.92
Ratio of earnings to fixed charges and preferred
dividends............................................. 15.37x 8.36x 46.92x
Ratio of earnings to fixed charges and preferred
dividends (A)......................................... 15.37x 7.67x 8.47x
BALANCE SHEET DATA:
Working capital......................................... $133,129 $163,303 $277,755
Property and equipment, net............................. 67,489 76,809 60,185
Total assets............................................ 320,205 359,303 445,170
Long-term debt.......................................... 47,540 66,291 10,259
Book value per share.................................... $ 7.16 $ 8.07 $ 12.07
</TABLE>
- ------------------------
(A) Excludes the gain on insurance settlement and gain on sale of business.
7
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THE PARTIES
THE COMPANY
General Cigar Holdings, Inc. ("General Cigar" or the "Company"), which
traces its roots to 1906, is a leading manufacturer and marketer of premium
cigar brands including Macanudo, Partagas, Punch and Hoyo de Monterrey. The
Company is also a major grower of high-quality Connecticut shade wrapper
tobacco, and owns and operates the Club Macanudo cigar bars in New York City and
Chicago.
For additional information concerning the Company, see "Where You Can Find
More Information" and "Available Information" on pages 54 and 55, respectively.
SWEDISH MATCH
Swedish Match AB ("Swedish Match") is an international group with
headquarters in Stockholm, Sweden. Swedish Match manufactures a broad range of
tobacco products, matches and disposable lighters that are sold in approximately
140 countries. Consolidated total sales for the twelve-month period ended
December 31, 1999 amounted to approximately 9,400 MSEK. Swedish Match is listed
on Stockholm Stock Exchange and on NASDAQ (SWMAY). The principal office and
business address of Swedish Match is: Rosenlundsgatan 36, SE-118 85 Stockholm,
Sweden.
SM MERGER CORP.
SM Merger Corporation ("SM Merger Corp.") was incorporated in Delaware on
January 13, 2000 by Swedish Match in connection with the proposed merger. SM
Merger Corp. has not been engaged in any business activities other than those in
connection with the merger. The principal office and business address of SM
Merger Corp. is c/o Swedish Match North America Inc., 6600 West Broad Street,
Richmond, VA 23230. The telephone number of SM Merger Corp. is (804) 287-3200.
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Company, through its predecessors Culbro Corporation and General Cigar
Co., Inc., has been operated as a publicly traded company since 1906. In recent
decades, although cigars have always been its principal business, its
predecessors also diversified into snack foods, plastics, real estate, and
nursery operations. In 1997 those operations not previously sold were spun off
to the stockholders of the Company, and the Company, as a single purpose cigar
company, was brought public on February 28, 1997, by issuing 6,900,000 shares of
Class A Common Stock at $18.00 per share with an aggregate value of
$111,500,000.
The Company's initial public offering occurred during a period of
significant growth in the cigar business and favorable public valuations of
cigar companies. Since the initial public offering, however, public valuations
for companies in the cigar industry have fallen, on a relative basis, below
those of other industries. The public marketplace has been wary of protracted
regulatory uncertainty and the potential impact on the Company of potential
liability for the sale of tobacco products. In addition, the increased demand
for cigars from 1993-1997 combined with relatively low barriers to entry led to
many new entrants in the premium cigar manufacturing business. The Company
believes this resulted in excess inventories and a flood of poor quality cigars
which in turn led to the financial markets downgrading their enthusiasm for the
industry and the publicly traded cigar companies, including the Company. Also at
this time the press coverage of the cigar industry which had been positive
through the 1990's became increasingly negative with many articles focusing on
the declining popularity of cigars. The Company believes that, over time, these
factors had a significant effect on the market's perception of the Company's
value.
Since the Company's initial public offering, trading volumes for the shares
have been, on average, relatively low, resulting in a relatively illiquid
trading market for the shares. In addition, two of the
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Company's main competitors have ceased to be publicly held companies and the
number of securities analysts following the cigar industry on the whole, and the
Company in particular, has declined.
As a result of the foregoing, certain of the Company's objectives in going
public were not being met. At the same time, a number of public stockholders
conveyed their dissatisfaction with the Company's stock price to management. In
May 1998 the Company instituted a share repurchase program pursuant to which
1,233,700 shares were bought in the open market at an average price of $8.63 per
share ranging from a low of $5.56 per share to a high of $10.38 per share from
May 26, 1998 until January 14, 1999.
In early 1999, Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr., the Chairman
and Chief Executive Officer, respectively, together with other members of
management, began to investigate and consider various strategies to enhance
stockholder value. At this time, after approximately eighteen months of a
downward trend in cigar industry valuations the Chairman and Chief Executive
Officer became concerned that there was not necessarily going to be a rebound in
the public market valuations of cigar companies. Because there were no signs of
imminent recovery in the public marketplace the Chairman and Chief Executive
Officer began to consider strategic alternatives. The board determined at that
point to engage Peter J. Solomon Company Limited ("PJSC") to help the Company to
consider any potential strategic plans. The Company determined that it would be
in the best interest of the stockholders to divest the Company of its
mass-market cigar business in order to focus exclusively on the premium cigar
business. The Company management believed the mass-market sale would allow them
to focus their efforts on the premium cigar business where they believed they
could add the greatest strategic value due to their expertise. The Company
considered a number of potential buyers with the goal of selling the mass-market
business.
On April 30, 1999, Swedish Match North America acquired the Company's
mass-market business for $200 million in cash. The Company and Swedish Match
also entered into several agreements to source tobacco and distribute cigars.
Throughout the summer and fall of 1999, there were numerous contacts between the
Company and Swedish Match relating to the transition matters following the sale
of the mass-market business and various agreements relating to the sale. While
the Company's strengths are in the United States premium cigar business, Swedish
Match possesses extensive international cigar and smokeless tobacco experience,
as well as an international reputation and an established network of
international contacts and resources.
Despite the mass-market sale, there was little appreciation in the Company's
stock price. However, the sale did enable the Company, as planned, to focus on
the premium cigar market, in which management believed the Company had a
competitive advantage.
Beginning in early fall 1999 Swedish Match indicated on several occasions
that they were interested in the possibility of acquiring a significant stake in
the Company's premium cigar brand business by purchasing the equity in the
Company held by the Unaffiliated Stockholders.
At the November 4, 1999 meeting of the Company's board of directors, the
Chairman and Chief Executive Officer discussed news reports about the pending
merger of Seita, S.A., and Tabacalera, S.A., to form Altadis, S.A. As a result
of the merger, Altadis, S.A. would own the Company's U.S. competitors,
Consolidated Cigar and Havatampa, and manufacturing facilities in the Dominican
Republic and Honduras, and the premium brand Romeo and Julieta. The board
members discussed the merger at length, particularly the strong financial ties
each of the merging companies had to Cuba and the brands and distribution power
the merged company would now have in the United States. At the end of the
meeting, the Company's Chief Executive Officer initiated a general discussion of
the future of the cigar industry and his desire to consider strategic
alternatives for the Company to enhance stockholder value. Mr. Cullman also
mentioned that he had been approached by senior management of Swedish Match. The
board agreed that management should pursue discussions with Swedish Match with
the assistance of PJSC. Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr.
indicated to the board that the Family had not reached any decision as to
whether or not the Family would support a sale of a portion of the business to
Swedish
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Match. During the month of November, members of Company management met several
times with PJSC and solicited advice on various scenarios for a possible
transaction with Swedish Match.
At the December 2, 1999 board meeting, Edgar M. Cullman, Sr. and Edgar M.
Cullman, Jr. apprised the Company's board of directors that a senior
representative of Swedish Match had invited them to meet with him and other
senior representatives of Swedish Match in London on December 7 and 8.
At the meetings on December 7 and 8 in London, Swedish Match indicated a
high level of interest in making a significant strategic investment in the
Company. The Company's management and its representatives presented Swedish
Match with certain financial information relating to the Company in order to
allow Swedish Match to assess an appropriate valuation of the Company. The
Company's management also presented Swedish Match with a confidentiality
agreement which Swedish Match subsequently signed and returned to the Company.
Swedish Match indicated that although they were interested in acquiring a
significant equity stake in the Company, they wanted Edgar M. Cullman, Sr. and
Edgar M. Cullman, Jr. to maintain management responsibility and day-to-day
control of General Cigar.
On December 9, 1999, upon their return to New York, the Chairman and the
Chief Executive Officer informed the board in a conference call that Swedish
Match had expressed a high level of interest in making an investment in the
Company's premium cigar brand business and that senior representatives of
Swedish Match planned to come to New York on December 19 and 20 to discuss
further the possible alliance between Swedish Match and the Company. The board
also discussed that day's announcement by Habanos, S.A., the Cuban cigar
marketing and sales entity, of its intention to sell a 50% interest to Altadis
S.A. and the resulting further consolidation of the world leadership in the
cigar market.
On December 19, 20 and 21, 1999, representatives of Swedish Match, the
Company and the Family met at the offices of PJSC to further discuss the terms
of a potential equity investment by Swedish Match in the Company. The Company
made management representatives including the Chief Financial Officer available
to Swedish Match in order to permit Swedish Match to begin their due diligence
process. During the discussion Swedish Match again indicated that they were
interested in acquiring a significant stake in the Company but also indicated
their desire to have Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr. remain as
Chairman and Chief Executive Officer and continue to control the Company's
day-to-day operations. The Family indicated their desire to retain the majority
of their equity in the Company, to have Edgar M. Cullman, Sr. and Edgar M.
Cullman, Jr. to continue to control the day-to-day operations, and to have a
mechanism to provide further liquidity with respect to their retained ownership.
The parties negotiated a potential transaction structure that would consist
of a sale by the Family to provide liquidity with respect to approximately one
third of the Family's aggregate equity in the Company to Swedish Match followed
immediately by a merger in which the Family would retain their remaining equity
interest in the Surviving Corporation. In addition, pursuant to the proposed
transaction, Swedish Match and representatives of the Family discussed potential
terms for put and call arrangements pursuant to which the Family could sell and
Swedish Match could acquire the retained equity interests of the Family.
Representatives of the Family and Swedish Match also discussed potential terms
of a shareholders agreement pursuant to which Edgar M. Cullman, Sr. and Edgar M.
Cullman, Jr. would continue to be responsible for day-to-day management of the
Surviving Corporation and members of the Family would designate a majority of
the board of directors of the Surviving Corporation.
Given Swedish Match's continuing strong interest, the Company's board of
directors, in late December 1999, authorized the formation of special committee
(the "Special Committee") of three disinterested directors and the retention by
the Special Committee of financial and legal advisors independent of the Company
in order to be prepared to respond to an offer from Swedish Match, if one were
received. The Special Committee was authorized to advise, and make
recommendations to, the board concerning the fairness of the structure and terms
of any transaction with Swedish Match. Neither it nor any of its advisors were
authorized to solicit any offers by any third party with respect to any
acquisition of stock. Following meetings with law firms and investment banking
firms selected by the Special Committee for their
10
<PAGE>
familiarity with transactions of the type being contemplated, the Special
Committee retained the law firm of Wachtell, Lipton, Rosen & Katz ("Wachtell,
Lipton") as counsel to the Special Committee, and Deutsche Bank Securities Inc.
("Deutsche Bank ") as financial advisor to the Special Committee, to assist in
its consideration of, and negotiations with respect to, a transaction.
Through early January, Swedish Match continued to review the transaction
with its management in Stockholm and commenced its legal and financial due
diligence. During this period, the Special Committee and its legal counsel
conducted a detailed review of the transaction under discussion. At the same
time, Deutsche Bank conducted its due diligence review of the Company, including
interviews of senior management of the Company, with respect to the Company's
business prospects and other issues. The Special Committee met or participated
in telephone conference calls with its financial and legal advisors to discuss
the terms of the transaction and the progress of Deutsche Bank's due diligence
review of the Company and its business. Counsel to the Company and Swedish Match
drafted and negotiated forms of a Merger Agreement, stockholders' agreement,
voting agreement and stock purchase agreement to reflect the most likely
structure for the transaction. These form agreements were delivered by Company
counsel to Wachtell, Lipton, Deutsche Bank and the Special Committee in early
January for their review and comment.
During the week of January 10th, representatives from Swedish Match flew to
New York and negotiations continued throughout the week of January 10th and into
the following week. During the same time, drafting of the transaction documents
and due diligence by Swedish Match and the Special Committee continued.
Between January 17 and January 19, negotiations took place among the
representatives of the Family, Swedish Match and, on behalf of the Unaffiliated
Stockholders, the Special Committee, regarding the terms of the transaction as a
result of which Swedish Match agreed at the request of the Special Committee to
increase the price to be paid to Unaffiliated Stockholders in the merger from
$15.00 to $15.25 per share and, in connection therewith, the Family agreed to
increase from twelve to eighteen months the period they would be prohibited from
pursuing other transactions. The Family also agreed that 3.5 million of their
shares would be sold to Swedish Match for $15.00 per share.
At a meeting of the Special Committee held on January 19, 2000, Deutsche
Bank delivered their oral opinion to the Special Committee, subsequently
confirmed in writing as of the same date, as to the fairness, from a financial
point of view, of the merger consideration to be paid to the Unaffiliated
Stockholders. Following its receipt of Deutsche Bank's opinion, described under
"Special Factors--Fairness of the Merger" and "Special Factors--Opinion of
Financial Advisor to the Special Committee," and advice that the Family was
prepared to support the transaction, subject to its forthcoming meeting with
Swedish Match executives, the Special Committee unanimously decided to recommend
the transaction to the full board of directors. Immediately following the
meeting of the Special Committee, a meeting of the entire board of directors was
held. Deutsche Bank reviewed the terms of the opinion it delivered to the
Special Committee and Latham & Watkins and Wachtell, Lipton discussed the terms
of the transaction documents. The board of directors then, upon the unanimous
recommendation of the Special Committee, unanimously approved and declared the
advisability of the Merger Agreement (the "Merger Agreement"), the charter
amendment, all other related agreements and the transactions contemplated
thereby, including the merger of SM Merger Corp. with and into the Company, with
the Company as the surviving corporation (the "Surviving Corporation"), and the
board subsequently authorized the execution and delivery of the agreements.
After the meeting of the board on January 19, 2000, Swedish Match
representatives and Company management met at the offices of Latham & Watkins,
counsel to the Company, in New York where the agreements were executed and
delivered by representatives of each party to such agreements. A public
announcement was made prior to the opening of business in New York on
January 20, 2000.
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RECOMMENDATION OF THE SPECIAL COMMITTEE
AND BOARD OF DIRECTORS; FAIRNESS OF THE MERGER
As discussed under "Special Factors--Background of the Merger," the Special
Committee unanimously recommended the Merger Agreement and the merger to the
board, determining the Merger Agreement and the merger to be fair to and in the
best interests of the Unaffiliated Stockholders. In reaching this conclusion,
the Special Committee considered a number of factors, including, among other
things, the Deutsche Bank opinion which states that, as of the date and subject
to the assumptions and limitations stated in the opinion, the consideration to
be received by Unaffiliated Stockholders pursuant to the Merger Agreement is
fair from a financial point of view to the Unaffiliated Stockholders. The full
text of the Deutsche Bank opinion, which sets forth the opinion expressed,
procedures followed, matters considered and limitations on review undertaken in
connection with the opinion, is attached as Annex B to this proxy statement.
Because the only difference between the Class A common stock and the Class B
common stock is the voting preference the Special Committee did not make any
distinction between the holders of the different classes of stock in their
analysis of the fairness to the Unaffiliated Stockholders. We urge you to read
the opinion in its entirety.
REASONS FOR THE SPECIAL COMMITTEE'S DETERMINATION. In reaching its
recommendation, the Special Committee considered the following material factors:
- The terms of the proposed merger, most importantly the price of $15.25 per
share to be paid to the Unaffiliated Stockholders, which represents a
76.8% premium to the closing price of the common stock on January 18, 2000
(the day before the Special Committee reached its recommendation) and a
93.7% premium to the closing price for the common stock on December 17,
1999, one month prior to the announcement of the proposed transaction. The
Special Committee determined that these terms, which were the product of
arm's-length negotiations between Swedish Match on the one hand and
Company management and members of the Family on the other hand, as well as
between Swedish Match and the Special Committee, provide Unaffiliated
Stockholders with a transaction that, taking into account the risks and
potential rewards of continued investment in the Company, is very
favorable to the public stockholders and more attractive to the
Unaffiliated Stockholders than retaining their shares of common stock.
- The presentation and opinion of Deutsche Bank which included, among other
things, analyses of the value of the Company and comparisons with similar
companies and similar acquisition transactions, details of which are
described under "Special Factors --Opinion of Financial Advisor to the
Special Committee," and which indicated that the consideration to be
received by the public stockholders was fair to such holders from a
financial point of view. In this regard, the Special Committee noted
especially that Deutsche Bank had not been authorized to solicit, and did
not solicit, interest from any other potential acquirer of the Company or
its assets. The Special Committee concluded that each of the three
valuation analyses performed by Deutsche Bank, all of which relate to the
Company's value as a going concern, supported the Special Committee's
conclusion that the merger is fair to and in the best interest of the
Unaffiliated Stockholders. The Special Committee adopted the analyses and
conclusion of Deutsche Bank.
- Other provisions of the Merger Agreement and the agreements between
Swedish Match and members of the Family. In particular, the Special
Committee considered the provisions of the Merger Agreement that prohibit
the Company from soliciting other potential acquirers, and the provisions
of the Voting Agreement between Swedish Match and members of the Family
that require the Family to vote their Class B shares, constituting a
majority of the voting power of the Company's common stock, in favor of
the merger and against any alternative acquisition of the Company during
the term of the Merger Agreement and for 18 months after termination of
the Merger Agreement in the event the Merger Agreement is terminated prior
to closing. The Special Committee recognized that these provisions could
deter a potential acquirer from proposing a
12
<PAGE>
transaction that might be more favorable to the public stockholders than
the merger. However, the Special Committee did not consider it likely that
an alternative buyer would be willing to pay a higher price than Swedish
Match is offering the Unaffiliated Stockholders. The Special Committee
also considered statements by members of the Family that they would not
consider a sale of its entire interest in the Company at the present time.
- Although members of the Family were retaining a substantial investment in
the Company after the merger, subject to put and call agreements with
Swedish Match, they had agreed to sell 3,500,000 shares to Swedish Match
immediately before the merger at a price of $15.00 per share.
- The Company's business, conditions and prospects. In this respect, the
Special Committee considered that the projections provided by the Company
for the years 2000 through 2005 showed year-to-year increases in net
income and profit margins. The Special Committee noted, however, that in
the recent past the Company has been unable to predict its own financial
performance or the conditions prevailing in its industry with any
regularity, and that both have exhibited high volatility.
- The current and historical trading prices for the Company's shares. In
this respect, the Special Committee considered that although the Company's
shares were initially offered to the public at a price of $18.00 per share
in February 1997 and had traded as high as $34.00 in that year, the shares
had not traded above $15.00 since May 1998 and had traded for as little as
$5.625 per share during the last quarter of 1999.
- The risks to Unaffiliated Stockholders associated with the common stock,
including, without limitation, the risks associated with tobacco liability
litigation and possible governmental action that would have the effect of
reducing demand for tobacco products, including likely new requirements
for health warnings on products packaging and advertising. The Special
Committee believed that the uncertainty relating to these risks could be
an obstacle to realizing stockholder value, and the Special Committee
recognized that the merger would eliminate these risks to Unaffiliated
Stockholders.
- The risks associated with the Company's investment in Russian securities
and the uncertainty in valuing those securities.
- The fact that the merger requires approval of the charter amendment by the
holders of a majority of the outstanding shares of Class A common stock
voting as a separate class, with any Class A shares held by the Family
voting in the same proportion as votes cast by the Unaffiliated
Stockholders.
The Special Committee also noted that the $15.25 per share represented a
26.3% premium to the book value of the Company per share at November 27, 1999 of
$12.07. However, the Special Committee did not consider this to be of particular
significance, because it did not believe that a reliable correlation exists
between book value and fair market value for businesses such as the Company,
where such a significant portion of the value of the business consists of
ongoing relationships with customers.
In view of the fact that Swedish Match and members of the Family had
indicated to the Special Committee their intention to continue to operate the
business of the Company, the Special Committee did not perform, or ask Deutsche
Bank to perform, a formal liquidation analysis of the Company. However, due to
the nature of the Company's tangible assets, which consist primarily of
inventory and accounts receivable, the Special Committee believed that there was
no practical possibility that a liquidation of the Company would produce greater
value to the public stockholders than the merger. Instead, the Special Committee
focused primarily on the Company's value as a going concern, as reflected in the
various analyses described under "Special Factors--Opinion of Financial Advisor
to the Special Committee" on page 16.
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<PAGE>
The foregoing discussion of the information and factors considered and given
weight by the Special Committee is not intended to be exhaustive. In view of the
wide variety of the factors considered in connection with its evaluation of the
proposed merger, the Special Committee did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
Special Committee viewed its position and recommendation as being based on the
totality of the information presented and considered by it.
REASONS FOR THE BOARD'S DETERMINATION. In reaching its decision to approve
the Merger Agreement, the board relied on the Special Committee's recommendation
and the factors relied on by the Special Committee as described above. In view
of the wide variety of factors considered in connection with its evaluation of
the proposed merger, the board did not find it practicable to, and did not,
quantify or otherwise attempt to assign relative weights to the foregoing
factors or determine that any factor was of particular importance. Rather, the
board viewed its position as being based on the totality of the information
presented and considered by it. In connection with its consideration of the
determination by the Special Committee, as part of its determination with
respect to the fairness of the consideration to be received by holders of common
stock pursuant to the Merger Agreement, the board adopted the conclusion, and
the analyses underlying such conclusion, of the Special Committee, based upon
its view as to the reasonableness of such analyses and adopted the financial
analyses underlying the Deutsche Bank opinion based upon their review as to the
reasonableness of such analyses.
FAIRNESS OF THE MERGER TO UNAFFILIATED STOCKHOLDERS. The board believes
that the merger is fair to and in the best interests of Unaffiliated
Stockholders for all of the reasons set forth above. In addition, in light of
the fact that certain members of the Company's board, as members of the Family
or as senior executives of the Company, have interests in the merger that differ
from those of the Unaffiliated Stockholders, the Company formed the Special
Committee, consisting of three independent directors of the Company, none of
whom are members of the Family or officers or employees of the Company, Swedish
Match or their respective affiliates, to consider Swedish Match's proposal. The
Special Committee engaged independent counsel and Deutsche Bank. The merger
consideration of $15.25 per share was the highest price obtained following
arm's-length negotiations between the Special Committee and representatives of
Swedish Match. Deutsche Bank considered the fairness of the consideration to be
received by the Unaffiliated Stockholders pursuant to the Merger Agreement. The
Special Committee unanimously determined that the Merger Agreement and the
merger and related charter amendment are fair to and in the best interests of
the Unaffiliated Stockholders. Finally, the board considered the fact that the
merger requires the approval of the charter amendment by the holders of a
majority of the outstanding shares of Class A common stock, with any shares held
by the Family voted in the same proportion as those owned by Unaffiliated
Stockholders.
In light of all of the foregoing, none of the Special Committee, the board
and a majority of the directors who are not employees of the Company considered
it necessary to, and both the Special Committee and the board believe the
proposed transaction is fair despite the fact they did not retain an
unaffiliated representative to act solely on behalf of Unaffiliated Stockholders
for purposes of negotiating the terms of the merger and the Merger Agreement.
Although approval of the merger did not require a separate vote of all of the
directors of the Company who are not members of the Family, the Special
Committee believed that its authority to negotiate with Swedish Match on behalf
of the the Unaffiliated Stockholders and to make its own evaluation and
recommendation to the full board of directors achieved the same assurance that
the merger is fair to the Unaffiliated Stockholders as though the merger had
been subject to such a separate vote. Similarly, the Special Committee believed
that the requirement that the charter amendment and the merger be approved by
the holders of Class A common stock voting separately as a class, with any
shares held by the Family voted in the same proportion as those owned by
Unaffiliated stockholders, achieved the same assurance of fairness as if the
merger were subject to approval by holders of a majority of the shares of common
stock unaffiliated with the Family.
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In reaching this conclusion, both the Special Committee and the board
considered it significant that (i) all members of the Special Committee were
independent of the Company, the Family and Swedish Match, (ii) all members of
the Special Committee were highly experienced and sophisticated in business and
financial matters and were well-informed about the business and operations of
the Company, (iii) the Special Committee had retained independent financial and
legal advisors that had extensive experience with transactions similar to the
merger and (iv) Deutsche Bank had been retained to advise the Special Committee
as to the fairness, from a financial point of view, of the proposal received
from Swedish Match and had reached the conclusions expressed in their opinion.
THE CULLMAN FAMILY. Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr. (the
"Cullmans") believe that the terms of the merger are fair to the Unaffiliated
Stockholders. In determining the fairness of the merger, the Cullmans considered
a number of factors collectively and, other than as specifically indicated
below, did not assign relative weights to them in reaching its conclusion.
However, the order of the discussion of the factors below reflects generally
their view of the relative importance of the various factors, with the most
important factors being discussed first. The Cullmans did not consider any one
factor as decisive. In connection with its consideration of the determination by
the Special Committee, as part of its determination with respect to the fairness
of the consideration to be received by holders of common stock pursuant to the
Merger Agreement, the Cullmans adopted the conclusion, and the analyses
underlying such conclusion, of the Special Committee, based upon their view as
to the reasonableness of such analyses.
- PREMIUM OVER RECENT MARKET PRICES. The Cullmans placed considerable weight
on the fact that the $15.25 per share to be paid to the Unaffiliated
Stockholders pursuant to the merger represented a premium of more than
76.8% over the closing price per Share as reported on the NYSE on
January 18, 2000, the last trading day prior to the signing of the Merger
Agreement. For additional historical prices of the stock, see page 47.
- SALE OF CERTAIN CULLMAN FAMILY SHARES. The Cullmans considered the fact
that certain members of the Family agreed to sell 3.5 million shares or
approximately one-third of their holdings to Swedish Match immediately
prior to the merger for $15.00 per share.
- VALUE OF STRATEGIC ALLIANCE. The Cullmans also considered that there were
numerous strategic advantages to an alliance between Swedish Match and the
Company, which they believed would cause Swedish Match to place a higher
value on the Company than would other potential investors.
- RECOMMENDATION OF THE SPECIAL COMMITTEE. The Cullmans placed considerable
weight on the fact that the Special Committee, with the assistance of
Deutsche Bank and the Special Committee's independent legal counsel,
participated in the negotiations of the terms of the Merger Agreement, and
that the merger was recommended by the Special Committee for approval by
the Company's board of directors. The Cullmans also noted that the members
of the Special Committee, have been directors of the Company and the
Company's predecessor for many years and possess a substantial knowledge
of and familiarity with the Company's business and the cigar industry.
- FAIRNESS OPINION. The Cullmans placed significant weight on the fact that
the Special Committee had received the opinion of Deutsche Bank that the
consideration to be paid to the Unaffiliated Stockholders in the merger is
fair to the Unaffiliated Stockholders from a financial point of view,
although the Cullmans recognize that such opinion was not addressed to
them, nor for their use or benefit. In connection with their consideration
of the Deutsche Bank opinion, as part of the determination with respect to
the fairness of the merger, the Cullmans adopted the financial analyses
underlying such opinion based upon their review as to the reasonableness
of such analyses. A copy of Deutsche Bank's opinion, which sets forth the
assumptions made, matters considered and limitations of the review
undertaken, is attached as Annex B to this Proxy Statement and should be
read in its entirety by each stockholder. See "Special Factors--Opinion of
Financial Advisor to the Special Committee."
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- OTHER FACTORS. The Cullmans took into consideration that the Unaffiliated
Stockholders will not have the opportunity to participate in any future
growth of the Company following consummation of the merger. Although
approval of the merger did not require a separate vote of all of the
directors of the Company who are not members of the Family, the Cullmans
believed that the authority of the Special Committee to negotiate with
Swedish Match on behalf of the Unaffiliated Stockholders and to make its
own evaluation and recommendation to the full board of directors achieved
the same assurance that the merger is fair to the Unaffiliated
Stockholders as though the merger had been subject to such a separate
vote. Similarly, the Cullmans believed that the requirement that the
charter amendment and the merger be approved by the holders of Class A
common stock voting separately as a class, with any shares held by the
Family voted in the same proportion as those owned by Unaffiliated
Stockholders, achieved the same assurance of fairness as if the merger
were subject to approval by holders of a majority of the shares of common
stock unaffiliated with the Family. The Cullmans also considered that in
addition to the required adoption of the Merger Agreement and approval of
the charter amendment by the Class A stockholders, Unaffiliated
Stockholders who do not vote in favor of the merger will have the right to
demand appraisal of the fair value of their shares under the DGCL. See
"Proposal One: Adoption of the Merger Agreement--Appraisal Rights."
SWEDISH MATCH. The rules of the SEC require Swedish Match to express its
belief as to the fairness of the terms of the merger to the Unaffiliated
Shareholders. While Swedish Match has not undertaken any formal evaluation of
its own as to the fairness of the terms of the merger to the Unaffiliated
Shareholders, Swedish Match has considered the factors taken into account by the
Special Committee, the Company's board and the Cullmans in determining the
fairness of the merger to the Unaffiliated Shareholders and by the Special
Committee and the Company's board in recommending the approval of the Merger
Agreement and the merger, as set forth in this Proxy Statement. These factors
include: (1) the merger consideration represented a significant premium over the
historical stock prices of the Company; (2) the terms of the transaction were
the product of arm's-length negotiations between Swedish Match, on the one hand,
and the Company's management and members of the Family, on the other hand, as
well as between Swedish Match and the Special Committee; (3) the Special
Committee, assisted by its own independent financial advisor and legal counsel,
unanimously recommended the Merger Agreement and the merger to the Company's
board; (4) the Special Committee obtained an opinion from its financial advisor,
Deutsche Bank, that the merger was fair to the Unaffiliated Shareholders; (5)
certain members of the Family agreed to sell one-third of their holdings to
Swedish Match for $15.00 per share; and (6) the approval of the merger is
subject to the vote of the Unaffiliated Shareholders. See "--Reasons for the
Special Committee" and "--The Cullman Family" above. Following its consideration
of these factors, Swedish Match adopted the conclusions, and the analysis
underlying such conclusions, of the Special Committee, the Company's Board and
the Cullmans with respect to the fairness of the terms of the merger to the
Unaffiliated Shareholders. Swedish Match did not find it practicable to, and did
not, quantify or otherwise attach relative weights to these factors independent
of the analysis of the Special Committee, the Company's board and the Cullmans
in reaching their respective conclusions as to fairness of the merger. Based
solely on the foregoing, and without undertaking any analysis of its own,
Swedish Match believes that the terms of the merger are fair to the Unaffiliated
Shareholders.
Swedish Match retained Merrill Lynch on December 13, 1999 to provide it with
financial advisory services for this transaction. Swedish Match did not retain
Merrill Lynch to undertake, nor did Merrill Lynch undertake, an evaluation as to
the fairness of the terms of the merger to the Unaffiliated Shareholders. As
part of the consideration of this transaction by the board of directors of
Swedish Match, Merrill Lynch delivered an opinion to the board of directors of
Swedish Match that the consideration to be paid by Swedish Match in connection
with the overall transaction was fair, from a financial point of view, to
Swedish Match. The full text of Merrill Lynch's written opinion, dated
January 27, 2000, which sets forth, among other things, the assumptions made,
matters considered and limits on the review undertaken by Merrill Lynch in
connection with the opinion, is attached as Annex C to this Proxy Statement and
is
16
<PAGE>
incorporated herein by reference. The summary of the opinion in this paragraph
is qualified in its entirety by reference to the full text of the opinion.
Swedish Match retained Merrill Lynch because of its expertise in evaluating
similar transactions. Merrill Lynch is currently acting for Swedish Match as
financial advisor on other potential acquisitions and has, in the past, provided
financial advisory and financing services to Swedish Match.
OPINION OF FINANCIAL ADVISOR TO THE SPECIAL COMMITTEE
Deutsche Bank has acted as financial advisor to the Special Committee in
connection with the merger. At the January 19, 2000 meeting of the Special
Committee, Deutsche Bank delivered its oral opinion, subsequently confirmed in
writing as of the same date, to the Special Committee to the effect that, as of
the date of such opinion, based upon and subject to the assumptions made,
matters considered and limits of the review undertaken by Deutsche Bank, the
$15.25 per share price was fair, from a financial point of view, to the
Company's Unaffiliated Stockholders.
THE FULL TEXT OF DEUTSCHE BANK'S WRITTEN OPINION, DATED JANUARY 19, 2000,
WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN BY DEUTSCHE BANK IN CONNECTION WITH THE
OPINION, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT AND IS INCORPORATED
HEREIN BY REFERENCE. YOU ARE URGED TO READ THE OPINION IN ITS ENTIRETY. THE
SUMMARY OF THE OPINION SET FORTH IN THIS PROXY STATEMENT IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION.
In connection with Deutsche Bank's role as financial advisor to the Special
Committee, and in arriving at its opinion, Deutsche Bank has, among other
things, reviewed certain publicly available financial information and other
information concerning the Company and certain internal analyses and other
information furnished to it by the Company. Deutsche Bank also held discussions
with members of the senior management of the Company regarding its business and
prospects. In addition, Deutsche Bank (i) reviewed the reported prices and
trading activity for the common stock of the Company (ii) compared certain
financial and stock market information for the Company with similar information
for selected companies whose securities are publicly traded, (iii) reviewed the
financial terms of selected recent business combinations which it deemed
comparable in whole or in part to the transaction with Swedish Match,
(iv) reviewed the terms of the Merger Agreement and certain related documents,
(v) considered the potential value of the Company's long term investments, which
consisted primarily of Russian bonds, which have a carrying value of $21.2
million ($0.75 per share) and face value of approximately $58 million
(approximately $2.00 per share), and (vi) performed such other studies and
analyses and considered such other factors as it deemed appropriate.
In preparing its opinion, Deutsche Bank did not assume responsibility for
the independent verification of, and did not independently verify, any
information, whether publicly available or furnished to it, concerning the
Company, including, without limitation, any financial information, forecasts or
projections, considered in connection with the rendering of its opinion.
Accordingly, for purposes of its opinion, Deutsche Bank assumed and relied upon
the accuracy and completeness of all such information. Deutsche Bank did not
conduct a physical inspection of any of the properties or assets, and did not
prepare or obtain any independent evaluation or appraisal of any of the assets
or liabilities of the Company. With respect to the financial forecasts and
projections made available to Deutsche Bank and used in its analysis, Deutsche
Bank has assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of the
Company as to the matters covered thereby. In rendering its opinion, Deutsche
Bank expressed no view as to the reasonableness of such forecasts and
projections or the assumptions on which they are based. The opinion was
necessarily based upon economic, market and other conditions as in effect on,
and the information made available to Deutsche Bank as of, the date of such
opinion.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analyses, the representations and warranties of the
Company and Swedish Match contained in the Merger
17
<PAGE>
Agreement are true and correct, that the Company and Swedish Match will each
perform all of the covenants and agreements to be performed by them under the
Merger Agreement and that all conditions to the obligation of each of the
Company and Swedish Match to consummate the merger will be satisfied without any
waiver thereof. Deutsche Bank has also assumed that all material governmental,
regulatory or other approvals and consents required in connection with the
consummation of the transactions contemplated by the Merger Agreement will be
obtained and that in connection with obtaining any necessary governmental,
regulatory or other approvals and consents, or any amendments, modifications or
waivers to any agreements, instruments or orders to which either the Company or
Swedish Match is a party or subject or by which it is bound, no limitations,
restrictions or conditions will be imposed, or amendments, modifications or
waivers made, that would have an adverse effect on the Company or Swedish Match
or materially reduce the contemplated benefits of the merger to the Company.
In connection with Deutsche Bank's role as financial advisor to the Special
Committee and in arriving at its opinion, Deutsche Bank was not authorized to
solicit, and did not solicit, interest from any other person with respect to the
acquisition of the Company or any of its assets.
Set forth below is a brief summary of certain financial analyses performed
by Deutsche Bank in connection with its opinion and reviewed first at the
meeting of the Special Committee and then at meeting of the entire board on
January 19, 2000:
HISTORICAL STOCK PERFORMANCE. Deutsche Bank reviewed and analyzed recent
and historical market prices and trading volume for the Company common stock and
compared such market prices to certain stock market and industry indices.
ANALYSIS OF SELECTED PUBLICLY TRADED COMPANIES. Deutsche Bank compared
certain financial information and commonly used valuation measurements for the
Company to corresponding information and measurements for a group of seven
publicly traded tobacco industry companies (consisting of Holt's Cigar Holdings,
Inc., 800-JR Cigar, Inc., Altadis, S.A., Gallaher Group plc, Imperial Tobacco
Group plc, RJ Reynolds Tobacco Holdings, Inc. and Sousa Cruz, S.A.
(collectively, the "Selected Companies")). Such financial information and
valuation measurements included, among other things, (i) common equity market
valuation; (ii) operating performance; (iii) ratios of common equity market
value as adjusted for debt and cash ("Enterprise Value") to earnings before
interest expense, income taxes and depreciation and amortization ("EBITDA"), and
earnings before interest expense and income taxes ("EBIT"); and (iv) ratios of
common equity market prices per share ("Price") to earnings per share ("EPS").
To calculate the trading multiples for the Company and the Selected Companies,
Deutsche Bank used publicly available information concerning historical and
projected financial performance, including published historical financial
information and earnings estimates reported by research analysts and the
Institutional Brokers Estimate System ("IBES"). IBES is a data service that
monitors and publishes compilations of earnings estimates by selected research
analysts regarding companies of interest to institutional investors. Deutsche
Bank calculated that the multiple of Enterprise Value to estimated calendar year
1999 EBITDA was 4.3x for the Company, compared to a range of 1.3x to 8.4x, with
a mean of 5.7x, for the Selected Companies; and the multiple of Enterprise Value
to estimated calendar year 1999 EBIT was 6.0x for the Company, compared to a
range of 1.9x to 8.9x with a mean of 6.4x, for the Selected Companies. Deutsche
Bank further calculated that the multiple of Price to estimated calendar year
1999 EPS was 13.7x for the Company, compared to a range of 5.7x to 14.8x, with a
mean of 8.5x, for the Selected Companies. Deutsche Bank concluded that this
analysis yielded a range of value of $5.75 to $10.25 per share.
None of the companies utilized as a comparison were identical to the
Company. Accordingly, Deutsche Bank believes the analysis of publicly traded
comparable companies is not simply mathematical. Rather, it involves complex
considerations and qualitative judgments, reflected in Deutsche Bank's opinion,
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies.
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<PAGE>
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Deutsche Bank reviewed the
financial terms, to the extent publicly available, of five completed mergers and
acquisition transactions since September 1, 1997 involving companies in the
cigar and tobacco industries (the "Selected Transactions"). Deutsche Bank
calculated various financial multiples and premiums over market value based on
certain publicly available information for each of the Selected Transactions and
compared them to corresponding financial multiples and premiums over market
value for the merger. Deutsche Bank calculated that the multiple of Enterprise
Value to one year forward EBITDA was 3.7x for the merger compared to a range of
5.5x to 8.8x, with a mean of 7.0x, for the Selected Transactions; the multiple
of Enterprise Value to one year forward EBIT was 5.0x for the merger compared to
a range of 6.0x to 7.8x, with a mean of 7.2x, for the Selected Transactions.
Deutsche Bank further calculated that the multiple of Price times the total
number of outstanding shares of common stock to one year forward net income was
24.0x for the merger compared to a range of 8.3x to 15.1x, with a mean of 11.3x,
for the Selected Transactions. Deutsche Bank also calculated that the Selected
Transactions were effected at a premium to the acquired companies' per share
market price one month prior to the announcement of the transaction and to the
acquired companies' per share market price one week prior to announcement of the
transaction with a median of 67.0%, and 33.5%, respectively, compared to
premiums of 93.7% and 75.5%, respectively, for the merger. All multiples for the
Selected Transactions were based on public information available at the time of
announcement of such transaction, without taking into account differing market
and other conditions during the two-year period during which the Selected
Transactions occurred. Deutsche Bank concluded that this analysis yielded a
range of value of $7.25--$14.00 per share.
Because the reasons for, and circumstances surrounding, each of the Selected
Transactions analyzed were so diverse, and due to the inherent differences
between the operations and financial conditions of the Company and the companies
involved in the Selected Transactions, Deutsche Bank believes that a comparable
transaction analysis is not simply mathematical. Rather, it involves complex
considerations and qualitative judgments, reflected in Deutsche Bank's opinion,
concerning differences between the characteristics of these transactions and the
merger that could affect the value of the subject companies and businesses and
the Company.
DISCOUNTED CASH FLOW ANALYSIS. Deutsche Bank performed a discounted cash
flow analysis for General Cigar Holdings, Inc. Deutsche Bank calculated the
discounted cash flow values for the Company as the sum of the net present values
of (i) the estimated future cash flow that the Company will generate for the
years 2000 through 2005 plus (ii) the terminal value of the Company at the end
of such period. The estimated future cash flows were based on the financial
projections for the years 2000 through 2005 prepared by the Company. The
terminal values of the Company were calculated based on projected EBITDA for
2005 and a range of multiples of 3.0x to 5.0x. Deutsche Bank used discount rates
ranging from 11.0% to 13.0%. Deutsche Bank used such discount rates based on its
judgment of the estimated weighted average cost of capital of the Selected
Companies, and used such multiples based on its review of the trading
characteristics of the common stock of the Selected Companies. This analysis
indicated a range of values of $11.62 to $14.44 per share.
In its analysis of trading values of selected companies and selected
precedent transactions and in its discounted cash flow analysis, Deutsche Bank
excluded any value attributable to the Company's holdings of Russian securities,
which consisted primarily of Russian bonds having a carrying value of
$21.2 million ($0.75 per share) and face value of approximately $58 million
(approximately $2.00 per share). Deutsche Bank estimated that these holdings, on
a fair market value basis, would add approximately $1.30 per share to the value
of the Common Stock.
The foregoing summary describes all analyses and factors that Deutsche Bank
deemed material in its presentation to the Special Committee, but is not a
comprehensive description of all analyses performed and factors considered by
Deutsche Bank in connection with preparing its opinion. The preparation of a
fairness opinion is a complex process involving the application of subjective
business judgment in determining the most appropriate and relevant methods of
financial analysis and the application of those
19
<PAGE>
methods to the particular circumstances and, therefore, is not readily
susceptible to summary description. Deutsche Bank believes that its analyses
must be considered as a whole and that considering any portion of such analyses
and of the factors considered without considering all such analyses and factors
could create a misleading view of the process underlying the opinion. In
arriving at its opinion, Deutsche Bank did not assign specific weights to any
particular analyses or factors.
In conducting its analyses and arriving at its opinions, Deutsche Bank
utilized a variety of generally accepted valuation methods. The analyses were
prepared solely for the purpose of enabling Deutsche Bank to provide its opinion
to the Special Committee as to the fairness to the Unaffiliated Stockholders of
the Company of the $15.25 per share price and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold, which are inherently subject to uncertainty. In connection with its
analyses, Deutsche Bank made, and was provided by the Company management with,
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
the Company or its advisors. Analyses based on estimates or forecasts of future
results are not necessarily indicative of actual past or future values or
results, which may be significantly more or less favorable than suggested by
such analyses. Because such analyses are inherently subject to uncertainty,
being based upon numerous factors or events beyond the control of the Company,
or its advisors, neither the Company nor Deutsche Bank nor any other person
assumes responsibility if future results or actual values are materially
different from these forecasts or assumptions.
The terms of the merger were determined through negotiations among the
Company, the Special Committee and Swedish Match and were approved by the
Company board of directors. Although Deutsche Bank provided advice to the
Special Committee during the course of these negotiations, the decision to enter
into the merger and the terms thereof were solely that of the Company's board of
directors. As described above, the opinion and presentation of Deutsche Bank to
the Special Committee were only one of a number of factors taken into
consideration by the Special Committee and the Company's board of directors in
making their determination to approve the transaction. Deutsche Bank's opinion
was provided to the Special Committee to assist its in connection with it
consideration of the merger and does not constitute a recommendation to any
holder of the Company common stock as to how to vote with respect to the merger.
The Special Committee selected Deutsche Bank as financial advisor in
connection with the merger based on Deutsche Bank's qualifications, expertise,
reputation and experience in mergers and acquisitions. The Special Committee
retained Deutsche Bank pursuant to a letter agreement dated January 7, 2000 (the
"Engagement Letter"). As compensation for Deutsche Bank's services in connection
with the merger, the Company has agreed to pay Deutsche Bank a cash fee of
$500,000, regardless of whether the merger is consummated. The Company has also
agreed to reimburse Deutsche Bank for reasonable fees and disbursements of
Deutsche Bank's counsel and all of Deutsche Bank's reasonable travel and other
out-of-pocket expenses incurred in connection with the merger or otherwise
arising out of the retention of Deutsche Bank under the Engagement Letter. The
Company has also agreed to indemnify Deutsche Bank and certain related persons
to the full extent lawful against certain liabilities, including certain
liabilities under the federal securities laws arising out of its engagement or
the merger.
Deutsche Bank is an internationally recognized investment banking firm
experienced in providing advice in connection with mergers and acquisitions and
related transactions. Deutsche Bank and its affiliates may actively trade
securities of the Company or Swedish Match for their own account or the account
of their customers and, accordingly, may from time to time hold a long or short
position in such securities.
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<PAGE>
CERTAIN PROJECTIONS
The Company does not as a matter of course make public forecasts as to
future operations, but the Company did prepare certain projections in December
1999 which it provided to Deutsche Bank in connection with their analysis of the
Swedish Match proposal and the financial evaluation of the Company at that time.
The projections set forth below are included in this proxy statement solely
because such information was available to Swedish Match, was provided by the
Company to Deutsche Bank in December 1999 and was used in connection with
Deutsche Bank's January 19, 2000 fairness opinion and related presentation to
the Special Committee. See "Special Factors--Background of the Merger" and
"Special Factors--Opinion of Financial Advisor to the Special Committee" on
pages 8 and 17, respectively.
THE PROJECTIONS SET FORTH BELOW WERE NOT PREPARED BY THE COMPANY WITH A VIEW
TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PRESENTATION AND DISCLOSURE GUIDELINES
ESTABLISHED BY THE SEC OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
REGARDING PROSPECTIVE FINANCIAL INFORMATION. THE PROJECTED FINANCIAL INFORMATION
INCLUDED IN THIS PROXY HAS BEEN PREPARED BY, AND IS THE RESPONSIBILITY OF, THE
COMPANY'S MANAGEMENT. PRICEWATERHOUSECOOPERS HAS NEITHER EXAMINED NOR COMPILED
THE ACCOMPANYING PROJECTED FINANCIAL INFORMATION AND, ACCORDINGLY,
PRICEWATERHOUSECOOPERS DOES NOT EXPRESS AN OPINION OR ANY OTHER FORM OF
ASSURANCE WITH RESPECT THERETO. THE PRICEWATERHOUSECOOPERS REPORT INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT RELATES TO THE COMPANY'S HISTORICAL
FINANCIAL INFORMATION. IT DOES NOT EXTEND TO THE PROJECTED FINANCIAL INFORMATION
AND SHOULD NOT BE READ TO DO SO. THE PROJECTIONS REFLECT NUMEROUS ASSUMPTIONS,
ALL MADE BY MANAGEMENT OF THE COMPANY AS OF DECEMBER 19, WITH RESPECT TO
INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL
CONDITIONS AND OTHER MATTERS, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY OF
WHICH ARE BEYOND THE COMPANY'S CONTROL. ACCORDINGLY, THERE CAN BE NO ASSURANCE
THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS SET FORTH BELOW WILL
PROVE ACCURATE. MOREOVER, THERE WILL USUALLY BE DIFFERENCES BETWEEN PROJECTED
AND ACTUAL RESULTS BECAUSE EVENTS AND CIRCUMSTANCES DO NOT OCCUR AS EXPECTED AND
THESE DIFFERENCES MAY BE MATERIAL. THE INCLUSION OF THE PROJECTIONS IN THIS
PROXY STATEMENT SHOULD NOT BE REGARDED AS AN INDICATION THAT THE COMPANY OR
SWEDISH MATCH OR ANY OF THEIR RESPECTIVE FINANCIAL ADVISORS OR OTHER
REPRESENTATIVES, OR THEIR RESPECTIVE OFFICERS AND DIRECTORS, CONSIDER SUCH
INFORMATION TO BE AN ACCURATE PREDICTION OF FUTURE EVENTS OR NECESSARILY
ACHIEVABLE. IN LIGHT OF THE UNCERTAINTIES INHERENT IN FORWARD LOOKING
INFORMATION OF ANY KIND, WE CAUTION AGAINST UNDUE RELIANCE ON SUCH INFORMATION.
WE DO NOT INTEND TO UPDATE, REVISE OR CORRECT SUCH PROJECTIONS IF THEY BECOME
INACCURATE (EVEN IN THE SHORT TERM).
<TABLE>
<CAPTION>
PROJECTED SELECTED UNAUDITED FINANCIAL DATA
---------------------------------------------------------------
FISCAL YEAR ENDED NOVEMBER 2000 2001 2002 2003 2004 2005
- -------------------------- -------- -------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net Sales (a)...................................... $153.0 $160.6 $165.4 $170.4 $178.9 $184.3
Income Before Interest and Taxes (b)............... 27.0 35.5 39.0 42.7 48.9 50.3
EBITDA (c)......................................... 36.0 44.1 47.4 50.9 56.8 58.2
Gross Margin (d)................................... 50.3% 52.7% 52.7% 52.7% 54.9% 54.9%
</TABLE>
- ------------------------
Source: Company management.
The following sets forth certain material assumptions used in the Company's
preparation of the foregoing projections and other relevant information:
(a) Assumes: a 3.0% growth in units sold in 2000, 2002, 2003 and 2005; a
5.0% price increase is charged to the end user in 2001 and 2004.
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<PAGE>
(b) Includes income from the Company's headquarters office building. Does
not include any potential profits from sale or liquidation of the
Company's Russian investments.
(c) EBITDA consists of earnings before income taxes plus net interest
expense and depreciation and amortization expense. EBITDA should not be
considered an alternative to measures of operating performance measured
in accordance with generally accepted accounting principles or as a
measure of the Company's operating results and cash flows or as a measure
of the Company's liquidity. The Company's EBITDA calculation may not be
comparable to similarly titled measures reported by other companies.
(d) Gross profit as a percentage of net sales.
PURPOSE AND REASONS FOR THE MERGER
PURPOSE. The purpose of the merger is to create a strategic alliance
through the purchase by Swedish Match of a significant equity stake in the
Company as a privately held entity. As more fully described below, Swedish Match
has entered into a stock purchase agreement (the "Stock Purchase Agreement") as
a result of which it will acquire 3.5 million shares directly from the Family
immediately prior to the merger. Upon completion of the merger, Swedish Match
will own approximately 64% of the Surviving Corporation's common stock, and the
Family will own approximately 36% of the Surviving Corporation's common stock.
As described under "Special Factors--Background of the Merger," public
valuations for cigar companies such as the Company have fallen, on a relative
basis, below those of other industries since the Company's initial public
offering. In addition, certain factors specific to the Company's business have
had, over time, in the Company's view, a significant effect on the market's
perception of the Company's value. As a result, certain of the company's
objectives for going public were not being realized. The Company and its
financial advisor, PJSC, discussed a number of strategic alternatives for the
Company and they analyzed and explored certain of these alternatives in greater
detail. However, Swedish Match's expressed desire to obtain a significant equity
interest in the Company with the accompanying control of the Company resulted in
management coming to the view that a strategic investor, which could benefit
directly and indirectly from an alliance with the Company, would place a higher
valuation on the Company than a passive investor who would not achieve added
value from its minority investment. At the same time, the business strategy
developed by the Company's management to grow the Company's business and
diversify internationally made it timely for the Company to develop a strategic
partnership with an entity whose experience in international cigar and smokeless
tobacco products would be complemented by the Company's United States expertise.
The parties believe that the merger is desirable because the companies'
strengths, experience and resources complement one another: While the Company's
strengths are in the United States premium cigar market, Swedish Match possesses
extensive European cigar and smokeless tobacco experience, as well as an
international reputation and an established network of international contacts
and resources. Management of the Company believes that the alliance with Swedish
Match, which has substantial experience and a significant presence in countries
that the Company has targeted for future development, will enable the Company to
identify and obtain more projects and access such new international markets at
lower cost than would be required to enter such markets on its own.
STRUCTURE. The structure of the transactions contemplated by the Merger
Agreement as a one-step merger was required by the Company's certificate of
incorporation. The structure provides that the merger will not be completed
until the charter amendment is effected. The primary benefit of the merger to
the Unaffiliated Stockholders of shares is the opportunity to receive a price
for their shares that is fair to such stockholders and which represents a
premium of approximately 93% over recent market prices for the shares.
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CERTAIN RELATIONSHIPS
In considering the recommendation of the Special Committee and the board
with respect to the merger, you should be aware that certain members of the
board and of the Company's management have interests that may present actual,
potential or the appearance of potential conflicts of interest in connection
with the merger. Certain members of the Family, Edgar M. Cullman, Sr., Edgar M.
Cullman, Jr., Susan R. Cullman and John L. Ernst are members of the Company's
board of directors. Peter J. Solomon, whose firm PJSC served as the Company's
financial advisor, sits on the Company's board of directors. The Special
Committee and the board were aware of these potential or actual conflicts of
interest and considered them along with other matters described under "Special
Factors--Recommendation of the Special Committee and Board of Directors;
Fairness of the Merger."
RETAINED EQUITY INTEREST
The Family beneficially owns an aggregate of 9,935,152 shares of common
stock, representing approximately 37% of the total outstanding shares of common
stock.
Pursuant to the Stock Purchase Agreement dated as of January 19, 2000, the
Family will sell approximately 3.5 million shares of General Cigar common stock
directly to Swedish Match for $15.00 per share immediately prior to the
consummation of the merger. Following the merger and the sale pursuant to the
Stock Purchase Agreement, the Family will own approximately 36% of the Surviving
Corporation as compared to the 37% of the company owed by them prior to the
merger.
None of the members of the Special Committee will own any interest in
Swedish Match or the Surviving Corporation following the effective time of the
merger.
As of November 27, 1999, General Cigar had a book value of approximately
$320.4 million and net earnings of approximately $106.6 million for the twelve
months ended November 27, 1999. The following chart describes the interests of
Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr. and Swedish Match immediately
following the merger as if the merger had been completed as of November 27,
1999.
<TABLE>
<CAPTION>
EDGAR M. CULLMAN, SR.
AND
EDGAR M. CULLMAN, JR.(1) SWEDISH MATCH
------------------------ ------------------------
<S> <C> <C>
Dollar Value of Interest in Net Book Value(2)... $57.7 million $102.7 million
Percentage of Interest in Net Book Value........ 36% 64%
Dollar Value of Interest in Net Earnings(3)..... $38.4 million $68.2 million
Percentage of Interest in Net Earnings.......... 36% 64%
</TABLE>
- ------------------------
(1) For purposes of this chart, the interests of Edgar M. Cullman, Sr. and Edgar
M. Cullman, Jr. include all of the Family interests.
(2) Represents pro forma net book value at November 27, 1999 assuming the
proposed transactions had been completed at November 27, 1999. Reflects
reduction of $160.6 million for General Cigar cash and borrowings to be used
to fund the proposed transactions.
(3) Net earnings are for the twelve months ended November 27, 1999.
DIRECTORS AND MANAGEMENT OF THE SURVIVING CORPORATION
The Merger Agreement provides that the initial board of directors of the
Surviving Corporation will consist of seven members: Edgar M. Cullman, Sr.,
Edgar M. Cullman, Jr., David Danziger and Bruce Barnett designated by the Family
and Lennart Sunden, Sven Hindrikes and Lennart Freeman, designated by Swedish
Match. The management of the Company immediately prior to the Effective Time of
the merger will be the management of the Surviving Corporation immediately after
the merger, with two
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<PAGE>
exceptions: (i) Swedish Match has the right to name one person to serve as an
officer of the Surviving Corporation and (ii) because A. Ross Wollen's duties as
General Counsel, Secretary and Investor Relations officer in a public company
will be eliminated, Mr. Wollen has informed the Company he will exercise his
termination rights pursuant to his employment agreement. The termination of
Mr. Wollen's employment pursuant to the merger will result in his receipt of a
payment under his employment agreement in an amount equal to three times his
current salary of $270,000. In addition, Mr. Wollen will receive a transaction
and retention bonus of $200,000 upon closing of the merger.
Employment and other agreements currently in effect will become obligations
of the Surviving Corporation following the merger. Any outstanding stock options
will be cashed out at the Effective Time of the merger.
The Board has approved transaction and retention bonus plans. Approximately
40 employees will receive retention bonuses in the aggregate amount of $3.5
million, 30% of which will be paid on the closing date of the merger, 40% of
which will be paid on the last day of fiscal year 2000, and 30% of which will be
paid on the last day of fiscal year 2001. The Company expects to enter into a
phantom stock plan prior to the closing of the merger, allowing for the award of
1,000,000 shares of phantom stock to approximately 35 Company employees on the
closing date of the proposed merger. The Company's senior management will
determine the number of shares granted to any employee. The notional exercise
price will be $15.25 per share, and the stock awards will vest 20% on the last
day of fiscal year 2001, 40% on the last day of fiscal year 2002 and 40% on the
last day of fiscal year 2003, subject in each case to the employee's continued
employment with the Surviving Corporation on such date. All awards will be
cashed out automatically as of the vesting date for an amount per share equal to
the then fair market value per share, calculated upon a multiple of 9 x
"Adjusted EBITDA" (as that term is defined in the Shareholder's Agreement), less
the notional exercise price. In addition six senior executives will be entitled
to receive a bonus based on a percentage of any gain from the sale or other
disposition of the Russian bonds held by the Company.
The Merger Agreement provides that the Surviving Corporation will, for a
period of six years after the Effective Time, maintain all rights to
indemnification in favor of such officers and directors to the same extent and
upon the terms and conditions provided in the Company's and its subsidiaries'
certificates of incorporation, and bylaws as in effect on the date of the Merger
Agreement. The Merger Agreement also provides that the Surviving Corporation
will maintain its existing (or appropriate substitute) policies of directors'
and officers' liability insurance for a period of six years after the Effective
Time, subject to certain limitations.
MANAGEMENT EMPLOYMENT AGREEMENTS
As Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr. will continue as officers
of the Surviving Corporation following the merger, it is contemplated that
employment agreements will be entered into prior to that time with the terms
described below. Edgar M. Cullman, Sr. will continue as Chairman of the Board
and will receive a salary of $325,000. Edgar M. Cullman, Jr. will continue as
the President and Chief Executive Officer and will receive a salary of $350,000.
Edgar M. Cullman, Jr. also may receive phantom stock and other incentive
compensation, including annual bonuses and Edgar M. Cullman, Sr. and Edgar M.
Cullman, Jr. may receive severance payments upon termination. Both Edgar M.
Cullman, Sr. and Edgar M. Cullman, Jr. have agreed not to compete with the
Surviving Corporation, solicit employees of the Surviving Corporation or solicit
those with a business relationship with the Surviving Corporation from the
Effective Time of the merger to the earlier of (i) three years from their
termination date or (ii) five years from the sale of all Family holdings to
Swedish Match.
Additionally, Term Sheets for employment agreements for Joseph C. Aird,
Daniel Nunez, David Danziger and Janet Krajewski have also been proposed. These
officers' salaries range from $160,000 to $300,000, with three-year terms . The
officers may receive retention bonuses, phantom stock and other
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incentive compensation, including annual bonuses. The officers will further
agree to maintain the confidentiality of the Company's and Surviving
Corporation's information and not to compete with the Surviving Corporation
following their termination of employment for periods ranging from 18 months to
two years.
Reaching a final agreement on the terms of the employment agreements is not
a condition to consummation of the merger.
CERTAIN EFFECTS OF THE MERGER
If the merger is consummated, the Unaffiliated Stockholders will no longer
have any interest in, and will not be stockholders of the Company and,
therefore, will not benefit from any future earnings or growth of the Company or
from any increases in the value of the Company and will no longer bear the risk
of any decreases in value of the Company. Instead, each stockholder, other than
the Company and its wholly-owned subsidiaries, Swedish Match, members of the
Family and Dissenting Stockholders (as that term is defined in "Proposal One:
Adoption of the Merger Agreement--Appraisal Rights" on page 42), will have the
right to receive upon consummation of the merger $15.25 in cash for each share
of common stock they hold, without interest. The benefit to the holders of
common stock of the transaction is the payment of a premium, in cash, above the
market value for such common stock prior to the announcement of the transaction.
This cash payment assures that all Unaffiliated Stockholders will receive the
same amount for their shares, rather than taking the risks associated with
attempting to sell their shares in the open market. The detriment to such
holders is their inability to participate as continuing stockholders in the
possible future growth of the Company. If the merger is consummated, the Family,
together with the stockholders of Swedish Match, will indirectly hold the entire
equity interest in the Company and will therefore be the sole beneficiaries of
any future earnings or growth of the Company and any increases in value of the
Company. See "Special Factors--Recommendation of the Special Committee and the
Board of Directors; Fairness of the Merger."
The common stock is currently registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). As a result of the merger, the common
stock will be delisted from the New York Stock Exchange, the registration of the
common stock under the Exchange Act will be terminated, the Company will be
relieved of the obligation to comply with the proxy rules of Regulation 14A
under Section 14 of the Exchange Act, and its officers, directors and beneficial
owners of more than 10% of the common stock will be relieved of the reporting
requirements and "short-swing" trading provisions under Section 16 of the
Exchange Act. Further, the Company will no longer be subject to periodic
reporting requirements of the Exchange Act and will cease filing information
with the SEC.
The certificate of incorporation and bylaws of the Company will be amended
as of the Effective Time and, as amended, will be the certificate of
incorporation and bylaws of the Surviving Corporation until thereafter amended.
PLANS FOR THE COMPANY AFTER THE MERGER
Each of Swedish Match and the Family expects that, except as described in
this proxy statement, the business and operations of the Surviving Corporation
will be continued substantially as they are currently being conducted by the
Company and its subsidiaries.
Except as described in this proxy statement, none of the Family, Swedish
Match, SM Merger Corp. or the Company has any present plans or proposals
involving the Company or its subsidiaries which relate to or would result in an
extraordinary corporate transaction such as a merger, reorganization,
liquidation, sale or transfer of a material amount of assets, or any material
change in the present dividend policy, indebtedness or capitalization, or any
other material change in the Company's corporate structure or business. Pursuant
to the shareholders' agreement (the "Shareholders' Agreement"), the Family and
Swedish Match will review proposals or may propose the acquisition or
disposition of assets or other
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changes in the Surviving Corporation's business, corporate structure,
capitalization, management or dividend policy which they consider to be in the
best interests of the Surviving Corporation and its stockholders.
CONDUCT OF THE BUSINESS OF THE COMPANY IF THE MERGER IS NOT CONSUMMATED
If the merger is not consummated, the board expects to seek to retain the
Company's current management team, although there can be no assurance it will be
successful in doing so. There are no plans in such circumstances to operate the
Company's business in a manner substantially different than presently operated.
FINANCING OF THE MERGER
The following is a summary of the sources and uses of funds related to the
proposed merger.
(AMOUNTS IN MILLIONS)
<TABLE>
<S> <C> <C> <C>
USES OF CASH SOURCES OF CASH
Purchase of Public Shares (a)....... $261.0 Swedish Match and SM Merger Corp.... $170.0
Purchase of Cullman Family Shares
(b)............................... 52.5 Company Cash........................ 105.0
Cash out of Stock Options (c)....... 6.5 Company Borrowings (d).............. 55.0
Estimated Transaction Costs and
Expenses.......................... 10.0
------ ------
Total Uses of Cash.................. $330.0 Total Sources of Cash............... $330.0
====== ======
</TABLE>
- ------------------------
(a) Represents approximately 17.1 million public shares at $15.25 per share.
(b) Represents approximately 3.5 million Cullman Family shares at $15.00 per
share.
(c) Represents approximately 1.2 million options at $15.25 per share less an
average strike price of $9.80 per share.
(d) The Company has represented to Swedish Match that it will be able to obtain
this financing and has begun preparations to secure the funding. On
March 27, 2000 the Company entered into a Commitment Letter with two bank
lenders for a credit facility of $85,000,000.
REGULATORY REQUIREMENTS; THIRD PARTY CONSENTS
The Company does not believe that any material federal or state regulatory
approvals, filings or notices are required by the Company in connection with the
merger other than:
- such approvals, filings or notices required pursuant to federal and state
securities laws; and
- the filing of the certificate of merger with the Secretary of State of the
State of Delaware.
The Company's cigar bars are subject to licensing and regulation by a number
of governmental authorities regarding alcoholic beverages. As a result of the
merger, various subsidiaries of the Company will be required to satisfy various
notification requirements imposed by the Federal Bureau of Alcohol, Tobacco and
Firearms (BATF), as well as state and municipal licensing authorities where its
restaurants are located. Filing requirements for notification vary by agency.
Subject to the timely submission of notices, which the Company intends to do
prior to the merger, the Company will be duly licensed and able to continue
business as usual throughout the notification period. Failure to appropriately
and timely file notices could pose a risk of loss or suspension of the affected
license.
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The Company does not believe any material third party consents will be
required by the Company in connection with the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary of the material federal income tax
consequences expected to result to stockholders whose shares of common stock are
converted into a right to receive cash in the merger or who receive cash
pursuant to the exercise of appraisal rights. This summary does not purport to
be a complete analysis of all potential tax effects of the merger. For example,
the summary does not consider the effect of any applicable state, local or
foreign tax laws. In addition, the summary does not address all aspects of
federal income taxation that may affect particular stockholders in light of
their particular circumstances and is not intended for stockholders that may be
subject to special federal income tax rules (including insurance companies,
tax-exempt organizations, mutual funds, financial institutions or
broker-dealers, stockholders who hold their common stock as part of a hedge,
straddle or conversion transaction, stockholders who acquired their common stock
pursuant to the exercise of an employee stock option or otherwise as
compensation, and stockholders who are not citizens or residents of the United
States or that are foreign corporations, foreign partnerships or foreign estates
or trusts as to the United States). The following summary also does not address
holders of stock options and, except as noted, does not address tax consequences
to the Family. The following summary assumes that stockholders have held their
common stock as "capital assets" (generally, property held for investment) under
the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based on the current provisions of the Code, applicable
Treasury Regulations, judicial authority and administrative rulings and
practice. There can be no assurance that the Internal Revenue Service (the
"IRS") will not take a contrary view. No ruling from the IRS has been or will be
sought with respect to any aspect of the transactions described herein. Future
legislative, judicial or administrative changes or interpretations could alter
or modify the statements and conclusions set forth herein, and any such changes
or interpretations could be retroactive and could affect the tax consequences to
stockholders.
EACH STOCKHOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE
PARTICULAR TAX CONSEQUENCES TO IT OF THE TRANSACTIONS DESCRIBED HEREIN,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF CHANGES IN APPLICABLE TAX LAWS.
TREATMENT OF HOLDERS OF COMMON STOCK OTHER THAN THE FAMILY
For the United States federal income tax purposes, SM Merger Corp. will be
disregarded as transitory, with the result that the stockholders will be deemed
to have sold a portion of their General Cigar common stock to Swedish Match (or
its affiliates) (I.E., a "Sale Transaction") and to have had a portion of their
General Cigar common stock redeemed by General Cigar (I.E., a "Redemption
Transaction").
General Cigar intends to take the position that, for each stockholder, the
portion of the General Cigar common stock disposed of in the merger or pursuant
to the exercise of appraisal rights that is allocable to the Sale Transaction is
the percentage equivalent of a fraction the numerator of which is the amount of
equity contributed to General Cigar by Swedish Match (or its affiliates) and
used as a part of the consideration for General Cigar common stock in connection
with the merger and the denominator of which is the aggregate amount of cash
paid to stockholders in connection with the merger. The remainder of the
stockholder's General Cigar common stock disposed of in the merger or pursuant
to the exercise of appraisal rights will be treated as having been redeemed in
the Redemption Transaction.
The conversion of common stock in the merger for the right to receive cash
and the receipt of cash pursuant to the exercise of appraisal rights will be
fully taxable to stockholders. The determination of the character of the gain or
loss could vary depending on whether such gain or loss results from a Sale
Transaction or a Redemption Transaction. To the extent that a stockholder is
considered to have sold General Cigar common stock to Swedish Match (or its
affiliates) in a Sale Transaction, such stockholder
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<PAGE>
will recognize capital gain or loss equal to the difference between the amount
realized on the deemed sale (i.e., the cash proceeds properly allocated thereto)
and the stockholder's adjusted tax basis in General Cigar common stock deemed
surrendered in such sale. Generally, a stockholder's tax basis in his or her
common stock will be equal to such stockholder's cost therefor. In the case of a
stockholder who is an individual, such capital gain or loss will be taxable at a
maximum capital gains rate of 20% if the holder held the common stock for more
than one year at the time of the merger.
To the extent that General Cigar is deemed to be the source of a portion of
the cash consideration paid to the stockholders, the receipt of such cash in
exchange for such stockholder's common stock in the merger will be treated as a
Redemption Transaction. If, taking into account the constructive ownership
rules of Section 318 of the Code, a stockholder's interest in the Company will
completely terminate as a result of the merger (or pursuant to the exercise of
appraisal rights), then the stockholder will receive sale or exchange treatment
(I.E., capital gain or loss treatment) as described in the preceding paragraph.
If a stockholder's interest in the Surviving Corporation, taking into
account the constructive ownership rules of Section 318 of the Code, is not
terminated as a result of the merger (or pursuant to the exercise of appraisal
rights), then the stockholder will recognize capital gain or loss as described
above only if the deemed redemption is either "not essentially equivalent to a
dividend" or "substantially disproportionate" within the meaning of Section 302
of the Code. While such determination is based on a stockholder's particular
facts and circumstances, the IRS has indicated in published rulings that for a
minority stockholder in a publicly held corporation that had minimal control
over the corporate matters, even a small reduction in the stockholder's
proportionate equity interest may be treated as a meaningful reduction, which
would result in capital gain treatment. Stockholders are urged to consult their
tax advisors with respect to the potential applicability of these provisions.
A foreign stockholder is any stockholder who is, for United States federal
income tax purposes, a foreign corporation, a non-resident alien individual, a
foreign partnership, a foreign estate or a foreign trust, as those terms are
defined in the Code (a "Foreign Stockholder"). In the case of any Foreign
Stockholder, the exchange agent may be required to withhold 30% of the amount
paid to redeem or purchase the shares of General Cigar common stock from the
stockholder in order to satisfy certain United States withholding requirements.
In order to avoid the application of any such withholding requirements, the
Foreign Stockholder may be required to prove in a manner satisfactory to General
Cigar and the exchange agent that either (i) the redemption or sale of its
General Cigar common stock pursuant to the merger will qualify as a sale or
exchange under Section 302 of the Code, rather than as a dividend for United
States federal income tax purposes, in which case no withholding will be
required, (ii) the Foreign Stockholder is eligible for a reduced tax treaty rate
with respect to dividend income, in which case the exchange agent will withhold
at the reduced treaty rate or (iii) no United States withholding is otherwise
required. In addition, if a Foreign Stockholder's gain in the merger is
effectively connected with the conduct of a trade or business in the United
States or if a Foreign Stockholder is an individual present in the United States
for 183 or more days during the taxable year of the merger, the gain may be
subject to United States federal income tax. Foreign Stockholders are urged to
consult their own tax advisers regarding the application to them of these
withholding rules and other tax consequences of the merger to them.
TREATMENT OF THE FAMILY
Immediately prior to the merger, the Family will sell directly to Swedish
Match (or its affiliates) approximately 3.5 million shares which constitute
one-third of the Family's holdings for a price of $15.00 per share in cash. As a
result of such sale, members of the Family will recognize capital gain or loss
measured by the difference between the amount of cash received and the tax basis
of such shares.
The remaining shares of Class B common stock owned by the Family, SM Merger
Corp. and Swedish Match will be converted into the right to receive shares of
stock in the Surviving Corporation in the merger
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<PAGE>
(the "SM Capital Exchange"). See "Special Factors--Interests Of Certain Persons
In The Merger; Certain Relationships." The SM Capital Exchange will qualify as a
tax-free recapitalization pursuant to which gain or loss is not recognized under
Section 368 of the Code.
BACKUP WITHHOLDING
A stockholder whose common stock is converted to cash pursuant to the merger
or the exercise of appraisal rights may be subject to backup withholding at the
rate of 31% with respect to the gross proceeds from the conversion of such
common stock unless such stockholder (1) is a corporation or other exempt
recipient and, when required, establishes this exemption, (2) provides its
correct taxpayer identification number, certifies that it is not currently
subject to backup withholding and otherwise complies with applicable
requirements of the backup withholding rules or (3) provides a certificate of
foreign status and makes any other required certification. A stockholder who
does not provide the Surviving Corporation with its correct taxpayer
identification number or otherwise properly establish an exemption when required
may be subject to penalties imposed by the IRS. Any amount withheld under these
rules will be creditable against the stockholder's federal income tax liability.
The Surviving Corporation will report to non-exempt stockholders and to the
IRS the amount of any reportable payments (including payments made to
stockholders pursuant to the merger or the exercise of appraisal rights) and any
amount withheld pursuant to the merger or the exercise of appraisal rights.
FEES AND EXPENSES
Whether or not the merger is consummated and except as otherwise provided
herein, all fees and expenses incurred in connection with the merger will be
paid by the party incurring such fees and expenses, except that:
- the Company will pay for all costs and expenses relating to the printing
and mailing of this proxy statement; and
- if the merger is consummated, the Surviving Corporation will pay any real
property transfer tax imposed on the holders of shares of capital stock of
the Company resulting from the merger.
Estimated fees and expenses (rounded to the nearest thousand) to be incurred
in connection with the merger, the financing and related transactions are as
follows:
<TABLE>
<S> <C>
PJSC Fees................................................... $ 3,300,000
Special Committee's Legal and Financial Advisor's Fees(1)... 750,000
SEC Filing Fees............................................. 53,500
Legal and Accounting Fees and Expenses...................... 1,250,000
Printing and Solicitation Fees and Expenses................. 110,000
Special Committee Fees...................................... 100,000
Employee Retention Bonuses(2)............................... 3,500,000
Other expenses.............................................. 936,500
-----------
Total............................................... $10,000,000
===========
</TABLE>
- ------------------------
(1) See "Special Factors--Opinion of Financial Advisor to the Special Committee"
(2) See "Special Factors--Management Employment Agreements"
To the extent not paid prior to the Effective Time by Swedish Match or the
Company, all such fees and expenses will be paid by the Surviving Corporation if
the merger is consummated. If the merger is not consummated, each party will
bear its respective fees and expenses, except as otherwise provided in the
Merger Agreement. See "The Merger Agreement--Fees and Expenses."
29
<PAGE>
INFORMATION CONCERNING THE SPECIAL MEETING
TIME, PLACE AND DATE
This proxy statement is furnished in connection with the solicitation by the
board of proxies from the holders of shares of common stock, par value $.01 per
share, of the Company for use at a Special Meeting of Stockholders (the "Special
Meeting") to be held at 10:00 a.m., local time, on Monday, May 8, 2000, at the
Hotel Inter-Continental New York, 111 East 48th Street, New York, New York in
the Whitney Room, or at any adjournment(s) or postponement(s) thereof, pursuant
to the enclosed Notice of Special Meeting of Stockholders.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, the stockholders will be asked to consider and vote
upon the adoption of the Merger Agreement and approval of the charter amendment.
A copy of the Merger Agreement is attached to this proxy statement as Annex A.
Pursuant to the Merger Agreement, each outstanding share of common stock (other
than (1) common stock held in the treasury of the Company or by any of its
wholly owned subsidiaries, (2) common stock subject to the Stock Purchase
Agreement, or (3) common stock held by the Dissenting Stockholders) will be
converted into the right to receive the merger consideration.
The Special Committee was appointed by the board to, among other things,
review and evaluate the terms of the merger and the transactions contemplated
thereby and to make a recommendation to the board regarding the fairness of the
merger to the holders of common stock. The Special Committee was composed of
Messrs. Lufkin, Vincent and Israel, none of whom are employees of the Company or
will have any continuing equity interest in the Surviving Corporation.
Mr. Vincent and Mr. Israel selected Mr. Lufkin as chairman of the Special
Committee. The Special Committee concluded that the terms and provisions of the
Merger Agreement and the merger are fair to and in the best interests of the
Unaffiliated Stockholders, and unanimously recommended that the board approve
and declare advisable the Merger Agreement and the related charter amendment. At
a meeting held on January 19, 2000, acting on the unanimous recommendation of
the Special Committee, the board unanimously approved the Merger Agreement and
the related charter amendment, concluded that the terms and provisions of the
Merger Agreement and the charter amendment are advisable and that the Merger
Agreement, the merger and the related charter amendment, are fair to and in the
best interests of the Unaffiliated Stockholders, and approved a recommendation
that the Unaffiliated Stockholders adopt the Merger Agreement and approve the
related charter amendment. The Special Committee and the board, in reaching
their respective decisions, considered a number of factors, including the
opinion of Deutsche Bank, the financial advisor to the Special Committee, that,
as of the date of such opinion and based upon and subject to various
considerations, assumptions and limitations stated therein, the $15.25 per share
cash consideration to be received by the public stockholders in the merger was
fair to the public stockholders of the Company from a financial point of view. A
copy of Deutsche Bank's opinion is attached as Annex B to this proxy statement.
See "Special Factors--Recommendation of the Special Committee and Board of
Directors; Fairness of the Merger" and "Special Factors--Opinion of Financial
Advisor to the Special Committee."
BASED ON THE UNANIMOUS RECOMMENDATION OF THE SPECIAL COMMITTEE, THE BOARD
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER
AGREEMENT AND APPROVAL OF THE CHARTER AMENDMENT.
RECORD DATE; VOTING AT THE MEETING; QUORUM
The board has fixed the close of business on April 7, 2000 as the record
date (the "Record Date") for the Special Meeting. Only stockholders of record as
of the close of business on April 7, 2000 will be entitled to notice of and to
vote at the Special Meeting.
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<PAGE>
As of the close of business on the Record Date, the Company had outstanding
13,603,393 shares of Class A common stock, held of record by approximately 219
registered holders and 13,436,007 shares of Class B common stock, held of record
by approximately 685 registered holders. Holders of the Class A common stock are
entitled to one vote per share and holders of Class B common stock are entitled
to ten votes per share. The presence in person or by proxy of the holders of not
less than a majority of the voting power of the outstanding common stock
entitled to vote at the Special Meeting constitutes a quorum. Broker non-votes
and shares as to which a stockholder abstains will be included in determining
whether there is a quorum at the Special Meeting.
REQUIRED VOTE
Under Delaware law, the Merger Agreement must be adopted and the charter
amendment must be approved by the affirmative vote of the holders of a majority
of the voting power of the outstanding shares of common stock with Class A
common stock having one vote per share and Class B common stock having ten votes
per share. Under the Merger Agreement, the Merger Agreement must also be adopted
and the charter amendment must also be approved by the affirmative vote of the
holders of a majority of Class A common stock and Class B common stock, each
voting separately as a class. The Family currently owns 9,935,152 shares of
Class B common stock in the aggregate, representing approximately 74% of the
outstanding shares of Class B common stock and a majority of the voting power of
the outstanding shares of common stock as of the Record Date. See "Special
Factors--Interests of Certain Persons in the Merger; Certain Relationships." The
Family has entered into a voting agreement (the "Voting Agreement"), which
provides, among other things, that each of them will vote their Class B shares
in favor of the Merger Agreement and the transactions contemplated thereby. See
"The Voting Agreement" on page 41. As a result of these arrangements, adoption
of the Merger Agreement and approval of the related charter amendment by the
holders of Class B common stock is assured. However, adoption of the Merger
Agreement and approval of the related charter amendment is subject to approval
of the holders of Class A common stock, and the Family has agreed to vote any
Class A shares held by them pro rata in accordance with the vote of the
Unaffiliated Stockholders.
Because the vote required under Delaware law and the Merger Agreement is
determined by reference to outstanding shares, failure to return an executed
proxy card or to vote in person at the Special Meeting or abstaining from the
vote will constitute, in effect, a vote against adoption of the Merger Agreement
and approval of the related charter amendment. Similarly, broker non-votes will
have the same effect as a vote against adoption of the Merger Agreement and the
related charter amendment.
VOTING AND REVOCATION OF PROXIES
The enclosed proxy card is solicited on behalf of the board. The giving of a
proxy does not preclude the right to vote in person should any stockholder
giving the proxy so desire. Stockholders have an unconditional right to revoke
their proxy at any time prior to its exercise, either by filing with the
Company's Secretary at the Company's principal executive offices a written
revocation or a duly executed proxy bearing a later date or by voting in person
at the Special Meeting. Attendance at the Special Meeting without casting a
ballot will not, by itself, constitute revocation of a proxy. Any written notice
revoking a proxy should be sent to the solicitation agent.
ACTION TO BE TAKEN AT THE SPECIAL MEETING
All shares of common stock represented at the Special Meeting by properly
executed proxies received prior to or at the Special Meeting, unless previously
revoked, will be voted at the Special Meeting in accordance with the
instructions on the proxies. Unless contrary instructions are indicated, proxies
will be voted "FOR" the adoption of the Merger Agreement and "FOR" the approval
of the charter amendment. As explained below in the section entitled "Appraisal
Rights," a vote in favor of the Merger Agreement means that the stockholder
owning those shares will not have the right to seek appraisal of the fair value
of
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<PAGE>
such stockholder's shares. The Company does not know of any matters, other than
as described in the Notice of Special Meeting of Stockholders, which are to come
before the Special Meeting. If any other matters are properly presented at the
Special Meeting for action, including, among other things, consideration of a
motion to adjourn such meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies or allowing
additional time for the satisfaction of conditions to the merger), the persons
named in the enclosed proxy card and acting thereunder generally will have
discretion to vote on such matters in accordance with their best judgment,
absent instruction to the contrary. Notwithstanding the foregoing, the persons
named in the enclosed proxy card will not use their discretionary authority to
use proxies voting against the Merger Agreement or the charter amendment to vote
in favor of adjournment or postponement of the Special Meeting. The merger is
also subject to a number of additional conditions. See "The Merger
Agreement--Conditions."
PROXY SOLICITATION
The cost of preparing, assembling and mailing this proxy statement, the
Notice of Special Meeting of Stockholders and the enclosed proxy card will be
borne by the Company. The Company is requesting that banks, brokers and other
custodians, nominees and fiduciaries forward copies of the proxy material to
their principals and request authority for the execution of proxies. The Company
may reimburse such persons for their expenses in so doing. In addition to the
solicitation of proxies by mail, the directors, officers and employees of the
Company and its subsidiaries may, without receiving any additional compensation,
solicit proxies by telephone, telefax, email, telegram or in person.
The Company has retained Georgeson Shareholder Communications, Inc. to
assist it in soliciting proxies from stockholders. Georgeson Shareholder
Communications, Inc. will receive a fee of approximately $7,000 as compensation
for its services and reimbursement of its out-of-pocket expenses.
No person is authorized to give any information or make any representation
not contained in this proxy statement, and if given or made, such information or
representation should not be relied upon as having been authorized.
COMPANY STOCKHOLDERS SHOULD NOT SEND ANY CERTIFICATES REPRESENTING SHARES OF
COMMON STOCK WITH THEIR PROXY CARD. IF THE MERGER IS CONSUMMATED, THE PROCEDURE
FOR THE EXCHANGE OF CERTIFICATES REPRESENTING SHARES OF COMMON STOCK WILL BE AS
SET FORTH IN THIS PROXY STATEMENT. SEE "THE MERGER AGREEMENT--THE EXCHANGE FUND;
PAYMENT FOR SHARES OF COMMON STOCK" AND "THE MERGER AGREEMENT--TRANSFERS OF
COMMON STOCK."
PROPOSAL ONE: ADOPTION OF THE MERGER AGREEMENT
THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement, a copy of which is attached as Annex A to this proxy statement. Such
summary is qualified in its entirety by reference to the full text of the Merger
Agreement.
THE MERGER; MERGER CONSIDERATION. The Merger Agreement provides that the
merger will become effective upon the filing of a certificate of merger with the
Secretary of State of the State of Delaware or at such other time as the parties
may agree and specify in the certificate of merger (the "Effective Time"). If
the Merger Agreement is adopted at the Special Meeting by the stockholders of
the Company and the other conditions to the merger are satisfied or waived, it
is currently anticipated that the merger will become effective as soon as
practicable after the Special Meeting; however, there can be no assurance as to
the timing of the consummation of the merger or that the merger will be
consummated.
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At the Effective Time, SM Merger Corp. will be merged with and into the
Company, the separate corporate existence of SM Merger Corp. will cease and the
Company will continue as the Surviving Corporation. In the merger and at the
Effective Time:
- each share of common stock issued and outstanding immediately prior to the
Effective Time (other than common stock held by the Family, the Company,
its wholly-owned subsidiaries, Swedish Match or Dissenting Stockholders)
will, by virtue of the merger and without any action on the part of the
holder thereof, be converted into and become the right to receive the
merger consideration;
- each share of common stock issued and outstanding immediately prior to the
Effective Time that is owned by the Company or its wholly-owned
subsidiaries will automatically be canceled and cease to exist and no
payment will be made with respect thereto;
- each share of common stock issued and outstanding immediately prior to the
Effective Time that is owned by Swedish Match, SM Merger Corp. and the
Family will be converted into and become one share of common stock of the
Surviving Corporation and will constitute the only outstanding shares of
capital stock of the Surviving Corporation;
- Dissenting Stockholders who do not vote to adopt the Merger Agreement, who
deliver to the Company a written demand for appraisal of their shares
prior to the taking of the vote on the Merger Agreement and who otherwise
strictly comply with the provisions of the DGCL regarding statutory
appraisal rights have the right to seek a determination of the fair value
of their shares of common stock and payment in cash therefor in lieu of
the merger consideration. See "Appraisal Rights"; and
- each certificate representing shares of common stock that has been
converted into the right to receive cash under the terms of the Merger
Agreement (a "Certificate") will, after the Effective Time, evidence only
the right to receive, upon the surrender of such certificate, $15.25 in
cash per share.
THE EXCHANGE FUND; PAYMENT FOR SHARES OF COMMON STOCK. On or before the
closing date of the merger, the Company will enter into an agreement with a
bank, trust company or other exchange agent selected by the Company (the "Paying
Agent"). As of the Effective Time, the Surviving Corporation will deposit or
cause to be deposited with the Paying Agent, cash in the amount equal to the
aggregate merger consideration (such amount being hereinafter referred to as the
"Exchange Fund") for the benefit of holders of shares of the common stock
converted into the right to receive the cash consideration pursuant to the
Merger Agreement.
Promptly following the Effective Time, the Company shall cause the Paying
Agent to mail to each holder of record of shares of common stock that have been
converted pursuant to the Merger Agreement into the right to receive merger
consideration, a letter of transmittal and instructions for use in surrendering
Certificates in exchange for the merger consideration. No stockholder should
surrender any Certificates until the stockholder receives the letter of
transmittal and other materials for such surrender. Upon surrender of a
Certificate for cancellation to the Paying Agent, together with a letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to the instructions, the holder of such Certificate will be
entitled to receive in exchange therefor the merger consideration into which the
number of shares of common stock previously represented by such Certificate(s)
shall have been converted into the right to receive $15.25 in cash pursuant to
the Merger Agreement, without any interest thereon, and the Certificates so
surrendered will be canceled.
If payment of the merger consideration is to be made to a person other than
the person in whose name the Certificate surrendered is registered, it will be a
condition of payment that the Certificate so surrendered will be properly
endorsed (together with signature guarantees on such Certificate) or otherwise
be in proper form for transfer and that the person requesting such payment pay
to the Paying Agent any transfer or other taxes required by reason of the
payment of the merger consideration to a
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person other than the registered holder thereof or establish to the satisfaction
of the Paying Agent that such tax has been paid or is not applicable.
STOCKHOLDERS SHOULD NOT SEND THEIR CERTIFICATES NOW AND SHOULD SEND THEM
ONLY PURSUANT TO INSTRUCTIONS SET FORTH IN THE LETTERS OF TRANSMITTAL TO BE
MAILED TO STOCKHOLDERS PROMPTLY AFTER THE EFFECTIVE TIME. IN ALL CASES, THE
MERGER CONSIDERATION WILL BE PROVIDED ONLY IN ACCORDANCE WITH THE PROCEDURES SET
FORTH IN THIS PROXY STATEMENT AND SUCH LETTERS OF TRANSMITTAL.
One hundred and eighty (180) days after the Effective Time, the Paying Agent
will deliver to the Surviving Corporation or otherwise at the direction of the
Surviving Corporation any portion of the Exchange Fund that remains
undistributed to or unclaimed by the holders of Certificates (including the
proceeds of any investments thereof), and any holders of Certificates who have
not theretofore complied with the above-described procedures to receive payment
of the merger consideration may look only to the Surviving Corporation for
payment of the merger consideration to which they are entitled.
TRANSFERS OF COMMON STOCK. After the Effective Time, the stock transfer
books of the Company will be closed, and there will be no further transfers of
Certificates on the records of the Company or its transfer agent. If, after the
Effective Time, Certificates are presented to the Paying Agent or the Surviving
Corporation, they will be canceled and exchanged for the merger consideration as
provided above and pursuant to the terms of the Merger Agreement (subject to
applicable law in the case of Dissenting Stockholders).
TREATMENT OF STOCK OPTIONS. At the Effective Time, each outstanding option
to acquire common stock will be canceled. In consideration of such cancellation,
the Surviving Corporation will pay to the holder of each such canceled stock
option, as soon as practicable after the Effective Time, the difference between
$15.25 and the option price in cash for each stock option held by such holder.
Prior to the Effective Time, the Company will use its best efforts to make
any required amendments to the terms of any stock option agreements with the
holder of stock options granted under the Company's stock option plans that are
necessary or appropriate to consummate the transactions contemplated by the
Merger Agreement.
CONDITIONS. The respective obligations of Swedish Match and SM Merger Corp.
and of the Company to consummate the merger are subject to the following
conditions, among others:
- the adoption of the Merger Agreement by the required stockholder votes;
- the amendment to the Company's certificate of incorporation attached as
Exhibit A to the Merger Agreement shall have been filed with the Delaware
Secretary of State;
- all material governmental consents, approvals and licenses shall have been
obtained;
- the expiration or termination of the waiting period under the HSR Act
applicable to the merger; and
- the absence of any governmental action or order that makes the merger
illegal or otherwise prohibits consummation of the merger.
The obligations of Swedish Match and SM Merger Corp. to effect the merger
are subject to the following additional conditions:
- the representations and warranties of the Company being true and correct
as of the Effective Time as though made on and as of the Effective Time,
except where, among other things, the failure to be true and correct,
individually or in the aggregate, would not have a material adverse effect
on the Company (without giving effect to qualifications as to materiality
contained within such representations and warranties);
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- the Company having performed or complied with all of its obligations and
covenants required to be performed by the Company under the Merger
Agreement at or prior to the Effective Time;
- the Family shall have performed their obligations under the Stock Purchase
Agreement and their obligations under the Shareholders' Agreement required
to be performed on the Closing Date; and
- the Company shall have received, and provided Swedish Match with copies
of, the resignations of certain directors, and the board of directors
shall have elected certain persons designated by Swedish Match.
The obligations of the Company to effect the merger are also subject to the
following additional conditions:
- the representations and warranties of Swedish Match and SM Merger Corp.
being true and correct as of the Effective Time as though made on and as
of the Effective Time;
- Swedish Match and SM Merger Corp. having performed or complied with all of
their respective obligations and covenants required to be performed by
them under the Merger Agreement at or prior to the Effective Time; and
- Swedish Match shall have performed its obligations under the Stock
Purchase Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties of Swedish Match, SM Merger Corp. and the
Company.
The representations of Swedish Match and SM Merger Corp. relate to, among
other things:
- their respective organization and qualification to do business, ownership,
and authority to enter into the Merger Agreement, the Shareholders'
Agreement and the Stock Purchase Agreement;
- the absence of a conflict of the Merger Agreement, the Shareholders'
Agreement and the Stock Purchase Agreement, and the transactions
contemplated thereby, with laws applicable to, and material agreements of,
Swedish Match and SM Merger Corp.;
- the consents and filings required with respect to the Merger Agreement,
the Shareholders' Agreement and the Stock Purchase Agreement and the
transactions contemplated thereby;
- the availability of financing; and
- the accuracy of the information provided by Swedish Match and SM Merger
Corp. for inclusion in this proxy statement and in filings to be made with
the SEC with respect to the proposed merger.
The representations of the Company relate to, among other things:
- the organization and qualification to do business of the Company and its
subsidiaries;
- the capitalization of the Company and its subsidiaries;
- the Company's authority to enter into the Merger Agreement;
- the absence of a conflict of the Merger Agreement and the transactions
contemplated thereby with laws applicable to and material agreements of
the Company and its subsidiaries;
- the real property of the Company;
- the intellectual property of the Company;
- the compliance by the Company with environmental laws;
- the inventory of the Company;
- the customers of the Company;
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- the consents and filings required with respect to the Merger Agreement,
the Shareholders' Agreement and the Stock Purchase Agreement and the
transactions contemplated thereby;
- filings made with the SEC;
- the compliance with law and accuracy of the proxy statement and filings
made with the SEC with respect to the proposed merger;
- the absence of changes in the business of the Company;
- the required vote of the stockholders of the Company with respect to the
proposed merger;
- the action of the board approving the Merger Agreement and the
transactions contemplated thereby; and
- the opinion of Deutsche Bank.
COVENANTS. The Company has agreed to operate, and cause each of its
subsidiaries to operate, their respective businesses in the ordinary and usual
course prior to the Effective Time. In this regard, the Company has agreed that
it will not, without the consent of Swedish Match (which consent may not be
unreasonably withheld or delayed), engage in certain types of transactions.
Specifically, the Company has agreed that prior to the Effective Time, the
Company will not, and will not permit any of its subsidiaries to, among other
things:
- declare or pay dividends;
- split, combine or reclassify their respective capital stock;
- repurchase, redeem or acquire any of their respective capital stock;
- amend their respective certificates of incorporation or bylaws;
- incur additional indebtedness except as permitted by the Merger Agreement
(subject to certain ordinary course allowances);
- increase or agree to increase the compensation payable to its officers or
enter into any collective bargaining agreement;
- enter into non-competition agreements;
- merge or sell substantially all of its assets;
- enter into or amend employment, consulting or severance agreements;
- change its method of accounting;
- acquire substantially all of the assets of any other person;
- grant, confer or award any options, warrants, conversion rights or other
rights or equity securities (other than Company common stock issued upon
exercise of options in accordance with their terms) not existing on the
date hereof;
- materially change any practice with respect to taxes, tax elections,
settle or compromise any material dispute involving a tax liability or
permit any material insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated;
- issue, deliver, sell, pledge or otherwise encumber any of its equity
securities (other than the issuance of Company common stock upon the
exercise of options);
- settle or compromise any material lawsuit or modify or terminate any
material Company contract or waive, release or assign any material right
or claim;
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- fail to pay its trade payables or to maintain its inventory in the
ordinary course of business; or
- make material capital expenditures or commitments.
Swedish Match has agreed to make a cash contribution to SM Merger Corp. in
the amount of $117.5 million prior to the Effective Time; to maintain provisions
in the organizational documents of the Surviving Corporation regarding the
indemnification of directors and officers following the Effective Time; and to
continue in force the Company's directors' and officers' liability insurance for
six years following the Effective Time.
Swedish Match and the Company have made further agreements regarding, among
other things, advising each other of representations or warranties contained in
the Merger Agreement becoming untrue, of their respective failure to comply with
or satisfy covenants, conditions or agreements contained in the Merger Agreement
and of any change, event or circumstance that could reasonably be expected to
have a material adverse effect on such party or on its ability to consummate the
proposed merger; cooperating in the preparation of required governmental
filings, in obtaining required permits and regulatory approvals and in the
release of public announcements; and granting access to information and
maintaining confidentiality.
ACQUISITION PROPOSALS. The Merger Agreement provides that neither the
Company nor any of its Subsidiaries will (whether directly or indirectly through
advisors, agents or other intermediaries), nor will the Company or any of its
Subsidiaries authorize or permit any of its or their officers, directors,
agents, representatives, advisors or Subsidiaries to:
- solicit, initiate or take any action knowingly to facilitate the
submission of inquiries, proposals or offers from any person or group,
other than Swedish Match and its representatives and Affiliates, relating
to (i) any acquisition or purchase of a material portion of the assets or
any equity securities of the Company, (ii) any tender offer or exchange
offer that if consummated would result in any person beneficially owning
any equity securities of the company, (iii) any merger, consolidation,
recapitalization, sale of all or substantially all of the assets,
liquidation, dissolution or similar transaction involving the Company or
any of its subsidiaries whose assets, individually or in the aggregate,
constitute a material portion of the assets other than the transactions
contemplated by the Merger Agreement or (iv) any other transaction the
consummation of which could reasonably be expected to interfere with,
prevent or materially delay the merger or which could reasonably be
expected to materially dilute the benefits to Swedish Match of the
transactions contemplated hereby (each such transaction being referred to
herein as an "Acquisition Proposal"), or agree to or endorse any
Acquisition Proposal;
- continue, enter into or participate in, any discussions or negotiations
with, furnish any information to any person (other than Swedish Match and
its representatives and affiliates) in connection with, or otherwise
knowingly take any other action to facilitate or encourage any effort or
attempt by, any person (other than Swedish Match and its representatives
and affiliates) to make, an Acquisition Proposal; or
- grant any waiver or release under any standstill or similar agreement with
respect to any equity securities of the Company or any of its
subsidiaries;
PROVIDED, HOWEVER, that the foregoing shall not prohibit the Company (either
directly or indirectly through advisors, agents or other intermediaries), prior
to a stockholder vote at the Special Meeting, in connection with the merger
from:
- furnishing information pursuant to an appropriate confidentiality letter
concerning the Company and its businesses, properties or assets to any
person or group, (a "Third Party") who has made a bona fide Acquisition
Proposal;
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- engaging in discussions or negotiations with a Third Party who has made a
bona fide Acquisition Proposal;
- taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) under the Exchange Act or otherwise making disclosure to its
stockholders; or
- taking any non-appealable, final action ordered to be taken by the Company
by any court of competent jurisdiction, but in each case referred to in
the preceding three clauses, only to the extent that the board shall have
concluded in good faith, upon the recommendation of the Special Committee
that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory
aspects of the proposal and the Person or entity making the proposal and
would, if consummated, result in a transaction that is more favorable to
the public stockholders of the Company than the merger;
PROVIDED, FURTHER, that the board shall not take any of the foregoing actions
and until after giving 72 hours' notice to Swedish Match and informing parent of
the terms and conditions of such proposal and the identity of the person making
it and providing Swedish Match with a copy of any such proposal in writing. The
Company shall, at all times, promptly inform Swedish Match of the status and
terms of any discussions regarding any Acquisition Proposal with any other
person.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the Effective Time, whether before or after the approval of the proposed merger
by the stockholders of the Company, by the mutual written consent of the Company
and Swedish Match, or by either the Company or Swedish Match if:
- any permanent injunction, judgment, order, decree, ruling or other action
of any governmental entity prohibiting the consummation of the merger has
become final and nonappealable;
- the merger has not been consummated by December 31, 2000 (provided that
such termination will not be available to any party who is in breach in
any material respect of any of its obligations under the Merger
Agreement); or
- the required stockholder approvals are not obtained at the Special
Meeting.
FEES AND EXPENSES. Whether or not the merger is consummated and except as
otherwise provided in the Merger Agreement, all fees and expenses incurred in
connection with the merger will be paid by the party incurring such fees and
expenses, except that the transfer taxes, sales taxes, stamp taxes and other
similar taxes (including real property transfer taxes) incurred as a result of
the merger.
AMENDMENT/WAIVER. Before or after approval of the Merger Agreement by the
stockholders, the Merger Agreement may be amended by the written agreement of
the parties thereto at any time prior to the Effective Time if such amendment is
approved on behalf of the Company by the board, based on the recommendation of
the Special Committee, and on behalf of Swedish Match or SM Merger Corp. by
their respective boards of directors or duly authorized committees thereof;
provided that, after any such stockholder approval has been obtained, no
amendment may be made which under applicable law or New York Stock Exchange
rules requires the approval of the stockholders of the Company if such approval
has not been obtained.
At any time prior to the Effective Time, the Company, Swedish Match and SM
Merger Corp. may extend the time for performance of any of the obligations or
other acts of the other parties to the Merger Agreement, waive any inaccuracies
in the representations and warranties contained in the Merger Agreement or in
any document delivered pursuant to the Merger Agreement, or waive compliance
with any agreements or conditions contained in the Merger Agreement. Any
extension or waiver will be valid only if set forth in writing and signed by the
party making such extension or waiver.
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THE VOTING AGREEMENT
On January 19, 2000, the Family entered into the Voting Agreement, under the
terms of which each member agreed:
- to vote or execute a written consent with respect to the shares of common
stock of the Company subject to the Voting Agreement in favor of the
approval of the Merger Agreement and the charter amendment (provided that
any Class A shares shall be voted pro rata in accordance with the vote of
the Unaffiliated Stockholders) and not to vote in favor of any other
transaction for a period of 18 months following any termination of the
Merger Agreement and to authorize Edgar M. Cullman, Sr. and Edgar M.
Cullman, Jr. to act as their representatives, with respect to such shares
and to appoint such individuals as their attorneys-in-fact to so vote or
act by written consent;
- to inform the Company and the Special Committee of the receipt of any
Acquisition Proposal; and
- other than as contemplated by the Voting Agreement and the Stock Purchase
Agreement, to refrain from selling, pledging or transferring their shares
of Class B common stock and Class A common stock of the Company subject to
the Voting Agreement and the Stock Purchase Agreement, or entering into
any voting agreement or granting any proxy with respect thereto.
The Voting Agreement applies to an aggregate of 9,935,152 shares of Class B
common stock and 162 shares of Class A common stock owned by the Family,
representing approximately 37% of the outstanding shares of common stock as of
such date. Shares acquired by any of the Family after January 19, 2000 will also
be subject to the terms of the Voting Agreement. The Voting Agreement terminates
on the earliest of the Effective Time, the last day of the 18th full calendar
month following the date of termination of the Merger Agreement or at any time
upon notice by Swedish Match to the Family's representative.
THE STOCK PURCHASE AGREEMENT
On January 19, 2000, Swedish Match and the Family entered into the Stock
Purchase Agreement, under the terms of which Swedish Match will purchase
immediately prior to the Effective Time from certain members of the Family an
aggregate of 3,500,000 shares of Company common stock (at a price of $15.00 per
share in cash).
The purchase and sale of shares pursuant to the Stock Purchase Agreement are
subject to the conditions of the parties in the Merger Agreement (other than
such purchase and sale) and terminates upon termination of the Merger Agreement.
THE SHAREHOLDERS' AGREEMENT
On January 19, 2000, Swedish Match and the Family entered into the
Shareholders' Agreement. The Shareholders' Agreement becomes effective at the
Effective Time and will govern the management of the Company following the
merger, including the composition of the Company's board of directors and super-
majority votes for certain fundamental actions. Following the merger, the board
will consist of seven directors, with four directors being nominated by the
Family, including Edgar M. Cullman Jr., Edgar M. Cullman, Sr., David Danziger
and Bruce A. Barnet and three directors being nominated by Swedish Match,
including Lennart Sunden, Sven Hendrikes and Lennart Freeman; provided, that if
the Family ceases to own at least one-third of the shares they hold immediately
following the Effective Time, and between the third anniversary and the sixth
anniversary of the Effective Time, Swedish Match will be entitled to nominate
four out of the seven board members and the Family will be entitled to nominate
three out of the seven board members. In addition, and if after the sixth
anniversary of the Effective Time, the Family ceases to own at least 15% of the
then outstanding common stock of the Company, Swedish Match will be entitled to
nominate four out of the seven board members and the Family will be entitled to
nominate three out of the seven board members.
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The Shareholders' Agreement also provides rights for the Family to sell
their remaining shares of Company common stock to Swedish Match over a
three-year period following the third anniversary of the Effective Time and for
Swedish Match to buy the Family's remaining shares over a three-year period
following the third anniversary of the Effective Time, each at periods as
specified therein. The Agreement provides certain price ranges for the put and
call rights of the Family and Swedish Match. The price at which the Family can
require Swedish Match to purchase their retained equity interest in the Company
increases over the three year period, is based upon a multiple of 9x "Adjusted
EBITDA" (as that term is defined in the Shareholders' Agreement) and can never
be lower than $15.00 per share or higher than $28.50 per share. The price at
which Swedish Match can require the Family to sell their retained equity
interest also increases over the three year period and is based upon a multiple
of 10x "Adjusted EBITDA." The call price can never be lower than $23.00 per
share but is not capped at any level.
APPRAISAL RIGHTS
Under Section 262 of the General Corporation Law of the State of Delaware
("DGCL"), any holder of common stock who does not wish to accept $15.25 per
share in cash for such stockholders shares of common stock (a "Dissenting
Stockholder") may elect to have the fair value of such stockholder's shares of
common stock (exclusive of any element of value arising from the accomplishment
or expectation of the merger) judicially determined and paid to such stockholder
in cash, together with a fair rate of interest, if any, provided that such
stockholder complies with the provisions of Section 262.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL, and is qualified in its entirety by the full
text of Section 262, which is provided in its entirety as Annex D to this proxy
statement. All references in Section 262 and in this summary to a "stockholder"
are to the record holder of the shares of common stock as to which appraisal
rights are asserted. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF COMMON
STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE,
MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY THE STEPS
SUMMARIZED BELOW AND IN TIMELY MANNER TO PERFECT APPRAISAL RIGHTS.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the Special Meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders entitled to appraisal rights that such appraisal rights are
available and include in such notice a copy of Section 262. This proxy statement
will constitute such notice to the holders of common stock and the applicable
statutory provisions of the DGCL are attached to this proxy statement as Annex
D. Any stockholder who wishes to exercise such appraisal rights or who wishes to
preserve the right to do so should review carefully the following discussion and
Annex D to this proxy statement. FAILURE TO COMPLY WITH THE PROCEDURES SPECIFIED
IN SECTION 262 TIMELY AND PROPERLY WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
Moreover, because of the complexity of the procedures for exercising the right
to seek appraisal of the common stock, the Company believes that stockholders
who consider exercising such rights should seek the advice of counsel.
Any holder of common stock wishing to exercise the right to demand appraisal
under Section 262 of the DGCL must satisfy each of the following conditions:
- the holder must deliver to the Company a written demand for appraisal of
such stockholder's shares before the vote on the Merger Agreement at the
Special Meeting, which demand will be sufficient if it reasonably informs
the Company of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares;
- the holder must not vote the holder's shares of common stock in favor of
the Merger Agreement; a proxy which does not contain voting instructions
will, unless revoked, be voted in favor of the Merger Agreement,
therefore, a stockholder who votes by proxy and who wishes to exercise
appraisal rights must vote against the Merger Agreement or abstain from
voting on the Merger Agreement; and
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- the holder must continuously hold such shares from the date of making the
demand through the Effective Time; a stockholder who is the record holder
of shares of common stock on the date the written demand for appraisal is
made but who thereafter transfers such shares prior to the Effective Time
will lose any right to appraisal in respect of such shares.
Neither voting (in person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to adopt the Merger Agreement will constitute a
written demand for appraisal within the meaning of Section 262. The written
demand for appraisal must be in addition to and separate from any such proxy or
vote.
Only a holder of record of shares of common stock issued and outstanding
immediately prior to the Effective Time is entitled to assert appraisal rights
for the shares of common stock registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the stockholder of record, fully
and correctly, as such stockholder's name appears on such stock certificates,
should specify the stockholder's name and mailing address, the number of shares
of common stock owned and that such stockholder intends thereby to demand
appraisal of such stockholder's common stock. If the shares are owned of record
by one in a fiduciary capacity, such as a trustee, guardian or custodian,
execution of the demand should be made in that capacity. If the shares are owned
of record by more than one person as in a joint tenancy or tenancy in common,
the demand should be executed by or on behalf of all owners. An authorized
agent, including one or more joint owners, may execute a demand for appraisal on
behalf of a stockholder; however, the agent must identify the record owner or
owners and expressly disclose the fact that, in executing the demand, the agent
is acting as agent for such owner or owners. A record holder such as a broker
who holds shares as nominee for several beneficial owners may exercise appraisal
rights with respect to the shares held for one or more beneficial owners while
not exercising such rights with respect to the shares held for one or more
beneficial owners; in such case, the written demand should set forth the number
of shares as to which appraisal is sought, and where no number of shares is
expressly mentioned the demand will be presumed to cover all shares held in the
name of the record owner. STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE
ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS ARE
URGED TO CONSULT WITH THEIR BROKERS TO DETERMINE AND APPROPRIATE PROCEDURES FOR
THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH NOMINEE.
A stockholder who elects to exercise appraisal rights pursuant to Section
262 should mail or deliver a written demand to: General Cigar Holdings, Inc.,
387 Park Avenue South, New York, New York 10016, A. Ross Wollen, General
Counsel.
Within ten days after the Effective Time, the Company as the surviving
corporation in the merger must send a notice as to the effectiveness of the
merger to each former stockholder of the Company who has made a written demand
for appraisal in accordance with Section 262 and who has not voted to adopt the
Merger Agreement. Within 120 days after the Effective Time, but not thereafter,
either the Surviving Corporation or any dissenting stockholder who has complied
with the requirements of Section 262 may file a petition in the Delaware Court
of Chancery demanding a determination of the value of the shares of common stock
held by all dissenting stockholders. The Company is under no obligation to and
has no present intent to file a petition for appraisal, and stockholders seeking
to exercise appraisal rights should not assume that the Surviving Corporation
will file such a petition or that the Surviving Corporation will initiate any
negotiations with respect to the fair value of such shares. Accordingly,
stockholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the time
periods and in the manner prescribed in Section 262. Inasmuch as the Company has
no obligation to file such a petition, the failure of a stockholder to do so
within the period specified could nullify such stockholder's previous written
demand for appraisal.
Under the Merger Agreement, the Company has agreed to give Swedish Match
prompt notice of any demands for appraisal received by the Company. Swedish
Match has the right to participate in and approve all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The
41
<PAGE>
Company will not, except with the prior written consent of Swedish Match, make
any payment with respect to any demands for appraisal, or offer to settle, or
settle, any such demands.
Within 120 days after the Effective Time, any stockholder who has complied
with the provisions of Section 262 to that point in time will be entitled to
receive from the Surviving Corporation, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the Merger
Agreement and with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. The Surviving Corporation must
mail such statement to the stockholder within 10 days of receipt of such request
or within 10 days after expiration of the period for delivery of demands for
appraisals under Section 262, whichever is later.
A stockholder timely filing a petition for appraisal with the Court of
Chancery must deliver a copy to the Surviving Corporation, which will then be
obligated within 20 days to file with the Delaware Register in Chancery with a
duly verified list containing the names and addresses of all stockholders who
have demanded appraisal of their shares and with whom agreements as to the value
of their shares have not been reached. After notice to such stockholders, the
Delaware Court of Chancery is empowered to conduct a hearing on the petition to
determine which stockholders are entitled to appraisal rights. The Delaware
Court of Chancery may require stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates to the Register in Chancery for notation thereon of the pendency of
the appraisal proceedings, and if any stockholder fails to comply with the
requirement, the Delaware Court of Chancery may dismiss the proceedings as to
that stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their shares, exclusive of
any element of value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, to be paid upon the
amount determined to be the fair value. The costs of the action may be
determined by the Delaware Chancery Court and taxed upon the parties as the
Delaware Chancery Court deems equitable. Upon application of a stockholder, the
Delaware Chancery Court may also order that all or a portion of the expenses
incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts, be charged pro rata against the value of all of the shares
entitled to appraisal. STOCKHOLDERS CONSIDERING SEEKING APPRAISAL SHOULD BE
AWARE THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION 262 COULD
BE MORE THAN, THE SAME AS OR LESS THAN THE MERGER CONSIDERATION THEY WOULD
RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID NOT SEEK APPRAISAL OF THEIR
SHARES. STOCKHOLDERS SHOULD ALSO BE AWARE THAT INVESTMENT BANKING OPINIONS ARE
NOT OPINIONS AS TO FAIR VALUE UNDER SECTION 262.
In determining fair value and, if applicable, a fair rate of interest, the
Delaware Chancery Court is to take into account all relevant factors. IN
WEINBERGER V. UOP, INC., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods that are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that, in making this determination of fair value,
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts that could be
ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
stated that "elements of future value, including the nature of the enterprise,
which are known or susceptible of proof as of the date of the merger and not the
product of speculation, may be considered." Section 262 provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger."
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time, be entitled to vote the shares
subject to such demand for any purpose or be entitled to
42
<PAGE>
the payment of dividends or other distributions on those shares (except
dividends or other distributions payable to holders of record of shares as of a
record date prior to the Effective Time).
Any stockholder may withdraw its demand for appraisal and accept the merger
consideration by delivering to the Surviving Corporation a written withdrawal of
such stockholder's demands for appraisal, except that (1) any such attempt to
withdraw made more than 60 days after the Effective Time will require written
approval of the Surviving Corporation and (2) no appraisal proceeding in the
Delaware Chancery Court shall be dismissed as to any stockholder without the
approval of the Delaware Chancery Court, and such approval may be conditioned
upon such terms as the Delaware Chancery Court deems just. If the Surviving
Corporation does not approve a stockholder's request to withdraw a demand for
appraisal when such approval is required or if the Delaware Chancery Court does
not approve the dismissal of an appraisal proceeding, the stockholder would be
entitled to receive only the appraised value determined in any such appraisal
proceeding, which value could be lower than the value of the merger
consideration.
FAILURE TO COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET FORTH IN
SECTION 262 OF THE DGCL WILL RESULT IN THE LOSS OF A STOCKHOLDER'S STATUTORY
APPRAISAL RIGHTS. CONSEQUENTLY, ANY STOCKHOLDER WISHING TO EXERCISE APPRAISAL
RIGHTS IS URGED TO CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH
RIGHTS.
PROPOSAL TWO:
APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
The following is a summary of the Certificate of Amendment of Amended and
Restated Certificate of Incorporation of General Cigar Holdings, Inc. (the
"Charter Amendment"), a copy of which is attached as Exhibit A to the Merger
Agreement attached as Annex A to this proxy statement. Such summary is qualified
in its entirety by reference to the full text of the Charter Amendment.
Subsection (b)(4) of Article Fourth of the certificate of incorporation
provides that the holders of shares of Class A and B common stock must receive
the same consideration for their shares in the event of a merger, consolidation,
purchase or acquisition of property or stock, or other reorganization.
In order to consummate the merger, pursuant to which the Unaffiliated
Stockholders (other than dissenting stockholders) will receive $15.25 per share
in cash and certain members of the Family will receive common stock in the
surviving corporation in exchange for their shares, as agreed in the Merger
Agreement, the Company's certificate of incorporation must be amended.
The proposed Charter Amendment will delete Subsection (b)(4) and replace it
with language allowing for different consideration to be paid to the holders of
different classes of common stock ONLY in the event of the merger contemplated
by the Merger Agreement.
Approval of the above Charter Amendment by a majority of the outstanding
Class A common stock and a majority of the outstanding Class B common stock,
each voting separately as a class, is a condition to consummation of the merger.
The Board, based on the advice of the Special Committee, recommends a vote
"FOR" approval of the Charter Amendment.
MARKET FOR THE COMMON STOCK
COMMON STOCK MARKET PRICE INFORMATION; DIVIDEND INFORMATION
The Company's Class A common stock is traded on the New York Stock Exchange
under the symbol "MPP." The following table shows, for the fiscal quarters
indicated, the per share high and low closing sale prices of the Class A common
stock on the New York Stock Exchange based on published financial sources. The
Class B common stock is not publicly traded because it converts automatically to
Class A
43
<PAGE>
Common Stock upon sale. No cash dividends have been declared on either class of
the Company's common stock.
<TABLE>
<CAPTION>
HIGH LOW
----------- ------------
<S> <C> <C>
FISCAL YEAR ENDING NOVEMBER 28, 1998
First Quarter............................................. $23 9/16 $15 1/4
Second Quarter............................................ 18 9/16 9 15/16
Third Quarter............................................. 11 5 7/8
Fourth Quarter............................................ 10 7/16 5 1/2
FISCAL YEAR ENDING NOVEMBER 27, 1999
First Quarter............................................. $10 1/4 $ 7 1/8
Second Quarter............................................ 10 1/2 7 3/16
Third Quarter............................................. 8 3/8 6 1/16
Fourth Quarter............................................ 7 1/2 5 5/8
</TABLE>
On January 19, 2000, the last full trading day prior to the day on which the
execution of the Merger Agreement was publicly announced, the high and low sales
prices for the Class A common stock on the New York Stock Exchange were $8 15/16
and $8 1/2, respectively, and the closing sale price was $8 15/16. On
February 14, 2000, the closing price for the Class A common stock on the New
York Stock Exchange was $14 9/16. The Company's Class B common stock converts
automatically to Class A common stock upon transfer other than to certain
permitted transferees. The Class A and Class B shares are identical except that
the Class A shares have one vote each and the Class B shares have ten votes
each. The market price for the Company's common stock is subject to fluctuation
and stockholders are urged to obtain current market quotations.
COMMON STOCK PURCHASE INFORMATION
Except as described in this proxy statement or through the exercise of
certain stock options by a former executive officer as set forth below, none of
the Company, its executive officers or directors, Swedish Match or SM Merger
Corp. has engaged in any transaction with respect to the common stock within the
past 60 days.
<TABLE>
<CAPTION>
PURCHASER GRANT DATE EXERCISE DATE OPTIONS EXERCISED EXERCISE PRICE
- --------- ---------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C>
Jay M. Green................... April 8, 1994 January 6, 2000 444,556 $0.8041
Jay M. Green................... January 27, 1993 January 6, 2000 39,699 $3.3673
</TABLE>
The Company purchased General Cigar common stock during the last two years
as described below.
<TABLE>
<CAPTION>
AGGREGATE
---------------------------------------------------------
SHARES AVG. $/SH VALUE HIGH LOW
--------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
First quarter 1998...................... -- $ -- $ -- $ -- $ --
Second quarter 1998..................... 238,100 $10.1214 $ 2,409,894 $10.3750 $9.5000
Third quarter 1998...................... 532,500 $ 7.8683 $ 4,189,869 $10.0375 $6.0000
Fourth quarter 1998..................... 204,200 $ 8.1046 $ 1,654,969 $10.0565 $5.5625
First quarter 1999...................... 258,900 $ 9.2414 $ 2,392,603 $ 9.7488 $8.5670
--------- -----------
1,233,700 $ 8.6304 $10,647,335 $10.3750 $5.5625
========= ===========
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of January 19, 2000,
except as otherwise indicated, concerning the beneficial ownership of the
Company's common stock by (1) each person or group known by the Company to
beneficially own more than 5% of the outstanding shares of common
44
<PAGE>
stock of either Class A or Class B shares; (2) each director of the Company;
(3) the Chief Executive Officer and other four most highly compensated executive
officers of the Company; and (4) all of the Company's directors and executive
officers as a group. Information with respect to the Class A common stock held
by each person or group of persons and percentage thereof includes all shares of
Class A common stock issuable upon conversion of shares of Class B common stock,
such that each share of Class B common stock is also reflected as a share of
Class A common stock. Edgar M. Cullman, Sr. and Edgar M. Cullman, Jr. have been
appointed to represent the Cullman-Ernst Group and all such shares are included
in their totals. See footnotes (2) and (4).
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------- -------------------------
SHARES SHARES
BENEFICIALLY PERCENT OF BENEFICIALLY PERCENT OF
NAME AND ADDRESS (1) OWNED(2) TOTAL(3) OWNED (2) TOTAL(3)
- -------------------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C>
Edgar M. Cullman, Sr. (4)......................... 9,935,152 36.7% 9,934,990 73.5%
Edgar M. Cullman, Jr. (4)......................... 9,935,152 36.7% 9,934,990 73.5%
Louise B. Cullman (4)............................. 3,679,829 13.6% 3,679,829 27.2%
Susan R. Cullman (4).............................. 3,384,906 12.5% 3,384,906 25.0%
Lucy C. Danziger (4).............................. 4,600,582 17.0% 4,600,582 34.0%
John L. Ernst (4)................................. 1,860,498 6.9% 1,860,498 13.8%
B. Bros. Realty Limited Partnership (5)........... 1,039,339 3.8% 1,039,338 7.7%
Gabelli Funds, Inc. (6)........................... 8,772,856 32.4% 2,250,695 16.7%
Wellington Management Company, LLP (7)............ 849,700 3.1%
Gilder Gagnon Howe & Co. LLC (8).................. 968,667 3.5%
Knight, Bain, Seath & Holbrook
Capital Management Inc. (9)..................... 678,300 2.5%
Bruce A. Barnet................................... 18,226 * 444 *
John L. Bernbach.................................. 2,667 * 2,667 *
Thomas C. Israel.................................. 40,010 * 22,228 *
Dan W. Lufkin..................................... 137,237 1.0 62,237 *
Graham V. Sherren................................. 2,222 * 2,222 *
Peter J. Solomon.................................. 22,227 * 4,445 *
Francis T. Vincent, Jr............................ 22,227 * 4,445 *
Joseph C. Aird.................................... 71,208 * 53,323 *
Janet A. Krajewski................................ 58,950 * 20,116 *
A. Ross Wollen.................................... 166,355 1.2 75,859 *
All directors and executive officers
collectively, consisting of 14 persons.......... 10,476,481 38.7% 10,160,800 75.2%
</TABLE>
- ------------------------
* Less than 1%
(1) Unless otherwise indicated, the address of each person listed is c/o General
Cigar Holdings, Inc., 387 Park Avenue South, New York, New York 10016.
(2) This information reflects the definition of beneficial ownership adopted by
the Securities and Exchange Commission. Beneficial ownership reflects sole
investment and voting power, except as reflected in footnote 4. Where more
than one person shares investment and voting power in the same shares, such
shares may be shown more than once. Such shares are reflected only once,
however, in the total for all directors and officers. Excluded are shares
held by charitable foundations and trusts of which members of the Cullman
and Ernst families, including persons referred to in footnote 4, are
officers and directors. As of January 19, 2000, a group (the "Cullman &
Ernst Group," referred to elsewhere in this proxy statement as the Family)
consisting of Edgar M. Cullman, Sr., Edgar M. Cullman, Jr., Susan R.
Cullman, direct members of their families and trusts for their benefit; John
L.
45
<PAGE>
Ernst, his sister and direct members of their families and trusts for their
benefit; a partnership in which members of the Cullman and Ernst families
hold substantial direct and indirect interests and charitable foundations
and trusts of which members of the Cullman and Ernst families are directors
or trustees, owned an aggregate of approximately 9,935,152 shares of the
Class B common stock (approximately 74% of the outstanding shares of
Class B common stock). Among others, Edgar M. Cullman, Sr., Edgar M.
Cullman, Jr., their wives, Susan R. Cullman and Mr. Ernst hold investment
and voting power or shared investment and voting power over such shares.
Certain of such shares are pledged as security for loans payable under
standard pledge arrangements. The Cullman & Ernst Group has entered into the
Stock Purchase Agreement, the Voting Agreement and the Shareholders'
Agreement.
(3) Other than 162 shares of Class A common stock, all stock held by the Cullman
& Ernst group is Class B common stock.
(4) Included within the shares shown as beneficially owned by Edgar M. Cullman,
Sr. are 9,935,152 shares of Class B common stock in which he holds shared
investment and/or voting power following his appointment as representative
in connection with the proposed merger discussed herein; included within the
shares shown as beneficially owned by John L. Ernst are 1,828,567 shares of
Class B common stock in which he holds shared investment and/or voting
power; included within the shares shown as beneficially owned by Edgar M.
Cullman, Jr. are 9,935,152 shares of Class B common stock in which he holds
shared investment and/or voting power following his appointment as
representative in connection with the proposed merger discussed herein; and
included within the shares shown as beneficially owned by Susan R. Cullman
are 2,994,740 shares of Class B common stock in which she holds shared
investment and/or voting power. Included within the shares shown as
beneficially owned by Louise B. Cullman are 3,220,112 shares of Class B
common stock in which she holds shared investment and/or voting power; and
included within the shares shown as beneficially owned by Lucy C. Danziger
are 4,236,747 shares of Class B common stock in which she holds shared
investment and/ or voting power. Excluded in each case are shares held by
charitable foundations and trusts in which such persons or their families or
trusts for their benefit are officers and directors. Messrs. Cullman, Ernst
and Cullman, Jr. and Susan R. Cullman disclaim beneficial interest in all
shares over which there is shared investment and/or voting power and in all
excluded shares. Louise B. Cullman is the wife of Edgar M. Cullman; Susan R.
Cullman and Lucy C. Danziger are the daughters of Edgar M. Cullman and
Louise B. Cullman.
(5) The address of B. Bros. Realty Limited Partnership is 641 Lexington Avenue,
New York, New York 10022.
(6) As of March 30, 2000. Such person's percentage of the total outstanding
shares of Class A common stock has been calculated assuming the conversion
of all shares of Class B common stock held by all holders of Class B common
stock. Such person's percentage of the total outstanding shares of Class A
common stock without conversion of any Class B common stock is 48.0%.
Assuming that such person (and no other holder of Class B common stock) were
to convert all of such person's shares of Class B common stock into shares
of Class A Common Stock, such person's percentage of the total outstanding
shares of Class A common stock would be 55.5%. The address of such person is
Gabelli Funds, Inc., One Corporate Center, Rye, New York, New York 10580. A
form filed with the Securities and Exchange Commission in September 1991 and
amended as of March 30, 2000 by Gabelli Funds, Inc., indicates that the
securities have been acquired by Gabelli Funds, Inc. and its wholly-owned
subsidiaries on behalf of their investment advisory clients. The Company has
been informed that no individual client of Gabelli Funds, Inc. has ownership
of more than 5% of the Company's outstanding common stock.
(7) The address of Wellington Management Company, LLP ("WMC") is 75 State
Street, Boston, Massachusetts 02109. A form filed with the Securities and
Exchange Commission as of December 31,
46
<PAGE>
1999 by WMC indicates that these shares are held in individual customer
accounts. A separate form with respect to the same shares was filed by
Hartford Mutual Funds, Inc. on behalf of the Hartford Capital Appreciation
Fund.
(8) The address of Gilder Gagnon Howe & Co. LLC ("Gilder Gagnon") is 1775
Broadway, New York, New York 10019. A form filed with the Securities and
Exchange Commission on February 14, 2000 by Gilder Gagnon indicates that
most of these shares are held in individual customer accounts.
(9) The address of Knight, Bain, Seath & Holbrook Capital Management Inc.
("Knight, Bain") is 1 Toronto Street, Suite 708, Toronto, Ontario M5C 2V6. A
form filed with the Securities and Exchange Commission on January 20, 1999
by Knight, Bain indicates that most of theses shares are held in individual
customer accounts. The EDGAR system revealed no subsequent forms being filed
by such person.
47
<PAGE>
DIRECTORS AND MANAGEMENT
THE COMPANY
Set forth below are the names of each director and executive officer of the
Company, the present principal occupation or employment of each such person and
the name and principal business of the corporation or other organization in
which such occupation or employment of each such person is conducted. Also set
forth below are the material occupations, positions, offices and employment of
each such person and the name and principal business of any corporation or other
organization in which any material occupation, position, office or employment of
each such person was held during the last five years. Each person listed below
is a citizen of the United States.
<TABLE>
<CAPTION>
DATE SINCE
NAME OF DIRECTOR NAMED
(LETTERS REFER TO INDIVIDUAL PRINCIPAL
COMMITTEE HAS OCCUPATION AND ALSO SERVES AS A
MEMBERSHIPS, CONTINUOUSLY BUSINESS DIRECTOR OF THE
IDENTIFIED SERVED AS A EXPERIENCE DURING FOLLOWING
BELOW)(1) AGE DIRECTOR(2) PAST FIVE YEARS(3) CORPORATIONS
- ------------------------ -------- ------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
Bruce A. Barnet......... 54 1990 Private Investor; Mainspring
(a, b, g) President and Chief Communications;
Executive Officer of Commerce, Inc. and Yapa,
Cahners Business Inc.
Information (1996-1999);
President and Chief
Executive Officer of
Cowles Enthusiast Media
(1993-1996)
John L. Bernbach........ 56 1988 Chairman and Chief North American
(a, e, f, g) Executive Officer of The Television, Inc.;
Bernbach Group, Inc.--
consulting (1994);
Northbridge Programming,
Chairman and Chief
Executive Inc.; Officer
of North American
Sportsworld Media Group
Television,
Inc.--television
distribution; Vice
Chairman of DDB Needham
Worldwide, Inc.
(1993-1994)
Edgar M. Cullman, 82 1961 Chairman of the Board of Centaur Communications
Sr. (4)............... Directors (1996); Limited;
(c, d, e) Chief Executive Officer Bloomingdale Properties,
of Culbro Corporation Inc.;
(1962-1996) Griffin Land &
Nurseries, Inc.; (5)
</TABLE>
48
<PAGE>
<TABLE>
<CAPTION>
DATE SINCE
NAME OF DIRECTOR NAMED
(LETTERS REFER TO INDIVIDUAL PRINCIPAL
COMMITTEE HAS OCCUPATION AND ALSO SERVES AS A
MEMBERSHIPS, CONTINUOUSLY BUSINESS DIRECTOR OF THE
IDENTIFIED SERVED AS A EXPERIENCE DURING FOLLOWING
BELOW)(1) AGE DIRECTOR(2) PAST FIVE YEARS(3) CORPORATIONS
- ------------------------ -------- ------------ ------------------------ ------------------------
<S> <C> <C> <C> <C>
Edgar M. Cullman, Jr. 53 1982 President and Chief Bloomingdale Properties,
(4)................... Executive Officer Inc.;
(c, d, f, g) (1996); Doral Financial
Chief Executive Officer Corporation; (6)
of Culbro Corporation
(1996-1997);
President and Chief
Operating Officer of
Culbro Corporation
(1984-1996);
President of Culbro Land
Resources, Inc. (1995)
(1992-1993)
Susan R. Cullman (4).... 49 1997 Co-Chairperson; Choate Rosemary Hall
(c, f, g) Republican Pro-Choice Foundation
Coalition (1995)
John L. Ernst (5)....... 59 1983 Chairman of the Board Doral Financial
(b, c, e) and President of Corporation;
Bloomingdale Properties, Griffin Land &
Inc. Nurseries, Inc.
Thomas C. Israel........ 55 1989 Chairman of A.C. Israel
(b, g) Enterprises, Inc.--
investments
Dan W. Lufkin........... 68 1976 Private investor Allen & Co., Inc.;
(a, b, c, d, e) Syratech, Inc.
Graham V. Sherren....... 62 1987 Chairman and Chief Duplo International
(g) Executive Officer of Ltd.;
Centaur Communications Gieves Group Ltd.;
Limited--publisher of Hundred Acre Securities
magazines and trade Ltd.;
periodicals in the InType Ltd.
United Kingdom
Peter J. Solomon........ 61 1980 Chairman of Peter J. Monro Muffler Brake,
(b, d) Solomon Company Limited Inc.;
and Peter J. Solomon Office Depot, Inc.;
Securities Company Phillips- Van Heusen
Limited Corporation
Francis T. Vincent, 61 1992 Vincent Enterprises; Oakwood Homes Corp.;
Jr.................... Private investor Time Warner, Inc.;
(a, b, g) Westfield America, Inc.
</TABLE>
Member of the: (a) Audit Committee; (b) Compensation Committee; (c) Executive
Committee; (d) Finance Committee; (e) Nominating Committee; (f) Public Policy
Committee; and (g) Strategic Planning Committee
- ------------------------
(1) The business address and business telephone number of each director, as well
as the Company, is 387 Park Avenue South, New York, NY 10016-8899, (212)
448-3800.
49
<PAGE>
(2) Except for Susan R. Cullman, who was elected as a director of General Cigar
in 1997, each director shown as serving on the Board of Directors prior to
1997 served as a director of Culbro, which was merged into General Cigar.
(3) Except as otherwise indicated each director has had the same principal
occupation during the past five years. Positions not otherwise identified
are with the Company.
(4) Mr. Cullman is the father of Mr. Cullman, Jr. and Ms. Cullman.
(5) Mr. Ernst is the nephew of Mr. Edgar M. Cullman.
(6) Messrs. Cullman served as directors of The Eli Witt Company, which filed for
relief from its creditors under Chapter 11 of the Federal Bankruptcy Code in
November 1996.
EXECUTIVE OFFICERS(1)(2)
<TABLE>
<CAPTION>
YEAR SERVICE
NAME OF EXECUTIVE OFFICER AS EXECUTIVE OTHER POSITIONS OR OTHER
AND PRINCIPAL POSITION OTHER PRESENT POSITIONS AND OFFICER BUSINESS EXPERIENCE DURING PAST
(BEGINNING YEAR) AGE OFFICES (BEGINNING YEAR) BEGAN(1) FIVE YEARS
- ------------------------- -------- --------------------------- ------------ -------------------------------
<S> <C> <C> <C> <C>
A. Ross Wollen.......... 56 Senior Vice President 1977 None
General Counsel (1980) (1983)
Secretary (1987)
Joseph C. Aird.......... 55 None 1987 Senior Vice President-
Senior Vice President, Controller (1987)
Chief Financial
Officer,
Treasurer and Acting
Controller (1998)
David M. Danziger....... 34 Vice President Corporate 1996 Senior Vice President- Villazon
Vice President Development (1996) & Company (a subsidiary of
Sales and Marketing General Cigar) (1998)
(1999) (3) Director of Operational
Projects - The Eli Witt Company
(7/95-1/96)
Harvard Business School (MBA)
(9/92-6/94)
Janet A. Krajewski...... 45 None 1993 None
Vice President-Taxes
(1993)
</TABLE>
(1) Excludes Messrs. Cullman who are listed under Directors.
(2) The business address and business telephone number of each executive officer
is 387 Park Avenue South, New York, NY 10016-8899, (212) 448-3800.
(3) Mr. Danziger is the grandson of Edgar M. Cullman and the nephew of Edgar M.
Cullman, Jr. Mr. Danziger served as Director of Operational Projects for The
Eli Witt Company, which filed for relief from its creditors under
Chapter 11 of the Federal Bankruptcy Code in November 1996.
50
<PAGE>
SWEDISH MATCH AB AND SM MERGER CORPORATION
Set forth below are the names of each director and executive officer of
Swedish Match, the present principal occupation or employment of each such
person and the name and principal business of the corporation or other
organization in which such occupation or employment of each such person is
conducted. Also set forth below are the material occupations, positions, offices
and employment of each such person and the name and principal business of any
corporation or other organization in which any material occupation, position,
office or employment of each such person was held during the last five years.
1. OFFICERS OF SWEDISH MATCH AB:
Principal Employer and Current Business Address for the following people:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL POSITION/ OTHER PREVIOUS POSITIONS,
NAME YEAR BEGAN OTHER POSITIONS LAST FIVE YEARS
---- ----------------------------- --------------- -----------------------------
<S> <C> <C> <C>
Lennart Sunden....... President and CEO (1998) Director (1999) Electrolux, President
Electrolux Floor Care and
Light Appliances
(1993-1998), and also
Senior Vice President,
Electrolux AB (1998)
Massimo Rossi........ Executive Vice President and Swedish Match, President
Deputy CEO (1992) Lights Division (1992-1997)
Sven Hindrikes....... Executive Vice President and Swedish Match, Senior Vice
CFO (2000) President and CFO
(1998-2000)
Linjebuss, Executive Vice
President and CFO (1994-1998)
Bo Aulin............. Senior Vice President, Svenska Tobaks AB, a Swedish
Corporate Affairs, Match, Subsidiary
Secretary, and General Vice President, Secretary and
Counsel (1996) General Counsel (1990-1996)
Bernt Magnusson...... Director, Chairman of the Vice Chairman, Avesta
Board (1993) Sheffield AB and Net
Insight AB; Board Member,
Volvo Car Corp.,
MeritaNordbanken Apb, Burma
Castrol Plc, Hoganas AB,
Emtunga International, the
Federation of Swedish
Industries and Forvaltnings
AB Stattum; Advisor to the
European Bank for
Reconstruction and
Development
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL POSITION/ OTHER PREVIOUS POSITIONS,
NAME YEAR BEGAN OTHER POSITIONS LAST FIVE YEARS
---- ----------------------------- --------------- -----------------------------
<S> <C> <C> <C>
Arne R. Bennborn..... Director (1996) Vice Chairman, Invest in
Sweden Agency-ISA; Member,
Royal Academy of
Engineering Sciences and
CISCO Sweden Advisory
Counsel
Jan Blomberg......... Director (1996) Vice Chairman, Drott AB;
Board Member, Besam AB,
Skandia Investment, Haldex
AB, Investment AB Bure,
Byggelit AB, Svenska Spel
AB, Mellanskog Industrier
AB and Handelsbanken
Regionbank City, Sweden
Kenneth Ek........... Director (1997) Shop Steward, Swedish
Association of Management
and Professional Staff
(Ledarna); Shop Steward,
Swedish Match factory in
Gothenburg, Sweden
Mats Jansson......... Director (1998) President and CEO, Oy Karl
Fazer Ab (1999); Board
Member, Lindex AB and
Hufvudstaden AB
Eva Larsson.......... Director (1999) Shop Steward, Swedish Match
factory in Tidaholm, Sweden
Gull-Britt Larsson... Director (1999) Shop Steward, Swedish Food
Workers' Association
(Livs); Co-determination
negotiator in Gottenburg,
Sweden
Meg Tiveus........... Director (1999) President of Svenska Spel AB;
Board Member, Swedish
Railways, Operan, ARK
Resebrya AB and Nordbanken
Kapitalforvaltning
Klaus Unger.......... Director (1984) Board Member, Arnold Andre
GmbH & Co KG; Member, Royal
Swedish Academy of
Engineering Sciences
</TABLE>
52
<PAGE>
2. OFFICERS OF SM MERGER CORP.:
Principal Employer and Current Business Address for the following people:
Swedish Match AB, SE-118 85 Stockholm, Sweden
<TABLE>
<CAPTION>
PRESENT PRINCIPAL POSITION/ OTHER PREVIOUS POSITIONS,
NAME YEAR BEGAN OTHER POSITIONS LAST FIVE YEARS
---- ------------------------------ --------------- ------------------------------
<S> <C> <C> <C>
Massimo Rossi........ President (1999) Director Swedish Match, President
Lights Division (1992-1997)
Sven Hindrikes....... Vice President (1999) Director Swedish Match, Senior Vice
President and CFO
(1998-2000)
Linjebuss, Executive Vice
President and CFO (1994-199)
Lin McKinnie......... Vice President Strategic and Director Swedish Match, Vice President
Financial Planning (1999) Strategic Planning
(1998-1999)
Swedish Match North America
Inc., Director/Manager
</TABLE>
OTHER BUSINESS
The board does not know of any other matters to be presented for action at
the Special Meeting other than as set forth in this proxy statement. If any
other business should properly come before the Special Meeting, the persons
named in the enclosed proxy card intend to vote thereon in accordance with their
best judgment on the matter except as may be otherwise indicated therein.
INDEPENDENT ACCOUNTANTS
The consolidated financial position of the Company as of November 27, 1999,
and November 28, 1998, and the results of operations and cash flows for each of
the three years in the period ended November 27, 1999 have been audited by
PricewaterhouseCoopers LLP as stated in their report, which is included in this
Proxy Statement on page F-25. It is expected that representatives of
PricewaterhouseCoopers LLP will be present at the Special Meeting, both to
respond to appropriate questions of stockholders of the Company and to make a
statement if they so desire.
STOCKHOLDER PROPOSALS
If the merger is consummated, there will be no public stockholders of the
Company and no public participation in any future meetings of stockholders of
the Company. However, if the merger is not consummated, the Company's public
stockholders will continue to be entitled to attend and participate in Company
stockholders' meetings. Pursuant to Rule 14a-8 under the Exchange Act
promulgated by the SEC, any stockholder of the Company who wishes to present a
proposal at the next Annual Meeting of Stockholders of the Company (in the event
the merger is not consummated), and who wishes to have such proposal included in
the Company's proxy statement for that meeting, must have delivered a copy of
such proposal to the Company at 387 Park Avenue South, New York, New York 10016,
Attention: Corporate Secretary, so that it was received no later than May 8,
2000. In order for proposals by stockholders not submitted in accordance with
Rule 14a-8 to have been timely within the meaning of Rule 14a-4(c) under the
Exchange Act, such proposal must have been submitted so that it was received no
later than May 8, 2000.
53
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows the Company to "incorporate by reference" information into
this proxy statement, which means that the Company can disclose important
information by referring you to another document filed separately with the SEC.
The following documents previously filed by the Company with the SEC are
incorporated by reference in this proxy statement and are deemed to be a part
hereof:
(1) The Company's Annual Report on Form 10-K and Form 10-K/A for the fiscal
year ended November 27, 1999; and
(2) The Company's Current Report on Form 8-K dated January 21, 2000.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for all purposes to the extent that a
statement contained in this proxy statement modifies or replaces such statement.
The Company undertakes to provide by first class mail, without charge and
within one business day of receipt of any written or oral request, to any person
to whom a copy of this proxy statement has been delivered, a copy of any or all
of the documents referred to above which have been incorporated by reference in
this proxy statement, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference therein). Requests for such
copies should be directed to Corporate Secretary, General Cigar Holdings, Inc.,
387 Park Avenue South, New York, New York 10016; telephone number: (212)
448-3800.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement contains or incorporates by reference certain
forward-looking statements and information relating to General Cigar that are
based on the beliefs of management as well as assumptions made by and
information currently available to General Cigar. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance, and underlying assumptions and other statements which are
other than statements of historical facts, including statements regarding the
completion of the proposed merger. When used in this document, the words
"anticipate," "believe," "estimate," "expect," "plan," "intend," "project,"
"predict," "may," and "should" and similar expressions, are intended to identify
forward-looking statements. Such statements reflect the current view of General
Cigar with respect to future events, including the completion of the proposed
merger, and are subject to numerous risks, uncertainties and assumptions. Many
factors could cause the actual results, performance or achievements of General
Cigar to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward-looking
statements, including, among others:
- delays in receiving required regulatory and other approvals;
- the failure of stockholders to adopt the Merger Agreement or approve the
charter agreement;
- changes in business strategy;
- availability of financing on acceptable terms to fund future growth;
- changes in consumer preferences resulting in a decline in the demand for
and the consumption of cigars;
- an inability to reduce SG&A expenses as expected;
- an increase in the price of raw materials;
- additional governmental regulation of tobacco or further tobacco
litigation;
- enactment of new or significant increases in existing excise taxes;
- political and/or economic instability in foreign countries where the
Company has operations; and
54
<PAGE>
- other risks and uncertainties set forth in the Company's other filings
with the Securities and Exchange Commission.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those described herein as anticipated, believed, estimated, expected, planned or
intended. General Cigar does not intend, or assume any obligation, to update
these forward-looking statements to reflect actual results, changes in
assumptions or changes in the factors affecting such forward-looking statements.
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations, other than as contained in this proxy statement, in connection
with the Merger Agreement or the merger, and, if given or made, such information
or representations may not be relied upon as having been authorized by the
Company, Swedish Match or SM Merger Corp. The delivery of this proxy statement
shall not, under any circumstances, create any implication that there has been
no change in the information set forth herein or in the affairs of the Company
since the date hereof.
Because the merger is a "going private" transaction, the Company has filed
with the SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 under the
Exchange Act with respect to the merger. This proxy statement does not contain
all of the information set forth in the Schedule 13E-3 and the exhibits thereto.
Copies of the Schedule 13E-3 and the exhibits thereto are available for
inspection and copying at the principal executive offices of the Company during
regular business hours by any interested stockholder of the Company, or a
representative who has been so designated in writing, and may be inspected and
copied, or obtained by mail, by written request directed to Corporate Secretary,
General Cigar Holdings, Inc., 387 Park Avenue South, New York, New York 10016,
or from the SEC as described below.
The Company is currently subject to the information requirements of the
Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. Copies of such reports, proxy statements and other
information, as well as the Schedule 13E-3 and the exhibits thereto, may be
copied (at prescribed rates) at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 and at the following Regional Offices of the SEC: 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, Suite 1300,
New York, New York 10048. For further information concerning the SEC's public
reference rooms, you may call the SEC at 1-800-SEC-0330. Some of this
information may also be accessed on the World Wide Web through the SEC's
Internet address at "http://www.sec.gov." The Company's common stock is listed
on the New York Stock Exchange (ticker symbol: MPP), and materials may also be
inspected at its offices, 20 Broad Street, seventh floor, New York, New York
10005.
By Order of the Board of Directors
A. Ross Wollen
SECRETARY
New York, New York
April 10, 2000
55
<PAGE>
LIST OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
- ---- --------
<S> <C>
Certificate................................................. 33
Company..................................................... 8
Cullmans.................................................... 15
Deutsche Bank............................................... 11
DGCL........................................................ 40
Dissenting Stockholder...................................... 40
EBIT........................................................ 18
EBITDA...................................................... 18
Effective Time.............................................. 32
Engagement Letter........................................... 20
Enterprise Value............................................ 18
EPS......................................................... 18
Exchange Act................................................ 25
Exchange Fund............................................... 33
Foreign Stockholder......................................... 28
General Cigar............................................... 8
IBES........................................................ 18
Merger Agreement............................................ 11
Paying Agent................................................ 33
PJSC........................................................ 9
Price....................................................... 18
Record Date................................................. 30
Redemption Transaction...................................... 27
Sale Transaction............................................ 27
Selected Companies.......................................... 18
Selected Transactions....................................... 19
SM Capital Exchange......................................... 29
SM Merger Corp.............................................. 8
Special Committee........................................... 10
Special Meeting............................................. 30
Stock Purchase Agreement.................................... 22
Surviving Corporation....................................... 11
Swedish Match............................................... 8
Unaffiliated Stockholders................................... 1
Voting Agreement............................................ 39
Wachtell, Lipton............................................ 11
</TABLE>
56
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AUDITED CONSOLIDATED FINANCIAL STATEMENTS:
<TABLE>
<S> <C>
Consolidated Statement of Operations for the 52 Weeks ended
November 27, 1999, November 28, 1998 and November 29,
1997...................................................... F-2
Consolidated Balance Sheet as of November 27, 1999 and
November 28, 1998......................................... F-3
Consolidated Statement of Stockholders' Equity for the
52 Weeks ended November 27, 1999, November 28, 1998 and
November 29, 1997......................................... F-4
Consolidated Statement of Cash Flows for the 52 Weeks ended
November 27, 1999, November 28, 1998 and November 29,
1997...................................................... F-5
Notes to Consolidated Financial Statements.................. F-6
Report of Independent Accountants........................... F-24
UNAUDITED FINANCIAL SCHEDULES:
Computation of Ratio of Earnings to Fixed Charged Charges
and Preferred Dividends................................... E-1
Computation of Ratio of Earnings to Fixed Charged Charges
and Preferred Dividends
(Excludes the gain on insurance settlement and gain on
sale of business)......................................... E-2
</TABLE>
F-1
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
NET SALES................................................. $182,266 $271,185 $262,833
Cost of goods sold........................................ 96,257 136,943 134,837
-------- -------- --------
GROSS PROFIT.............................................. 86,009 134,242 127,996
Selling, general and administrative expenses.............. 62,443 85,876 68,037
Special charges........................................... -- 8,227 --
-------- -------- --------
OPERATING PROFIT.......................................... 23,566 40,139 59,959
Gain on sale of business.................................. 142,318 -- --
Gain on insurance settlement.............................. -- 3,753 --
Nonoperating income....................................... 379 522 760
Interest income........................................... 6,138 156 139
Interest expense.......................................... 2,317 4,546 3,189
-------- -------- --------
Income before provision for income taxes.................. 170,084 40,024 57,669
Provision for income taxes................................ 63,522 14,209 21,605
-------- -------- --------
NET INCOME................................................ $106,562 $ 25,815 $ 36,064
======== ======== ========
Basic net income per share................................ $ 4.01 $ 0.95 $ 1.33
======== ======== ========
Weighted average common shares outstanding................ 26,513 27,286 27,173
======== ======== ========
Diluted net income per share.............................. $ 3.92 $ 0.92 $ 1.26
======== ======== ========
Weighted average common shares and equivalents
outstanding............................................. 27,129 28,102 28,604
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-2
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NOV. 27, NOV. 28,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $111,932 $ 3,985
Marketable securities..................................... 12,751 --
Receivables, less allowance of $808 (1998-$1,327)......... 31,027 39,666
Inventories............................................... 137,090 157,862
Other current assets...................................... 13,067 7,852
-------- --------
TOTAL CURRENT ASSETS.................................. 305,867 209,365
Property and equipment, net................................. 60,185 76,809
Intangible assets, net, principally trademarks and
goodwill.................................................. 65,738 71,170
Investments in marketable securities........................ 12,603 --
Other assets................................................ 777 1,959
-------- --------
TOTAL ASSETS.......................................... $445,170 $359,303
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities.................. $ 26,957 $ 41,518
Long-term debt due within one year........................ 253 1,457
Income taxes.............................................. 902 3,087
-------- --------
TOTAL CURRENT LIABILITIES............................. 28,112 46,062
Long-term debt.............................................. 10,259 66,291
Accrued retirement benefits................................. 10,558 12,892
Deferred income taxes....................................... 14,832 9,852
Other noncurrent liabilities................................ 57,707 9,033
-------- --------
TOTAL LIABILITIES..................................... 121,468 144,130
-------- --------
Minority interest in preferred stock of subsidiary.......... 3,300 --
-------- --------
Commitments and Contingencies (Note 15)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.01--authorized: 20,000,000
shares; Issued: none.................................... -- --
Class B common stock, par value $0.01--authorized:
25,000,000 shares; Issued: 13,566,044 shares at November
27, 1999; Issued: 13,997,799 shares at November 28,
1998.................................................... 136 140
Class A common stock, par value $0.01--authorized:
50,000,000 shares; Issued: 14,222,801 shares at November
27, 1999; Issued: 13,635,050 shares at November 28,
1998.................................................... 142 136
Additional paid-in capital................................ 166,407 165,598
Accumulated other comprehensive income.................... 399 --
Retained earnings......................................... 164,027 57,602
-------- --------
331,111 223,476
Less: Cost of Class A common stock held in treasury
1,233,700 shares (1998--974,800 shares)............. (10,709) (8,303)
-------- --------
TOTAL STOCKHOLDERS' EQUITY............................ 320,402 215,173
-------- --------
TOTAL LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS'
EQUITY............................................... $445,170 $359,303
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
CLASS B CLASS A OTHER
COMMON STOCK COMMON STOCK ADDITIONAL COMPRE-
--------------------- --------------------- CULBRO PAID-IN HENSIVE RETAINED
SHARES AMOUNT SHARES AMOUNT INVESTMENT CAPITAL INCOME EARNINGS
---------- -------- ---------- -------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1996..... -- $ -- -- $ -- $ 93,719 $ -- $ -- $ --
Net income through the Offering
date........................... -- -- -- -- 4,277 -- -- --
Liability assumption............. -- -- -- -- (46,937) -- -- --
Transactions with Culbro......... -- -- -- -- (2,393) -- -- --
Reclassification of Culbro
Investment at Offering date.... 20,267,940 203 -- -- (48,666) 48,463 -- --
Exercise of stock options........ -- -- 423,321 4 -- 1,831 -- --
Tax benefit arising from exercise
of employee stock options...... -- -- -- -- -- 3,732 -- --
Net proceeds from Offering....... -- -- 6,900,000 69 -- 111,415 -- --
Net income subsequent to
Offering....................... -- -- -- -- -- -- -- 31,787
Shares tendered.................. -- -- (7,306) -- -- -- -- --
Exchange of shares............... (4,560,714) (46) 4,560,714 46 -- -- -- --
---------- ---- ---------- ---- -------- -------- ---- --------
BALANCE AT NOVEMBER 29, 1997..... 15,707,226 157 11,876,729 119 -- 165,441 -- 31,787
Exercise of stock options........ -- -- 48,891 -- -- 129 -- --
Fractional shares................ -- -- 3 -- -- -- -- --
Exchange of shares............... (1,709,427) (17) 1,709,427 17 -- -- -- --
Tax benefit arising from exercise
of employee stock options...... -- -- -- -- -- 28 -- --
Purchase of treasury stock....... -- -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- -- 25,815
---------- ---- ---------- ---- -------- -------- ---- --------
BALANCE AT NOVEMBER 28, 1998..... 13,997,799 140 13,635,050 136 -- 165,598 -- 57,602
Comprehensive income:
Net income..................... -- -- -- -- -- -- -- 106,562
Unrealized gains on marketable
securities, net of taxes..... -- -- -- -- -- -- 399 --
---------- ---- ---------- ---- -------- -------- ---- --------
Total comprehensive income....... -- -- -- -- -- -- 399 106,562
Exercise of stock options........ -- -- 155,996 2 -- 450 -- --
Exchange of shares............... (431,755) (4) 431,755 4 -- -- -- --
Tax benefit arising from exercise
of employee stock options...... -- -- -- -- -- 359 -- --
Purchase of treasury stock....... -- -- -- -- -- -- -- --
Dividends on preferred stock..... -- -- -- -- -- -- -- (137)
---------- ---- ---------- ---- -------- -------- ---- --------
BALANCE AT NOVEMBER 27, 1999..... 13,566,044 $136 14,222,801 $142 $ -- $166,407 $399 $164,027
========== ==== ========== ==== ======== ======== ==== ========
<CAPTION>
TOTAL
STOCK-
TREASURY HOLDERS'
STOCK EQUITY
-------- --------
<S> <C> <C>
BALANCE AT NOVEMBER 30, 1996..... $ -- $ 93,719
Net income through the Offering
date........................... -- 4,277
Liability assumption............. -- (46,937)
Transactions with Culbro......... -- (2,393)
Reclassification of Culbro
Investment at Offering date.... -- --
Exercise of stock options........ -- 1,835
Tax benefit arising from exercise
of employee stock options...... -- 3,732
Net proceeds from Offering....... -- 111,484
Net income subsequent to
Offering....................... -- 31,787
Shares tendered.................. -- --
Exchange of shares............... -- --
-------- --------
BALANCE AT NOVEMBER 29, 1997..... -- 197,504
Exercise of stock options........ -- 129
Fractional shares................ -- --
Exchange of shares............... -- --
Tax benefit arising from exercise
of employee stock options...... -- 28
Purchase of treasury stock....... (8,303) (8,303)
Net income....................... -- 25,815
-------- --------
BALANCE AT NOVEMBER 28, 1998..... (8,303) 215,173
Comprehensive income:
Net income..................... -- 106,562
Unrealized gains on marketable
securities, net of taxes..... -- 399
-------- --------
Total comprehensive income....... -- 106,961
Exercise of stock options........ -- 452
Exchange of shares............... -- --
Tax benefit arising from exercise
of employee stock options...... -- 359
Purchase of treasury stock....... (2,406) (2,406)
Dividends on preferred stock..... -- (137)
-------- --------
BALANCE AT NOVEMBER 27, 1999..... $(10,709) $320,402
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income................................................ $106,562 $ 25,815 $ 36,064
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization........................... 8,706 9,414 7,159
Special charges......................................... -- 8,227 --
Gain on sale of business................................ (142,318) -- --
Gain on insurance settlement............................ -- (3,753) --
Changes in assets and liabilities, net of effects from
Sale in 1999, and Villazon Acquisition:
Decrease (increase) in accounts receivable.............. 7,323 11,297 (13,706)
Increase in inventories................................. (9,286) (50,504) (47,121)
(Decrease) increase in accounts payable and accrued
liabilities........................................... (21,806) (3,220) 14,257
(Decrease) increase in income taxes payable............. (3,487) 1,761 (1,070)
Increase in deferred income taxes....................... 4,802 4,535 4,555
Other, net, principally taxes (Note 5).................. 39,090 (3,321) 4,272
-------- -------- --------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES... (10,414) 251 4,410
-------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of business............................ 204,493 -- --
Purchase of marketable securities......................... (21,450) -- --
Acquisition of Villazon, net of cash acquired............. -- -- (71,198)
Additions to property and equipment....................... (7,216) (19,418) (15,155)
Proceeds from insurance settlement........................ -- 4,000 --
Acquisition of General Cigar International................ -- -- (2,000)
-------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES... 175,827 (15,418) (88,353)
-------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from Offering................................ -- -- 111,484
Net (repayment) borrowing on credit facility.............. (51,000) 19,000 --
Purchase of treasury stock................................ (2,406) (8,303) --
Payments of debt.......................................... (4,512) (650) (17,416)
Proceeds from exercise of stock options................... 452 129 1,835
Net transactions with Culbro.............................. -- -- (2,393)
Other, net................................................ -- -- (1,000)
-------- -------- --------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES... (57,466) 10,176 92,510
-------- -------- --------
Net increase (decrease) in cash and cash equivalents........ 107,947 (4,991) 8,567
Cash and cash equivalents at beginning of period............ 3,985 8,976 409
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $111,932 $ 3,985 $ 8,976
======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 1: DESCRIPTION OF BUSINESS AND CERTAIN TRANSACTIONS
General Cigar Holdings, Inc. (the "Company") was formed on December 12,
1996. Until the Company's initial public offering on February 28, 1997, the
Company was a wholly-owned subsidiary of Culbro Corporation ("Culbro"). The
consolidated financial statements of the Company include the accounts of the
Company and its direct and indirect subsidiaries: General Cigar Co., Inc.
("General Cigar"), Villazon & Company, Inc. ("Villazon"), GCMM Co., Inc.
("GCMM"), Club Macanudo, Inc. and Club Macanudo (Chicago), Inc. (collectivelly
"Club Macanudo"), and 387 PAS Corp. ("387 PAS"). The accompanying financial
statements reflect the results of operations of these businesses for all of the
periods presented. The operations of Club Macanudo, which operates cigar bars in
New York and Chicago, and 387 PAS, which owns and operates the Company's
headquarters building, were not material to the Company's results of operations
in any of the periods presented.
As of April 30, 1999, the Company is engaged in the business of
manufacturing and marketing hand-crafted Premium cigars. In addition, the
Company grows Premium wrapper tobacco, distributes imported Djeep brand
disposable lighters and operates Club Macanudo cigar bars in New York City and
Chicago. Its principal well-known brand names of Premium cigars include the
Macanudo, Partagas, Punch, Hoyo de Monterrey, El Rey Del Mundo, Temple Hall,
Cohiba, Canaria d'Oro, Cifuentes and Ramon Allones brands.
STOCK OFFERING AND STOCK REPURCHASE PROGRAM
On February 28, 1997, the Company sold 6.9 million shares of its Class A
Common Stock in an initial public offering, reflecting approximately 26% of its
then common equity. The net proceeds from the Offering, after underwriters'
discounts and commissions and other expenses, were approximately $111.5 million.
The proceeds were used to reduce debt, a substantial portion of which was
incurred in connection with the Villazon Acquisition. Each share of Class A
Common Stock entitles its holder to one vote. The remaining equity of the
Company in the form of Class B Common Stock, which entitles its holder to ten
votes for each share, was owned by Culbro at the date of the Offering. Following
the August 29, 1997 merger of Culbro into the Company, each Culbro shareholder
received 4.44557 shares of the Company's Class B stock in exchange for each
share of Culbro stock. Generally, Class B shares that are sold become Class A
shares.
On May 21, 1998, the Company announced a program to repurchase up to 5% of
the Company's common stock from time to time in open market transactions.
Through November 27, 1999, the Company purchased an aggregate of 1,233,700
shares of Class A common stock, representing 4.5% of the then outstanding
shares, for $10.7 million under this program.
SALE OF MASS-MARKET CIGAR BUSINESS
On April 30, 1999, the Company sold of its Mass-Market Cigar business to
Swedish Match North America Inc. ("SMNA"), for $204.5 million in cash (the
"Mass-Market Sale"). A portion of the proceeds was used to prepay $54.8 million
of bank debt and a $3.8 million equipment loan. The Company recorded a gain on
the sale of $142.3 million ($88.2 million, or $3.25 per diluted share, after
tax).
F-6
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 1: DESCRIPTION OF BUSINESS AND CERTAIN TRANSACTIONS (CONTINUED)
Net sales and operating profit from the Mass-Market Cigar business, which
are included in the accompanying financial statements, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales........................................ $32,372 $84,940 $83,276
Operating profit................................. 3,431 10,775 15,663
</TABLE>
Net assets of Mass-Market Cigar business at November 28, 1998 are summarized
as follows:
<TABLE>
<CAPTION>
NOV. 28,
1998
--------
<S> <C>
Current assets, primarily finished goods inventories........ $10,867
Property and equipment, net................................. 11,960
Current liabilities......................................... (2,164)
Long-term debt.............................................. (1,195)
-------
Net assets of Mass-Market Cigar business................ $19,468
=======
</TABLE>
The net assets above exclude tobacco inventories. In connection with the
Mass-Market Sale, the Company entered into a five year Supply Agreement with the
buyer to supply tobacco for use in the Mass-Market Cigar operations. Under the
Agreement, tobacco grown by General Cigar is sold at market value, and tobacco
purchased from third parties subsequent to the date of the Supply Agreement is
sold at the purchase price.
The gain of $142.3 million includes an adjustment of approximately $16
million to reduce to market value the Mass-Market tobacco inventory on hand at
the date of sale. Under the terms of the Supply Agreement, such tobacco will be
sold to SMNA at market value. The adjustment was recorded in the 1999 fourth
quarter as an adjustment to the gain.
In 1999, the Company recorded $0.9 million of interest income calculated on
the average balance of tobacco in inventory maintained for SMNA.
ACQUISITIONS
On January 21, 1997, the Company purchased two affiliated companies,
Villazon and Company, Inc., a U.S. corporation, and Honduras American Tabaco,
S.A., a Honduran corporation (collectively "Villazon"), for approximately $81.2
million consisting of $91.1 million of purchase price and direct acquisition
costs, less $9.9 million of cash acquired. At closing, $64.3 million of cash was
paid and $24.4 million aggregate principal amount of seller notes were issued
(the "Villazon Acquisition"). Both companies are engaged in the cigar business.
The Villazon Acquisition was accounted for using the purchase method of
accounting. Acquisition costs in excess of the fair value of net tangible assets
were approximately $69 million, representing principally trademarks and
goodwill. This amount is being amortized over 30 years. The Company entered into
a Bank Credit Agreement (the "Credit Agreement") to finance the acquisition.
Proceeds from the Offering were used to reduce the amount outstanding under the
Credit Agreement and to repay $14.4 million of the seller notes. The remaining
$10 million of the seller notes bear interest at prime plus 0.5% and are due
January 2002 (See Note 7).
F-7
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 1: DESCRIPTION OF BUSINESS AND CERTAIN TRANSACTIONS (CONTINUED)
On October 2, 1997, the Company acquired DB International Marketing, Ltd.,
("DBI"), a U.K. based cigar distribution company, which previously was a
customer of the Company. DBI was subsequently renamed General Cigar
International ("GCI"). The purchase price was estimated at $7.0 million of which
$2.0 million was paid at closing. The acquisition was accounted for using the
purchase method of accounting. The excess of the purchase price over the net
tangible assets acquired is being amortized over 20 years.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
The Company's fiscal year ends on the Saturday nearest November 30. Fiscal
1999, 1998 and 1997 ended on November 27, 1999, November 28, 1998 and November
29, 1997, respectively, and each year contained 52 weeks.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash maintained in demand deposits at
banks and highly liquid investments with original maturities of 90 days or less.
The cost of these investments approximates fair value. Cash and cash equivalents
are placed principally with major international banks.
MARKETABLE SECURITIES
Marketable securities at November 27, 1999 are classified in one of two
categories: available-for-sale or held-to-maturity. Available-for-sale are
recorded at market value. Net unrealized gains and losses, net of the related
income tax effect, on available-for-sale securities are excluded from earnings
and reported as a separate component of stockholders' equity until realized.
Investments held-to-maturity are carried at cost.
INVENTORIES
The Company's inventories are stated at the lower of cost, using the average
cost method, or market. Raw materials include tobacco in the process of aging, a
substantial amount of which will not be used or sold within one year. It is
industry practice to include such inventories in current assets. Raw materials
also include tobacco in bond which is subject to customs duties payable upon
withdrawal from bond. Following industry practice, the Company does not include
such duties in inventories until paid.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost. Depreciation is determined on
the straight-line method over the estimated useful asset lives for financial
reporting purposes and principally on accelerated methods for tax purposes.
F-8
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The amounts included in the financial statements for accounts receivable,
accounts payable and accrued liabilities reflect their approximate fair values
because of the short-term maturity of these instruments. The fair values of the
Company's other financial instruments are discussed in Note 3.
INTANGIBLE ASSETS
Intangible assets include principally the excess of the costs of businesses
acquired over the fair value of their net tangible assets. Such costs,
representing trademarks and goodwill, are amortized on the straight-line method
over the expected periods to be benefited, generally ranging from 20 to 30
years. When circumstances warrant, the Company assesses the recoverability of
intangible assets by determining whether the amortization of the asset balance
over its remaining life can be recovered through undiscounted future operating
cash flows of the acquired operation.
REVENUE RECOGNITION
Sales and the related cost of sales are recognized upon shipment of
products. The Company generally accepts returns of cigars that are stale or
damaged in transit. Sales revenue is recorded net of anticipated returns based
on historical experience. Sales returns are not material.
ADVERTISING AND PROMOTION EXPENSE
Advertising and promotion costs are expensed when incurred. Production costs
of future media advertising are deferred until the advertisements are displayed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and revenue and expenses during the period reported. Actual results
could differ from those estimates. Estimates are used when accounting for
allowance for uncollectible accounts receivable, depreciation and amortization,
employee benefit plans, valuation allowance for taxes and contingencies, among
others.
RECLASSIFICATION
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year's presentation.
NOTE 3: MARKETABLE SECURITIES
The Company has invested some of the proceeds from the Mass-Market Sale in
certain marketable securities, principally Ruble denominated bonds of the
Russian Federation. At November 27, 1999 the bonds, which mature at various
dates in 2000 through 2004, and carry coupon rates ranging from 7% to 15%, are
classified as investments held-to-maturity and are included in the Consolidated
Balance Sheet in marketable securities at a cost of $21.3 million. Of this
amount, $12.8 million are included in current assets
F-9
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 3: MARKETABLE SECURITIES (CONTINUED)
and $8.4 million are included in noncurrent assets. The realization of interest
and principal is subject to credit and foreign exchange risks, including the
convertibility of the currency. Accretion of bond discount is not being recorded
currently, and interest which is paid semi-annually is being recorded when
proceeds are converted and repatriated in U.S. dollars. The 1999 fourth quarter
results included interest income of $1.7 million representing the realization of
approximately 78.8 million Rubles of interest for approximately one quarter.
The bonds are traded in Rubles on the Moscow Interbank Currency Exchange
(MICEX). The prices on the MICEX do not reflect the U.S. dollar value of the
bonds offshore, where there is no organized market. An independent valuation of
the market value of the bonds at November 27, 1999 was approximately $26
million. However, the value of these bonds is significantly impacted by shifts
in economic and political conditions in Russia. Accordingly, the actual amount
realized may be greater or less than this amount.
At the time of the investment, the tax basis of the bonds was $157 million
greater than the book basis. The related $60 million of tax benefits are being
utilized to reduce the Company's tax liability. See Note 5.
The remaining $3.5 million of marketable securities are classified as
investments available-for-sale. These investments, which consist of private
equity funds holding primarily publicly traded securities of Russian
corporations, are recorded at market value. At November 27, 1999, gross
unrealized gains were $0.6 million. Such unrealized gains are excluded from
earnings and reported, net of the related income tax effect, as a separate
component of stockholders' equity until realized.
NOTE 4: RELATED PARTY TRANSACTIONS
The Company has transactions in the normal course of business with entities
with which certain stockholders and board of directors members of General Cigar
are associated. The aggregate cost of such services from these firms was
approximately $3.3 million, $1.7 million and $2.8 million in 1999, 1998 and
1997, respectively, and was provided and paid on terms which the Company
believes are similar to those with unrelated parties.
NOTE 5: INCOME TAXES
The income tax provision has been calculated in accordance with SFAS No.
109, "Accounting for Income Taxes". The domestic and foreign pretax income is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Domestic........................................ $153,309 $22,593 $46,839
Foreign......................................... 16,775 17,431 10,830
-------- ------- -------
$170,084 $40,024 $57,669
======== ======= =======
</TABLE>
F-10
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 5: INCOME TAXES (CONTINUED)
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current federal.................................. $52,950 $ 7,379 $14,889
Current state and local.......................... 6,191 1,715 3,037
Deferred, principally federal.................... 4,381 5,115 3,679
------- ------- -------
$63,522 $14,209 $21,605
======= ======= =======
</TABLE>
The reasons for the differences between the United States statutory income
tax rate and the effective rates are shown in the following table:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Tax expense at statutory rates................... $59,529 $14,008 $20,184
State and local.................................. 4,024 1,115 1,974
Foreign operations............................... (396) (1,679) (757)
Other............................................ 365 765 204
------- ------- -------
$63,522 $14,209 $21,605
======= ======= =======
</TABLE>
The significant components of net deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Depreciation and amortization.............................. $10,705 $9,727
Unremitted earnings of foreign subsidiaries................ 12,523 8,292
Investment basis differences............................... (12,301) --
Postretirement benefit liabilities......................... (2,554) (2,744)
Pension liabilities........................................ (1,458) (2,248)
Inventories................................................ (920) (874)
Other...................................................... (3,464) (2,301)
------- ------
2,531 9,852
Valuation allowance........................................ 12,301 --
------- ------
$14,832 $9,852
======= ======
</TABLE>
The Company has accrued domestic taxes for income of foreign subsidiaries
that is expected to be remitted to the parent company. Income taxes are not
accrued for unremitted earnings of foreign subsidiaries that have been, or are
intended to be, reinvested indefinitely. Foreign income, which is substantially
exempt from foreign taxes, primarily consists of earnings from the Company's
offshore manufacturing operations.
During 1999, 1998 and 1997, the exercise of certain stock options which had
been granted previously under various Culbro stock option plans, and the sale of
stock issued under such plans gave rise to compensation which is includable in
the taxable income of the applicable employees and deductible by the Company for
federal and state income tax purposes. Such compensation resulted from increases
in the fair
F-11
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 5: INCOME TAXES (CONTINUED)
market value of the Company's Common Stock subsequent to the date of grant of
the applicable exercised stock options. In accordance with Accounting Principles
Board Opinion No. 25, the tax benefit related to the deductions is not
recognized as a reduction of income tax expense for financial accounting
purposes and is recorded directly in additional paid-in capital. In 1999, 1998
and 1997, $359, $28 and $3,732, respectively, of such benefit was realized and
included in additional paid-in capital.
In connection with a 1997 Distribution and Merger Agreement with Culbro, in
which Culbro was merged into the Company, the Company entered into a Tax Sharing
Agreement which provides, among other things, for the allocation between a
former Culbro subsidiary and the Company of federal, state, local and foreign
tax liabilities for all periods through the Distribution and Merger Agreement
date. With respect to the consolidated tax returns filed by Culbro, the Tax
Sharing Agreement provides that the Company will be liable only for amounts that
it would have been required to pay for any deficiencies assessed, generally as
if it had filed separate tax returns.
In 1999, the Company invested $21.3 million in Ruble denominated bonds of
the Russian Federation. At the time of the investment, the tax basis of the
bonds was $157 million greater than the book basis, resulting in a $60 million
deferred tax benefit which was offset with a full valuation allowance. In the
fourth quarter, the Company realized $47.7 million of the $60 million deferred
tax benefit through an exchange of certain of the bonds for Russian bonds with
different maturities and yields. The Company has recorded a $47.7 million tax
reserve in other noncurrent liabilities which will be maintained until the
transactions are reviewed and resolved.
NOTE 6: SPECIAL CHARGES
WORK FORCE REDUCTION
In 1998, the Company implemented work force reductions of approximately 700
workers, principally in manufacturing, sales and administration. The objective
of the reductions was to bring the level of activity in these functions in line
with current market conditions. Severance and benefits charged to expense for
these reductions totaled $4.3 million. Severance and benefits paid and charged
against the related liability as of November 27, 1999 were $3.9 million. The
remaining balance is anticipated to be paid during 2000.
IMPAIRMENT LOSS
In 1998, the Company also recorded a non-cash impairment loss of $3.9
million in accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". Because of
changes in circumstances impacting certain non-core operations, management
estimated that the future cash flows from using these assets was less than their
carrying value. Consequently, a non-cash impairment loss of $3.5 million was
recognized. Also, during 1998, a decision was made to transfer certain domestic
production to offshore facilities. As a result, the Company revised the carrying
value of certain potentially excess assets based on discounted future cash
flows, and recognized a non-cash impairment loss of $0.4 million.
The total amount of special charges for 1998 was $8.2 million ($5.3 million
or $0.19 per diluted share, after tax). The SFAS No. 121 charges had no impact
on the Company's 1998 cash flow or its ability to
F-12
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 6: SPECIAL CHARGES (CONTINUED)
generate cash flow in the future. As a result of the SFAS No. 121 charges,
depreciation expense related to these assets will decrease in future periods.
NOTE 7: LONG-TERM DEBT
LONG-TERM DEBT INCLUDES:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Villazon seller notes, due January 2002................... $10,000 $10,000
Credit Agreement.......................................... -- 51,000
Equipment loan,........................................... -- 3,535
Capital leases............................................ 512 3,213
------- -------
Total..................................................... 10,512 67,748
Less: due within one year................................. 253 1,457
------- -------
Total long-term debt...................................... $10,259 $66,291
======= =======
</TABLE>
In May 1999, the Company prepaid the $51 million of Credit Agreement debt
and the $3.5 million of equipment loan with proceeds from the Mass-Market Sale.
As a result of the sale, the Company reduced its previous commitment under the
revolving line of credit from $92.5 million to $50.0 million and terminated its
related interest rate swap agreements with commercial banks.
The Company initially entered into this Credit Agreement on January 21, 1997
with certain banks which provided financing of $120 million principally for the
Villazon Acquisition and repayment of Culbro's general corporate debt. The
Credit Agreement, which expires in April 2001, initially included a $60 million
term loan and a revolving credit facility of $60 million.
In accordance with the terms of the amended Credit Agreement, borrowings
under the revolving credit facility bear interest of either (1) the ABR (2) the
Eurodollar rate plus 0.75% or (3) a combination thereof, at the Company's
option. The Company pays a commitment fee of 1/4 of 1% on the unused portion of
the revolving credit facility.
INTEREST RATE SWAPS
At November 28, 1998, the Company had outstanding three interest rate swap
agreements with commercial banks, having a total notional principal amount of
$40 million. These agreements effectively changed the Company's interest rate
exposure on $40 million variable rate debt to a fixed weighted average rate of
5.46%. The fair value of the Company's interest rate swap agreements at November
28, 1998 was $0.3 million. In 1999, as a result of prepaying the balance
outstanding of the Credit Agreement, the Company terminated all interest rate
swap agreements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management believes as the interest rate under the Credit Agreement is
variable this debt approximates its fair value. Management also believes that
the fixed rate debt included in the balance sheet reflects its current market
value based on market interest rates for comparable risks, maturities and
collateral.
F-13
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 8: RETIREMENT BENEFITS
PENSION PLAN AND OTHER POSTRETIREMENT BENEFITS
In 1999, the Company adopted Statement of Financial Accounting Standards No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits"
("SFAS 132"), which standardizes the disclosure requirements for pensions and
other postretirement benefits. SFAS 132 addresses disclosure only and does not
address liability measurement or expense recognition. There was no effect on
financial position or net income as a result of adopting SFAS 132.
The Company's employees participate in a noncontributory defined benefit
pension plan, which covers substantially all of the Company's domestic
employees. The Company is directly responsible for all of the pension
obligations of the plan, including those relating to its former employees, as
well as all vested employees of Culbro and its former subsidiaries under the
plan. The plan's benefits are based on employees' years of service and
compensation. Contributions to the plan are made in accordance with the
provisions of the Employee Retirement Income Security Act.
The components of the Company's net pension (income) expense are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service costs................................... $ 810 $ 907 $ 894
Interest cost................................... 3,934 4,059 4,126
Expected return on assets....................... (5,882) (5,446) (4,907)
Amortization of transition obligation........... 20 48 48
Curtailment gain................................ (679) -- --
Recognized actuarial gain....................... (603) (418) (167)
Amortization of prior service cost.............. 19 37 37
------- ------ ------
Net pension (income) expense.................. $(2,381) $ (813) $ 31
======= ====== ======
</TABLE>
The Company provides health and life insurance benefits to certain of its
retired employees. The components of the Company's net postretirement benefits
expense are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost......................................... $ 55 $ 58 $ 79
Interest cost........................................ 345 491 516
Curtailment gain..................................... (143) -- --
---- ---- ----
Net postretirement benefit expense................. $257 $549 $595
==== ==== ====
</TABLE>
In 1999, net pension income and net postretirement benefit expense include
curtailment gains related to the Mass-Market Sale.
F-14
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 8: RETIREMENT BENEFITS (CONTINUED)
The reconciliation of beginning and ending balances of benefit obligations
and fair value of plan assets, and the funded status of the plan, are as
follows:
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION PLAN BENEFITS
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Changes in benefit obligations:
Net benefit obligation at beginning of year..... $ 58,591 $ 57,028 $ 4,906 $ 4,939
Service cost.................................... 810 907 55 58
Interest cost................................... 3,934 4,059 344 346
Curtailment gain................................ (806) -- (150) --
Actuarial (gain) loss........................... (4,548) 1,375 (172) 76
Benefits paid................................... (4,841) (4,779) (530) (512)
-------- -------- ------- -------
Net benefit obligation at end of year......... $ 53,140 $ 58,590 $ 4,453 $ 4,907
======== ======== ======= =======
Changes in plan assets:
Fair value of plan assets at beginning of
year.......................................... $ 83,867 $ 81,896 $ -- $ --
Actual return on plan assets.................... (4,217) 7,111 -- --
Administrative expenses......................... (603) (361) -- --
Employer contributions.......................... -- -- 530 512
Benefits paid................................... (4,841) (4,779) (530) (512)
-------- -------- ------- -------
Fair value of plan assets at end of year...... $ 74,206 $ 83,867 $ -- $ --
======== ======== ======= =======
Reconciliation of funded status:
Funded status at end of year.................... $ 21,066 $ 25,276 $(4,454) $(4,906)
Unrecognized actuarial gain..................... (24,717) (31,474) (880) (709)
Unrecognized transition obligation.............. -- 36 -- --
Unrecognized prior service cost................. 115 247 11 19
-------- -------- ------- -------
Net amount recognized at end of year.......... $ (3,536) $ (5,915) $(5,323) $(5,596)
======== ======== ======= =======
</TABLE>
The weighted average assumptions used in the actuarial computations that
derived the above amounts were as follows:
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION PLAN BENEFITS
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Weighted average assumptions
as of measurement date:
Discount rate................................ 8.00% 7.15% 8.00% 7.15%
Expected return on plan assets............... 9.00% 9.00% -- --
Rate of compensation increase................ 5.00% 5.00% 5.00% 5.00%
</TABLE>
F-15
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 8: RETIREMENT BENEFITS (CONTINUED)
Because the Company's obligation for retiree medical benefits is fixed, any
increase in the medical cost trend would have no effect on the accumulated
postretirement benefit obligation, service cost or interest cost.
NOTE 9: STOCK OPTION PLAN
The 1997 Stock Option Plan (the "1997 Plan") provides for the grant of
either incentive stock options or nonqualified options to purchase shares of the
Company's Class A common stock to officers, directors and key employees. The
1997 Plan authorized the issuance of options to purchase up to an aggregate of
3,300,000 shares of the Company's Class A common stock. The majority of options
under the 1997 Plan have a term of ten years and are exercisable rateably over a
three year period beginning with the third anniversary from the date of grant.
The terms of the 1997 Plan impose certain restrictions on the sale of the shares
received upon exercise of the option. On February 27, 1997, the Company granted
options to purchase 661,600 shares of common stock at an exercise price of
$18.00 per share. On January 22, 1998 and March 13, 1998, the Company granted
additional options to purchase 75,000 and 25,000 shares of common stock at an
exercise price of $19.66 and $15.34, respectively. On December 14, 1998, the
Company exchanged the stock options granted on February 27, 1997. The exchange
was accomplished by canceling 488,600 options at an exercise price of $18.00 per
share and granting 307,818 new options at an exercise price of $9.00 per share.
The new options represented 63% of the canceled options. On January 28, 1999,
the Company granted options to purchase 15,000 shares of common stock at an
exercise price of $9.16 per share. Under the 1997 Plan, granted shares which are
subsequently forfeited become available for future grant.
Upon consummation of a 1997 Distribution and Merger Agreement, the Company
assumed all stock options outstanding under Culbro's stock option plans. These
options were converted into options to purchase shares of common stock of the
Company under the 1997 Plan. The number of outstanding options and the exercise
prices were adjusted to preserve the value of the options. Consistent with the
prior terms of the Culbro options, a portion of the options may be exercised as
incentive stock options, which under current tax laws do not provide any tax
deductions to the Company. These options are not exercisable until three years
from the date of original grant and may be exercised over a period ending not
later than ten years from the date of grant. None of these options may be
exercised as stock appreciation rights.
OTHER STOCK AWARDS
Under a separate stock option award, the Company granted an option to a
non-employee consultant to purchase 15,000 shares at an exercise price of $9.09
per share.
F-16
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 9: STOCK OPTION PLAN (CONTINUED)
The following table summarizes all the transactions of the above options for
the fiscal years ended November 27, 1999, November 28, 1998 and November 29,
1997:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- ---------
<S> <C> <C>
Culbro options outstanding at November 30, 1996........ 495,514 --
Exercised prior to Merger and Distribution............. (52,914) --
---------
Outstanding at Merger and Distribution date............ 442,600 --
=========
Conversion to General Cigar options.................... 1,970,339 $ 5.75
Exercised after merger................................. (423,321) $ 3.29
General Cigar options granted during 1997.............. 661,600 $18.00
---------
Options outstanding at November 29, 1997............... 2,208,618 $ 9.89
Exercised during 1998.................................. (48,891) $ 2.72
Options forfeited...................................... (173,000) $18.00
General Cigar options granted during 1998.............. 100,000 $18.58
---------
Options outstanding at November 28, 1998............... 2,086,727 $ 9.80
Exercised during 1999.................................. (155,996) $ 2.90
Options cancelled as a result of an exchange........... (488,600) $18.00
Options forfeited...................................... (155,485) $10.90
General Cigar options granted during 1999.............. 372,818 $ 9.03
---------
Options outstanding at November 27, 1999............... 1,659,464 $ 7.76
=========
Prices range between $0.80-$9.40
(weighted-average contractual life of 5.0 years)..... 1,088,562 $ 4.03
Prices range between $10.28-$19.66
(weighted-average contractual life of 6.1 years)..... 570,902 $14.87
Exercisable options at:
November 29, 1997.................................... 472,172 $ 2.07
November 28, 1998.................................... 903,283 $ 1.93
November 27, 1999.................................... 941,849 $ 3.84
</TABLE>
STOCK-BASED COMPENSATION
The Company applies APB No. 25, "Accounting for Stock Issued to Employees"
in accounting for its 1997 Plan. Compensation cost related to options issued
under an employment agreement was $0.4 million in 1998 and $0.3 million in 1997.
At November 28, 1998, these options were fully vested. The Company has adopted
the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", which require disclosing the pro forma effect on earnings and
earnings per share of the fair value method of accounting for stock-based
compensation. Had compensation cost been determined by the fair value
F-17
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 9: STOCK OPTION PLAN (CONTINUED)
method prescribed by SFAS No. 123, the Company's net income and net income per
common share would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income:
As reported............................... $106,562 $25,815 $36,064
Pro forma................................. $105,874 $24,824 $33,808
Basic net income per share:
As reported............................... $ 4.01 $ 0.95 $ 1.33
Pro forma................................. $ 3.99 $ 0.91 $ 1.24
Diluted net income per share:
As reported............................... $ 3.92 $ 0.92 $ 1.26
Pro forma................................. $ 3.90 $ 0.88 $ 1.18
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions for grants in 1999, 1998 and 1997, respectively: expected volatility
of approximately 40% for all years; risk free interest rate of 5.30%, 4.70% and
6.43%; expected option term of 6 years for all years; and no dividend yield for
all options issued. The expected option term was developed based on historical
grant and exercise information. The weighted-average fair value of options
granted in 1999, 1998 and 1997 was $3.98, $8.64 and $8.96, respectively.
NOTE 10: LEASES
The Company has the following noncancelable leases:
CAPITAL LEASES
Future minimum lease payments under capital leases and the present value of
such payments as of November 27, 1999 were:
<TABLE>
<S> <C>
2000........................................................ $253
2001........................................................ 185
2002........................................................ 102
2003........................................................ 11
2004 and thereafter......................................... --
----
Net minimum lease payments.................................. 551
Less: Amounts representing interest......................... 39
----
Present value of net minimum lease payments................. 512
Less: Current portion....................................... 253
----
Long-term capital lease obligations......................... $259
====
</TABLE>
F-18
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 10: LEASES (CONTINUED)
Capital leases included in Property and Equipment, net were $0.5 million at
November 27, 1999 and $4.7 million at November 28, 1998.
OPERATING LEASES
Future minimum rental payments under noncancelable leases as of November 27,
1999 covering principally buildings were:
<TABLE>
<S> <C>
2000........................................................ $ 2,387
2001........................................................ 2,025
2002........................................................ 1,552
2003........................................................ 1,308
2004........................................................ 1,002
Later years................................................. 1,907
-------
Total minimum lease payments................................ $10,181
=======
</TABLE>
Total rental expense for all operating leases in 1999, 1998 and 1997 was
$2.6 million, $1.7 million and $1.5 million, respectively.
NOTE 11: EARNINGS PER SHARE
Basic and diluted earnings per share are calculated based upon the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 128
"Earnings per Share", adopted in 1998, using the following data:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Basic and Diluted EPS Computation:
Net income......................... $ 106,562 $ 25,815 $ 36,064
Less: Preferred stock dividends.... (137) -- --
----------- ----------- -----------
Net income available to common
stockholders..................... $ 106,425 $ 25,815 $ 36,064
=========== =========== ===========
Weighted average number of common
shares outstanding:
Basic.......................... 26,513,374 27,285,551 27,172,526
Add: Effect of stock options... 615,889 816,316 1,431,049
----------- ----------- -----------
Diluted........................ 27,129,263 28,101,867 28,603,575
=========== =========== ===========
Basic Net Income Per Share......... $ 4.01 $ 0.95 $ 1.33
=========== =========== ===========
Diluted Net Income Per Share....... $ 3.92 $ 0.92 $ 1.26
=========== =========== ===========
</TABLE>
F-19
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 11: EARNINGS PER SHARE (CONTINUED)
The calculation of weighted average common shares outstanding for the
diluted calculation excludes the consideration of stock options for 947,177 in
1999 and 1,183,444 in 1998, because the options' exercise prices were greater
than the average market price of the common shares.
NOTE 12: SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
NET SALES
Excise taxes paid on cigar sales were $4.6 million, $9.9 million and $9.2
million for 1999, 1998 and 1997, respectively, and are included in net sales and
cost of goods sold.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Included in selling, general and administrative expenses were advertising
expenses of $7.6 million, $9.9 million and $6.9 million for 1999, 1998 and 1997,
respectively.
GAIN ON INSURANCE SETTLEMENT
The gain on insurance settlement was realized from the settlement of the
final insurance claim relating to a 1994 fire that destroyed an administration
and warehouse facility owned by the Company. The gain reflected total proceeds
of $4.0 million less expenses related to the claim.
NONOPERATING INCOME
Nonoperating income included the net results of leasing activity in the
Company's headquarters office building.
INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
NOV. 27, NOV. 28,
1999 1998
-------- --------
<S> <C> <C>
Raw materials and supplies.............................. $106,086 $108,327
Work-in-process......................................... 6,617 6,968
Finished goods.......................................... 24,387 42,567
-------- --------
$137,090 $157,862
======== ========
</TABLE>
F-20
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 12: SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment consists of:
<TABLE>
<CAPTION>
ESTIMATED NOV. 27, NOV. 28,
USEFUL LIVES 1999 1998
-------------- --------- ---------
<S> <C> <C> <C>
Land.................................... $ 2,958 $ 3,073
Buildings............................... 10 to 40 years 69,107 73,957
Machinery and equipment................. 3 to 7 years 36,808 50,551
--------- ---------
108,873 127,581
Accumulated depreciation................ (48,688) (50,772)
--------- ---------
$ 60,185 $ 76,809
========= =========
</TABLE>
Land and buildings include the Company's New York City headquarters
building, at a cost of $42.0 million and accumulated depreciation of
$12.9 million at November 27, 1999.
Total depreciation expense for the Company was $5.8 million, $6.4 million
and $4.3 million for 1999, 1998 and 1997, respectively.
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued liabilities include trade payables of $16.9
million and $22.4 million for 1999 and 1998, respectively, accrued salaries,
wages and other compensation of $4.3 million and $7.1 million for 1999 and 1998,
respectively, and other accrued liabilities of $5.8 million and $12.0 million
for 1999 and 1998, respectively, primarily for accrued workers compensation and
general liability insurance.
MINORITY INTEREST IN PREFERRED STOCK OF SUBSIDIARY
The $3.3 million of preferred stock of subsidiary represents 3,300 shares of
convertible participating preferred stock issued by GCMM in connection with the
acquisition of $21.3 million of marketable securities. The remaining investment
in marketable securities was funded in cash. The preferred stock carries a
coupon of 7% payable quarterly.
SUPPLEMENTAL CASH FLOW INFORMATION
Total interest paid by the Company was $2.4 million, $4.3 million and $3.0
million for 1999, 1998 and 1997, respectively.
The Company made income tax payments of $19.8 million, $7.8 million and
$16.7 million in 1999, 1998 and 1997, respectively.
In 1999, non-cash investing activities consisted of $3.3 million issuance of
subsidiary preferred stock for marketable securities.
F-21
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 13: BUSINESS SEGMENT INFORMATION
As of April 30, 1999, the Company's operations are conducted within one
business segment comprising the manufacturing and marketing of Premium cigars,
sold primarily in the United States, and related activities including the
distribution of lighters and the operation of cigar bars. The Company's export
sales are not material.
In 1999, 1998 and 1997, sales to one customer were approximately $26.2
million, $41.7 million and $30.3 million, or 14.4%, 15.4% and 11.5%,
respectively, of the Company's net sales.
NOTE 14: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
1999 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $52,495 $49,109 $38,698 $41,964 $182,266
Gross profit.................. 24,694 22,914 19,951 18,450 86,009
Gain on sale of business...... -- 152,261 -- (9,943) 142,318
Net income.................... 3,966 97,575 5,355 (334) 106,562
Diluted net income per
share....................... $ 0.15 $ 3.60 $ 0.20 $ (0.02) $ 3.92
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
1998 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $67,737 $68,248 $63,398 $71,802 $271,185
Gross profit.................. 32,951 31,926 30,957 38,408 134,242
Special charges............... -- -- -- 8,227 8,227
Gain on insurance
settlement.................. -- -- -- 3,753 3,753
Net income.................... 7,687 6,766 5,013 6,349 25,815
Diluted net income per
share....................... $ 0.27 $ 0.24 $ 0.18 $ 0.23 $ 0.92
======= ======= ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
1997 QUARTERS 1ST 2ND 3RD 4TH TOTAL
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales..................... $49,798 $58,908 $70,660 $83,467 $262,833
Gross profit.................. 22,283 26,473 35,267 43,973 127,996
Net income.................... 4,277 6,390 11,369 14,028 36,064
Diluted net income per
share....................... $ 0.15 $ 0.22 $ 0.40 $ 0.49 $ 1.26
======= ======= ======= ======= ========
</TABLE>
NOTE 15: COMMITMENTS AND CONTINGENCIES
As of November 27, 1999, the Company had firm commitments for capital
expenditures of approximately $1.3 million for the completion of existing
projects in its manufacturing facilities. The Company also plans to complete
purchases of approximately $34 million of tobacco over the next nine to twelve
months, under earlier existing commitments.
The Company believes that the outcome of currently pending legal proceedings
will not, in the aggregate, have a material adverse effect on the Company's
financial position, result of operations, and cash flows.
F-22
<PAGE>
GENERAL CIGAR HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
NOTE 16: NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
requires that all derivative instruments be recognized at fair value as either
assets or liabilities. SFAS No. 133 is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company is currently evaluating
the impact, if any, of adopting SFAS No. 133.
NOTE 17: SUBSEQUENT EVENT--AGREEMENT AND PLAN OF MERGER
On January 19, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Swedish Match AB ("Swedish Match") and
Swedish Match's wholly owned subsidiary, SM Merger Corporation ("Merger Sub").
The Merger Agreement provides that upon satisfaction of certain conditions,
Merger Sub will merge into the Company with the Company surviving the merger
(the "Merger"). The Merger will result in Swedish Match owning a 64% interest in
the Company. Pursuant to the Merger Agreement, each share of common stock of the
Company owned by the public will be purchased for $15.25 per share in cash. The
Cullman family has agreed to sell approximately one third of their holdings to
Swedish Match for $15.00 per share in cash immediately prior to the Merger
pursuant to a stock purchase agreement (the "Stock Purchase Agreement"). The
Cullman family, which has managed the Company since 1961, will hold the
remaining 36% of the Company following the Merger and will continue to manage
the Company. The Merger requires the approval of the Company's stockholders,
including the vote of a majority of the Class A shares, other than those held by
the Cullman family, voting separately as a class. The Cullman family has agreed
pursuant to a voting agreement with Swedish Match (the "Voting Agreement") to
vote all of their Class B shares in their capacities as stockholders in favor of
the Merger and against any competing offer for a period of eighteen months in
the event of a termination of the Merger Agreement. The Board of Directors of
the Company unanimously approved the Merger based upon the unanimous
recommendation of a special committee of independent directors. See Form 8-K
filed by General Cigar on January 21, 2000.
The aggregate cost of the transaction is approximately $330 million of which
$170 million will be paid by Swedish Match to buy certain shares of the Cullman
family at $15.00 per share and to provide part of the financing for the Company
to buy public shares at $15.25 per share. The Company plans to finance the
remaining $160 million of the transaction with a combination of existing cash
and equivalents, and borrowings under a new credit facility which is currently
being negotiated. Under the current terms of the Merger Agreement, the Company
is expected to borrow approximately $55 million to finance the transaction which
is expected to close during the second quarter of 2000.
The consolidated financial statements of the Company do not reflect the
effect of the Merger Agreement.
F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
General Cigar Holdings, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of General
Cigar Holdings, Inc. and its subsidiaries at November 27, 1999 and November 28,
1998, and the results of their operations and their cash flows for each of the
three years in the period ended November 27, 1999 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
<TABLE>
<S> <C>
/s/ PRICEWATERHOUSECOOPERS LLP
- -------------------------------------------
New York, New York
February 1, 2000
</TABLE>
F-24
<PAGE>
EXHIBIT 1
GENERAL CIGAR HOLDINGS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
52 WEEKS ENDED
---------------------------------------------------
NOV. 29, 1997 NOV. 28, 1998 NOV. 27, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Pre-tax income........................................ $57,669 $40,024 $170,084
------- ------- --------
Fixed charges:
Interest expense.................................... $ 3,198 $ 4,546 $ 2,317
Appropriate portion (one-third) of rent expense..... 500 567 867
Amortization of debt expense........................ 314 327 297
------- ------- --------
Total fixed charges................................. 4,012 5,440 3,481
------- ------- --------
Pre-tax income plus fixed charges..................... $61,681 $45,464 $173,565
======= ======= ========
Preferred dividend requirements....................... $ -- $ -- $ 137
------- ------- --------
Ratio of pre-tax income to after-tax income........... 1.60 1.55 1.59
------- ------- --------
Preferred dividend factor........................... -- -- 218
Total fixed charges................................. 4,012 5,440 3,481
------- ------- --------
Total fixed charges plus preferred dividend
factor............................................ $ 4,012 $ 5,440 $ 3,699
======= ======= ========
Ratio of Earnings to Fixed Charges and Preferred
Dividends........................................... 15.37x 8.36x 46.92x
</TABLE>
E-1
<PAGE>
EXHIBIT 2
GENERAL CIGAR HOLDINGS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
52 WEEKS ENDED
---------------------------------------------
NOV. 29, 1997 NOV. 28, 1998 NOV. 27, 1999
------------- ------------- -------------
<S> <C> <C> <C>
Pre-tax income (a)....................................... $57,669 $36,271 $27,766
------- ------- -------
Fixed charges:
Interest expense....................................... $ 3,198 $ 4,546 $ 2,317
Appropriate portion (one-third) of rent expense........ 500 567 867
Amortization of debt expense........................... 314 327 297
------- ------- -------
Total fixed charges.................................... 4,012 5,440 3,481
------- ------- -------
Pre-tax income plus fixed charges (a).................... $61,681 $41,711 $31,247
======= ======= =======
Preferred dividend requirements.......................... $ -- $ -- $ 137
------- ------- -------
Ratio of pre-tax income to after-tax income.............. 1.60 1.55 1.50
Preferred dividend factor.............................. -- -- 206
Total fixed charges.................................... 4,012 5,440 3,481
------- ------- -------
Total fixed charges plus preferred dividend factor..... $ 4,012 $ 5,440 $ 3,687
======= ======= =======
Ratio of Earnings to Fixed Charges and Preferred
Dividends (a).......................................... 15.37x 7.67x 8.47x
</TABLE>
- ------------------------
(a) Excludes the gain on insurance settlement and gain on sale of business.
E-2
<PAGE>
ANNEX A
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GENERAL CIGAR HOLDINGS, INC.,
A DELAWARE CORPORATION,
SWEDISH MATCH AB,
A KINGDOM OF SWEDEN CORPORATION,
AND
SM MERGER CORPORATION,
A DELAWARE CORPORATION
DATED: JANUARY 19, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
ARTICLE I. DEFINITIONS............................................ 1
DEFINED TERMS...............................................
1.1 1
OTHER DEFINED TERMS.........................................
1.2 8
ARTICLE II. THE MERGER............................................ 8
THE MERGER..................................................
2.1 8
EFFECTIVE TIME..............................................
2.2 9
CLOSING.....................................................
2.3 9
CERTIFICATE OF INCORPORATION AND BY-LAWS....................
2.4 9
DIRECTORS...................................................
2.5 9
OFFICERS....................................................
2.6 9
ARTICLE III. EFFECT OF MERGER ON SECURITIES OF SUB AND THE
COMPANY......................................................... 9
CONVERSION OF SUB COMMON STOCK..............................
3.1 9
CONVERSION OF COMPANY COMMON STOCK..........................
3.2 10
OPTIONS.....................................................
3.3 10
EXCHANGE OF CERTIFICATES....................................
3.4 11
DISSENTING SHARES...........................................
3.5 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......... 12
ORGANIZATION AND CAPITALIZATION.............................
4.1 13
AUTHORIZATION...............................................
4.2 14
SUBSIDIARIES................................................
4.3 14
ABSENCE OF CERTAIN CHANGES OR EVENTS........................
4.4 15
REAL PROPERTY...............................................
4.5 15
MATERIAL CONTRACTS AND COMMITMENTS..........................
4.6 16
NO CONFLICT OR VIOLATION....................................
4.7 16
CONSENTS AND APPROVALS......................................
4.8 17
SEC DOCUMENTS; FINANCIAL STATEMENTS, ETC....................
4.9 17
UNDISCLOSED LIABILITIES.....................................
4.10 17
LITIGATION..................................................
4.11 18
LABOR MATTERS...............................................
4.12 18
COMPLIANCE WITH LAW.........................................
4.13 18
NO BROKERS..................................................
4.14 18
INTELLECTUAL PROPERTY.......................................
4.15 19
EMPLOYEE BENEFITS...........................................
4.16 20
TAX MATTERS.................................................
4.17 22
AFFILIATED TRANSACTIONS.....................................
4.18 23
COMPLIANCE WITH ENVIRONMENTAL LAWS..........................
4.19 23
OPINION OF FINANCIAL ADVISOR................................
4.20 24
BOARD RECOMMENDATION........................................
4.21 24
REQUIRED COMPANY VOTE.......................................
4.22 24
PROXY STATEMENT; SCHEDULE 13E-3.............................
4.23 24
INVENTORY...................................................
4.24 24
CUSTOMERS...................................................
4.25 25
AVAILABLE FUNDS.............................................
4.26 25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB....... 25
ORGANIZATION, ETC...........................................
5.1 25
AUTHORIZATION...............................................
5.2 26
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
CONSENTS AND APPROVALS......................................
5.3 26
NO CONFLICT OR VIOLATION....................................
5.4 26
PROXY STATEMENT.............................................
5.5 26
FINANCING...................................................
5.6 27
ARTICLE VI. COVENANTS OF THE COMPANY, PARENT AND SUB.............. 27
MAINTENANCE OF BUSINESS PRIOR TO CLOSING....................
6.1 27
INVESTIGATION BY PARENT AND SUB.............................
6.2 29
CONSENTS AND EFFORTS........................................
6.3 30
OTHER OFFERS................................................
6.4 30
MEETING OF STOCKHOLDERS.....................................
6.5 31
PROXY STATEMENT.............................................
6.6 32
DIRECTOR AND OFFICER LIABILITY..............................
6.7 32
NOTICES OF CERTAIN EVENTS...................................
6.8 33
FURTHER ASSURANCES..........................................
6.9 34
CASH CONTRIBUTION...........................................
6.10 34
ARTICLE VII. CONDITIONS TO THE MERGER............................. 34
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.................
7.1 34
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY................
7.2 35
CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB.............
7.3 35
ARTICLE VIII. MISCELLANEOUS....................................... 36
TERMINATION.................................................
8.1 36
ASSIGNMENT..................................................
8.2 37
NOTICES.....................................................
8.3 37
ENTIRE AGREEMENT; WAIVERS...................................
8.4 38
MULTIPLE COUNTERPARTS.......................................
8.5 38
INVALIDITY..................................................
8.6 39
TITLES......................................................
8.7 39
FEES AND EXPENSES...........................................
8.8 39
CUMULATIVE REMEDIES.........................................
8.9 39
GOVERNING LAW...............................................
8.10 39
AMENDMENT...................................................
8.11 39
PUBLIC ANNOUNCEMENTS........................................
8.12 39
ENFORCEMENT OF AGREEMENT....................................
8.13 40
NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES.................
8.14 40
INTERPRETIVE PROVISIONS.....................................
8.15 40
EXHIBITS
A. Amendment
B. Shareholders' Agreement
C. Stock Purchase Agreement
D. Voting Agreement
Form of Amended and Restated Certificate of Incorporation of
E. the Company
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "AGREEMENT"), dated January 19,
2000, is by and among General Cigar Holdings, Inc., a Delaware corporation (the
"COMPANY"), Swedish Match, a Kingdom of Sweden corporation ("PARENT") and SM
Merger Corporation, a Delaware corporation and wholly owned subsidiary of Parent
("SUB").
RECITALS
A. This Agreement provides for the merger (the "MERGER") of Sub with and
into the Company, with the Company as the surviving corporation in such merger,
all in accordance with the provisions of this Agreement.
B. Simultaneously herewith, Parent is entering into a Stock Purchase
Agreement (the "STOCK PURCHASE AGREEMENT") with the C&E Shareholders pursuant to
which Parent has agreed to purchase directly from the C&E Shareholders 3.5
million shares of Company Common Stock held by such stockholders at a price
equal to $15.00 per share (the "STOCK PURCHASE"), a Voting Agreement (defined
below) with the C&E Shareholders and a Shareholders' Agreement (defined below)
with the C&E Shareholders.
C. The respective Boards of Directors of Parent, Sub and the Company have
approved this Agreement and declared it to be advisable and in the best
interests of their respective companies and stockholders to consummate the
Merger, and, simultaneously herewith, Parent is approving and adopting this
Agreement as the sole stockholder of Sub. The Company intends promptly to submit
this Agreement to its Stockholders for adoption.
D. The parties desire to make certain representations, warranties, covenants
and agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the
following meanings:
"AFFILIATE" shall mean, with respect to any Person or entity (the
"REFERENT PERSON"), any Person or entity which controls the referent person,
any Person or entity which the referent person controls, or any Person or
entity which is under common control with the referent person. For purposes
of the preceding sentence, the term "control" shall mean the power, direct
or indirect, to direct or cause the direction of the management and policies
of a Person or entity through voting securities, by contract or otherwise.
"AMENDMENT" shall mean that amendment to the Company's Certificate of
Incorporation set forth on EXHIBIT A hereto.
"ASSETS" shall mean all of the Company's and its Subsidiaries' right,
title and interest in and to all properties, assets and rights of any kind,
whether tangible or intangible, real or personal, owned by the Company or
its Subsidiaries or in which the Company or any of its Subsidiaries has any
interest whatsoever.
"C&E SHAREHOLDERS" shall mean the Persons listed on the signature pages
of the Shareholders' Agreement other than the Company and Parent.
"CLASS A COMMON STOCK" shall mean the Class A common stock, par value
$0.01 per share, of the Company.
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"CLASS B COMMON STOCK" shall mean the Class B common stock, par value
$0.01 per share, of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and any
successor statute.
"COMPANY COMMON STOCK" shall mean the Class A and Class B Common Stock.
"CONTRACT" shall mean any agreement, contract, lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, franchise
agreement, undertaking, covenant not to compete, employment agreement,
license, instrument, obligation, commitment, purchase and sales order,
quotation and other executory commitment to which the Company or its
Subsidiaries is a party or which relates to the Company's or its
Subsidiaries' businesses or any of the Assets, whether oral or written,
express or implied, and which pursuant to its terms has not expired,
terminated or been fully performed by the parties thereto.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"DISSENTING STOCKHOLDERS" shall mean those Stockholders who hold
Dissenting Shares.
"DISSENTING SHARES" shall mean any shares held by Stockholders who are
entitled to an appraisal of their shares under the DGCL, and who have
properly exercised, perfected and not subsequently withdrawn or lost their
appraisal rights with respect to their Company Common Stock in accordance
with the DGCL.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, encumbrance or other right of
third parties, whether voluntarily incurred or arising by operation of law,
and includes, without limitation, any agreement to give any of the foregoing
in the future, and any contingent or conditional sale agreement or other
title retention agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" shall mean all accusations, allegations, notices
of violation, liens, claims, demands, suits, or causes of action for any
damage, including, without limitation, personal injury, property damage
(including, without limitation, any depreciation or diminution of property
values), lost use of property or consequential damages, arising directly or
indirectly out of Environmental Conditions or Environmental Laws. By way of
example only (and not by way of limitation), Environmental Claims include
(i) violations of or obligations under any contract related to Environmental
Laws or Environmental Conditions between the Company or its Subsidiaries and
any other Person, (ii) actual or threatened damages to natural resources,
(iii) claims for nuisance or its statutory equivalent, (iv) claims for the
recovery of response costs, or administrative or judicial orders directing
the performance of investigations, responses or remedial actions under any
Environmental Laws, (v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to the Resource Conservation
and Recovery Act, as amended, or similar provisions of applicable state law,
(vi) claims related to Environmental Laws or Environmental Conditions for
restitution, contribution, or indemnity, (vii) fines, penalties or liens of
any kind against property related to Environmental Laws or Environmental
Conditions, (viii) claims related to Environmental Laws or Environmental
Conditions for injunctive relief or other orders or notices of violation
from federal, state or local agencies or courts, and (ix) with regard to any
present or former employees, claims relating to exposure to or injury from
Environmental Conditions.
"ENVIRONMENTAL CONDITIONS" shall mean the state of the environment,
including natural resources (E.G., flora and fauna), soil, surface water,
ground water, any present or potential drinking water supply, subsurface
strata or ambient air.
"ENVIRONMENTAL LAWS" shall mean all applicable foreign, federal, state,
district and local laws, all rules or regulations promulgated thereunder,
and all orders, consent orders, judgments, notices, permits or demand
letters issued, promulgated or entered with respect to the Company or any of
its
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Subsidiaries pursuant thereto, relating to pollution or protection of the
environment (including, without limitation, ambient air, surface water,
ground water, land surface, or subsurface strata), including, without
limitation, (i) laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, industrial
materials, wastes or other substances into the environment and (ii) laws
relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport or
other handling of pollutants, contaminants, chemicals, industrial materials,
wastes or other substances. Environmental Laws shall include, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the Toxic Substances Control
Act, as amended, the Hazardous Materials Transportation Act, as amended, the
Resource Conservation and Recovery Act, as amended ("RCRA"), the Clean Water
Act, as amended, the Safe Drinking Water Act, as amended, the Clean Air Act,
as amended, the Occupational Safety and Health Act, as amended, and all
analogous laws promulgated or issued by any state or other governmental
authority.
"ENVIRONMENTAL REPORTS" shall mean any and all written analyses,
summaries or explanations, in the possession or control of the Company or
its Subsidiaries, of (a) any Environmental Conditions in, on or about the
properties of the Company or its Subsidiaries or (b) the Company's or its
Subsidiaries' compliance with Environmental Laws.
"EQUITY SECURITIES" shall mean (i) shares of capital stock or other
equity securities, (ii) subscriptions, calls, warrants, options or
commitments of any kind or character relating to, or entitling any Person or
entity to purchase or otherwise acquire, any capital stock or other equity
securities and (iii) securities convertible into or exercisable or
exchangeable for shares of capital stock or other equity securities.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under
"common control" with, or a member of an "affiliated service group" with, or
otherwise required to be aggregated with, the Company or its Subsidiaries as
set forth in Section 414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITIES" shall mean all plants, offices, manufacturing facilities,
stores, warehouses, administration buildings and all real property and
related facilities owned or leased by the Company or its Subsidiaries.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, equipment, spare parts, appliances and vehicles
owned by the Company or its Subsidiaries, wherever located, including all
warranty rights with respect thereto.
"GAAP" shall mean, with respect to any Person, generally accepted
accounting principles in the United States of America, as in effect from
time to time, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, domestic, federal,
state or local government authority, quasi-governmental authority,
instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or
other agency, or any political or other subdivision, department or branch of
any of the foregoing.
"HAZARDOUS SUBSTANCES" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive,
reactive, toxic or otherwise hazardous substances or materials (whether
solids, liquids or gases) subject to regulation, control or remediation
under Environmental Laws. By way of example only, the term Hazardous
Substances includes petroleum, urea formaldehyde, flammable, explosive and
radioactive materials, PCBs, pesticides, herbicides, asbestos, sludge, slag,
acids, metals, solvents and waste waters.
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"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"INTELLECTUAL PROPERTY" shall mean all patents and applications,
including all reissues, continuations, divisions, continuations-in-part,
renewals or extensions thereof; trademarks, service marks, trade names,
trade dress, domain names, logos, business and product names, slogans, and
registrations and applications for registration or renewal thereof;
copyrights and registrations or renewals thereof; inventions, process,
designs, formulae, trade secrets, know-how, confidential and technical
information; all other intellectual property and proprietary rights; copies
and tangible embodiments thereof (in whatever form or medium, including
electronic media); and licenses of any of the foregoing.
"INVENTORY" shall mean the inventory owned by the Company and used in
connection with the business of the Company, consisting of supplies, raw
materials (tobacco), work in progress, finished goods, packaging materials
and machine parts.
"LAWS" shall mean (a) all applicable laws, statutes, ordinances,
regulations, rules and orders of every federal, state, local or foreign
government and every federal, state, local or foreign court or other
governmental or regulatory agency, department, authority, body or
instrumentality and (b) any judgment, decision, decree or order of any court
or governmental or regulatory agency, department, authority, body or
instrumentality.
"LEASES" shall mean all of the leases or subleases for any Facility used
or occupied by the Company or any of its Subsidiaries to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar
phrase shall mean, with respect to any Person, any material adverse effect
on or change with respect to (i) the business, operations, assets (taken as
a whole), liabilities (taken as a whole), condition (financial or otherwise)
or results of operations of such Person and its Subsidiaries, taken as a
whole or (ii) the right or ability of such Person or its Subsidiaries to
consummate any of the transactions contemplated hereby; provided, however,
that such terms shall not include any material adverse effect resulting from
an adverse trend or trends in the cigar industry as a whole.
"NYSE" shall mean the New York Stock Exchange, Inc.
"OPTIONS" shall mean (i) the options to purchase in the aggregate
1,160,207 shares of Company Common Stock issued to certain executive
employees and non-employee directors of the Company pursuant to the Stock
Option Plan and (ii) the options to purchase in the aggregate 15,000 shares
of Company Common Stock issued to Jim Morgan, a consultant to the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PERMITS" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, or notifications to,
any governmental authority, whether foreign, federal, state or local, or any
other Person, necessary or desirable for the past, present or currently
anticipated conduct of, or relating to the operation of the business of, the
Company or its Subsidiaries.
"PERMITTED ENCUMBRANCES" shall mean (a) liens for Taxes (i) not yet due
and payable or (ii) being contested in good faith, if a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made therefor, (b) statutory liens of landlords, liens of carriers,
warehouse persons, mechanics and other liens imposed by law incurred in the
ordinary course of business, (c) liens incurred or deposits made in
connection with workers' compensation, unemployment insurance and other
similar types of social security programs or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and similar
obligations, in each case in the ordinary course of business, consistent
with past practice, (d) purchase money liens incurred in the ordinary course
of business,
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consistent with past practice, and (e) easements, rights-of-way,
restrictions and other similar charges or encumbrances, in each case, which
do not materially interfere with the ordinary conduct of business of the
Company and its Subsidiaries and do not materially detract from the value of
the property to which such encumbrance relates.
"PERSON" shall mean any person or entity, whether an individual,
trustee, corporation, partnership, limited partnership, limited liability
company, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority, or any other form of
entity.
"PERSONNEL" shall mean all directors, officers and employees of the
Company or any of its Subsidiaries.
"REQUISITE STOCKHOLDER APPROVAL" shall mean the approval and adoption of
this Agreement, the Amendment and the Merger by each of the following:
(i) the affirmative vote of the holders of a majority of the outstanding
shares of the Class A Common Stock of the Company voting as a single class;
(ii) the affirmative vote of the holders of a majority of the outstanding
shares of the Class B Common Stock of the Company voting as a single class;
and (iii) the affirmative vote of the holders representing a majority of the
entire voting power of the outstanding Class A and Class B Common Stock
voting together as a single class (with Class A Common Stock having one vote
per share and Class B Common Stock having ten votes per share).
"RETURNS" shall mean any and all returns, reports, declarations,
schedules, forms and information statements and any other similar documents
with respect to Taxes required to be filed by or on behalf of the Company or
its Subsidiaries with any governmental authority or Tax authority or agency,
whether domestic or foreign, including, without limitation, consolidated,
combined and unitary returns and all amendments thereto or thereof.
"SEC" shall mean the Securities and Exchange Commission.
"SEC REPORTS" shall mean the 10-K Annual Report of the Company for the
year ended November 28, 1998, the Form 10-Q Quarterly Reports of the Company
for the periods ended February 27, 1999, May 29, 1999 and August 28, 1999
and the Definitive Proxy Statement on Schedule 14A for the Company's 1999
annual stockholders meeting.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHAREHOLDERS' AGREEMENT" shall mean the agreement among the Company,
Parent and the C&E Stockholders, dated as of the date hereof, and attached
as EXHIBIT B hereto.
"SOFTWARE" shall mean all computer software, including but not limited
to, application software and system software, including all source code and
object code versions thereof, in any and all forms and media, whether
recorded on paper, magnetic media or other electronic or non-electronic
media (including data and related documentation, user manuals, training
materials, flow charts, diagrams, descriptive tests and programs, computer
print-outs, underlying tapes, computer databases and similar items),
integrated circuits, embedded systems, and other electro-mechanical or
processor based systems.
"STOCKHOLDERS" shall mean the record holders of Company Common Stock.
"STOCK OPTION PLAN" shall mean the 1997 Stock Plan of the Company.
"STOCK PURCHASE AGREEMENT" shall mean the agreement among Parent and the
C&E Stockholders, dated as of the date hereof attached as EXHIBIT C hereto.
"SUBSIDIARY" shall mean, with respect to any of the parties to this
Agreement, any corporation or other business entity, whether or not
incorporated, of which at least 50% of the securities or interests having,
by their terms, ordinary voting power to elect members of the board of
directors, or other
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persons performing similar functions with respect to such entity, are held,
directly or indirectly, by such party.
"TAX(ES)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including, without
limitation, any interest, penalties, additions to tax or additional amounts
that may become payable in respect thereof, imposed by any foreign, federal,
state or local government or taxing authority, which taxes shall include,
without limitation, all income taxes, alternative minimum, windfall profits,
payroll and employee withholding taxes, unemployment insurance, social
security, sales and use taxes, value-added taxes, excise taxes, franchise
taxes, capital net worth, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers' compensation
and other obligations of the same or of a similar nature.
"TRADEMARKS" shall mean the trademarks set forth in Section 4.15(a) of
the Disclosure Schedule.
"TREASURY SECURITIES" shall mean Company Common Stock and Options owned
by the Company or any of its Subsidiaries.
"VOTING AGREEMENT" shall mean the agreement among the Company, Parent
and the C&E Stockholders, dated as of the date hereof, and attached as
EXHIBIT D hereto.
"YEAR 2000 PROBLEM" shall mean any inability or failure of any Software,
hardware or equipment containing embedded microcontrollers used in the
business of the Company or its Subsidiaries that contains or calls on a
calendar function, including but not limited to any function that is indexed
to a computer processing unit clock, provides specific days, dates or times,
or calculates spans of dates or times, to record, store, process, calculate,
compare, sequence and provide true and accurate day, date, and time data
from, into and between the twentieth and the twenty-first centuries,
including but not limited to with respect to the years 1999, 2000 and 2001
and leap year calculations.
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1.2 OTHER DEFINED TERMS. In addition to the terms defined in the Recitals
to this Agreement and Section 1.1, the following terms shall have the meanings
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
TERM SECTION
- ---- -------------------
<S> <C>
"Acquisition Proposal"...................................... 6.4
"Actions"................................................... 4.11
"Cash Contribution Amount".................................. 6.10
"Cash Merger Consideration"................................. 3.2(a)
"Closing"................................................... 2.3
"Closing Date".............................................. 2.3
"Company Contracts"......................................... 4.6
"Company Reports"........................................... 4.9
"Confidentiality Letter".................................... 6.2
"Disclosure Schedule"....................................... Article IV Preamble
"Effective Time"............................................ 2.2
"Employee".................................................. 4.16(a)
"ERISA Plan"................................................ 4.16(a)
"Exchange Fund"............................................. 3.5(d)
"Financial Statements"...................................... 4.9
"Leased Property"........................................... 4.5(b)
"Merger".................................................... Recitals
"Paying Agent".............................................. 3.5(a)
"Plans"..................................................... 4.16(a)
"Preferred Stock"........................................... 4.1(b)
"Proxy Statement"........................................... 6.6(a)
"Roll-Over Share"........................................... 3.2(c)
"Schedule 13E-3"............................................ 6.7
"Special Committee"......................................... 6.4
"Special Meeting"........................................... 4.23
"Stock Purchase"............................................ Recitals
"Subject Litigation"........................................ 6.7(b)
"Surviving Corporation"..................................... 2.1
"Surviving Corporation Common Stock"........................ 3.1
"Third Party"............................................... 6.4
</TABLE>
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ARTICLE II.
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the satisfaction or waiver,
if permissible, of the conditions hereof, and in accordance with the DGCL, at
the Effective Time, Sub shall be merged with and into the Company. Upon the
effectiveness of the Merger, the separate corporate existence of Sub shall cease
and the Company, under the name General Cigar Holdings, Inc., shall continue as
the surviving corporation (the "SURVIVING CORPORATION"). The Merger shall have
the effects specified under the DGCL.
2.2 EFFECTIVE TIME. On the Closing Date, the parties shall cause the
Merger to be consummated by causing a certificate of merger with respect to the
Merger to be executed and filed in accordance with the relevant provisions of
the DGCL and shall make all other filings or recordings required under the DGCL.
The Merger shall become effective at the time of filing of the certificate of
merger or at such later time as is specified therein (the "EFFECTIVE TIME").
2.3 CLOSING. Upon the terms and subject to the conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of Latham & Watkins, 885 Third Avenue, New York, New York at 10:00 a.m.,
local time, on the first business day immediately following the day on which the
last to be satisfied or waived of the conditions set forth in Article VII shall
be satisfied or waived in accordance herewith (other than those conditions that
by their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions) or (b) at such other time, date or
place as Sub and the Company may agree. The date on which the Closing occurs is
herein referred to as the "CLOSING DATE."
2.4 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) At the Effective Time, and without any further action on the part of the
Company or Sub, the certificate of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be amended and restated so as to
read in its entirety in the form set forth as EXHIBIT E hereto, and, as so
amended and restated, until thereafter further amended as provided therein and
under the DGCL, it shall be the certificate of incorporation of the Surviving
Corporation following the Merger.
(b) At the Effective Time, and without any further action on the part of the
Company or Sub, the by-laws of Sub as in effect immediately prior to the
Effective Time shall be the by-laws of the Surviving Corporation following the
Merger until thereafter changed or amended as provided therein or by applicable
law.
2.5 DIRECTORS. The initial Board of Directors of the Surviving Corporation
shall consist of seven members, four of whom shall be designated prior to the
Effective Time by the C&E Shareholders and three of whom shall be designated by
Parent.
2.6 OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation and
shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
ARTICLE III.
EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY
3.1 CONVERSION OF SUB COMMON STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, the common
shares, no par value, of Sub issued and outstanding immediately prior to the
Effective Time shall automatically be converted into and thereafter represent
such number of validly issued, fully paid and non-assessable shares of Common
Stock, par value $0.01 per share (the "SURVIVING CORPORATION COMMON STOCK"), of
the Surviving Corporation equal to the Cash Contribution Amount divided by
$15.25.
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3.2 CONVERSION OF COMPANY COMMON STOCK.
(a) At the Effective Time, by virtue of the Merger and without any action on
the part of the holder thereof, each share of Company Common Stock outstanding
immediately prior to the Effective Time (other than (i) Treasury Securities,
(ii) Roll-Over Shares and (iii) Dissenting Shares, if any) shall automatically
be converted into the right to receive, and each certificate which immediately
prior to the Effective Time represented a share of Company Common Stock shall be
cancelled and shall cease to exist and evidence solely the right to receive,
$15.25 in cash (the "CASH MERGER Consideration") upon surrender of the
certificate formerly representing Company Common Stock as provided in Section
3.4.
(b) All Treasury Securities shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be canceled and cease to
exist at and after the Effective Time and no consideration shall be paid with
respect thereto.
(c) At the Effective Time, each share of Class B Common Stock held by the
C&E Stockholders and each share of Class A Common Stock held by Parent as a
result of the purchase of shares of Company Common Stock pursuant to the Stock
Purchase Agreement (each a "ROLL-OVER SHARE") shall be converted into and
thereafter represent one fully-paid and non-assessable share of Surviving
Corporation Common Stock.
(d) At the Effective Time, the holders (other than the C&E Shareholders and
Parent) of certificates representing shares of Company Common Stock shall cease
to have any rights as stockholders of the Company, and their sole right shall be
the right to surrender such certificates or certificates in exchange for payment
of the Cash Merger Consideration. At the Effective Time, the C&E Shareholders
and Parent shall cease to have any rights as stockholders of the Company, and
their sole right shall be the right to surrender such certificates in exchange
for Surviving Corporation Common Stock.
3.3 OPTIONS.
(a) Immediately prior to the Effective Time, each outstanding Option whether
or not then exercisable, shall be canceled by the Company, and at the Effective
Time, or as soon as practicable thereafter, the former holder thereof shall be
entitled to receive from the Company in consideration for such cancellation an
amount in cash equal to the product of (i) the number of shares of Company
Common Stock previously subject to such Option and (ii) the excess, if any, of
the Cash Merger Consideration per share over the exercise price per share, if
any, previously subject to such Option (the "NET VALUE"), reduced by the amount
of withholding or other taxes required by law to be withheld.
(b) Except as provided herein or as otherwise agreed by the parties, the
Stock Option Plan and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary shall terminate as of the Effective Time, and the
Company shall exercise its reasonable best efforts to ensure that following the
Effective Time, no current or former employee, officer, director or consultant
shall have any Option to purchase Company Common Stock or any other equity
interest in the Company under the Stock Option Plan or any other Employee Plan
maintained by the Company.
(c) Prior to the Effective Time, the Board of Directors (or, if appropriate,
any committee administering the Stock Option Plan) shall adopt such resolutions
or take such actions as are necessary, subject, if necessary, to obtaining
consents of the holders thereof, to carry out the terms of this Section 3.3.
3.4 EXCHANGE OF CERTIFICATES.
(a) From and after the Effective Time, a bank or trust company to be
designated by the Company (the "PAYING AGENT") shall act as paying agent in
effecting the exchange of the Cash Merger Consideration for certificates
representing shares of Company Common Stock entitled to payment pursuant to
Section 3.2(a) (the "CERTIFICATES"). At the Effective Time, the Company shall
deposit with the Paying Agent an amount of cash (which shall include the Cash
Contribution Amount) necessary to
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enable the Paying Agent to exchange the Cash Merger Consideration for
Certificates received by the Paying Agent.
(b) Promptly after the Effective Time, the Surviving Corporation shall cause
the Paying Agent to mail to each holder of an outstanding Certificate or
Certificates, a form letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent) and
instructions for effecting the surrender of the Certificates for payment
therefor. As soon as practicable after the Effective Time, each holder of an
outstanding Certificate or Certificates upon surrender to the Paying Agent of
such Certificate or Certificates, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon and any other
items specified by such letter, and the acceptance thereof by the Paying Agent,
shall be entitled to receive in exchange therefor the Cash Merger Consideration
multiplied by the number of shares of Company Common Stock formerly represented
by such Certificate or Certificates. No interest will be paid on or accrue on
the Cash Merger Consideration. The Paying Agent shall accept such Certificates
upon compliance with such reasonable terms and conditions as the Paying Agent
may impose to effect an orderly exchange thereof in accordance with customary
exchange practices. After the Effective Time, there shall be no further transfer
on the records of the Company or its transfer agent of Certificates and if such
Certificates are presented to the Company for transfer, they shall be canceled
against delivery of such cash. Until surrendered as contemplated by this Section
3.4(b), each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Cash Merger
Consideration, net of any applicable withholding tax, for each share of Company
Common Stock.
(c) All cash paid upon the surrender for exchange of Certificates shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
shares formerly represented by such Certificates.
(d) Any cash deposited with the Paying Agent pursuant to this SECTION 3.4
(the "EXCHANGE FUND") which remains undistributed to the holders of the
Certificates 180 days after the Effective Time shall be delivered to the
Surviving Corporation at such time and any former holders of shares of Company
Common Stock (other than Roll-Over Shares) prior to the Merger who have not
theretofore complied with this Article III shall thereafter look only to the
Surviving Corporation and only as general unsecured creditors thereof for
payment of their claim, if any, for the Cash Merger Consideration.
(e) None of Parent, Sub, the Company or the Paying Agent shall be liable to
any Person in respect of any cash from the Exchange Fund delivered to a public
office pursuant to any applicable abandoned property, escheat or similar law. If
any Certificates shall not have been surrendered prior to one year after the
Effective Time (or immediately prior to such earlier date on which any cash in
respect of such Certificate would otherwise escheat to or become the property of
any federal, state, local, or municipal, foreign or other government or
subdivision, branch, department or agency thereof and any governmental or
quasi-governmental authority of any nature, including any court or other
tribunal), any such cash in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any Person previously entitled
thereto.
(f) In the event 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 Surviving
Corporation, the posting by such Person of a bond in such reasonable amount as
Surviving Corporation may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Paying Agent will pay, in
exchange for such lost, stolen or destroyed Certificate the Cash Merger
Consideration deliverable in respect thereof pursuant to this Agreement.
3.5 DISSENTING SHARES. Notwithstanding SECTION 3.2 hereof, Dissenting
Shares shall not be converted into a right to receive the consideration
specified in SECTION 3.2(a). The holders thereof shall be entitled only to such
rights as are granted by Section 262 of the DGCL. Each holder of Dissenting
Shares who becomes entitled to payment for such shares pursuant to Section 262
of the DGCL shall receive payment therefor from the Surviving Corporation in
accordance with the DGCL; PROVIDED,
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HOWEVER, that (i) if any such holder of Dissenting Shares shall have failed to
establish his entitlement to appraisal rights as provided in Section 262 of the
DGCL, (ii) if any such holder of Dissenting Shares shall have effectively
withdrawn his demand for appraisal rights with respect to such shares or lost
his right to appraisal and payment for his shares under Section 262 of the DGCL,
or (iii) if neither any holder of Dissenting Shares nor the Surviving
Corporation shall have filed a petition demanding a determination of the value
of all Dissenting Shares within the time provided in Section 262 of the DGCL,
such holder shall forfeit the right to appraisal of such shares and each such
share shall be treated as if it had been converted, as of the Effective Time,
into the right to receive the Cash Merger Consideration, without interest
thereon, from the Surviving Corporation as provided in Section 3.2. The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of shares, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Parent and Sub to enter into this Agreement, the Company
hereby makes, as of the date hereof and as of the Closing Date, the following
representations and warranties to Parent and Sub, except as otherwise set forth
in an SEC Report filed by the Company prior to the date hereof or in a written
disclosure schedule (the "DISCLOSURE SCHEDULE") (provided that the listing of an
item in one schedule of the Disclosure Schedule shall be deemed to be a listing
in each schedule of the Disclosure Schedule and to apply to any other
representation and warranty of the Company in this Agreement to the extent that
it is reasonably apparent from a reading of the disclosure of such item in such
first schedule that such item would also qualify or apply to such other schedule
or representation and warranty) delivered by the Company to Sub on or prior to
the date hereof.
4.1 ORGANIZATION AND CAPITALIZATION.
(a) ORGANIZATION. The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to conduct its business as it is presently being conducted
and to own and lease its Assets. The Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law except where the failure to be
so qualified and in good standing would not reasonably be expected to have a
Material Adverse Effect on the Company. The Company has delivered to Parent
true, correct and complete copies of its certificate of incorporation and
by-laws (in each case, as amended to date). The Company is not in default under
or in violation of any provision of its certificate of incorporation or by-laws.
(b) CAPITALIZATION. The authorized capital stock of the Company consists of
(i) 75 million shares of Company Common Stock, consisting of 50 million shares
of Class A Common Stock and 25 million shares of Class B Common Stock of the
Company and (ii) 20 million shares of preferred stock of the Company, par value
$0.01 per share (the "PREFERRED STOCK"). As of January 14, 2000, (i) 27,039,400
shares of Company Common Stock were issued and outstanding, consisting of
13,525,152 shares of Class A Common Stock and 13,514,248 shares of Class B
Common Stock, (ii) no shares of Preferred Stock were issued and outstanding,
(iii) Options to acquire 1,175,207 shares of Company Common were outstanding and
3,315,000 shares of Company Common Stock were reserved for issuance upon the
exercise of stock options, and (iv) 1,233,700 shares of Class A Common Stock of
the Company were held by the Company in treasury. SCHEDULE 4.1(b) includes a
complete and correct list of outstanding Options (including the number of
Options, the exercise price of each such Option and the vesting schedule for
each such Option). Except as set forth on SCHEDULE 4.1(b), the Company has no
outstanding subscriptions for shares of Company Common Stock and no outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to
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vote) with the stockholders of the Company on any matter. All issued and
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights. After the
Effective Time, the Surviving Corporation will have no obligation to issue,
transfer or sell any shares of capital stock or other securities of the Company
or the Surviving Corporation. Except as set forth in this Section 4.1(b), there
are no (i) outstanding Equity Securities of the Company or (ii) commitments or
obligations of any kind or character for (A) the issuance of any Equity
Securities of the Company or (B) the repurchase, redemption or other acquisition
of any Equity Securities of the Company.
(c) VOTING TRUSTS, PROXIES, ETC. Except as set forth on Schedule 4.1(c),
there are to the Company's knowledge, no stockholder agreements, voting trusts,
proxies or other agreements or understandings with respect to or concerning the
purchase, sale or voting of any Equity Securities of the Company.
4.2 AUTHORIZATION. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and all agreements and documents
contemplated hereby. Subject only to the Requisite Stockholder Approval, the
consummation by the Company of the transactions contemplated hereby has been
duly authorized by all requisite corporate action. This Agreement has been duly
authorized, executed and delivered by the Company, subject to the Requisite
Stockholder Approval, and is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in
effect which affect the enforcement of creditors' rights generally or (b)
general principles of equity, whether considered in a proceeding at law or in
equity.
4.3 SUBSIDIARIES.
(a) OWNERSHIP; CAPITALIZATION. Except as set forth on SCHEDULE 4.3(a), the
Company has no investments (whether through the acquisition of an equity
interest, the making of a loan or advance or otherwise), directly or indirectly,
in any other Person. Each of the Company's Subsidiaries are set forth on
SCHEDULE 4.3(a). Except as set forth on SCHEDULE 4.3(a), the Company is the
beneficial owner of all of the outstanding shares of capital stock of each
Subsidiary, free and clear of any and all Encumbrances. The authorized, issued
and outstanding capital stock, and the record ownership of all such shares of
capital stock, of each Subsidiary is as set forth on SCHEDULE 4.3(a). All of the
shares of capital stock of each Subsidiary have been duly authorized and validly
issued and are fully paid and non-assessable. No Subsidiary has any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of such Subsidiary on any
matter. Except as set forth on SCHEDULE 4.3(a), there are no (i) outstanding
Equity Securities of any of the Company's Subsidiaries, (ii) commitments or
obligations of any kind or character for (A) the issuance of Equity Securities
of any of the Company's Subsidiaries or (B) the repurchase, redemption or other
acquisition of any Equity Securities of any of the Company's Subsidiaries, or
(iii) stockholder agreements, voting trusts, proxies or other agreements or
understandings with respect to or concerning the purchase, sale or voting of any
Equity Securities of any of the Company's Subsidiaries.
(b) ORGANIZATION. Each of the Company's Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has full corporate power and authority to conduct its business
as it is presently being conducted and to own and lease its Assets. Each of the
Company's Subsidiaries is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which such qualification is
necessary under applicable law except whether the failure to be so qualified and
in good standing would not reasonably be expected to have a Material Adverse
Effect on the Company. The Company has delivered to Parent true, correct and
complete copies of each of its Subsidiaries' certificate of incorporation and
by-laws (in each case, as amended to date).
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4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since August 28, 1999, (x) the
Company and its Subsidiaries have been operated in the ordinary course of
business, consistent with past practice, (y) there has been no Material Adverse
Change and to the knowledge of the Company, no events or developments have
occurred that, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Change, with respect to the Company and (z) without
limiting the generality of the foregoing, neither the Company nor its
Subsidiaries has taken any action of the type contemplated by Section
6.1(a)(iii) and (vi)--(xvii) hereof, except in the case of clauses (x) or (z) as
set forth on Schedule 4.4.
4.5 REAL PROPERTY.
(a) OWNED REAL PROPERTY. Schedule 4.5(a) hereto sets forth all Facilities
owned by the Company and its Subsidiaries. With respect to each parcel of owned
real property except as set forth on SCHEDULE 4.5(a), (A) the Company or its
Subsidiaries has good and marketable fee simple title to such parcel of real
property, free and clear of any and all Encumbrances other than Permitted
Encumbrances, (B) there are no leases, subleases, licenses, options, rights,
concessions or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of such parcel of real
property, (C) there are no outstanding options, rights of first refusal or other
contractual right in favor of any other party to purchase any such parcel of
real property or any portion thereof or interest therein, and (D) there are no
parties (other than the Company and its Subsidiaries) who are in possession of
or who are using any such parcel of real property.
(b) LEASED REAL PROPERTY. Schedule 4.5(b) sets forth all Leases, true and
correct copies of which have been delivered to Sub. The Company or one of its
Subsidiaries has good and valid leasehold title to, and enjoy peaceful and
undisturbed possession of, all leased property described in such leases (the
"LEASED PROPERTY"), free and clear of any and all Encumbrances other than any
Permitted Encumbrances which would not permit the termination of the Lease
therefor by the lessor, and none of the Company or any of its Subsidiaries or,
to the knowledge of the Company, any third party has entered into any sublease,
license, option, right, concession or other agreement or arrangement, written or
oral, granting to any Person (other than the Company or a Subsidiary) the right
to use or occupy such Leased Property or any portion thereof or interest therein
with respect to each Lease. With respect to each material lease relating to the
Leased Property: (A) there has been no material default under any such Lease by
the Company or its Subsidiary, as applicable, or, to the knowledge of the
Company, by any other party, (B) such Lease is a valid and binding obligation of
the Company or such Subsidiary, is in full force and effect with respect to the
Company or such Subsidiary and is enforceable against the Company or such
Subsidiary in accordance with its terms, except as the enforceability thereof
may be limited by (1) applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally or (2) general principles of equity,
whether considered in a proceeding at law or in equity, and (C) no action has
been taken by the Company or such Subsidiary and no event has occurred which,
with notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto other than the Company or such Subsidiary,
without the consent of the Company or such Subsidiary.
4.6 MATERIAL CONTRACTS AND COMMITMENTS.
(a) The term "Company Contract" means each Contract to which the Company or
any of its Subsidiaries is a party or by which it is bound which: (i) has been
or would be required to be filed by the Company as an exhibit to a Company
Report under Item 10 of Rule 601 of Regulation S-K under the Exchange Act, or
(ii) (x) the loss of which would have a Material Adverse Effect, or (y) pursuant
to which the Company or any of its Subsidiaries is required to pay or is
scheduled to receive (assuming full performance pursuant to the terms thereof)
$500,000 or more during the 12-month period following the date of this
Agreement. Except as set forth on Schedule 4.6(a), the Company Reports filed
prior to the date hereof contain an accurate and complete listing of all Company
Contracts.
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(b) Except as set forth on Schedule 4.6(b) neither the Company nor any of
its Subsidiaries is a party to or is bound by any contract which contains
covenants limiting the freedom of the Company or any of its Subsidiaries to
engage in any line of business in any geographic area or to compete with any
person or entity or restricting the ability of the Company or any of its
Subsidiaries to acquire equity securities of any Person or entity. Unless the
same has expired in accordance with its terms or the Company or a Subsidiary
thereof has elected to terminate the same in compliance with the terms thereof,
each of such contracts, leases, agreements and understandings is in full force
and effect and (a) none of the Company or any of its Subsidiaries or, to the
best knowledge of the Company, any other party thereto, has breached or is in
default thereunder, (b) no event has occurred which, with the passage of time or
the giving of notice would constitute such a breach or default thereunder, or
would permit modification, acceleration or termination thereof, (c) no claim of
material default thereunder has, to the best knowledge of the Company, been
asserted or threatened and (d) none of the Company or any of its Subsidiaries
or, to the best knowledge of the Company, any other party thereto is seeking the
renegotiation thereof of substitute performance thereunder, except (i) as
disclosed in the Company Reports filed prior to the date hereof or as set forth
on Schedule 4.6 of the Disclosure Schedule and (ii) where such breach or
default, modification, acceleration or termination or attempted renegotiation or
substitute performance, individually or in the aggregate, does not have and
would not be reasonably expected to have a Material Adverse Effect on the
Company.
4.7 NO CONFLICT OR VIOLATION. Neither the execution, delivery and
performance of this Agreement, nor the consummation of the transactions
contemplated hereby, by the Company or its Subsidiaries will result in (a) a
violation of or a conflict with any provision of the certificate of
incorporation or by-laws or other organizational documents of the Company or any
of its Subsidiaries, (b) a breach of, or a default under, or the creation of any
right of any party to accelerate, terminate or cancel pursuant to (including,
without limitation, by reason of the failure to obtain a consent or approval
under any such Contract), any term or provision of any Contract, Lease,
Encumbrance, Permit, authorization or concession to which the Company or its
Subsidiaries is a party or by which any of the Assets are bound, (c) a violation
by the Company or any of its Subsidiaries of any Law applicable to the Company
or such Subsidiary, (d) an impairment of any right of the Company or any of its
Subsidiaries under any Contract to which it is a party or by which its Assets
are bound or under any Permit relating to the operation of its business, or (e)
an imposition of any Encumbrance (other than Permitted Encumbrances),
restriction or charge on the business of the Company or any of its Subsidiaries
or on any of their Assets, except in the case of clauses (b), (c), (d) and (e),
where such breach, default, creation of any right, impairment or imposition
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
4.8 CONSENTS AND APPROVALS. No consent, waiver, agreement, approval,
Permit or authorization of, or declaration, filing, notice or registration to or
with, any federal, state, local or foreign governmental or regulatory authority
or body or other Person or entity is required to be made or obtained by the
Company or its Subsidiaries in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby other than (a) filings required in connection with or in
compliance with the provisions of the HSR Act, any applicable foreign regulatory
filings and the Exchange Act (collectively, the "REGULATORY FILINGS"), (b) the
filing of a Certificate of Amendment to the Certificate of Incorporation of the
Company with respect to the Amendment under DGCL, (c) the filing of the
Certificate of Merger with respect to the Merger under the DGCL, and (d) those
consents, waivers, agreements, approvals, authorizations, declarations, filings,
notices or registrations, that have been, or will be prior to the Closing Date,
obtained or made, as set forth on Schedule 4.8.
4.9 SEC DOCUMENTS; FINANCIAL STATEMENTS, ETC. The Company has filed all
forms, reports and documents required to be filed by it with the SEC since
January 1, 1998 (collectively, the "COMPANY REPORTS"). As of their respective
dates, the Company Reports (i) complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to
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be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The
consolidated financial statements of the Company included in or incorporated by
reference in the Company Reports (the "FINANCIAL STATEMENTS") are complete and
correct in all material respects, were prepared from, and are in accordance
with, the books and records of the Company and its consolidated Subsidiaries,
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto and present fairly the financial condition of the Company and its
Subsidiaries as of the respective dates thereof and the results of operations,
stockholders' equity and cash flows for the periods covered thereby in
accordance with GAAP, consistently applied throughout the periods covered
(subject, in the case of the unaudited interim financial statements, to normal,
year-end audit adjustments). Since November 30, 1998, there has been no change
in any of the significant accounting (including tax accounting) policies,
practices or procedures of the Company or any of its Subsidiaries except as
required by GAAP or applicable law.
4.10 UNDISCLOSED LIABILITIES. Since August 28, 1999, neither the Company
nor any of its Subsidiaries has incurred any liabilities or obligations (whether
absolute, accrued, fixed, contingent, liquidated, unliquidated or otherwise and
whether due or to become due) of any nature, which would be required by GAAP, as
of the date hereof, to be set forth on a consolidated balance sheet of the
Company and its Subsidiaries or in the notes thereto except liabilities,
obligations or contingencies (a) which are disclosed reflected or reserved for
on the unaudited balance sheet of the Company and its Subsidiaries as of August
28, 1999 (including the notes thereto) or in this Agreement or in Schedule 4.10
of the Disclosure Schedule or (b) which (i) were incurred in the ordinary course
of business after August 28, 1999 and consistent with past practices or (ii) are
disclosed or reflected or reserved for in the Company Reports filed after August
28, 1999 and prior to the date hereof, or (c) which were incurred as a result of
actions taken or refrained from being taken (i) in furtherance of the
transactions contemplated by this Agreement, or (ii) at the request of Parent
and Sub.
4.11 LITIGATION. Except as set forth in the Company Reports or on Schedule
4.11, there are no outstanding actions, orders, writs, injunctions, judgments or
decrees or any claims, suits, charges, proceedings, labor disputes,
arbitrations, governmental audits or investigations (collectively, "ACTIONS")
pending or, to the knowledge of the Company, threatened against or related to
the Company or any of its Subsidiaries, or other than routine claims for
benefits, any Employee Plan of the Company or any of its Subsidiaries or any
trust or funding instrument, fiduciary or administrator thereof; except for
those Actions that would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
4.12 LABOR MATTERS. There is no (and within the past five years, there has
been no) labor strike, slow-down or other work stoppage or labor disturbance
pending or, to the knowledge of the Company, threatened against the Company or
its Subsidiaries nor, to the knowledge of the Company, is any grievance
currently being asserted. Except as set forth in Schedule 4.12, neither the
Company nor any of its Subsidiaries has received any notice of any claim, or has
knowledge of any facts which, in the reasonable judgment of the Company, are
likely to give rise to any claim, that it has not complied in any material
respect with any Federal, State or local laws relating to the employment of
labor, including, without limitation, any provisions thereof relating to wages,
hours, collective bargaining, the payment of social security and similar taxes,
equal employment opportunity, employment discrimination or employment safety.
4.13 COMPLIANCE WITH LAW. The Company and its Subsidiaries have not
violated and are in compliance with (a) all Federal, State and local United
States Laws, and (b) to the Company's knowledge all foreign Laws, in each case,
relating to the Assets, business or operations of the Company or its
Subsidiaries, except to the extent that any such violation or failure to comply
is not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on the Company. Neither the Company nor its Subsidiaries has
received any written notice to the effect that, or otherwise has any knowledge
that, (i) the Company and its Subsidiaries are not currently in compliance with,
or are in violation of, any
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applicable Laws or (ii) any currently existing circumstances are likely to
result in a failure of the Company or its Subsidiaries to comply with, or a
violation by the Company or its Subsidiaries of, any Laws, which such failure to
comply or violation would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company. Each of the Company
and each of its Subsidiaries has in effect all Permits necessary for it to own,
lease or operate its properties and assets and to carry on its business as now
conducted, and there has occurred no default under any such Permit, except such
as would not in each case, individually or in the aggregate, have a Material
Adverse Effect. No representation or warranty is made in this Section 4.13 with
respect to compliance with Laws relating to the matters covered in Sections 4.16
(Employee Benefits), 4.17 (Tax Matters) and 4.19 (Compliance with Environmental
Laws).
4.14 NO BROKERS. Other than Peter J. Solomon Company Limited and Deutsche
Bank Securities Inc. the arrangements with which have been disclosed in writing
to Parent prior to the date hereof, none of the Company, its Subsidiaries or any
of their officers, directors, employees, stockholders or other Affiliates has
employed or made any agreement with any broker, finder or similar agent or any
Person or firm to pay any finder's fee, brokerage fee or commission or similar
payment in connection with the transactions contemplated hereby.
4.15 INTELLECTUAL PROPERTY.
(a) TRADEMARKS. Section 4.15(a)(1) of the Disclosure Schedule contains a
complete list of all trademarks that are material to the business of the Company
and its Subsidiaries as it is currently conducted (the "TRADEMARKS"). Section
4.15(a)(2) of the Disclosure Schedule sets forth the trademark registrations
and/or pending applications therefor that are owned by the Company and its
Subsidiaries, relating to the Trademarks as well as other marks. Except as set
forth in Section 4.15(a)(3) of the Disclosure Schedule the Company and its
Subsidiaries own the Trademarks which have been registered or applied for in the
United States Patent and Trademark Office (hereinafter "U.S. TRADEMARKS"), free
and clear of all Encumbrances. The Company and its Subsidiaries own the
Trademarks in those foreign countries and jurisdictions where they have been
registered ("Foreign Trademarks"), free and clear of all Encumbrances, except
such Encumbrances as would not reasonably be expected to have a Material Adverse
Effect on the Company. All appropriate actions have been taken by the Company
and its Subsidiaries to maintain the validity and enforceability of the U.S.
Trademarks, including payment of all required fees. All appropriate actions have
been taken by the Company and its Subsidiaries to maintain the validity and
enforceability of the Foreign Trademarks, including payment of all required
fees, except where non-action would not reasonably be expected to have a
Material Adverse Effect on the Company. Except as set forth in Section
4.15(a)(3) of the Disclosure Schedule, no judicial or administrative proceeding
of any kind is pending or, to the knowledge of the Company, has been threatened
against the Company or its Subsidiaries in the United States involving (a) the
ownership, validity, enforceability, infringement, misuse or misappropriation of
any Trademarks or (b) the ownership, validity, enforceability, infringement,
misuse or misappropriation by the Company or its Subsidiaries of Intellectual
Property rights of any third party which proceeding would reasonably be expected
to have a Material Adverse Effect on the Company. The Company has no knowledge
of the infringement or misappropriation of any of the Trademarks by a third
party which could have a Material Adverse Effect on the Company. The Company and
its Subsidiaries have not received written notice of any infringement or
liability of any kind for the use of intellectual property rights of others with
respect to the Intellectual Property within the last three (3) years which could
have a Material Adverse Effect on the Company. None of the Company, its
Subsidiaries or any of their Affiliates have granted any license or right to
use, option, release or covenant not to sue or non-assertion assurance to any
third person with respect to, or granted any outstanding lien or security
interest in, any of the U.S. Trademarks or the Foreign Trademarks, except where
such grant would not have a Material Adverse Effect on the Company. There is no
existing or contemplated agreement, understanding, or grant of permission
between the Company, its Subsidiaries or any of their Affiliates and any third
person that encumbers or otherwise affects the Company's right to use the U.S.
Trademarks or the Foreign Trademarks, except where such agreement,
understanding, or grant of permission would not have a
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Material Adverse Effect on the Company. Immediately after the Merger, the
Surviving Corporation shall own or have the right to use all of the Trademarks
currently used in the business of the Company and its Subsidiaries, in each case
free from any Encumbrances, and on the same terms and conditions as in effect
prior to the Merger.
(b) The Company owns or has the right to use all Intellectual Property that
is material to the business of the Company or its Subsidiaries. The conduct of
the business of the Company and its Subsidiaries does not infringe upon,
conflict in any way with or misappropriate any Intellectual Property of any
third party, except for infringements, conflicts or misappropriations that,
individually and in the aggregate, would not have a Material Adverse Effect on
the Company. None of the Intellectual Property used in the business of the
Company and its Subsidiaries is being infringed or used by any third party,
except for such infringements or uses as, individually and in the aggregate,
would not have a Material Adverse Effect on the Company.
(c) To the Company's knowledge, none of the Intellectual Property which is
used in the United States and owned by the Company and its Subsidiaries is
subject to any outstanding order, ruling, decree, judgment or stipulation by or
with any Governmental Authority.
(d) To the Company's knowledge, neither the Company nor any of its
Subsidiaries has experienced any material disruption or Material Adverse Change
in the conduct of the businesses as a result of the Year 2000 Problem.
4.16 EMPLOYEE BENEFITS.
(a) Schedule 4.16(a) lists as of the date hereof each material "employee
pension benefit plan," as that term is defined in Section 3(2) of ERISA, each
material "employee welfare benefit plan," as that term is defined in Section
3(1) of ERISA (such plans being hereinafter referred to collectively as the
"ERISA PLANS"), each material other retirement, pension, profit-sharing, money
purchase, deferred compensation, incentive compensation, bonus, stock option,
stock purchase, severance pay, unemployment benefit, vacation pay, health, life
or other insurance, fringe benefit, or other employee benefit plan, program,
agreement or arrangement maintained or contributed to as of the date hereof by
the Company or its Affiliates in respect of or for the benefit of any employee
of the Company or its Subsidiaries (an "EMPLOYEE") or former Employee, and
separately identifies any such plan, program, agreement or arrangement
maintained or contributed to solely in respect of or for the benefit of
Employees or former Employees employed or formerly employed by the Company or
its Subsidiaries outside of the United States (collectively, together with the
ERISA Plans, referred to hereinafter as the "PLANS").
(b) Except as set forth on Schedule 4.16(b), with respect to the ERISA
Plans:
(i) Neither the Company nor any of its ERISA Affiliates, any of the
ERISA Plans, any trust created thereunder, or any trustee or administrator
thereof, has engaged in any transaction as a result of which the Company or
its Subsidiaries would reasonably be expected to be subject to any liability
pursuant to Section 409 of ERISA or to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed pursuant to Section
4975 of the Code, excluding any liability, penalty or tax that would not
constitute a Material Adverse Effect; and
(ii) Since the effective date of ERISA, no material liability under
Title IV of ERISA has been incurred by the Company or its Subsidiaries
(other than liability for premiums due to the PBGC) unless such liability
has been, or prior to the Closing Date will be, satisfied in full.
(c) Except as set forth on Schedule 4.16(c), with respect to the ERISA Plans
other than those ERISA Plans identified on Schedule 4.16(d) as "multiemployer
plans":
(i) The PBGC has not instituted proceedings to terminate any such ERISA
Plan that is subject to Title IV of ERISA;
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(ii) None of such ERISA Plans has incurred an "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each of the ERISA Plans ended prior to the date of this Agreement;
(iii) Each of such ERISA Plans has been operated and administered in all
material respects in accordance with its provisions and with all applicable
Laws;
(iv) Each of such ERISA Plans that is intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the IRS to
be so qualified, and to the knowledge of the Company nothing has occurred
since the date of the most recent such determination (other than the
effective date of certain amendments to the Code the remedial amendment
period for which has not yet expired) that would adversely affect the
qualified status of any of such ERISA Plans; and
(v) As of the date hereof, there are no pending material claims by or on
behalf of any of the ERISA Plans, by any employee or beneficiary covered
under any such ERISA Plan against any such ERISA Plan, or otherwise
involving any such ERISA Plan (other than routine claims for benefits and
routine expenses).
(d) Except as set forth on Schedule 4.16(d), (i) none of the ERISA Plans is
a "multiemployer plan," as that term is defined in Section 3(37) of ERISA, and
(ii) with respect to any such multiemployer plans (as so defined), neither the
Company nor any of its Subsidiaries have made or incurred a "complete
withdrawal" or a "partial withdrawal," as such terms are respectively defined in
Sections 4203 and 4205 of ERISA. To the Company's knowledge, if the Company and
each of its ERISA Affiliates were to withdraw from each multiemployer plan in
which they participate as of the date hereof, the Company's and its
Subsidiaries' withdrawal liability would not have a Material Adverse Effect on
the Company or its Subsidiaries.
(e) Except as set forth on Schedule 4.16(e), no amount that could be
received (whether in cash or property or the vesting of property) as a result of
the Merger or any of the other transactions contemplated by this Agreement,
either alone or together with other events, by any employee, officer or director
of the Company or any of its affiliates who is a "disqualified individual" (as
such term is defined in Proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or any Plan currently in effect would be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code). Neither
the Company nor any of its Subsidiaries is a party to any contract, agreement or
other arrangement which would result in the payment of amounts prior to the
Effective Time that will be nondeductible by reason of Section 162(m) of the
Code.
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4.17 TAX MATTERS.
(a) FILING OF TAX RETURNS AND PAYMENT OF TAXES. Each of the Company and
its Subsidiaries has filed all material Tax Returns and reports required to be
filed by it or requests for extensions to file such Returns or reports have been
timely filed, granted and have not expired. All Returns filed by the Company and
each of its Subsidiaries are complete and accurate in all material respects. The
Company and each of its Subsidiaries have paid (or the Company has paid on its
behalf) all material Taxes required to be paid by the Company or any of its
Subsidiaries, and the most recent financial statements contained in the Company
Filed SEC Documents reflect an adequate reserve for all Taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements.
(b) NO MATERIAL DEFICIENCIES. Except as disclosed in Schedule 4.17(b), no
material deficiencies for any Taxes have been proposed, asserted or assessed
against the Company or any of its Subsidiaries that are not adequately reserved
for, and no requests for waivers or extension of the time to assess or collect
any material Taxes of the Company or any of its Subsidiaries have been granted
or are pending.
(c) WITHHOLDING. All material Taxes required to be withheld by the Company
or any of its Subsidiaries have been duly withheld and paid to the proper taxing
authority or properly set aside in accounts for such purpose.
(d) AFFILIATED GROUP. Neither the Company nor any of its Subsidiaries is
or has been at any time since January 1, 1990 for purposes of filing any income
tax Return a member of any affiliated, consolidated, combined or unitary group
of which a corporation (other than the Company and its Subsidiaries) is or was
the common parent.
(e) AUDITS. Except as disclosed in Schedule 4.17(b), (i) no Taxes of the
Company or any of its Subsidiaries are currently under audit by any taxing
authority, and no taxing authority is now asserting against the Company or any
of its Subsidiaries any material deficiency or claim for additional Taxes or any
material adjustment of Taxes and (ii) since January 1, 1990, no material claim
has been made by any taxing authority in any jurisdiction where the Company or
any of its Subsidiaries does not file Returns that the Company or such
Subsidiary is or may be subject to taxation by that jurisdiction.
(f) TAX SHARING AGREEMENTS. Except as disclosed in Schedule 4.17(F), (i)
neither the Company nor any of its Subsidiaries is a party to or bound by or has
any obligation under any Tax sharing agreement, allocation, indemnity or other
similar arrangement entered into with any person (other than the Company or any
of its Subsidiaries) and (ii) neither the Company nor any of its Subsidiaries
may be held liable for Taxes of any other Person as a transferee or successor of
such Person.
(g) ASSETS. None of the Assets is: (A) property that is required to be
treated as being owned by any other Person pursuant to the so-called safe harbor
lease provisions of former Section 168(f)(8) of the Code; (B) "tax-exempt use
property" within the meaning of Section 168(h) of the Code; or (C) property that
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(h) SECTION 481 ADJUSTMENTS, ETC. Except as disclosed in Schedule 4.17(h),
(i) there are no outstanding material adjustments under Section 481 of the Code
or other similar adjustments as a result of changes in methods of accounting
applicable to the Company or any of its Subsidiaries, (ii) there are no Tax
rulings, requests for rulings or closing agreements relating to the Company or
any of its Subsidiaries which would be reasonably expected to affect its
liability for Taxes for any period after the Closing and (iii) none of the
assets of the Company or any of its Subsidiaries are subject to any Tax liens
(other than liens for Taxes which are not yet due and payable).
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4.18 AFFILIATED TRANSACTIONS. Except as disclosed in the Company Reports
filed prior to the date hereof or as contemplated by this Agreement, there are
no contracts, leases, agreements or understandings, whether written or oral,
with or on behalf of any Affiliate of the Company, to which the Company or any
of its Subsidiaries is a party or is otherwise bound which would be required to
be described in a report or schedule filed with the SEC or filed as an exhibit
thereto pursuant to the Exchange Act and the applicable rules and regulations
thereunder, other than contracts, leases, agreements or understandings which are
not, singly or in the aggregate material to the Company and its Subsidiaries,
taken as a whole, or which have been disclosed in writing to Parent.
4.19 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth on Schedule
4.19:
(a) The Company and its Subsidiaries are in material compliance with all
Federal, State and local United States Environmental Laws and to the Company's
knowledge it is materially in compliance with all foreign Environmental Laws,
including, without limitation, all Permits required thereunder to conduct their
business as currently being conducted or proposed to be conducted.
(b) There are no material Environmental Claims pending or to the knowledge
of the Company threatened against the Company or any of its Subsidiaries, nor
have any of them received any written notification nor does the Company
otherwise have any knowledge, of any allegation of any actual, or potential
responsibility for, or any inquiry or investigation regarding, any disposal,
release or threatened release at any location of any Hazardous Substance
generated or transported by the Company or any of its Subsidiaries.
(c) (i) No underground tank or other underground storage receptacle for
Hazardous Substances is currently located on any Facility and (ii) to the
knowledge of the Company there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing, or dumping) of Hazardous Substances
on, upon or into any Facility other than those authorized by Environmental Laws
including, without limitation, the Permits required thereunder, except in the
case of clause (i) or (ii) as would not individually or in the aggregate have a
Material Adverse Effect on the Company.
(d) Except as would not have a Material Adverse Effect on the Company, there
are no PCBs or asbestos-containing materials located at or on any Facility.
(e) Neither Company nor any of its Subsidiaries is a party, whether as a
direct signatory or as successor, assign or third-party beneficiary, or
otherwise bound, to any Lease or other Contract under which the Company or its
Subsidiaries are obligated by any representation, warranty, indemnification,
covenant, restriction or other undertaking concerning Environmental Conditions
or compliance with Environmental Laws.
(f) True and correct copies of the Environmental Reports, as well as all
other written environmental reports, audits or assessments which have been
conducted either by the Company or its Subsidiaries or any Person engaged by the
Company or its Subsidiaries for such purpose, at any current or former
Facilities have been made available to Parent and a list of all such reports,
audits and assessments is set forth on Schedule 4.19(f).
4.20 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of
Deutsche Bank Securities Inc., dated the date of this Agreement, to the effect
that, as of such date, the Cash Merger Consideration to be received in
connection with the Merger by the holders of Company Common Stock is fair to
such holders from a financial point of view, a signed copy of which opinion has
been delivered to Parent.
4.21 BOARD RECOMMENDATION. The Board of Directors of the Company, at a
meeting duly called and held, has by unanimous vote (i) declared the
advisability of this Agreement and the Amendment, determined that this Agreement
and the transactions contemplated hereby, including the Merger, taken
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together are fair to and in the best interests of the stockholders of the
Company and (ii) resolved to recommend that the holders of Company Common Stock
adopt this Agreement and approve the Amendment.
4.22 REQUIRED COMPANY VOTE. There are no votes of the holders of any class
or series of the Company's securities necessary to approve this Agreement, the
Merger, the Amendment and the other transactions contemplated hereby other than
the Requisite Stockholder Vote.
4.23 PROXY STATEMENT; SCHEDULE 13E-3. The Proxy Statement to be mailed to
the Stockholders in connection with the special meeting of the Stockholders (the
"SPECIAL MEETING") and the Schedule 13E-3, and any amendment thereof or
supplement thereto (excluding any information supplied in writing by Parent or
Sub specifically for inclusion therein), when, in the case of the Proxy
Statement, mailed and at the time of the Special Meeting, and in the case of the
Schedule 13E-3, when filed, shall 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, in light of the circumstances under
which they were made, not false or misleading, and shall comply with all
requirements of the Exchange Act. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information furnished in
writing by Parent or Sub or its representatives specifically for inclusion in
any of the foregoing documents.
4.24 INVENTORY. Except as provided for or reserved against on the
Company's consolidated balance sheet, dated as of August 28, 1999, the finished
product Inventory of the Company and its Subsidiaries is merchantable and fit
for the use for which it was procured or manufactured and legally qualified for
export and sale, and all other Inventory of the Company and its Subsidiaries is
in good and usable condition. Except as set forth in Schedule 4.24, all
Inventory of the Company and its Subsidiaries is in good and marketable
condition and salable in the normal course of the business of the Company or its
Subsidiaries. The Inventory of the Company and its Subsidiaries (excluding
inventory of raw materials) is sufficient for and not materially or
substantially in excess of the requirements of the business of the Company and
its Subsidiaries.
4.25 CUSTOMERS. The Company has not received any notice nor has any reason
to believe that any material customer of the Company or its Subsidiaries (i) has
ceased, or will cease, to purchase or will significantly reduce its purchases,
in the aggregate, from the Company or its Subsidiaries, (ii) has reduced, or
will reduce, its use of products or goods of the Company or its Subsidiaries or
(iii) has sought, or is seeking, to reduce the price it will pay for products or
goods of the Company or its Subsidiaries, such as would in the case of clauses
(i), (ii) and (iii), individually or in the aggregate, have a Material Adverse
Effect. To the Company's knowledge the rate of return of products of the Company
or any of its Subsidiaries sold prior to or following the Effective Time by any
customer of the Company or its Subsidiaries is not expected to be materially
greater than the rate of return of products experienced by the Company and its
Subsidiaries for the past three years.
4.26 AVAILABLE FUNDS. The Company has, or will have immediately prior to
the Closing, sufficient funds available, which when added to the Cash
Contribution Amount, will permit the Company to perform its obligations under
SECTION 3.4(a).
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
As an inducement to the Company to enter into this Agreement, Parent and Sub
hereby, jointly and severally, make the following representations and warranties
as of the date hereof and as of the Closing Date to the Company:
5.1 ORGANIZATION, ETC.
(a) Sub is duly organized, validly existing and in good standing under the
laws of the state of Delaware. Sub has been formed for the purpose of effecting
the Merger, has no commitments or
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obligations other than those relating thereto and its obligations under this
Agreement, does not conduct any business and has no assets or liabilities.
(b) Parent is duly organized, validly existing and in good standing under
the laws of the Kingdom of Sweden and has full corporate power and authority to
conduct its business as it is presently being conducted and to own and lease its
Assets. Parent is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which such qualification is necessary
under applicable law except where the failure to be so qualified and in good
standing would not reasonably be expected to have a Material Adverse Effect on
the Parent.
5.2 AUTHORIZATION.
(a) Sub has all necessary corporate power and authority to, and has taken
all corporate action necessary on its part to, execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Sub and is a legal, valid and binding
obligation of Sub, enforceable against Sub in accordance with its terms, except
as the enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in
effect which affect the enforcement of creditors' rights generally or (b)
general principles of equity, whether considered in a proceeding at law or in
equity.
(b) Parent has all necessary corporate power and authority to execute and
deliver this Agreement and each of the Shareholders' Agreement and the Stock
Purchase Agreement and all agreements and documents contemplated hereby and
thereby. The consummation by the Parent of the transactions contemplated hereby
and thereby have been duly authorized by all requisite corporate action. This
Agreement, the Shareholders' Agreement and the Stock Purchase Agreement have
each been duly authorized, executed and delivered by the Parent and are each
legal, valid and binding obligations of the Parent, enforceable against the
Parent in accordance with their respective terms, except as the enforceability
thereof may be limited by (a) applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally or (b) general principles of equity,
whether considered in a proceeding at law or in equity.
5.3 CONSENTS AND APPROVALS. No consent, waiver, agreement, approval,
Permit or authorization of, or declaration, filing, notice or registration to or
with, any federal, state, local or foreign governmental or regulatory authority
or body is required to be made or obtained by Parent or Sub in connection with
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby other than any Regulatory Filings and
pursuant to the DGCL.
5.4 NO CONFLICT OR VIOLATION. Neither the execution, delivery and
performance of this Agreement, the Shareholders' Agreement or the Stock Purchase
Agreement nor the consummation of the transactions contemplated hereby or, by
Parent or Sub will result in (a) a violation of or a conflict with any provision
of the certificate of incorporation or by-laws of Parent or Sub, or (b) a breach
of, or a default under, or the creation of any right of any party to accelerate,
terminate or cancel pursuant to (including, without limitation, by reason of the
failure to obtain a consent or approval under any such contract), any term or
provision of any contract, encumbrance or permit to which Parent or Sub is a
party or by which any of its assets are bound, which breach, default or creation
of any such right would reasonably be expected to have a Material Adverse Effect
on Parent or Sub.
5.5 PROXY STATEMENT. The information concerning Parent or Sub, their
officers, directors, employees and stockholders furnished in writing to the
Company by Parent or Sub specifically for use in the Proxy Statement will not,
when mailed to the Stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, Parent and Sub make no representation
or warranty
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with respect to any information supplied by the Company or any of its
representatives which is contained in or incorporated by reference in any of the
foregoing documents.
5.6 FINANCING. Parent has, or will have immediately prior to the Closing
and the closing under the Stock Purchase Agreement, sufficient funds to perform
its obligations hereunder and thereunder.
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ARTICLE VI.
COVENANTS OF THE COMPANY, PARENT AND SUB
The Company, Parent and Sub covenant and agree with each other that from the
date hereof through the Closing:
6.1 MAINTENANCE OF BUSINESS PRIOR TO CLOSING.
(a) Prior to the Effective Time, except as set forth in SECTION 6.1 of the
Disclosure Schedule or as contemplated by any other provision of this Agreement,
unless Parent has consented in writing thereto, the Company:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations and business according to their usual, regular and ordinary
course consistent with past practice;
(ii) shall use its reasonable best efforts, and shall cause each of its
Subsidiaries to use reasonable efforts, to preserve intact their business
organizations and goodwill, keep available the services of their respective
officers and employees and maintain satisfactory relationships with
suppliers, distributors, customers and other Persons having business
relationships with them;
(iii) shall not, and shall cause its Subsidiaries not to, amend their
respective certificates of incorporation or by-laws or comparable governing
instruments, other than as expressly provided by the terms of this
Agreement;
(iv) shall promptly notify Parent of (i) any Material Adverse Change in
the Company and will confer on a regular and frequent basis with
representatives of Parent to report on the status of operations, (ii) any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated),
or (iii) the material breach of any representation or warranty contained
herein;
(v) shall promptly deliver to Parent correct and complete copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(vi) shall not, and shall not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or
business combination (other than the Merger), release or relinquishment of
any material contract rights, or any acquisition or disposition of Assets or
securities;
(vii) shall not, and shall not permit any of its Subsidiaries to grant,
confer or award any options, warrants, conversion rights or other rights or
Equity Securities (other than Company Common Stock issued upon exercise of
Options in accordance with their terms) not existing on the date hereof;
(viii) except to the extent necessary to conform to changed laws or
regulations, shall not, and shall not permit any of its Subsidiaries to,
amend the terms of any Employee Plan, including, without limitation, any
employment, severance or similar agreements or arrangements in existence on
the date hereof, or adopt any new employee benefit plans, programs or
arrangements or any employment, severance or similar agreements or
arrangements;
(ix) shall not, and shall not permit any of its Subsidiaries to, (i)
increase or agree to increase the compensation payable or to become payable
to its officers or, other than increases in accordance with past practice
which are not material, to its employees or (ii) enter into any collective
bargaining agreement;
(x) shall not, and shall not permit any of its Subsidiaries to, (i)
incur, create, assume or otherwise become liable for borrowed money or
assume, guarantee, endorse or otherwise become responsible or liable for the
obligations of any other individual, corporation or other entity or (ii)
make any loans or advances to any other Person, except (x) borrowings
between the Company and its consolidated
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Subsidiaries; (y) in the case of clause (i) for borrowings under existing
credit facilities in the ordinary course of business and borrowings of up to
$65 million under new credit facilities in connection with consummation of
the Merger (pursuant to which the Company and its Subsidiaries shall be
permitted to grant a security interest in their Assets, including with
respect to the Company's headquarters at 387 Park Avenue South); and (z) in
the case of clause (ii) for advances consistent with past practice in the
ordinary course of business which are not material;
(xi) shall not, and shall not permit any of its Subsidiaries to, (i)
materially change any practice with respect to Taxes, (ii) make, change or
revoke any material Tax election, (iii) settle or compromise any material
dispute involving a Tax liability or (iv) permit any material insurance
policy naming it as a beneficiary or a loss payable payee to be canceled or
terminated;
(xii) shall not, and shall not permit any of its Subsidiaries to, (i)
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests, (ii) directly or indirectly redeem, purchase or otherwise acquire
any shares of its capital stock or capital stock of any of its Subsidiaries,
or make any commitment for any such action or (iii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for share
of its capital stock;
(xiii) shall not, and shall not permit any of its Subsidiaries to,
issue, deliver, sell, pledge or otherwise encumber any of its Equity
Securities (other than the issuance of Company Common Stock upon the
exercise of Options);
(xiv) shall not, and shall not permit any of its Subsidiaries to, make
or agree to make any capital expenditure that when added with all capital
expenditures since December 1, 1999 would exceed in the aggregate $3
million;
(xv) shall not, and shall not permit any of its Subsidiaries to, change
any accounting principles or practices, except to the extent necessary to
conform to changed laws or regulations;
(xvi) shall not, and shall not permit any of its Subsidiaries to, pay,
discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Company Reports or incurred thereafter in the ordinary course of business
consistent with past practice, or waive any benefits of, or agree to modify
in any respect, any confidentiality, standstill, non-solicitation or similar
agreement to which the Company or any Subsidiary is a party;
(xvii) shall not (i) acquire (by merger, consolidation, acquisition of
stock, other securities or assets or otherwise), (ii) make a capital
investment in (whether through the acquisition of an equity interest, the
making of a loan or advance or otherwise) or (iii) guarantee indebtedness
for borrowed money of, (A) any Person or (B) any portion of the assets of
any Person that constitutes a division or operating unit of such Person;
(xviii) shall not, and shall not permit any of its Subsidiaries (x) to
settle or compromise any pending or threatened suit, action or claim related
to tobacco or (y) to settle or compromise any other pending or threatened
suit, action or claim in which the amount involved is greater than $100,000
or which is material to the Company and its Subsidiaries taken as a whole or
which relates to the transactions contemplated hereby, or (z) to modify,
amend or terminate any material Company Contract or waive, release or assign
any material right or claim;
(xix) shall not, and shall not permit any of its Subsidiaries, to fail
to pay its trade payables or to maintain its Inventory in the ordinary
course of business consistent with past practices; and
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(xx) shall not, and shall not permit any of its Subsidiaries to take, or
agree (in writing or otherwise) or resolve to take, any of the foregoing
actions.
(b) Prior to the Effective Time, unless Company has consented in writing
thereto, Sub shall not, and Parent shall not cause Sub to, engage in any
activities of any nature except as provided in or contemplated by this
Agreement.
6.2 INVESTIGATION BY PARENT AND SUB. The Company shall allow Parent, Sub,
and their counsel, accountants and other representatives during regular business
hours upon reasonable notice, to make such reasonable inspection of the Assets,
Facilities, business and operations of the Company and its Subsidiaries and to
inspect and make copies of Contracts, books and records and all other documents
and information reasonably requested by Parent and related to the operations and
business of the Company and its Subsidiaries including, without limitation,
historical financial information concerning the business of the Company and its
Subsidiaries and to meet with designated Personnel of the Company or its
Subsidiaries and/or their representatives. The Company and its Subsidiaries
shall furnish to Parent promptly upon request (a) all additional documents and
information with respect to the affairs of the Company and its Subsidiaries
relating to their businesses and (b) access to the Personnel and to the
Company's and its Subsidiaries' accountants and counsel as Parent, or its
counsel or accountants, may from time to time reasonably request and the Company
and its Subsidiaries shall instruct their Personnel, accountants and counsel to
cooperate with Parent, and to provide such documents and information as Parent
and its representatives may reasonably request. Parent and Sub will hold, and
will use reasonable best efforts to cause their counsel, accountants and other
representatives to hold all documents and information in confidence to the
extent required by, and in accordance with, that certain confidentiality letter,
dated December 6, 1999, between the Company and Parent (the "CONFIDENTIALITY
LETTER").
6.3 CONSENTS AND EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to (A) promptly make its respective
filings under the HSR Act with respect to the Merger and (B) use its
commercially 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 and make effective, in the most expeditious manner
practicable, the Merger, the Stock Purchase and the other transactions
contemplated by this Agreement. Parent, Sub and the Company will use their
reasonable best efforts and cooperate with one another (i) in promptly
determining whether any filings are required to be made or consents, approvals,
waivers, licenses, permits or authorizations are required to be obtained (or,
which if not obtained, would result in an event of default, termination or
acceleration of any agreement or any put right under any agreement) under any
applicable law or regulation or from any governmental authorities or third
parties, including parties to loan agreements or other debt instruments, in
connection with the transactions contemplated by this Agreement, including the
Merger and the Stock Purchase, and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits or authorizations.
(b) Each of the parties agrees to cooperate with each other in taking, or
causing to be taken, all actions necessary to delist the Company Common Stock
from the NYSE, PROVIDED, that such delisting shall not be effective until after
the Effective Time. The parties also acknowledge that the common stock of the
Surviving Corporation following the Merger will not be listed on any national
securities exchange or quoted on the NASDAQ Stock Market Inc.'s National Market.
6.4 OTHER OFFERS. Neither the Company nor any of its Subsidiaries shall
(whether directly or indirectly through advisors, agents or other
intermediaries), nor shall the Company or any of its Subsidiaries authorize or
permit any of its or their officers, directors, agents, representatives,
advisors or Subsidiaries to, (x) solicit, initiate or take any action knowingly
to facilitate the submission of inquiries, proposals or offers from any Person
or group, other than Parent and its representatives and Affiliates, relating to
(i) any
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acquisition or purchase of a material portion of the assets or any Equity
Securities of the Company, (ii) any tender offer (including a self tender offer)
or exchange offer that if consummated would result in any Person beneficially
owning any Equity Securities of the Company, (iii) any merger, consolidation,
recapitalization, sale of all or substantially all of the assets, liquidation,
dissolution or similar transaction involving the Company or any of its
Subsidiaries whose assets, individually or in the aggregate, constitute a
material portion of the Assets other than the transactions contemplated by this
Agreement or (iv) any other transaction the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Merger or which could reasonably be expected to materially dilute the
benefits to Parent of the transactions contemplated hereby (each such
transaction being referred to herein as an "ACQUISITION PROPOSAL"), or agree to
or endorse any Acquisition Proposal, (y) continue, enter into or participate in,
any discussions or negotiations with, furnish any information to any Person
(other than Parent and its representatives and Affiliates) in connection with,
or otherwise knowingly take any other action to facilitate or encourage any
effort or attempt by, any Person (other than Parent and its representatives and
Affiliates) to make, an Acquisition Proposal or, (z) grant any waiver or release
under any standstill or similar agreement with respect to any Equity Securities
of the Company or any of its Subsidiaries; PROVIDED, HOWEVER, that the foregoing
shall not prohibit the Company (either directly or indirectly through advisors,
agents or other intermediaries), prior to a shareholder vote at the Special
Meeting, in connection with the Merger from (i) furnishing information pursuant
to an appropriate confidentiality letter (which letter shall not be less
favorable to the Company in any material respect than the Confidentiality
Letter, and a copy of which shall be provided for informational purposes only to
Parent) concerning the Company and its businesses, properties or Assets to any
Person or group, (a "THIRD PARTY") who has made a bona fide Acquisition
Proposal, (ii) engaging in discussions or negotiations with a Third Party who
has made a bona fide Acquisition Proposal, (iii) taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act or
otherwise making disclosure to its stockholders, or (iv) taking any
non-appealable, final action ordered to be taken by the Company by any court of
competent jurisdiction, but in each case referred to in the foregoing clauses
(i) through (iii), only to the extent that the Board of Directors of the Company
shall have concluded in good faith, upon the recommendation of the Special
Committee of the Board of Directors of the Company (the "SPECIAL COMMITTEE"),
that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposal and the Person or entity making the proposal and would, if
consummated, result in a transaction that is more favorable to the stockholders
of the Company (other than the C&E Shareholders) than the transaction
contemplated by this Agreement; PROVIDED, FURTHER, that the Board of Directors
of the Company shall not take any of the foregoing actions referred to in
clauses (i) through (iii) until after giving 72 hours' notice to Parent with
respect to its intent to take such action and informing Parent of the terms and
conditions of such proposal and the identity of the Person making it and
providing Parent with a copy of any such proposal in writing. The Company shall,
at all times, promptly inform Parent of the status and terms of any discussions
regarding any Acquisition Proposal with any other Person.
6.5 MEETING OF STOCKHOLDERS. The Company shall take all action necessary
in accordance with applicable law and its certificate of incorporation and
by-laws, including the timely mailing of the Proxy Statement, to convene the
Special Meeting as promptly as practicable to consider and vote upon the
approval and adoption of this Agreement and the approval of the Amendment. The
Board of Directors of the Company shall recommend such approval, shall not
withdraw or modify such recommendation and shall take all lawful action to
solicit such approval; PROVIDED that the Board of Directors of the Company may
fail to make or withdraw or modify such recommendation, but only to the extent
that the Board of Directors of the Company, upon the recommendation of the
Special Committee, shall have concluded in good faith after consultation with
outside counsel that such action is required to prevent the Board of Directors
of the Company from breaching its fiduciary duties to the stockholders of the
Company under applicable law (including but not limited to the circumstances
contemplated by the proviso of Section 6.4). Without limiting the generality of
the foregoing, in the event that the Board of Directors of the Company
27
<PAGE>
withdraws or modifies its recommendation, the Company nonetheless shall cause
the Special Meeting to be convened and a vote taken with respect to this
Agreement, the Merger and the Amendment.
6.6 PROXY STATEMENT.
(a) Parent and the Company shall cooperate and prepare, and the Company
shall file with the SEC as soon as practicable, a proxy statement with respect
to the Special Meeting of the Stockholders in connection with the Merger (the
"PROXY STATEMENT"), respond to comments of the staff of the SEC, clear the Proxy
Statement with the staff of the SEC and promptly thereafter mail the Proxy
Statement to all holders of record of Company Common Stock. The Company shall
comply in all respect with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the SEC thereunder applicable to
the Proxy Statement and the solicitation of proxies for the Special Meeting
(including any requirement to amend or supplement the Proxy Statement) and each
party shall furnish to the other such information relating to it and its
Affiliates and the transactions contemplated by this Agreement and such further
and supplemental information as may be reasonably requested by the other party.
The Proxy Statement shall include the recommendation of the Company's Board of
Directors in favor of the Merger, unless otherwise required by the fiduciary
duties of the directors under applicable law as contemplated hereby.
(b) No amendment or supplement to the Proxy Statement shall be made by the
Company without the approval of Parent which approval shall not be unreasonably
withheld or delayed. The Company shall advise Parent of any comments (whether
written or oral) and any requests by the SEC relating to the Proxy Statement,
including any requests for additional information or for the amendment of such
statement. In addition, the Company shall furnish Parent with any written
comments and summaries of oral comments of the SEC relating to the Proxy
Statement and all requests by the SEC for additional information or the
amendment of such statement, and shall, prior to furnishing to the SEC any
responses to such comments or requests, consult with Parent and its advisors.
6.7 DIRECTOR AND OFFICER LIABILITY.
(a) For a period of six years after the Effective Time, the Surviving
Corporation and the Parent shall jointly and severally indemnify and hold
harmless the present and former officers and directors of the Company in respect
of acts or omissions occurring prior to the Effective Time to the extent
provided under the Company's certificate of incorporation and by-laws in effect
on the date hereof; PROVIDED that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. To the maximum extent
permitted by the DGCL, such indemnification shall be mandatory rather than
permissive and the Surviving Corporation shall advance expenses in connection
with such indemnification. The by-laws of the Surviving Corporation shall
contain provisions substantially similar in terms of the rights granted to the
provisions with respect to indemnification and insurance set forth in the
Company's certificate of incorporation, which provisions shall not be amended in
any manner that would adversely affect the rights under those by-laws of the
Company's employees, agents, directors or officers for acts or omissions on or
prior to the Effective Time, except if such amendment is required by law. For a
period of six years after the Effective Time, Parent will cause the Surviving
Corporation to use its reasonable best efforts to provide officers' and
directors' liability insurance in respect of acts or omissions occurring prior
to the Effective Time covering each such 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 that in satisfying its obligation under this
Section 6.7, the Surviving Corporation shall not be required to pay premiums in
excess of 125% of the amount per annum the Company paid in its last full fiscal
year.
(b) In furtherance of and not in limitation of the preceding paragraph, the
officers and directors of the Company that are defendants in all litigation
commenced by stockholders of the Company with respect to (x) the performance of
their duties as such officers and/or directors under federal or state law
(including litigation under federal and state securities laws) and (y) the
Merger, including, without limitation, any and
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<PAGE>
all such litigation commenced on or after the date of this Agreement (the
"SUBJECT LITIGATION") shall be entitled to be represented, at the reasonable
expense of the Company or the Surviving Corporation, in the Subject Litigation
by one counsel (and Delaware counsel if appropriate and one local counsel in
each jurisdiction in which a case is pending) each of which such counsel shall
be selected by a plurality of such director defendants; PROVIDED that Company or
the Surviving Corporation shall not be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and that a condition to the indemnification payments provided in
Section 6.8(a) shall be that such officer/ director defendant not have settled
any Subject Litigation without the consent of the Company or the Surviving
Corporation (such consent not to be unreasonably withheld) and, prior to the
Closing, Parent; and PROVIDED FURTHER that neither the Company nor the Surviving
Corporation shall have any obligation hereunder to any officer/director
defendant when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and non-appealable,
that indemnification of such officer/director defendant in the manner
contemplated hereby is prohibited by applicable law.
(c) In the event 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 all or substantially all of its properties and assets
to any Person, then, and in each such case, proper provisions shall be made so
that the successors and assigns of the Surviving Corporation shall assume its
obligations set forth in this Section 6.8.
6.8 NOTICES OF CERTAIN EVENTS. Each of the Company and Parent shall
promptly notify the other party 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 or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement; and
(c) with respect to the Company, any Actions commenced or, to the best of
its knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any Subsidiary which, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Section
4.12 or which relate to the consummation of the transactions contemplated by
this Agreement.
6.9 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 Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
the Company or Sub, 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.
6.10 CASH CONTRIBUTION. Prior to the Effective Time, Parent will make a
cash equity contribution to Sub in the amount of $117.5 million (the "CASH
CONTRIBUTION AMOUNT") and Parent will ensure that Sub will have no outstanding
liabilities as of the Effective Time and no Assets other than the Cash
Contribution Amount. Prior to the Effective Time, the Company will take such
actions as are required to have sufficient funds available (including through
borrowings of up to $65 million under existing credit facilities or credit
facilities entered into with the approval of Parent) to permit, taking into
account the Cash Contribution Amount, the Company to perform its obligations
under Section 3.4(a).
29
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ARTICLE VII.
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
Company, on the one hand, and Parent and Sub on the other hand, to consummate
the transactions contemplated hereby on the Closing Date are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
(a) The Requisite Stockholder Approval shall have been obtained;
(b) The Amendment shall have been filed with the Delaware Secretary of
State;
(c) All consents, approvals and licenses of any governmental or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement, and for the Surviving Corporation to conduct the
business of the Company in substantially the manner now conducted, shall have
been obtained, unless the failure to obtain such consents, authorizations,
orders or approvals would not, individually or in the aggregate, have a Material
Adverse Effect on the Company after giving effect to the transactions
contemplated by this Agreement;
(d) Any applicable waiting period under the HSR Act relating to the Merger
shall have expired or been terminated; and
(e) No provision of any applicable law or regulation and no judgment, order,
decree or injunction shall prohibit or restrain the consummation of the Merger
or make such consummation illegal.
7.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the transactions contemplated hereby on the Closing Date
are subject, in the sole discretion of the Company, to the satisfaction, on or
prior to the Closing Date, of the following additional conditions, which may be
waived by the Company in accordance with Section 8.4: (a) all representations
and warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects at and as of the Closing Date, as if such
representations and warranties were made at and as of the Closing Date (except
to the extent that any such representations and warranties were made as of a
specified date, which representations and warranties shall continue on the
Closing Date to be true as of such specified date), (b) Parent and Sub shall
each have performed in all material respects all obligations arising under the
agreements and covenants required hereby to be performed by it prior to or on
the Closing Date, (c) Parent shall have performed its obligations under the
Stock Purchase Agreement and (d) the Company shall have received, at or prior to
the Closing, a certificate executed by the President of each of Parent and Sub
certifying that, as of the Closing Date, the conditions set forth in Section
7.2(a), (b) and (c) have been satisfied.
7.3 CONDITIONS TO THE OBLIGATIONS OF PARENT AND SUB. The obligations of
Parent and Sub to consummate the transactions contemplated hereby on the Closing
Date are subject, in the sole discretion of Parent, to the satisfaction, on or
prior to the Closing Date, of each of the following additional conditions, any
of which may be waived by Parent in accordance with Section 8.4:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS.
(i) All representations and warranties of the Company contained in this
Agreement shall be true and correct at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date
(except to the extent that any such representations and warranties were made
as of a specified date, such representations and warranties shall continue
on the Closing Date to have been true in all material respects as of such
specified date), except where the untruth or incorrectness of such
representations and warranties would not, singly or in the aggregate, have a
Material Adverse Effect on the Company. For purposes of this Section
7.3(a)(i), the representations and warranties of the Company contained in
this Agreement shall be deemed to have been made without any
30
<PAGE>
qualification as to knowledge or materiality and, accordingly, all
references in such representations and warranties to "material," "Material
Adverse Effect," "in all material respects," "Material Adverse Change,"
"knowledge" and similar terms and phrases (including, without limitation,
references to the dollar thresholds therein) shall be deemed to be deleted
therefrom, PROVIDED that the foregoing clause shall not apply solely for the
purpose of determining the truth and correctness of the lists set forth in
certain informational representations and warranties that require disclosure
of lists of items of a material nature or above a specified threshold.
(ii) The Company shall have performed in all material respects all
obligations arising under the agreements and covenants required hereby to be
performed by it prior to or on the Closing Date.
(iii) The C&E Stockholders shall have performed their obligations under
the Stock Purchase Agreement and shall have performed any obligations under
the Shareholders' Agreement required to be performed on the Closing Date.
(iv) Sub shall have received, at or prior to the Closing, a certificate
executed by the President and the Chief Financial Officer of the Company
certifying that, as of the Closing Date, the conditions set forth in
Sections 7.3(a) and (b) have been satisfied.
(b) The Company shall have received, and provided Parent with copies of, the
resignations of certain directors, and the Board of Directors shall have elected
certain persons designated by Parent (and Parent shall have been provided with
resolutions confirming such election), such that at the Effective Time, the
Board of Directors of the Company shall consist of the directors identified in
Schedule II to the Shareholders' Agreement.
31
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ARTICLE VIII.
MISCELLANEOUS
8.1 TERMINATION.
(a) TERMINATION. This Agreement may be terminated prior to the Effective
Time as follows (notwithstanding any adoption of this Agreement by the
stockholders of the Company):
(i) by mutual written consent of Parent and the Company at any time;
(ii) by Parent or the Company if the Closing shall not have occurred
on or before December 31, 2000, provided that the party seeking to
exercise such right is not then in breach in any material respect of any
of its obligations under this Agreement;
(iii) by either the Company or Parent, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Sub
or the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and non-appealable; or
(iv) by either the Company or Parent if, at the Special Meeting the
Required Stockholder Approval shall not have been obtained.
The party desiring to terminate this Agreement pursuant to Sections
8.1(a)(ii)-(iv) shall give written notice of such termination to the other party
in accordance with Section 8.3.
(b) EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto or such party's officers,
directors, employees or representatives, except (i) that the agreements
contained in Sections 6.2, 8.8 and 8.13 hereof shall survive the termination
hereof and (ii) nothing herein shall relieve any party from liability for
any breach of this Agreement.
(c) PROCEDURE UPON TERMINATION. In the event of termination of this
Agreement pursuant to Section 8.1:
(i) Each party shall redeliver all documents, work papers and other
material of any other party and any and all copies thereof relating to
the transactions contemplated hereby, whether obtained before or after
the execution hereof, to the party furnishing the same;
(ii) No confidential information received by any party with respect
to the business of any other party or its Affiliates shall be disclosed
to any third party, unless required by law; and
(iii) The Confidentiality Letter shall survive in accordance with its
terms.
8.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned, in whole or in part, by operation of law
or otherwise by any party without the prior written consent of all other parties
to this Agreement, PROVIDED that the Parent shall be entitled to assign its
rights and obligations under this Agreement to any Subsidiary of Parent,
PROVIDED FURTHER that in such event Parent remains liable for all of the
obligations of such Subsidiary hereunder. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, and, with respect to the provisions
of Article III and Section 6.7 hereof, shall inure to the benefit of the persons
or entities benefiting from the provisions thereof who are intended to be
third-party beneficiaries thereof, and no other Person shall have any right,
benefit or obligation hereunder.
8.3 NOTICES. All notices, requests, demands and other communications which
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received, if personally delivered; when
transmitted, if transmitted by telecopy, upon receipt of telephonic or
electronic confirmation; the day after it is sent, if sent for next day delivery
to a domestic address by
32
<PAGE>
recognized overnight delivery service (e.g., Federal Express); and upon receipt,
if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to the Company, addressed to:
General Cigar Holdings, Inc.
387 Park Avenue South
New York, New York 10016
Attention: Chief Executive Officer
Telecopy: (212) 561-8791
With a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Attention: R. Ronald Hopkinson, Esq.
Telecopy: (212) 751-4864
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Elliott Stein, Esq.
Telecopy: (212) 403-2000
If to Parent or Sub, addressed to:
Swedish Match AB
SE--118 85 Stockholm
Sweden
Attention: Senior Vice President and Legal Counsel
Telecopy: (46-8) 720-7656
With a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, NY 10022
Attention: Paul S. Bird, Esq.
Telecopy: (212) 909-6836
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
8.4 ENTIRE AGREEMENT; WAIVERS. This Agreement, together with all exhibits
and schedules hereto (including, without limitation, the Disclosure Schedule),
and the other agreements referred to herein, constitute the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided. The Confidentiality Letter shall terminate
at the Effective Time.
33
<PAGE>
8.5 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.6 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
8.7 TITLES. The titles, captions or headings of the Articles and Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
8.8 FEES AND EXPENSES. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
Transfer taxes, sales taxes, stamp taxes and other similar taxes (including real
property transfer taxes) directly or indirectly incurred as a result of the
transactions contemplated by this Agreement, including such taxes that would not
have been imposed but for such transactions, shall be paid by the Company.
8.9 CUMULATIVE REMEDIES. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
8.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
8.11 AMENDMENT. This Agreement may be amended by the parties hereto at any
time by action of their respective boards of directors (provided that such
action by the Company shall also require approval by the Special Committee)
before or after approval of matters presented in connection with the Merger by
the stockholders of the Company, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto shall terminate at the Effective Time.
8.12 PUBLIC ANNOUNCEMENTS. Neither Parent or Sub, on the one hand, nor the
Company, on the other hand, will issue any press release or public statement
with respect to the transactions contemplated by this Agreement, including the
Merger, without the other party's prior consent (such consent not to be
unreasonably withheld or delayed), except as may be required by applicable law,
court process or the listing requirements of NYSE. In addition to the foregoing,
Parent and Sub and the Company will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any such press
release or other public statements with respect to such transactions. The
parties agree that the initial press release or releases to be issued with
respect to the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.14 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES. The representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate at the Effective Time.
34
<PAGE>
8.15 INTERPRETIVE PROVISIONS.
(a) The words "hereof," "herein," "hereby" and "hereunder" and words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
GENERAL CIGAR HOLDINGS, INC.
By: /s/ Edgar M. Coleman, Jr.
------------------------------------
Name:
Title:
SWEDISH MATCH AB
By: /s/ Massimo Rossi
------------------------------------
Name:
Title:
SM MERGER CORPORATION
By: Massimo Rossi
------------------------------------
Name:
Title:
35
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GENERAL CIGAR HOLDINGS, INC.
GENERAL CIGAR HOLDINGS, INC., a corporation duly organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify that:
1. The Amended and Restated Certificate of Incorporation of the Corporation
is hereby amended by deleting Subsection (b)(4) of Article Fourth thereof and
inserting the following in lieu thereof:
"In the event of any corporate merger, consolidation, purchase or
acquisition of property or stock, or other reorganization other than the
merger contemplated by the Merger Agreement dated January 19, 2000 by and
among GENERAL CIGAR HOLDINGS, INC., SWEDISH MATCH AB and SM Merger
CORPORATION, as such may be amended from time to time, in which any
consideration is to be received by the holders of shares of Class A Common
Stock or the holders of shares of Class B Common Stock, the holders of
shares of Class A Common Stock and the holders of shares of Class B Common
Stock shall receive the same consideration on a per share basis; provided
that, if such consideration consists in any part of voting securities (or of
options or warrants to purchase or of securities convertible into or
exchangeable for, voting securities), the holders of shares of Class B
Common Stock may receive, on a per share basis, voting securities with ten
(10) times the number of votes per share as those voting securities to be
received by the holders of shares of Class A Common Stock (or options or
warrants to purchase, or securities convertible into or exchangeable for,
voting securities with ten (10) times the number of votes per share as those
voting securities issuable upon exercise of the options or warrants to be
received by the holders of the shares of Class A Common Stock, or into which
the convertible or exchangeable securities to be received by the holders of
the shares of Class A Common Stock may be converted or exchanged)."
2. The foregoing amendment was duly adopted in accordance with the
provisions of Sections 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, GENERAL CIGAR HOLDINGS, INC. has caused this Certificate
to be executed by [NAME], its [OFFICE], on this st day of , .
GENERAL CIGAR HOLDINGS, INC.
By:
------------------------------------
Name:
Office
<PAGE>
EXHIBIT B
SHAREHOLDERS' AGREEMENT
AMONG
SWEDISH MATCH AB,
THE PERSONS LISTED ON THE SIGNATURE PAGES HEREOF,
AND
GENERAL CIGAR HOLDINGS, INC.
DATED AS OF JANUARY 19, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
ARTICLE I
DEFINITIONS................................................................ 2
ARTICLE II
REPRESENTATIONS AND WARRANTIES............................................. 8
Section 2.1. Representations and Warranties of each C&E Shareholder...... 8
Section 2.2. Representations and Warranties of Swedish Match............. 10
ARTICLE III
CORPORATE GOVERNANCE AND MANAGEMENT........................................ 10
Section 3.1. Composition of the Board.................................... 10
Section 3.2. Removal of Directors........................................ 11
Section 3.3. Vacancies................................................... 11
Section 3.4. Meetings of the Board....................................... 12
Section 3.5. Action by the Board......................................... 12
Section 3.6. Executive Officers.......................................... 16
Section 3.7. Conflicting Charter or Bylaw Provision...................... 17
ARTICLE IV
RESTRICTIONS ON TRANSFER................................................... 17
Section 4.1. General..................................................... 17
Section 4.2. Transfers to Permitted Transferees.......................... 17
Section 4.3. Put Right of C&E Shareholders............................... 17
Section 4.4. Call Right of Swedish Match................................. 19
Section 4.5. Designated Purchaser........................................ 22
Section 4.6. Disagreement over Put Price or Call Price................... 22
Section 4.7. Legend...................................................... 23
ARTICLE V
OTHER COVENANTS AND AGREEMENTS............................................. 23
Section 5.1. C&E Representative.......................................... 23
Section 5.2. Confidentiality............................................. 24
Section 5.3. Financial Information and Other Reports..................... 25
Section 5.4. Trust and Security Agreement................................ 26
Section 5.5. Non-Competition; Non-Solicitation........................... 27
Section 5.6. Further Assurances.......................................... 28
ARTICLE VI
MISCELLANEOUS.............................................................. 28
Section 6.1. Effectiveness; Termination.................................. 28
Section 6.2. Governing Law............................................... 28
Section 6.3. Jurisdiction; Waiver of Jury Trial.......................... 28
Section 6.4. Amendment, Waivers, etc..................................... 29
Section 6.5. Assignment; No Third Party Beneficiaries.................... 29
Section 6.6. Notices..................................................... 30
Section 6.7. Remedies.................................................... 31
Section 6.8. Specific Performance........................................ 31
Section 6.9. Severability................................................ 31
Section 6.10. Integration................................................. 31
Section 6.11. Section Headings............................................ 31
Section 6.12. Counterparts................................................ 32
Section 6.13. Indemnity................................................... 32
</TABLE>
<PAGE>
Schedule I: C&E Shareholders
Schedule II: Initial Directors
Exhibit A: Terms of Company Retention and Incentive Plan
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SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT, dated as of January 19, 2000, among Swedish Match
AB, a company organized under the laws of Sweden ("SWEDISH MATCH"), the Persons
listed on the signature pages hereof (the "C&E SHAREHOLDERS"), and General Cigar
Holdings, Inc., a company organized under the laws of the State of Delaware (THE
"COMPANY").
RECITALS
A. Concurrently with the execution and delivery of this Agreement, the
Company, Swedish Match and SM Merger Corporation, a company organized under the
laws of the State of Delaware ("SM ACQUISITION"), are entering into an Agreement
and Plan of Merger, dated as of the date hereof (as the same may from time to
time be modified, supplemented or restated, the "MERGER AGREEMENT"), providing
for the merger of SM Acquisition with and into the Company (the "MERGER") upon
the terms and subject to the conditions set forth therein.
B. Currently with the execution and delivery of this Agreement, (I) the C&E
Shareholders and Swedish Match are entering into a Stock Purchase Agreement,
dated as of the date hereof (as the same may from time to time be modified,
supplemented or restated, the "STOCK PURCHASE AGREEMENT"), providing for the
sale by the C&E Shareholders to Swedish Match of an aggregate of 3,500,000
shares of common stock of the Company upon the terms and subject to the
conditions set forth therein, and (II) the C&E Shareholders and Swedish Match
are entering into a C&E Voting Agreement, dated as of the date hereof (as the
same may from time to time be modified, supplemented or restated, the "C&E
VOTING AGREEMENT"), providing for the voting of shares of the Company by the C&E
Shareholders in favor of the adoption of the Merger Agreement and certain other
matters.
C. Following the Merger, (I) Swedish Match, directly or through a
subsidiary, will own, beneficially and of record, 63.52% of the then outstanding
shares of the common stock, par value $0.01 per share (the "COMMON STOCK"), of
the Company and (II) the C&E Shareholders will own, beneficially and of record,
in the aggregate, 36.48% of the then outstanding shares of Common Stock.
D. The parties hereto desire to enter into this Agreement to govern certain
of their rights, duties and obligations relating to their ownership of stock of
the Company following the Merger. The parties understand and acknowledge that,
except for Article II, this Agreement shall be effective, and the rights and
obligations of the parties under this Agreement shall commence, as of the
Effective Time.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms, as used in this Agreement, have the following meanings:
"ADJUSTED EBITDA" means, for any period, consolidated net income of the
Company for such period, minus (I) net extraordinary or non-recurring or unusual
gains of the Company for such period, plus, without duplication, (II) to the
extent deducted in calculating such consolidated net income, net extraordinary
or non-recurring or unusual losses, net consolidated income tax expense, net
consolidated interest expense, and consolidated depreciation and amortization
expense of the Company for such period, in each case determined in accordance
with GAAP consistently applied; PROVIDED that (A) if, since the beginning of
such period, the Company or any Subsidiary has made a disposition or acquisition
not in the ordinary course of business or undertaken any other material
transaction not in the ordinary course of business, Adjusted EBITDA shall be
calculated after giving pro forma effect to such disposition, acquisition or
other material transaction as if such disposition, acquisition or other material
transaction had taken place on the first day of such period, and (B) no gain or
loss arising, resulting from or related to any investment in or disposition of
bonds issued by the Russian Federation and currently held by the Company shall
be included in the calculation of Adjusted EBITDA.
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"AFFILIATE" means, with respect to any Person, (I) any other Person directly
or indirectly controlling, controlled by or under common control with, such
Person, and (II) if a C&E Shareholder, any Permitted Transferee of such C&E
Shareholder. Control of any Person shall consist of the power to direct the
management and policies of such Person (whether through the ownership of voting
securities, by contract, as trustee or executor or otherwise) and shall be
deemed to exist upon the ownership of securities entitling the holder thereof to
exercise more than 50% of the voting power in the election of directors of such
Person (or other persons or body performing similar functions). For purposes of
this Agreement, neither Swedish Match nor any C&E Shareholder shall constitute
an Affiliate of the Company.
"AFFILIATE AGREEMENT" means any agreement, commitment, understanding or
arrangement between the Company or any Subsidiary, on the one hand, and any
Shareholder or any Affiliate of a Shareholder, on the other hand.
"ANNUAL STATEMENT" has the meaning given in Section 5.3(a).
"ARBITRATOR" has the meaning given in Section 4.6(a).
"AVERAGE ADJUSTED EBITDA" means, as of any date of determination, (I) the
aggregate amount of Adjusted EBITDA for the most recent consecutive
eight-quarter period ending prior to the date of determination for which Annual
Statements or SemiAnnual Statements, as the case may be, are available for the
fiscal year or six-month period ending on the last day of such eight-quarter
period, divided by (II) 2.0.
"BOARD" means the board of directors of the Company immediately following
the Effective Time and at all times thereafter.
"C&E REPRESENTATIVE" has the meaning given in Section 5.1.
"C&E SHARES" means the shares of Common Stock owned from time to time by the
C&E Shareholders.
"C&E SHAREHOLDER" has the meaning given in the Introduction and includes any
Permitted Transferee of a C&E Shareholder that acquires Equity Securities in
accordance with this Agreement.
"C&E VOTING AGREEMENT" has the meaning given in Recital B.
"CALL FORMULA" means, with respect to the exercise of any Call Right, (I)
the Average Adjusted EBITDA for the most recent eight-quarter period ending
prior to the exercise of such Call Right multiplied by 10.0, plus (II) the
amount of cash and cash equivalents of the Company and its Subsidiaries on a
consolidated basis as of the last day of such eight-quarter period, determined
in accordance with GAAP consistently applied, minus (III) Total Debt as of the
last day of such eight-quarter period.
"CALL NOTICE" has the meaning given in Section 4.4(a).
"CALL PRICE" has the meaning given in Section 4.4(c).
"CALL RIGHT" has the meaning given in Section 4.4(a).
"COMMENCEMENT DATE" means (I) June 1, 2000, if the Effective Time occurs on
or prior to such date, (II) December 1, 2000, if the Effective Time occurs on or
prior to such date but after June 1, 2000, and (III) June 1, 2001, if the
Effective Time occurs after December 1, 2000.
"COMMON STOCK" has the meaning given in Recital C, and includes any stock
having ordinary power to vote for election of Directors into which such common
stock may thereafter be converted or exchanged.
"COMPANY" has the meaning given in the Introduction and includes any
successor thereto, whether by merger, consolidation or otherwise.
"DIRECTOR" means a member of the Board.
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"EFFECTIVE TIME" means the effective time of the Merger.
"EQUITY SECURITIES" means (i) shares of capital stock, whether common or
preferred, of the Company, (ii) options, warrants or other rights to acquire
shares of capital stock, whether common or preferred, of the Company, and
(iii) any other securities or instruments convertible or exchangeable into
shares of capital stock, whether common or preferred, of the Company.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means Chairman of the Board and the Chief Executive
Officer of the Company.
"EXERCISE PERIOD" means any Year 4 Exercise Period, Year 5 Exercise Period
or Year 6 Exercise Period. For avoidance of doubt, it is agreed and acknowledged
that each Exercise Period shall begin and end at exactly the same time for both
the Put Right and the Call Right.
"FUNDAMENTAL ACTION" has the meaning given in Section 3.5(b).
"GAAP" means the accounting principles and practices generally accepted from
time to time in the United States.
"INITIAL C&E SHARES" means 6,435,152 shares of Common Stock (representing
the number of C&E Shares immediately following the Effective Time), adjusted for
any stock split, stock dividend, reclassification, reverse stock split or
similar event.
"INITIAL CREDIT FACILITY" means the credit or loan agreement to be entered
into by the Company prior to the Merger, as agreed upon by the C&E
Representative and Swedish Match.
"INITIAL INCENTIVE PLAN" means the Company Retention and Incentive Plan for
the benefit of the employees of the Company having the terms set forth on
Exhibit A and such other terms agreed upon prior to the Merger by the Company,
Swedish Match and the C&E Representative.
"LIEN" means any mortgage, lien, pledge, charge, encumbrance, security
interest or other adverse claim.
"MERGER" has the meaning given in Recital A.
"MERGER AGREEMENT" has the meaning given in Recital A.
"PERMITTED TRANSFEREE" means (i) in the case of Swedish Match, any Affiliate
of Swedish Match, and (ii) in the case of a C&E Shareholder, (A) any other C&E
Shareholder, (B) a spouse or lineal descendant (whether natural or adopted),
sibling, parent, heir, executor, administrator, testamentary trustee, lifetime
trustee or legatee of such C&E Shareholder, (C) any charitable organization
described in Section 170(c) of the U.S. Internal Revenue Code of 1986, as
amended, (D) any trust, the trustees of which include only the Persons named in
clause (A) or (B) and the beneficiaries of which include only the Persons named
in clause (A), (B) or (C), (E) any corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of which
include only the Persons named in clause (A) or (B), or (F) if such C&E
Shareholder is a trust, the beneficiary or beneficiaries authorized or entitled
to receive distributions from such trust.
"PERSON" means an individual, corporation, limited liability company,
partnership, trust or other entity, including a governmental or political
subdivision or an agency or instrumentality thereof.
"PRINCIPAL C&E SHAREHOLDER" means each of Edgar M. Cullman, Sr. and Edgar M.
Cullman, Jr.
"PRO RATA CALL AMOUNT" means, with respect to any C&E Shareholder, at any
time, the number of C&E Shares owned beneficially by such C&E Shareholder at
such time multiplied by a fraction, (i) the numerator of which is the number of
C&E Shares owned by such C&E Shareholder at such time and the (ii) denominator
of which is the total number of C&E Shares outstanding at such time.
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"PRO RATA PUT AMOUNT" means, with respect to any C&E Shareholder who has
given notice of the exercise of a Put Right to the C&E Representative pursuant
to Section 5.1(b) (the "EXERCISING C&E SHAREHOLDER"), the number of C&E Shares
that such Exercising C&E Shareholder desires to sell during such Exercise Period
multiplied by a fraction, (i) the numerator of which is the number of C&E Shares
that such Exercising C&E Shareholder desires to sell during such Exercise Period
and (ii) the denominator of which is the total number of C&E Shares that all C&E
Shareholders desire to sell by the exercise of the Put Right during such
Exercise Period.
"PUT FORMULA" means, with respect to the exercise of any Put Right, (i) the
Average Adjusted EBITDA for the most recent eight-quarter ending period prior to
the exercise of such Put Right multiplied by 9.0, plus (ii) the amount of cash
and cash equivalents of the Company and its Subsidiaries on a consolidated basis
as of the last day of such eight-quarter period, determined in accordance with
GAAP consistently applied, minus (iii) Total Debt as of the last day of such
eight-quarter period.
"PUT NOTICE" has the meaning given in Section 4.3(a).
"PUT PRICE" has the meaning given in Section 4.3(c).
"PUT RIGHT" has the meaning given in Section 4.3(a).
"RESTRICTED PERIOD" means, with respect to either Principal C&E Shareholder,
the period beginning on the Effective Time and ending on the earlier of (i) the
third anniversary of the termination of employment of such Principal C&E
Shareholder with the Company and (ii) the fifth anniversary of the sale of all
of the C&E Shares of such Principal C&E Shareholder pursuant to this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY AGREEMENT" has the meaning given in Section 5.4.
"SEMI-ANNUAL STATEMENT" has the meaning given in Section 5.3(a).
"SHAREHOLDER" means Swedish Match, any C&E Shareholder and each Person
(other than the Company and its subsidiaries) who is or shall become a party to
this Agreement, whether as an original party to this Agreement as of the date
hereof, pursuant to Section 4.2 or otherwise. A Person shall cease to be a
Shareholder when such Person ceases to own, beneficially or of record, any
Equity Securities; PROVIDED that so long as a Permitted Transferee of Swedish
Match owns, beneficially or of record, any Equity Securities, Swedish Match
shall be a Shareholder for all purposes of this Agreement.
"SM ACQUISITION" has the meaning given in Recital A.
"SM OFFICER" has the meaning given in Section 3.6(b).
"STOCK PURCHASE AGREEMENT" has the meaning given in Recital B.
"SUBSIDIARY" means any corporation, limited liability company, partnership
or other entity of which the stock or membership, general or limited partnership
or other ownership interests having ordinary power to elect a majority of the
board of directors (or other persons or bodies performing similar functions) are
directly or indirectly owned by the Company.
"SWEDISH MATCH" has the meaning given in the Introduction and includes any
Permitted Transferee of Swedish Match that acquires Equity Securities in
accordance with this Agreement.
"TOTAL DEBT" means, as of any date of determination, the total consolidated
Indebtedness of the Company and its Subsidiaries as of such date, determined in
accordance with GAAP consistently applied. For avoidance of doubt, it is
stipulated that Indebtedness of the Company or its Subsidiaries to Swedish Match
or its Affiliates shall be included in the calculation of Total Debt.
"INDEBTEDNESS" means (i) obligations for borrowed money, (ii) obligations
evidenced by bonds, debentures, notes or other similar instruments, (iii)
reimbursement obligations with respect to letters of credit, bankers'
acceptances or
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similar facilities (other than reclamation bonds, surety bonds, performance
bonds and letters of credit required by statutes, governmental authorities,
customers or suppliers and issued in the ordinary course of business),
(iv) obligations issued or assumed as deferred purchase price of property or
services or conditional sales obligations (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance with
customary practices), and (v) liabilities in respect of capital or financing
leases that would be required to be capitalized on a balance sheet, in each case
determined in accordance with GAAP consistently applied.
"TRANSFER" has the meaning given in Section 4.1(a).
"TRIGGER EVENT" means the purchase by Swedish Match or its designee of C&E
Shares pursuant to the exercise of a Put Right resulting in the C&E Shareholders
owning, in the aggregate, one-third or less of the Initial C&E Shares.
"YEAR 4" means the twelve-month period beginning on the third anniversary of
the Commencement Date and ending on the day preceding the fourth anniversary of
the Commencement Date.
"YEAR 4 EXERCISE PERIODS" means the 30-day periods following the delivery of
the Semi-Annual Statements for the first six months of Year 4 and the Annual
Statements for Year 4.
"YEAR 4 EXERCISED SHARES" means the C&E Shares purchased by Swedish Match or
its designees upon the exercises of Put Rights and/or the Call Rights during the
Year 4 Exercise Periods.
"YEAR 5" means the twelve-month period beginning on the fourth anniversary
of the Commencement Date and ending on the day preceding the fifth anniversary
of the Commencement Date.
"YEAR 5 EXERCISE PERIODS" means the 30-day periods following the delivery of
the Semi-Annual Statements for the first six months of Year 5 and the Annual
Statements for Year 5.
"YEAR 5 EXERCISED SHARES" means the C&E Shares purchased by Swedish Match or
its designees upon the exercises of Put Rights and/or Call Right during the Year
5 Exercise Periods.
"YEAR 6" means the twelve-month period beginning on the fifth anniversary of
the Commencement Date and ending on the day preceding the sixth anniversary of
the Commencement Date.
"YEAR 6 EXERCISE PERIODS" means the 30-day periods following the delivery of
the Semi-Annual Statements for the first six months of Year 6 and the Annual
Statements for Year 6.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATIONS AND WARRANTIES OF EACH C&E SHAREHOLDER. Each
C&E Shareholder, severally and not jointly, represents and warrants to Swedish
Match as follows:
(a) AUTHORITY FOR THIS AGREEMENT. Such C&E Shareholder has all
requisite power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by such C&E Shareholder and constitutes a
valid and binding obligation of each C&E Shareholder enforceable in
accordance with its terms. If such C&E Shareholder is married and the C&E
Shares of such C&E Shareholder constitute community property or otherwise
need spousal or other approval for this Agreement to be legal, valid and
binding with respect to such C&E Shares, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such C&E Shareholder's spouse, enforceable against such spouse
in accordance with its terms. If such C&E Shareholder is a trust, no consent
of any beneficiary is required for the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(b) AUTHORITY FOR SECURITY AGREEMENT. Such C&E Shareholder has all
requisite power and authority to enter into the Security Agreement and to
consummate the transactions contemplated thereby. The execution, delivery
and performance of the Security Agreement has been duly authorized by all
requisite action on the part of such C&E Shareholder. Upon the execution and
delivery of the Security Agreement by such C&E Shareholder, the Security
Agreement will constitute a valid and binding obligation of such C&E
Shareholder enforceable in accordance with its terms. If such C&E
Shareholder is married and the C&E Shares of such C&E Shareholder constitute
community property or otherwise need spousal or other approval for the
Security Agreement to be legal, valid and binding with respect to such C&E
Shares, the execution and delivery of the Security Agreement has been duly
authorized by such C&E Shareholder's spouse, and upon its execution and
delivery by such spouse will constitute a valid and binding agreement of
such spouse, enforceable against such spouse in accordance with its terms.
If such C&E Shareholder is a trust, no consent of any beneficiary is
required for the execution and delivery of the Security Agreement or the
consummation of the transactions contemplated thereby.
(c) NO CONFLICTS. Neither the execution and delivery of this Agreement
or the Security Agreement, nor the consummation of the transactions
contemplated hereby or thereby nor compliance with the terms hereof or
thereof will violate, conflict with or result in a breach, or constitute a
default (with or without notice of lapse of time or both) under any
provision of, any trust agreement, loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree, statute,
law, ordinance, rule or regulation applicable to such C&E Shareholder or to
such C&E Shareholder's property or assets.
(d) THE SUBJECT SHARES. Immediately following the Effective Time, such
C&E Shareholder will be the record and beneficial owner of, or is trustee of
a trust that is the record holder of and whose beneficiaries are the
beneficial owners of, and has good and marketable title to, the C&E Shares
set forth opposite such C&E Shareholder's name on Schedule I hereto (subject
to any adjustments in the number of shares to be sold by certain C&E
Shareholders pursuant to the Stock Purchase Agreement in accordance with
Section 1.1 thereof), in each case free and clear of all Liens. As of the
Effective Time such C&E Shareholder will have the sole right to vote, or to
dispose, of such C&E Shares, and none of such C&E Shares will be subject to
any agreement, arrangement or restriction with respect to the voting of such
C&E Shares, except as contemplated by this Agreement. Except for this
Agreement, the Stock Purchase Agreement, the Security Agreement, and, if
such C&E Shareholder is a trust, in accordance with the terms of such trust,
(I) there are, and as of the Effective Time there will be, no agreements or
arrangements of any kind, contingent or otherwise, obligating such C&E
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Shareholder to Transfer any of the C&E Shares, and (II) no Person has, nor
as of the Effective Time any Person will have, any contractual or other
right or obligation to purchase or otherwise acquire any of the C&E Shares
of such C&E Shareholder.
Section 2.2. REPRESENTATIONS AND WARRANTIES OF SWEDISH MATCH. Swedish Match
hereby represents and warrants to each C&E Shareholder that Swedish Match has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Swedish Match, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Swedish Match. This Agreement has been duly executed and
delivered by Swedish Match and constitutes a valid and binding obligation of
Swedish Match enforceable in accordance with its terms. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
will violate, conflict with or result in a breach, or constitute a default (with
or without notice or lapse of time or both) under any provision of, the articles
of association of Swedish Match, any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to Swedish Match or to Swedish Match's
property or assets.
ARTICLE III
CORPORATE GOVERNANCE AND MANAGEMENT
Section 3.1. COMPOSITION OF THE BOARD. (a) The Board shall consist of seven
Directors. Such Directors shall be designated as follows:
(i) Prior to the sixth anniversary of the Effective Time, until such
time as of a Trigger Event has occurred, four of the Directors shall be
nominated by the C&E Representative on behalf of the C&E Shareholders and
three of the Directors shall be nominated by Swedish Match.
(ii) Prior to the sixth anniversary of the Effective Time, following
the occurrence of a Trigger Event, four of the Directors shall be
nominated by Swedish Match and three of the Directors shall be nominated
by the C&E Representative on behalf of the C&E Shareholders.
(iii) After the sixth anniversary of the Effective Time, so long as
the C&E Shareholders own, in the aggregate, 15% or more of the then
outstanding shares of Common Stock, four of the Directors shall be
nominated by the C&E Representative on behalf of the C&E Shareholders and
three of the Directors shall be nominated by Swedish Match.
(iv) After the sixth anniversary of the Effective Time, upon the C&E
Shareholders owning, in the aggregate, less than 15% of the then
outstanding shares of Common Stock, four of the Directors shall be
nominated by Swedish Match and three of the Directors shall be nominated
by the C&E Representative on behalf of the C&E Shareholders.
(b) Each Shareholder agrees that it shall vote its shares of Common
Stock or execute consents, as the case may be, and take all other necessary
action in order to ensure that the composition of the Board is as set forth
in Section 3.1. The Board immediately after the Effective Time shall consist
of the individuals listed on Schedule II.
Section 3.2. REMOVAL OF DIRECTORS. Each Shareholder agrees that if, at any
time, it is then entitled to vote for the removal of Directors, it will not vote
any of its shares of Common Stock in favor of the removal of any Director who
shall have been designated or nominated pursuant to Section 3.1(a) unless such
Director or the Person(s) entitled to designate or nominate such Director shall
have consented to such removal in writing; PROVIDED that if the Persons entitled
to designate or nominate any Director
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pursuant to Section 3.1(a) shall request the removal of such Director in
writing, such Shareholder shall vote its shares of Common Stock in favor of such
removal.
Section 3.3. VACANCIES. If, as a result of death, disability, retirement,
resignation, removal or otherwise, there shall exist or occur any vacancy on the
Board:
(a) the Shareholder(s) entitled under Section 3.1(a) to nominate such
Director whose death, disability, retirement, resignation or removal
resulted in such vacancy, may, subject to the provisions of Section
3.1(a) nominate another individual to fill such vacancy and serve as a
Director; and
(b) subject to Section 3.1(a), each Shareholder then entitled to vote
for the election of such nominee as a Director agrees that it will vote its
shares of Common Stock, or execute a written consent, as the case may be, in
order to ensure that such nominee is elected to the Board.
Section 3.4. MEETINGS OF THE BOARD. (a) The Board shall meet at least once
in every quarter. The Chairman of the Board shall provide at least 30 calendar
days' prior notice of such regular meetings of the Board (or such shorter period
consented to by all the Directors). The Chairman or any two Directors may call a
special meeting of the Board by delivery of at least ten calendar days' prior
notice to all Directors (or such shorter period consented to by all the
Directors).
(b) A quorum of the Board shall consist of at least five Directors;
PROVIDED that if all of the Directors designated by the C&E Shareholders or
Swedish Match fail to attend two consecutive Board meetings (including an
adjournment, for more than five calendar days, of a meeting called in
accordance with Section 3.4(a)), then the presence of four Directors shall
constitute a quorum of the Board.
Section 3.5. ACTION BY THE BOARD. (a) All actions of the Board shall require
the affirmative vote of at least a majority of the Directors at a duly convened
meeting of the Board at which a quorum is present or the unanimous written
consent of the Board.
(b) Notwithstanding Section 3.5(a), none of the following actions
(collectively, the "FUNDAMENTAL ACTIONS") may validly be taken by the
Company without the prior approval of at least six of the Directors at a
duly convened meeting of the Board at which a quorum is present or the
unanimous written consent of the Board, except as otherwise provided in
Section 3.5(c):
(i) the authorization, declaration or payment of any dividend or
other distribution on any Equity Security;
(ii) any recapitalization, capital increase or capital reduction by
the Company, or the issuance, sale, repurchase, redemption or other
acquisition of any Equity Securities;
(iii) the issuance by a Subsidiary to any Person (other than the
Company or a Subsidiary) of any common or preferred stock or other equity
securities (including options, warrants or other rights to acquire shares
of capital stock, or other securities or instruments convertible or
exchangeable into shares of capital stock), or the repurchase, redemption
or other acquisition of any shares of common or preferred stock or other
equity securities (including options, warrants or other rights to acquire
shares of capital stock, or other securities or instruments convertible
or exchangeable into shares of capital stock) of a Subsidiary from any
Person (other than the Company or a Subsidiary);
(iv) other than the Initial Incentive Plan, the adoption of any
stock option, stock appreciation, stock purchase, phantom stock or other
equity-based, performance or other employee or retiree benefit or
compensation plan, program, policy or arrangement for current or former
employees of the Company or Subsidiaries, it being understood that
salaries of and annual bonus for employees (other than the Executive
Officers) and the grant of awards or benefits to employees pursuant to
any such plan, program, policy or arrangement previously approved by the
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Board in accordance with this clause (iv) (including the Initial
Incentive Plan) shall not require a supermajority vote of the Board
pursuant to this clause (iv);
(v) the appointment, dismissal or removal of any Executive Officer
or the SM Officer, it being understood that any such appointment,
dismissal or removal shall also take place in accordance with Section
3.6;
(vi) the determination or modification of the compensation paid to
any Executive Officer, including the grant of awards or benefits to any
Executive Officer pursuant to the Initial Incentive Plan and plans,
programs, policies or arrangements approved by the Board in accordance
with clause (iv) of this Section 3.5(b);
(vii) the purchase or other acquisition of capital or fixed assets,
in a single transaction or series of related transactions, if after
giving effect thereto, the Company would have expended (A) in excess of
$500,000 or equivalent on the purchase or other acquisition of such
capital or fixed assets, or (B) in excess of $5 million on all purchases
or other acquisitions of capital and fixed assets during the applicable
fiscal year (other than purchases or acquisitions approved pursuant to
clause (A)); or entering into any agreement involving the foregoing;
(viii) the purchase or other acquisition of any asset or group of
related assets (other than raw materials in the ordinary course of
business), in a single transaction or series of related transactions, if
after giving effect thereto, the Company would have expended (A) in
excess of $500,000 or equivalent on such purchase or other acquisition,
or (B) in excess of $5 million or equivalent on all purchases or other
acquisitions of assets during the applicable fiscal year (other than
purchases or other acquisitions approved pursuant to clause (A)); or
entering into any agreement involving the foregoing;
(ix) the lease by the Company of any asset or group of related
assets, in a single transaction or series of related transactions,
involving aggregate lease payments by the Company of in excess of $1
million or equivalent;
(x) the sale, lease or other disposition of any asset or group of
related assets of the Company (other than inventory in the ordinary
course of business), in a single transaction or series of related
transactions (A) having a fair market value in excess of $500,000 or
equivalent or (B) if after giving effect thereto, the Company would have
sold, leased or otherwise disposed of assets during the applicable fiscal
year having a fair market value in excess of $5 million or equiv alent
(other than sales, leases or other dispositions approved pursuant to
clause (A)); or entering into any agreement involving the foregoing;
(xi) the transfer of or the grant of a license to any material
trademark or trade name of the Company or any Subsidiary (including
trademarks or trade names used by the Company or a Subsidiary under
license), other than (A) licenses of the "Club Macanudo" trademark or
trade name in a manner consistent with past practice, (B) licenses for
production or sale of tobacco accessories, and (C) customary licenses for
sales promotions in the ordinary course.;
(xii) the entry into, modification, extension, termination or
replacement of any financing or credit agreement, facility or other
arrangement (A) providing for total borrowings by the Company in excess
of $5 million or equivalent, or (B) such that the aggregate amount of the
outstanding borrowings of the Company thereafter exceeds $10 million or
equivalent, EXCEPT for the entry into the Initial Credit Facility and
drawdowns or borrowings under the Initial Credit Facility, provided that
the Company provides Swedish Match at least 10 days prior notice of any
drawdowns or other borrowing under the Initial Credit Facility of an
amount in excess of $10 million or equivalent;
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(xiii) other than borrowings under the Initial Credit Facility, the
issuance or sale of any bond, debenture, note or other similar
instruments (A) for an amount in excess of $5 million or equivalent, and
the redemption or repurchase, or the modification of the terms of, any
such bond, debenture, note or similar instrument or (B) resulting in the
aggregate amount of the outstanding borrowings of the Company thereafter
exceeding $10 million or equivalent;
(xiv) the modification, extension or termination of the Initial
Credit Facility;
(xv) incurrence of any guaranty obligation with respect to any
indebtedness, liability or other obligation of any Person, other than any
Subsidiary, (A) not in the ordinary course of business consistent with
past practice, or (B) such that the aggregate amount of outstanding
obligations guaranteed by the Company after incurring such guaranty
obligation exceed $1.5 million or equivalent;
(xvi) other than with respect to purchases of raw materials and
distribution or marketing of products in the ordinary course of business
(excluding exclusive distribution or agency agreements or arrangements),
entering into any agreement, commitment, understanding or arrangement,
(A) having a term in excess of three years, or (B) if the aggregate
amount reasonably expected to be received or paid thereunder by the
Company exceeds $3 million or equivalent;
(xvii) the commencement or settlement by the Company of any suit,
action or other proceeding (A) relating to alleged or actual health
effects from use of tobacco products or the regulation of the production,
sale or distribution of tobacco products, or (B) in which the amount
involved (for such suit, action or other proceeding together related
suits, actions or other proceedings) exceeds $500,000 or equivalent
(without regard to whether the matter in question is covered by insurance
or any indemnity, contribution or similar agreement or arrangement by or
with any other Person);
(xviii) the appointment or dismissal of the Company's independent
auditors or legal counsel;
(xix) the adoption or modification of any material accounting or tax
principle or practice of the Company;
(xx) the entry by the Company into any new significant business
activity or line of business;
(xxi) the modification, whether by amendment or supplement, of the
Company's certificate of incorporation or bylaws; and
(xxii) the liquidation, petition for bankruptcy, winding-up, merger,
consolidation, dissolution, split up or other similar transaction of or
involving the Company.
(c) In addition to any vote of the Directors required by applicable law
or Section 3.5(a) or (b), in the event the Company or any Subsidiary
proposes to enter into any Affiliate Agreement, or to modify or terminate
any Affiliate Agreement, and in enforcing or abandoning the rights of the
Company or any Subsidiary under or pursuant to any Affiliate Agreement
(including the commencement or settlement of any suit or action), the
approval of the directors not nominated by Swedish Match (if the Affiliate
Agreement is with Swedish Match or any of its Affiliates) or the C&E
Shareholders (if the Affiliate Agreement is with a C&E Shareholder or an
Affiliate of a C&E Shareholder) shall be required to authorize the Company
to take such action.
(d) The parties agree and acknowledge that all requirements set forth
in Section 3.5(b) regarding the approval of the taking of Fundamental
Actions shall apply to all Subsidiaries, both individually and on a
consolidated basis. The Shareholders further agree and acknowledge that all
the requirements and thresholds set forth in Section 3.5(b) are intended to
apply to the Company on both a consolidated and unconsolidated basis.
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Section 3.6. EXECUTIVE OFFICERS. (a) The Executive Officers shall be
appointed by the Board from among the individuals designated by the party hereto
having the right to designate a majority of the Directors pursuant to Section
3.1(a). If at any time the Person having the right to designate the nominees for
Executive Officer proposes the removal of an Executive Officer, each of the
Shareholders shall take all necessary action in their capacities as shareholders
in order to cause the removal of such Executive Officer (including requesting
the Directors nominated by them to vote for such removal). Upon any death,
disability, retirement, resignation or removal of an Executive Officer, the
replacement therefor shall be designated for appointment by the Board in
accordance with the first sentence of this Section 3.6. The initial Chairman of
the Board shall be Edgar M. Cullman, Sr., and the initial Chief Executive
Officer shall be Edgar M. Cullman, Jr.
(b) Swedish Match shall have the right to designate for approval by the
Board at least one senior executive for a position with the Company to be
agreed upon among Swedish Match, the C&E Representative and the Company (the
"SM OFFICER"), and to remove or replace the SM Officer at any time. If at
any time Swedish Match proposes the removal of the SM Officer, each of the
Shareholders shall take all necessary action in their capacities as
shareholder to cause the removal of the SM Officer (including requesting the
Directors nominated by them to vote for such removal). Upon the death
disability, retirement, resignation or removal of the SM Officer, the
replacement therefor shall be designated by Swedish Match for appointment by
the Board.
Section 3.7. CONFLICTING CHARTER OR BYLAW PROVISION. Each Shareholder shall
vote its shares of Common Stock, and shall take all other actions reasonably
necessary, to ensure that the Company's certificate of incorporation and bylaws
(I) facilitate compliance with this Agreement, including the management and
governance of the Company in accordance with this Article III, and (II) do not
at any time conflict with any provision of this Agreement.
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ARTICLE IV
RESTRICTIONS ON TRANSFER
Section 4.1. GENERAL. (a) After the Effective Time, none of the Shareholders
or any of their successors in interest may, directly or indirectly, sell,
transfer, assign, grant a participation in, option, pledge, hypothecate or
otherwise dispose of or encumber (collectively, "TRANSFER") any of their Equity
Securities, except (I) subject to Section 4.2, to a Permitted Transferee of such
proposed transferor, (II) pursuant to Section 4.3 or 4.4, or (III) in the case
of Equity Securities that are not Common Stock, pursuant to the terms and
conditions of the agreement or instrument pursuant to which the applicable
Equity Security was issued (as the same may be modified from time to time).
(b) Any attempt by any Shareholder to transfer any Equity Securities not
in compliance with this Agreement shall be null and void, and the Company
shall not, and shall cause any transfer agent not to, give effect in the
Company's stock records to any such attempted Transfer.
Section 4.2. TRANSFERS TO PERMITTED TRANSFEREES. No share of Common Stock
shall be Transferred pursuant to clause (i) of Section 4.1 to any Permitted
Transferee of the applicable Shareholder unless and until such Permitted
Transferee shall have agreed in writing, in a manner acceptable in form and
substance to Swedish Match (in the case of a proposed Transfer by a C&E
Shareholder) and the C&E Representative (in the case of a proposed Transfer by
Swedish Match), (I) to accept the shares of Common Stock Transferred to it
subject to the terms and conditions of this Agreement, and (II) to be bound by
this Agreement and to agree and acknowledge that such Person shall constitute a
Shareholder, and, if applicable, a C&E Shareholder, for all purposes of this
Agreement.
Section 4.3. PUT RIGHT OF C&E SHAREHOLDERS. (a) At any time during an
Exercise Period, the C&E Shareholders shall have the right, upon the delivery of
notice by the C&E Representative to Swedish Match in accordance with Section
4.3(d) (each, a "PUT NOTICE"), to sell all or a portion of the C&E Shares to
Swedish Match or its designee in accordance with this Section 4.3 (each, a "PUT
RIGHT").
(b) The number of C&E Shares with respect to which the Put Right may be
exercised during Year 4 Exercise Periods and Year 5 Exercise Periods shall
be subject to the following limitations:
(i) In the case of a Put Right exercised during a Year 4 Exercise
Period, the number of C&E Shares with respect to which such Put Right may
be exercised, when added to all C&E Shares previously sold to Swedish
Match or its designee upon the exercise of Put Rights or Call Rights or
to be sold to Swedish Match or its designee upon the exercise of such Put
Right, may not exceed one-third of the Initial C&E Shares.
(ii) In the case of a Put Right exercised during a Year 5 Exercise
Period, the number of C&E Shares with respect to which such Put Right may
be exercised, when added to all C&E Shares previously sold to Swedish
Match or its designee upon the exercise of Put Rights or Call Rights or
to be sold to Swedish Match or its designee upon the exercise of such Put
Right, may not exceed two-thirds of the Initial C&E Shares.
(c) The price for the sale of each C&E Share to Swedish Match upon the
exercise of a Put Right shall be as follows (the "PUT PRICE"):
(i) In the case of a Put Right exercised during a Year 4 Exercise
Period, the amount equal to (A) the Put Formula divided by (B) the number
of outstanding shares of Common Stock at the time of the exercise of the
Put Right; PROVIDED that such price shall not exceed $23.00 nor be less
than $15.00.
(ii) In the case of a Put Right exercised during a Year 5 Exercise
Period, the amount equal to (A) the Put Formula divided by (B) the number
of outstanding shares of Common Stock at the time of the exercise of the
Put Right; PROVIDED that such price shall not exceed $26.00 nor be less
than $15.00.
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(iii) In the case of a Put Right exercised during a Year 6 Exercise
Period, the amount equal to (A) the Put Formula divided by (B) the number
of outstanding shares of Common Stock at the time of the exercise of the
Put Right, PROVIDED that such price shall not exceed $28.50 nor be less
than $15.00.
(d) Each Put Notice shall specify (i) the number of C&E Shares to be
sold to Swedish Match by each selling C&E Shareholder in connection with the
exercise of such Put Right, which number may not exceed the amounts
specified in Section 4.3(b) in the case of the exercise of a Put Right
during a Year 4 Exercise Right or a Year 5 Exercise Right, (ii) the date for
the closing of the purchase and sale of such C&E Shares, which date shall
not be less than 20 days nor more than 45 days from the date of the Put
Notice, and (iii) the calculation of the Put Price to be paid for the sale
of such C&E Shares to Swedish Match pursuant to Section 4.3(c).
(e) Upon the delivery of a Put Notice by the C&E Representative to
Swedish Match, each C&E Shareholder named in the Put Notice shall be
obligated to sell to Swedish Match, and Swedish Match shall be obligated to
purchase from each such C&E Shareholder the number of C&E Shares specified
in the Put Notice. A closing in respect of the purchase and sale of the C&E
Shares specified in the Put Notice shall occur at the headquarters of the
Company on the date for the closing specified in the Put Notice (or at such
other place or date as Swedish Match and the C&E Representative may agree
upon); PROVIDED that if Swedish Match shall have delivered a notice of
disagreement of the Put Price specified in the Put Notice, such closing
shall occur within ten days of the resolution of such disagreement pursuant
to Section 4.6. At the closing:
(i) the C&E Representative shall deliver, or cause to be delivered,
to Swedish Match or its designee, free and clear of all Liens, one or
more stock certificates, duly endorsed or accompanied by stock powers
duly endorsed in blank, evidencing all the C&E Shares being sold to
Swedish Match or its designee in connection with the exercise of such Put
Right;
(ii) Swedish Match or its designee shall deliver by wire transfer of
immediately available funds to the bank account designated by the C&E
Representative at least five days prior to such closing, an amount equal
to the aggregate Put Price for all C&E Shares being sold in connection
with the exercise of such Put Right; and
(iii) the Company shall deliver (A) to Swedish Match a new stock
certificate or certificates, duly executed and issued in the name of
Swedish Match or its designee, evidencing all the C&E Shares sold to
Swedish Match or its designee at such closing, and (B) to the C&E
Representative a new stock certificate or certificates, duly executed and
issued in the name of the selling C&E Shareholders, evidencing the C&E
Shares owned by such C&E Shareholders following such closing
All the foregoing deliverables shall be deemed to be made simultaneously,
and none shall be deemed completed until all have been completed.
Section 4.4. CALL RIGHT OF SWEDISH MATCH. (A) at any time during an Exercise
Period, Swedish Match or its designee shall have the right, upon the delivery of
notice to the C&E Representative in accordance with Section 4.4(d) (each, a
"CALL NOTICE"), to purchase all or a portion of the C&E Shares from the C&E
Shareholders, on a pro rata basis (except as otherwise determined by the C&E
Representative in accordance with the first sentence of Section 4.4(e)), in
accordance with this Section 4.4 (each, a "CALL RIGHT").
(b) The number of C&E Shares with respect to which the Call Right may be
exercised during Year 4 Exercise Periods and Year 5 Exercise Periods shall
be subject to the following limitations:
(i) In the case of a Call Right exercised during a Year 4 Exercise
Period, the number of C&E Shares with respect to which such Call Right
may be exercised, when added to all C&E Shares previously purchased by
Swedish Match or its designee upon the exercise of Put Rights or Call
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Rights or to be purchased by Swedish Match or its designee upon the
exercise of such Call Right, may not exceed one-third of the Initial C&E
Shares.
(ii) In the case of a Call Right exercised during a Year 5 Exercise
Period, the number of C&E Shares with respect to which such Call Right
may be exercised, when added to all C&E Shares previously purchased by
Swedish Match or its designee upon the exercise of Put Rights or Call
Rights or to be purchased by Swedish Match or its designee upon the
exercise of such Call Right, may not exceed two-thirds of the Initial C&E
Shares.
(c) The price for the sale of each C&E Share to Swedish Match upon the
exercise of a Call Right shall be as follows (the "CALL PRICE"):
(i) In the case of a Call Right exercised during a Year 4 Exercise
Period, the greater of (A) $23.00 and (B) the amount equal to (x) the
Call Formula divided by (y) the number of outstanding shares of Common
Stock at the time of the exercise of the Call Right.
(ii) In the case of a Call Right exercised during a Year 5 Exercise
Period, the greater of (A) $26.00 and (B) the amount equal to (x) the
Call Formula divided by (y) the number of outstanding shares of Common
Stock at the time of the exercise of the Call Right.
(iii) In the case of a Call Right exercised during a Year 6 Exercise
Period, the greater of (A) $28.50 and (B) the amount equal to (x) the
Call Formula divided by (y) the number of outstanding shares of Common
Stock at the time of the exercise of the Call Right.
(d) Each Call Notice shall specify (i) the number of C&E Shares to be
purchased by Swedish Match in connection with the exercise of such Call
Right, which number may not exceed the amounts specified in Section
4.4(b) in the case of the exercise of a Call Right during a Year 4 Exercise
Right or a Year 5 Exercise Right, (ii) the date for the closing of the
purchase and sale of such C&E Shares, which date shall not be less than 20
days nor more than 45 days from the date of the Call Notice, and (iii) the
calculation of the Call Price to be paid for the purchase of such C&E Shares
by Swedish Match pursuant to Section 4.4(c).
(e) Upon the delivery of a Call Notice by Swedish Match to the C&E
Representative, Swedish Match shall be obligated to purchase from each C&E
Shareholder, and each such C&E Shareholder shall be obligated to sell to
Swedish Match, such C&E Shareholder's Pro Rata Call Amount of the C&E
Shares; PROVIDED that the C&E Representative has the right to modify the
number of C&E Shares that each C&E Shareholder shall be obligated to sell to
Swedish Match so long as (x) the total number of C&E Shares to be purchased
by Swedish Match is the same as the number specified by Swedish Match in the
Call Notice, and (y) neither Principal C&E Shareholder may sell more than
his Pro Rata Call Amount pursuant to any Call Notice. A closing in respect
of the purchase and sale of the C&E Shares specified in the Call Notice
shall occur at the headquarters of the Company on the date for the closing
specified in the Call Notice (or at such other place or date as Swedish
Match and the C&E Representative may agree upon); PROVIDED that if the C&E
Representative shall have delivered a notice of disagreement of the Call
Price specified in the Call Notice, such closing shall occur within ten days
of the resolution of such disagreement pursuant to Section 4.6. At the
closing:
(i) the C&E Representative shall deliver, or cause to be delivered,
to Swedish Match or its designee, free and clear of all Liens, one or
more stock certificates, duly endorsed or accompanied by stock powers
duly endorsed in blank, evidencing all the C&E Shares being purchased by
Swedish Match or its designee in connection with the exercise of such
Call Right;
(ii) Swedish Match or its designee shall deliver by wire transfer of
immediately available funds to the bank account designated by the C&E
Representative at least five days prior to such closing, amount equal to
the aggregate Call Price for all C&E Shares being purchased in connection
with the exercise of such Call Right; and
(iii) The Company shall deliver (A) to Swedish Match a new stock
certificate or certificates, duly executed and issued in the name of
Swedish Match or its designee, evidencing all the C&E
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Shares purchased by Swedish Match or its designee at such closing and
(B) to the C&E Representative a new stock certificate or certificates,
duly executed and issued in the name of each selling C&E Shareholder,
evidencing the C&E Shares owned by each C&E Shareholder following such
closing.
All the foregoing deliverables shall be deemed to be made simultaneously,
and none shall be deemed completed until all have been completed.
Section 4.5. DESIGNATED PURCHASER. If Swedish Match is required to purchase
any C&E Shares upon the exercise of a Put Right, or has the right to purchase
any C&E Shares upon the exercise of a Call Right, Swedish Match may, at its
option, designate one or more of its Affiliates to purchase all or a portion of
such C&E Shares. In such event, Swedish Match shall cause its designee to pay
the applicable Put Price or Call Price, as the case may be, and shall be liable
for the performance by its designee of all obligations with respect to the
purchase of the C&E Shares pursuant to the exercise of the Put Right or Call
Right, as the case may be.
Section 4.6. DISAGREEMENT OVER PUT PRICE OR CALL PRICE. (a) In the event
Swedish Match disagrees with the calculation of a Put Price specified in a Put
Notice, or the C&E Representatives disagree with the calculation of a Call Price
specified in a Call Notice, Swedish Match or the C&E Representatives, as the
case may be, shall, within 15 days of the delivery of the Put Notice or Call
Notice, as the case may be, deliver written notice of such disagreement to the
other party, together with an explanation of its disagreement. Thereafter,
Swedish Match and the C&E Representatives shall negotiate in good faith to
resolve such disagreement. If Swedish Match and the C&E Representatives are
unable to reach a resolution within 15 days of the delivery of the notice of
disagreement, Swedish Match and the C&E Representatives shall promptly submit
such disagreement for resolution to an internationally recognized, independent
accounting firm mutually acceptable to Swedish Match and the C&E Representative
(the "ARBITRATOR"). The Arbitrator shall, within 15 days after submission
(unless an audit of Semi-Annual Statements is requested pursuant to Section
4.6(b), in which case within 45 days after submission), determine and report to
Swedish Match and the C&E Representatives its determination of the Put Price or
Call Price, as the case may be, and such determination shall be final and
binding on the parties.
(b) In the event that Swedish Match or the C&E Representatives deliver a
notice of disagreement with a Put Price or a Call Price, as the case may be,
pursuant to Section 4.6(a) and the applicable Put Right or the Call Right is
exercised during an Exercise Period following the delivery of Semi-Annual
Statements, then the party delivering such notice of disagreement may, by
written notice to the other parties hereto within 15 days of the delivery of
the notice of disagreement, demand an audit of such SemiAnnual Statements by
the Arbitrator and the Company shall promptly request the Arbitrator to
conduct such audit. The Arbitrator shall, within 45 days of such request,
audit such Semi-Annual Statements and deliver its opinion with respect to
such SemiAnnual Statements. The Company shall provide such books and records
and other information to the Arbitrator as may be necessary or appropriate
with respect to such audit and shall make such adjustments and modifications
to the Semi-Annual Statements as may be required or deemed appropriate by
the Arbitrator for the delivery of an unqualified opinion with respect to
such Semi-Annual Statements.
(e) The fees and expenses of the Arbitrator shall be borne one-half by
Swedish Match and one-half by the C&E Representatives; PROVIDED that if
Swedish Match or the C&E Representatives request an audit of Semi-Annual
Statements pursuant to Section 4.6(b) and the determination of the Put Price
or Call Price, as the case may be, by the Arbitrator following such audit
deviates by 3% or less than the Put Price or Call Price proposed in the
applicable Put Notice or Call Notice, the party requesting such audit shall
bear all the fees and expenses of the Arbitrator in connection with such
audit.
Section 4.7. LEGEND. Any certificate for any share of Common Stock that is
issued to any Shareholder on or after the Effective Time shall bear a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE
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OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO
SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE SHAREHOLDERS'
AGREEMENT DATED AS OF JANUARY 19, 2000, AS MAY BE AMENDED FROM TIME TO
TIME, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM THE COMPANY OR
ANY SUCCESSOR THERETO.
ARTICLE V
OTHER COVENANTS AND AGREEMENTS
Section 5.1. C&E REPRESENTATIVE. (a) Each C&E Shareholder hereby designates
and appoints (and each Permitted Transferee of each such C&E Shareholder is
hereby deemed to have so designated and appointed) each Principal C&E
Shareholder, acting jointly or individually, as its attorney(s)-in-fact with
full power of substitution for each of them (each, in such capacity, a "C&E
REPRESENTATIVE"), to serve as the representative(s) of each such C&E Shareholder
to perform all such acts as are required, authorized or contemplated by this
Agreement to be performed by such person and hereby acknowledges that the C&E
Representatives shall be the only persons authorized to take any action so
required, authorized or contemplated by this Agreement by each such C&E
Shareholder. Each such C&E Shareholder further acknowledges that the foregoing
appointment and designation shall be deemed to be coupled with an interest and
shall survive the death or incapacity of such C&E Shareholder. Each such C&E
Shareholder hereby authorizes (and each such Permitted Transferee shall be
deemed to have authorized) the other parties hereto to disregard any notices or
other action taken by such C&E Shareholder pursuant to this Agreement, except
for notice and actions taken by any C&E Representatives. The other parties
hereto are and will be entitled to rely on any action so taken or any notice
given by the C&E Representatives and are and will be entitled and authorized to
give notices only to the C&E Representatives for any notice contemplated by this
Agreement to be given to any such C&E Shareholder. A successor to the C&E
Representatives may be chosen by a majority in interest of the C&E Shareholders;
PROVIDED that notice thereof is given by the new C&E Representative to the
Company and to Swedish Match.
(b) In the event that any C&E Shareholder desires to exercise a Put
Right during any Exercise Period, such C&E Shareholder shall notify the C&E
Representative, no later than 20 days prior to the last day of such Exercise
Period, of such C&E Shareholder's desire to exercise a Put Right during such
Exercise Period. Each notice given to the C&E Representative pursuant to
this Section 5.1(b) shall specify the name of the C&E Shareholder desiring
to exercise the Put Right and the number of C&E Shares proposed to be sold
by such C&E Shareholder during the applicable Exercise Period. In the event
that the C&E Representatives receive from C&E Shareholders notices
representing a greater number of C&E Shares than are permitted be sold in
such Exercise Period pursuant to Section 4.3(b), the C&E Representative
shall reduce the number of shares proposed to be sold by each C&E
Shareholder's Pro Rata Put Amount (unless the C&E Representatives and the
C&E Shareholders desiring to sell shares during such Exercise period agree
to modify the number of C&E Shares being sold by each such C&E Shareholder).
Notwithstanding the foregoing, Swedish Match may, at all times, rely on the
Put Notice delivered pursuant to Section 4.3, and Swedish Match shall have
no obligation to purchase any C&E Shares pursuant to the exercise of a Put
Right until the receipt by Swedish Match of a Put Notice from the C&E
Representative in accordance with Section 4.3.
Section 5.2. CONFIDENTIALITY. (a) No Shareholder shall, and each Shareholder
shall cause its Affiliates not to, use for any purpose or disclose to any Person
(other than to other Shareholders), any Confidential Information, except as
required by applicable laws or regulations. In the event any Shareholder or any
of its Affiliates is required to disclose any Confidential Information under any
law or regulation (including complying with any oral or written questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or process to which a Shareholder is subject), such Person
shall, to the extent practicable, promptly notify the other parties of such
requirement so that such other parties may seek an appropriate protective order
or similar relief.
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(b) "CONFIDENTIAL INFORMATION" means (i) any information concerning the
Company and Subsidiaries, and Persons which become Subsidiaries, or the
financial condition, business, operations or prospects of the Company and,
Persons which become Subsidiaries in the possession of or furnished to any
Shareholder (including by virtue of its present or former right to designate
a Director) and (ii) any information concerning this Agreement or the
transactions contemplated by this Agreement; PROVIDED that the term
"Confidential Information" does not include information which (x) is or
becomes generally available to the public other than as a result of a
disclosure by a Shareholder or its partners, directors, officers, employees,
agents, counsel, investment advisers or representatives (collectively,
"REPRESENTATIVES") in violation of this Agreement, (y) is or was available
to such Shareholder on a nonconfidential basis prior to its disclosure to
such Shareholder or its Representatives by the Company or (z) was or becomes
available to such Shareholder on a non-confidential basis from a source
other than the Company, provided that such source is or was (at the time of
receipt of the relevant information) not, to the best of such Shareholder's
knowledge, bound by a confidentiality agreement with (or other
confidentiality obligation to) the Company or another Person.
Section 5.3. FINANCIAL INFORMATION AND OTHER REPORTS. The Company shall
prepare and furnish to Swedish Match and the C&E Representative:
(a) as soon as available and in any event, within 30 days after the end
of each fiscal year of the Company, an audited consolidated balance sheet of
the Company and the consolidated Subsidiaries as at the end of such year and
the related audited consolidated statement of operations, changes in equity
(deficit) and cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, together with all notes
and schedules required by GAAP, and audited by PricewaterhouseCoopers, LLP
(the "ANNUAL STATEMENTS");
(b) as soon as available and in any event within 30 days after the end
of the second quarter of each fiscal year of the Company, an audited
consolidated balance sheet of the Company and the consolidated Subsidiaries
as of the end of such quarter and the related audited consolidated statement
of operations, changes in equity (deficit) and cash flows for such six-month
period, setting forth in each case in comparative form the figures for such
six-month period in the previous fiscal year and for the corresponding
portion of the previous year (the "SEMIANNUAL STATEMENTS");
(c) as soon as available and in any event within 20 days after the end
of each of the first and third quarters of each fiscal year, a consolidated
balance sheet of the Company and the consolidated Subsidiaries as of the end
of such quarter, and the related consolidated statement of operations,
changes in equity (deficit) and cash flows for such quarter and for the
current fiscal year to date, setting forth in each case in comparative form
the figures for such quarter in the previous fiscal year and for the
corresponding portion of the previous fiscal year; and
(d) as soon as available and in any event within five days after the end
of each month, a consolidated balance sheet of the Company and the
consolidated Subsidiaries as of the end of such month, and the related
consolidated statement of operations for such month and for the current
fiscal year to date, setting forth in each case in comparative form the
figures for such month in the previous fiscal year and the corresponding
portion of the previous fiscal year.
All such financial statements shall present fairly in all material respects
the consolidated financial condition of the Company and the consolidated
Subsidiaries as at the applicable dates, and the consolidated results of their
operations, changes in equity (deficit) and cash flows for the periods reflected
therein, and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (in the case of the financial statements referred to in Sections 5.3(b),
(c) and (d), subject to normal year-end audit procedures).
Section 5.4. TRUST AND SECURITY AGREEMENT. Immediately following the
Effective Time, each C&E Shareholder and Swedish Match shall execute and deliver
a trust and security agreement, having such terms and conditions as Swedish
Match and the C&E Representatives shall agree upon, with a security agent
mutually acceptable to Swedish Match and the C&E Representatives, pursuant to
which (i) each
17
<PAGE>
C&E Shareholder shall pledge, and grant a valid perfected security interest in,
its C&E Shares to the security agent for the benefit of Swedish Match to secure
the due and prompt performance by such C&E Shareholder of its obligations upon
the exercise by Swedish Match of Call Rights, and (ii) Swedish Match shall
pledge, and grant a valid perfected security interest in, its shares of Common
Stock to the security agent for the benefit of the C&E Shareholders to secure
the due and prompt performance by Swedish Match of its obligations upon the
exercise by the C&E Shareholders of the Put Rights.
Section 5.5. NON-COMPETITION; NON-SOLICITATION. (a) At all times during the
Restricted Period, neither Principal C&E Shareholder shall, directly and
indirectly, (i) become employed by, (ii) engage in business with, (iii) serve as
an agent or consultant to, or (iv) become a partner, member, principal or
stockholder (other than a holder of less than 5% of any outstanding publicly
held security) of, any Person that competes in any material way with any part of
the business of the Company or any Subsidiary. Each Principal C&E Shareholder
agrees and acknowledges that the Company and the Subsidiaries are engaged in
business in each of the states of the United States and throughout the world.
(b) At all times during the Restricted Period, neither Principal C&E
Shareholder shall, directly and indirectly, for his own account or for the
account of any other Person, (i) solicit for employment, employ or otherwise
interfere with the relationship of the Company or any Subsidiary with any
person throughout the world who is or was employed by or otherwise engaged
to perform services for the Company or any Subsidiary other than any such
solicitation or employment on behalf of the Company or any Subsidiary, or
(ii) induce any employee of the Company or any Subsidiary who is a member of
management to engage in any activity which the Principal C&E Shareholder is
prohibited from engaging in under this Section 5.5 or to terminate his
employment with the Company or such Subsidiary.
(c) At all times during the Restricted Period, neither Principal C&E
Shareholder shall, directly and indirectly, for his own account or for the
account of any other Person, solicit or otherwise attempt to establish any
business relationship with any Person, which is or was a supplier, customer,
client or distributor of the Company or any Subsidiary, with respect to any
business or activity that competes or would compete, directly or indirectly,
in any material way with any part of the business of the Company or any
Subsidiary.
(d) Each Principal C&E Shareholder acknowledges and agrees that (i) the
covenants, obligations and agreements of such Principal C&E Shareholder
contained in this Section 5.5 relate to special, unique and extraordinary
matters, (ii) Swedish Match is and will be relying on such covenants in
connection with purchases of C&E Shares pursuant to the Put Rights or Call
Rights, and (iii) a violation of any of the terms of such covenants,
obligations or agreements will cause the Company and Swedish Match
irreparable injury for which adequate remedies are not available at law.
Therefore, each Principal C&E Shareholder agrees that the Company and
Swedish Match shall be entitled to an injunction, restraining order or such
other equitable relief (without the requirement to post bond) as a court of
competent jurisdiction may deem necessary or appropriate to restrain such
Principal C&E Shareholder from committing any violation of such covenants,
obligations or agreements. These injunctive remedies are cumulative and in
addition to any other rights and remedies the Company and Swedish Match may
have.
Section 5.6. FURTHER ASSURANCES. Each Shareholder shall, from time to time,
execute and deliver, or cause to be executed and delivered, such additional
documents and instruments as the other parties may reasonably request to carry
out the intent and purposes of this Agreement and consummate the transactions
contemplated by this Agreement.
18
<PAGE>
ARTICLE VI
MISCELLANEOUS
Section 6.1. EFFECTIVENESS; TERMINATION. (a) Except for Article II, this
Agreement shall be effective, and the rights and obligations of the parties
under this Agreement shall commence, without any action or notice by any party,
as of the Effective Time. No party shall have any right or obligation under this
Agreement prior to the Effective Time, other than for any inaccuracy in or
breach of any representation or warranty of such party in Article II.
(b) This Agreement shall terminate without any action or notice by any party
(i) upon the C&E Shareholders ceasing to own any shares of Common Stock, or
(ii) at any time by written agreement of Swedish Match, the C&E Representative
(on behalf of the C&E Shareholders) and the Company, or (iii) the termination of
the Merger Agreement in accordance with the terms thereof; PROVIDED that, in the
event of the termination of this Agreement pursuant to clause (i) or (ii) of
this Section 6.1(b), the obligations of each Principal C&E Shareholders under
Section 5.5, and Sections 6.2, 6.3, 6.6, 6.7, 6.8 and 6.9, shall survive such
termination until the expiration of the Restricted Period for such C&E Principal
Shareholder.
Section 6.2. GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the laws of the state of Delaware, without regard
to any principles or rules of conflicts of laws thereof.
Section 6.3. JURISDICTION; WAIVER OF JURY TRIAL. (a) Each of the parties
hereto irrevocably and unconditionally (i) agrees that any legal suit, action or
proceeding brought by any party hereto arising out of or based upon this
Agreement or the transactions contemplated hereby may be brought in the Courts
of Delaware or the United States District Court for the District of Delaware
(each, a "DELAWARE COURT"), (ii) waives, to the fullest extent it may
effectively do so, any objection which it may now or hereafter have to the
laying of venue of any such proceeding brought in any Delaware Court, and any
claim that any such action or proceeding brought in any Delaware Court has been
brought in an inconvenient forum, and (iii) submits to the non-exclusive
jurisdiction of Delaware Courts in any suit, action or proceeding. Each of the
parties agrees that a judgment in any suit, action or proceeding brought in a
Delaware Court shall be conclusive and binding upon it and may be enforced in
any other courts to whose jurisdiction it is or may be subject, by suit upon
such judgment.
(b) Each of the parties agrees and acknowledges that any controversy
that may arise under this Agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating
to this Agreement, or the breach, termination or validity of this Agreement.
Section 6.4. AMENDMENT, WAIVERS, ETC. Neither this Agreement nor any term
hereof may be amended or otherwise modified other than by an instrument in
writing signed by Swedish Match, the C&E Representative and the Company. No
provision of this Agreement may be waived, discharged or terminated other than
by an instrument in writing signed by the party against whom the enforcement of
such waiver, discharge or termination is sought.
Section 6.5. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. (a) This Agreement
shall not be assignable or otherwise transferable by a party without the prior
consent of the other parties, and any attempt to so assign or otherwise transfer
this Agreement without such consent shall be void and of no effect; PROVIDED
that (i) any Person acquiring shares of Common Stock in accordance with this
Section 4.2 shall, upon the delivery of the documents contemplated by Section
4.2, become a "Shareholder", and if such Person is a Permitted Transferee of a
C&E Shareholder, such Person shall also be deemed a "C&E Shareholder", and
(ii) Swedish Match may, in its sole discretion, assign or transfer all or any of
its rights, interests and obligations under this Agreement to any Permitted
Transferee of Swedish Match, provided that no such assignment or transfer shall
relieve Swedish Match of any liability under this Agreement, and Swedish
19
<PAGE>
Match shall be jointly and severally liable for the obligations of its Permitted
Transferee under this Agreement.
(b) This Agreement shall be binding upon the respective heirs,
successors, legal representatives and permitted assigns of the parties
hereto. Nothing in this Agreement shall be construed as giving any Person,
other than the parties hereto and their heirs, successors, legal
representatives and permitted assigns, any right, remedy or claim under or
in respect of this Agreement or any provision hereof.
Section 6.6. NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for in this Agreement shall be in
writing and shall be deemed validly given upon personal delivery or one day
after being sent by overnight courier service or by telecopy (so long as for
notices or other communications sent by telecopy, the transmitting telecopy
machine records electronic conformation of the due transmission of the notice),
at the following address or telecopy number, or at such other address or
telecopy number as a party may designate to the other parties:
(i) if to Swedish Match to:
Swedish Match AB
SE-118 85 Stockholm
Sweden
Attn: Senior Vice President and Legal Counsel
Telecopy: (46-8) 720-7656
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn.: Paul S. Bird
Telecopy: (1-212) 909-6836;
(ii) if to any C&E Shareholder to:
Edgar M. Cullman, Sr.
Edgar M. Cullman, Jr.
c/o General Cigar Holdings, Inc.
387 Park Avenue South
New York, New York 10016-8899
Fax: (1-212) 561-8791
with a copy to:
Latham & Watkins
885 Third Avenue
New York, New York 10022-4802
Attn: R. Ronald Hopkinson
Telecopy: (1-212) 751-4864
(iii) if to the Company to:
General Cigar Holdings, Inc.
387 Park Avenue South
New York, New York 10016-8899
Attn.: General Counsel
Telecopy: (1-212) 561-8791
20
<PAGE>
Section 6.7. REMEDIES. No failure or delay by any party in exercising any
right, power or privilege under this Agreement 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 provided herein shall be cumulative and not exclusive of any
rights or remedies provided by law.
Section 6.8. SPECIFIC PERFORMANCE. Each of the parties hereto acknowledges
that there may be no adequate remedy at law for the failure by such party to
comply with the provisions of this Agreement and that such failure would cause
immediate harm that would not be adequately compensable in damages. Accordingly,
each of the parties hereto agrees that its agreement contained herein may be
specifically enforced without the requirement of posting a bond or other
security, in addition to all other remedies available to the parties hereto
under this Agreement.
Section 6.9. SEVERABILITY. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to the
maximum extent possible. In any event, the invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of this Agreement, including that provision, in any
other jurisdiction.
Section 6.10. INTEGRATION. This Agreement, including the Schedules hereto,
the Stock Purchase Agreement and the C&E Voting Agreement constitute the full
and entire understanding and agreement of the parties with respect to the
subject matter hereof and thereof and supersede any and all prior understandings
or agreements relating to the subject matter hereof and thereof.
Section 6.11. SECTION HEADINGS. The article and section headings of this
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
Section 6.12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 6.13. INDEMNITY. The C&E Shareholders, severally and not jointly,
hereby agree to, and shall, indemnify the C&E Representative and hold the C&E
Representative harmless from and against any and all loss, cost, liability,
expense, claims, injuries, or other detriment (including without limitation
payment of court costs and attorneys' fees) that the C&E Representative shall
incur from or with respect to its performance under this Agreement except to the
extent caused by the C&E Representative's intentionally wrongful conduct or
negligence.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date above written.
<TABLE>
<S> <C> <C>
GENERAL CIGAR HOLDING, INC.
By: /s/ EDGAR M. CULLMAN
-----------------------------------------
Name:
Title:
SWEDISH MATCH AB
By: /s/ EDGAR M. CULLMAN, JR.
-----------------------------------------
Name:
Title:
Each of the undersigned hereby acknowledges
and accepts his appointment as a C&E
Representative pursuant to Section 5.1(a):
</TABLE>
<TABLE>
<S> <C>
By: /s/ EDGAR M. CULLMAN
------------------------------------------
Edgar M. Cullman
By: /s/ EDGAR M. CULLMAN, JR.
------------------------------------------
Edgar M. Cullman, Jr.
</TABLE>
22
<PAGE>
I. TRUSTS OF WHICH LOUISE B. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants: 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
19. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
28. Trust Created by Rita G. Bloomingdale
Dated 11/27/31 For The Benefit of Louise B. Cullman 133,367 13-6045860
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
33. Trust Created by Louise B. Cullman
Dated 12/16/43 For The Benefit of Lucy C. Danziger: 98,976 1 13-6102581
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
41. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
42. Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants: 85,479 1 13-6102592
43. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 11,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
Edgar M. Cullman, Jr.: 178,667 113-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr: 61,215 1 13-6102603
66. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
67. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
68. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants 90,387 1 13-6102602
76. Trust Created by Samuel J. & Rita G. Bloomingdale
Dated 1/10/50 For The Benefit of Susan R. Cullman 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of Susan R. Cullman 83,194 1 13-6102605
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman,
Trustees: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
83. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
84. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
85. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
Descendants: 76,419 1 13-6102612
</TABLE>
/s/ LOUISE B. CULLMAN
--------------------------------------
Louise B. Cullman, not in her
individual
capacity but solely as a trustee of
the
above named trusts
<TABLE>
<C> <S> <C> <C> <C>
27. Louise B. Cullman--personal 459,716 ###-##-####
</TABLE>
/s/ LOUISE B. CULLMAN
--------------------------------------
Louise B. Cullman, in her individual
capacity
<PAGE>
II. TRUSTS OF WHICH EDGAR M. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
33. Trust Created by Louise B. Cullman
Dated 12/16/43 For The Benefit of Lucy C. Danziger: 98,976 1 13-6102581
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
46 Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants: 85,479 1 13-6102592
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 111,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 1 13-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr.: 61,215 1 13-6102603
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
72. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 90,387 1 13-6102602
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
76. Trust Created by Samuel J. & Rita G.Bloomingdale
Dated 1/10/50 For The Benefit of Susan R. Cullman: 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of Susan R. Cullman: 83,194 1 13-6102605
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 3-6102609
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
90. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
Descendants: 76,419 1 13-6102612
/s/ EDGAR M. CULLMAN
-----------------------------------------------------
/s/ EDGAR M. CULLMAN
- -----------------------------------------------------
Edgar M. Cullman, not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
25. Edgar M. Cullman--personal 494,071 101 ###-##-####
/s/ EDGAR M. CULLMAN
-----------------------------------------------------------------------------------------------
Edgar M. Cullman, in his individual capacity
92. Samuel J. Bloomingdale Foundation 87,319 13-6099790
93. Louise B. & Edgar M. Cullman Foundation 28,451 13-6100041
95. Justus Heijmans Foundation 889 13-6272082
/s/ EDGAR M. CULLMAN
-----------------------------------------------------------------------------------------------
Edgar M. Cullman, not in his individual
capacity but solely as President for
the above named Foundations.
</TABLE>
<PAGE>
III. TRUSTS OF WHICH LUCY C. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
46. Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants: 85,479 1 13-6102592
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman, III: 90,689 1 13-6737012
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
/s/ Lucy C. Danziger
----------------------------------------------------------------------
Lucy C. Danziger, not in her individual
capacity but solely as a trustee of
the above named trusts.
29. Lucy C. Danziger--personal 363,834 1 ###-##-####
/s/ Lucy C. Danziger
----------------------------------------------------------------------
Lucy C. Danziger, in her individual capacity
91. B. Bros. Realty Limited Partnership
Lucy C. Danziger & John L. Ernst
General Partners 1,039,338 1 13-3313591
/s/ Lucy C. Danziger
----------------------------------------------------------------------
Lucy C. Danziger, not in her individual
capacity but solely as General Partner for the above named Partnership
</TABLE>
<PAGE>
IV. TRUSTS OF WHICH EDGAR M. CULLMAN, JR. IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
21. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of Carolyn S. Fabrici
Family: 8,891 13-6810526
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
38 Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 15,335 1 13-6102588
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 111,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 1 13-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr.: 61,215 1 13-6102603
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman, III: 90,689 1 13-6737012
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
72. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 90,387 1 13-6102602
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
------------------------------------------------
Edgar M. Cullman, Jr. not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
54. Edgar M. Cullman, Jr.--personal 539,252 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
------------------------------------------------
Edgar M. Cullman, in his individual capacity
</TABLE>
<PAGE>
V. TRUSTS OF WHICH SUSAN R. CULLMAN IS A TRUSTEE:
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman, III: 90,689 1 13-6737012
64. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
65. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 1 13-6102598
76. Trust Created by Samuel J. & Rita G. Bloomingdale
Dated 1/10/50 For The Benefit of Susan R. Cullman: 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of Susan R. Cullman: 83,194 1 13-6102605
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
</TABLE>
VII. TRUSTS OF WHICH JOHN L. ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
12. Trust Created U/W/P Susan B. Ernst
Dated 4/19/81 For The Benefit of John L. Ernst Family: 33,155 1 13-6810525
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
</TABLE>
<PAGE>
VIII. TRUST OF WHICH ALEXANDRA ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
</TABLE>
<TABLE>
<S> <C> <C>
/s/ ALEXANDRA ERNST
-----------------------------------------
Alexandra Ernst, not in her individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
4. Alexandra Ernst--personal 6,881 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ ALEXANDRA ERNST
-----------------------------------------
Alexandra Ernst, in her individual
capacity
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
21. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of Carolyn S. Fabrici
Family: 8,891 13-6810526
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman, III: 32,008 1 13-6736143
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
</TABLE>
<TABLE>
<S> <C> <C>
/s/ JOHN L. ERNST
-----------------------------------------
John L. Ernst, not in his individual
capacity but solely as a trustee of
the above named trusts
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
1. John L. Ernst--personal 26,673 1 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ JOHN L. ERNST
-----------------------------------------
John L. Ernst, in his individual capacity
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
5. Jessica P. Ernst--personal 5,556 101-66-910
</TABLE>
<TABLE>
<S> <C> <C>
/s/ JOHN L. ERNST
-----------------------------------------
John L. Ernst, not in his individual
capacity, but
as Parent of the above named minor child
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
22. Dorothy P. Ernst--personal John L. Ernst, Guardian 11,909 1 065-38-791
</TABLE>
<TABLE>
<S> <C> <C>
/s/ JOHN L. ERNST
-----------------------------------------
John L. Ernst, not in his individual
capacity but solely as Guardian for the
above named individual
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
90. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
Descendants: 76,419 1 13-6102612
</TABLE>
<TABLE>
<S> <C> <C>
/s/ SUSAN R. CULLMAN
-----------------------------------------
Susan R. Cullman, not in her individual
capacity but solely as a trustee of the
above
named trusts
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
75. Susan R. Cullman--personal 390,165 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ SUSAN R. CULLMAN
-----------------------------------------
Susan R. Cullman, in her individual
capacity
</TABLE>
<PAGE>
VI. TRUSTS OF WHICH CAROLYN S. FABRICI IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 5,675 1 13-6100144
19. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst : 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Carolyn S. Fabrici
-----------------------------------------
Carolyn S. Fabrici, not in her individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
13. Carolyn S. Fabrici--personal 106,062 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Carolyn S. Fabrici
-----------------------------------------
Carolyn S. Fabrici, in her individual
capacity
</TABLE>
<PAGE>
IX. TRUSTS OF WHICH FREDERICK M. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
12. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of John L. Ernst Family: 33,155 1 13-6810525
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
36. Trust Created by Lucy C. Danziger
Dated 12/24/69 For The Benefit of Rebecca D. Gamzon: 101,358 1 13-6345528
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
52. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of Frederick M. Danziger: 6,223 13-6159963
53. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of Richard M. Danziger: 13,336 13-6159970
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Frederick M. Danziger
-----------------------------------------
Frederick M. Danziger, not in his
individual capacity but solely as a
trustee of the above named trusts
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
51. Frederick M. Danziger--personal 73,538 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Frederick M. Danziger
-----------------------------------------
Frederick M. Danziger in his individual
capacity
</TABLE>
<PAGE>
TRUSTS OF WHICH ELISSA F. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
60. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Edgar M. Cullman, III: 90,689 1 13-6737012
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Samuel B. Cullman: 32,008 1 13-6736142
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Samuel B. Cullman: 90,689 1 13-6737011
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Elissa F. Cullman
-----------------------------------------
Elissa F. Cullman, not in her individual
capacity but solely as a trustee of the
above named trusts
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
74. Elissa F. Cullman--personal 75,574 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Elissa F. Cullman
-----------------------------------------
Elissa F. Cullman, in her individual
capacity
</TABLE>
XI. TRUSTS OF WHICH MARGOT P. ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst
Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst
Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst
Descendants: 14,199 13-6100143
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Margot P. Ernst
-----------------------------------------
Margot P. Ernst, not in her individual
capacity but solely as a trustee of the
above named trusts
</TABLE>
<PAGE>
XII. TRUSTS OF WHICH RICHARD M. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
36. Trust Created by Lucy C. Danziger
Dated 12/24/69 For The Benefit of
Rebecca D. Gamzon: 101,358 1 13-6345528
52. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of
Frederick M. Danziger: 6,223 13-6159963
53. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of
Richard M. Danziger 13,336 13-6159970
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Richard M. Danziger
-----------------------------------------
Richard M. Danziger, not in his individual
capacity but solely as a trustee of the
above named trusts
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
91. B. Bros. Realty Limited Partnership
Lucy C. Danziger & John L. Ernst
General Partners 1,039,338 1 13-3313591
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Lucy C. Danziger
-----------------------------------------
Lucy C. Danziger, as General Partner
/s/ John L. Ernst
-----------------------------------------
John L. Ernst, as General Partner
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
92. Samuel J. Bloomingdale Foundation 87,319 13-6099790
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Susan R. Cullman
-----------------------------------------
Susan R. Cullman, as President
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
93. Louise B. & Edgar M. Cullman Foundation 28,451 13-6100041
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Susan R. Cullman
-----------------------------------------
Susan R. Cullman, as President
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
95. Justus Heijmans Foundation 889 13-6272082
</TABLE>
<TABLE>
<S> <C> <C>
/s/ Edgar M. Cullman
-----------------------------------------
Edgar M. Cullman, as Trustee
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
94. Richard C. & Susan B. Ernst Foundation 53,560 13-6153761
</TABLE>
<TABLE>
<S> <C> <C>
/s/ John L. Ernst
-----------------------------------------
John L. Ernst, as President
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C> <C> <C>
4. Alexandra Ernst--personal
/s/ Alexandra Ernst 6,881 ###-##-####
---------------------------------
6. Matthew L. Ernst--personal
/s/ Matthew L. Ernst 5,556 ###-##-####
---------------------------------
59. Edgar M. Cullman, III--personal
/s/ Edgar M. Cullman 60,431 1 ###-##-####
---------------------------------
62. Samuel B. Cullman--personal
/s/ Samuel B. Cullman 83,550 1 ###-##-####
---------------------------------
65. Georgina D. Cullman--personal
/s/ Georgina D. Cullman 34,577 1 ###-##-####
---------------------------------
82. Carolyn B. Sicher--personal
/s/ Carolyn B. Sicher 95,233 1 ###-##-####
---------------------------------
</TABLE>
<PAGE>
EXHIBIT C
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of January 19, 2000,
between certain shareholders signatories hereto (each a "C&E SHAREHOLDER" and
together the "C&E SHAREHOLDERS") of General Cigar Holdings, Inc., a Delaware
corporation (the "COMPANY"), and Swedish Match AB, a Kingdom of Sweden
corporation ("SWEDISH MATCH").
RECITALS
A. Whereas, Swedish Match desires to purchase from C&E Shareholders and C&E
Shareholders desire to sell to Swedish Match, an aggregate of 3.5 million shares
of Class B Common Stock of the Company (the "STOCK PURCHASE").
B. Whereas concurrently with the execution and delivery of this Agreement
Swedish Match, the Company and SM Merger Corporation, a Delaware corporation
("SM ACQUISITION"), are entering into an Agreement and Plan of Merger (the
"MERGER AGREEMENT") which provides for the merger of SM Acquisition with and
into the Company (the "MERGER").
C. All terms used herein and not otherwise defined herein shall have the
meanings assigned to them in the Merger Agreement.
AGREEMENT
NOW, THEREFORE, In consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
I. PURCHASE OF COMPANY SHARES
1.1 SALE OF THE COMPANY SHARES. Upon the terms and subject to the
conditions contained herein, at the Closing each C&E Shareholder shall sell,
convey, transfer, assign and deliver to Swedish Match the shares of Class B
Common Stock of the Company set forth with respect to such C&E Shareholder on
Schedule A hereto (the "SHARES"), free and clear of all Liens (provided that the
C&E Representative shall have the right, upon notice to Swedish Match, to modify
the allocation of shares set forth on Schedule A among the C&E Shareholders
prior to the Closing as long as (i) the aggregate number of Shares being sold by
all the C&E Shareholders remains unchanged and (ii) Edgar M. Cullman, Sr. and
Edgar M. Cullman, Jr., do not sell more than one third of their current holdings
of shares of Class B Common Stock (owned directly or indirectly) pursuant to
this Agreement.
1.2 CONSIDERATION FOR THE SHARES. Upon the terms and subject to the
conditions contained herein, at the Closing, Swedish Match shall pay to the C&E
Shareholders $15.00 per Share, constituting an aggregate of $52.5 million (the
"AGGREGATE PURCHASE PRICE").
1.3 DELIVERY OF SHARES. At the Closing the C&E Representative will deliver
to Swedish Match a duly issued and executed stock certificate, registered in the
name of Swedish Match and representing all the Shares being sold hereunder.
1.4 DELIVERY OF PURCHASE PRICE. At the Closing, Swedish Match will deliver
to the C&E Representative the Aggregate Purchase Price in immediately available
funds payable to the account designated by the C&E Representative. Swedish
Match's obligations with respect to the delivery of the purchase price for the
Shares shall terminate upon the delivery of the Aggregate Purchase Price in
accordance with the first sentence of this Section 1.4, and the C&E
Representative shall be solely responsible for the distribution to each C&E
Shareholder of its portion of the Aggregate Purchase Price.
1.5 THE CLOSING. The Closing of the purchase and sale of the Shares
hereunder (the "CLOSING") shall occur immediately prior to consummation of the
Merger, provided that all conditions precedent to
<PAGE>
consummation of the Merger (other than as agreed upon by Swedish Match and the
C&E Representative) have been satisfied.
II. SWEDISH MATCH'S REPRESENTATIONS AND WARRANTIES
Swedish Match represents and warrants to the C&E Shareholders as of the
Closing Date as follows:
2.1 ORGANIZATION AND STANDING. Swedish Match is duly organized, validly
existing and in good standing under the laws of the Kingdom of Sweden and has
full corporate power and authority to conduct its business as it is presently
being conducted and to own and lease its Assets.
2.2 CORPORATE POWER; AUTHORIZATION. Swedish Match has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Swedish Match, and the consummation of the transactions contemplated hereby,
have been duly authorized by all necessary corporate action on the part of
Swedish Match. This Agreement has been duly executed and delivered by Swedish
Match and constitutes a valid and binding obligation of Swedish Match
enforceable in accordance with its terms.
2.3 NO CONFLICTS. Neither the execution and delivery of this Agreement by
Swedish Match, nor the consummation of the transactions contemplated hereby and
compliance with the terms hereof will violate, conflict with or result in a
breach, or constitute a default (with or without notice or lapse of time or
both) under any provision of, the articles of association of Swedish Match, any
trust agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or regulation
applicable to Swedish Match or to Swedish Match's property or assets.
2.4 FINANCING. Swedish Match has, or will have immediately prior to the
Closing, sufficient funds to perform its obligations hereunder. Such funds
(whether provided by Swedish Match or by a permitted designee, transferee or
assignee of Swedish Match pursuant to SECTION 5.2 hereof) will not come from
General Cigar Holdings, Inc., any of the subsidiaries of General Cigar Holdings,
Inc., SM Acquisition Corporation, or debt whose acquisition or financing was
based upon the profits or assets of General Cigar Holdings, Inc., any of the
subsidiaries of General Cigar Holdings, Inc. or SM Acquisition Corporation.
III. SELLER'S REPRESENTATIONS AND WARRANTIES
Each C&E Shareholder, severally (and not jointly) represents and warrants to
Swedish Match as of the Closing Date as follows:
3.1 AUTHORITY. Such C&E Shareholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by such
C&E Shareholder and constitutes a valid and binding obligation of such C&E
Shareholder enforceable in accordance with its terms. If any C&E Shareholder is
married and the Shares of such C&E Shareholder constitute community property or
otherwise needs spousal or other approval for this Agreement to be legal, valid
and binding with respect to such Shares, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, such C&E Shareholder's spouse, enforceable against such spouse in
accordance with its terms. If such C&E Shareholder is a trust, no consent of any
beneficiary is required for the execution and deliver of this Agreement or the
consummation of the transactions contemplated hereby.
3.2 NO CONFLICTS. None of (i) the execution and delivery of this
Agreement; (ii) the consummation of the transactions contemplated hereby; or
(iii) compliance with the terms hereof will violate, conflict with or result in
a breach, or constitute a default (with or without notice of lapse of time or
both) under any provision of, any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to such C&E Shareholder or to such C&E
Shareholder's property or assets.
<PAGE>
3.3 THE SHARES. Such C&E Shareholder is the record and beneficial owner
of, or is trustee of a trust that is the record holder of and whose
beneficiaries are the beneficial owners of, and has good and marketable title
to, the Shares set forth opposite such C&E Shareholder's name on Schedule A
hereto, free and clear of any mortgage, lien, pledge, charge, encumbrance,
security interest or other adverse claim (collectively "LIENS"). To the best of
such C&E Shareholder' knowledge each such Share has been duly authorized and
validly issued and is fully paid and non-assessable. Upon delivery of the stock
certificates therefor at the Closing in accordance with Section 1.3, Swedish
Match or its designee will acquire good, valid and marketable title to the
Shares, free and clear of all Liens. Each C&E Shareholder has the sole right to
vote, or to dispose, of such Shares, and none of such Shares is subject to any
agreement, arrangement or restriction with respect to the voting of such Shares.
Except for the this Agreement and the C&E Voting Agreement, (i) there are, and
as of the Closing there will be no agreements or arrangements of any kind,
contingent or otherwise, obligating any C&E Shareholder to sell, transfer,
assign, grant a participation interest in, option pledge, hypothecate or
otherwise dispose or encumber (each, a "TRANSFER"), or cause to be Transferred,
any of the Shares, and (ii) no Person has any contractual or other right or
obligation to purchase or otherwise acquire any of the Shares.
IV. CONDITIONS TO THE STOCK PURCHASE
4.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of the
C&E Shareholders, on the one hand, and Swedish Match on the other hand, to
consummate the transactions contemplated hereby at the Closing are subject to
the satisfaction, on or prior to the Closing Date, of each of the conditions set
forth in Article VII of the Merger Agreement (other than as agreed upon by
Swedish Match and the C&E Representative). In addition unless waived by Swedish
Match, the obligation of Swedish Match to consummate the transactions
contemplated hereby will be subject to all representations and warranties of the
C&E Shareholders contained in this Agreement being true and correct in all
material respects when made and as of the date of the Closing.
V. MISCELLANEOUS
5.1 AMENDMENT. This Agreement may be amended, modified or supplemented
only by a written instrument executed by the C&E Representative (on behalf of
the C&E Shareholders) and Swedish Match.
5.2 ASSIGNMENT. Swedish Match may, in its sole discretion, assign or
transfer all or any of its rights, interests and obligations under this
Agreement to any of its Subsidiaries, PROVIDED, that Swedish Match shall not
assign or transfer any of its rights, interests or obligations under this
Agreement to General Cigar Holdings, Inc. or SM Acquisition and PROVIDED
FURTHER, that no such permissible assignment or transfer shall relieve Swedish
Match of any liability under this Agreement and Swedish Match shall be jointly
and severally liable for the obligations of its transferee or assignee under
this Agreement.
5.3 APPLICABLE LAW; CONSENT TO JURISDICTION. This Agreement shall be
construed and enforced in accordance with, and be governed by, the internal laws
of the State of New York, without regard to its choice of law rules, and the
parties consent to the exclusive jurisdiction of the federal and state courts
located in the city of New York to resolve any dispute relating to this
Agreement.
5.4 TERMINATION. This agreement shall terminate upon the termination of
the Merger Agreement, and no part of this Agreement shall survive such
termination.
5.5 SURVIVABILITY. The representations and warranties contained in this
Agreement shall survive the Closing.
5.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts; each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
5.7 STOCK TRANSFER TAXES. Any applicable stock transfer taxes shall be
paid by the C&E Shareholders. 5.8 C&E Representative. Each C&E Shareholder
hereby designates and appoints each of Edgar M.
<PAGE>
Cullman, Sr. and Edgar M. Cullman, Jr., acting jointly or individually, as its
attorney(s)-in-fact with full power of substitution for each of them (each, a
"C&E REPRESENTATIVE"), to serve as the representative(s) of each such C&E
Shareholder to perform all such acts as are required, authorized or contemplated
by this Agreement to be performed by such person and hereby acknowledges that
the C&E Representatives shall be the only persons authorized to take any action
so required, authorized or contemplated by this Agreement by each such C&E
Shareholder. Each such C&E Shareholder further acknowledges that the foregoing
appointment and designation shall be deemed to be coupled with an interest and
shall survive the death or incapacity of such C&E Shareholder. Each such C&E
Shareholder hereby authorizes (and each such Permitted Transferee shall be
deemed to have authorized) the other parities hereto to disregard any notices or
other action taken by such C&E Shareholder pursuant to this Agreement, except
for notice and actions taken by any C&E Representatives. The other parties
hereto are and will be entitled to rely on any action so taken or any notice
given by the C&E Representatives and are and will be entitled and authorized to
give notices only to the C&E Representatives for any notice contemplated by this
Agreement to be given to any such C&E Shareholder. A successor to the C&E
Representatives may be chosen by a majority in interest of the C&E Shareholders;
provided that notice thereof is given by the new C&E Representative to the
Company and to Swedish Match.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, Swedish Match and C&E Shareholders have executed this
Agreement as of the day and year first above written.
<TABLE>
<S> <C> <C>
SWEDISH MATCH AB
By: /s/ MASSIMO ROSSI
-----------------------------------------
Name: Massimo Rossi
Title:
</TABLE>
Each of the undersigned hereby acknowledges and accepts his appointment as a
C&E Representative pursuant to Section 5.8:
<TABLE>
<C> <S> <C>
/s/ EDGAR M. CULLMAN
-------------------------------------------
Edgar M. Cullman
/s/ EDGAR M. CULLMAN, JR.
-------------------------------------------
Edgar M. Cullman, Jr.
</TABLE>
<PAGE>
I. TRUSTS OF WHICH LOUISE B. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
Trust Created by Rita G. Bloomingdale
2. Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
Trust Created by Rita G. Bloomingdale
3. Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
Trust Created by Susan B. Ernst
7. Dated 1/6/53 For The Benefit of John L. Ernst Descendants: 11,469 13-6100141
Trust Created by Susan B. Ernst
8. Dated 4/9/52 For the Benefit of John L. Ernst Descendants: 19,400 13-6100138
Trust Created by Samuel J. Bloomingdale
9. Dated 8/2/55 For the Benefit of John L. Ernst Descendants: 14,199 13-6100143
Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
10. Descendants: 21,098 1 13-6387289
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
11. Descendants: 173,990 13-6100148
Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
14. Descendants: 17,088 13-6100139
Trust Created by Rita G. Bloomingdale
15. Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
Trust Created by Samuel J. Bloomingdale
16. Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
17. Descendants 52,017 1 13-6100139
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
18. Descendants: 15,675 1 13-6100144
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
19. Descendants: 173,990 13-6100149
Trust Created by Rita G. Bloomingdale
23. Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
Trust Created by Samuel J. Bloomingdale
24. Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
Trust Created by Rita G. Bloomingdale
28. Dated 11/27/31 For The Benefit of Louise B. Cullman 133,367 13-6045860
Trust Created by Samuel J. Bloomingdale
30. Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
Trust Created by Rita G. Bloomingdale
31. Dated 12/21/50 For The Benefit of Lucy C. Danziger 24,086 1 13-6103585
Trust Created by Rita G. Bloomingdale
32. Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
Trust Created by Louise B. Cullman
33. Dated 12/16/43 For The Benefit of Lucy C. Danziger: 98,976 1 13-6102581
Trust Created U/W/O Frances W. Cullman
34. Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
41. Descendants: 108,471 1 13-6102590
Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
42. Descendants: 85,479 1 13-6102592
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
43. Descendants: 48,145 1 13-6100167
Trust Created by Samuel J. Bloomingdale
55. Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 11,165 1 13-6102595
Trust Created by Rita G. Bloomingdale
56. Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
Trust Created by Rita G. Bloomingdale
57. Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 113-6102597
Trust Created U/W/O Frances W. Cullman
58. Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr: 61,215 1 13-6102603
Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
66. Descendants: 68,497 1 13-6100165
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
67. Descendants: 152,260 1 13-6102601
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
68. Descendants 90,387 1 13-6102602
Trust Created by Samuel J. & Rita G. Bloomingdale
76. Dated 1/10/50 For The Benefit of Susan R. Cullman 226,190 13-6102604
rust Created by Edgar M. Cullman & Louise B. Cullman
77. Dated 3/21/50 For The Benefit of Susan R. Cullman 83,194 1 13-6102605
Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman,
78. Trustees: 115,584 1 13-6102606
Trust Created by Rita G. Bloomingdale
79. Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
Trust Created by Rita G. Bloomingdale
80. Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
Trust Created U/W/O Frances W. Cullman
81. Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
83. Descendants: 63,127 1 13-6100169
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
84. Descendants: 168,762 1 13-6102611
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
85. Descendants: 76,419 1 13-6102612
</TABLE>
<TABLE>
<S> <C>
/s/ LOUISE B. CULLMAN
------------------------------------------------
Louise B. Cullman, not in her individual
capacity but solely as a trustee of the
above named trusts
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
27. Louise B. Cullman--personal 459,716 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ LOUISE B. CULLMAN
------------------------------------------------
Louise B. Cullman, in her individual capacity
</TABLE>
<PAGE>
II. TRUSTS OF WHICH EDGAR M. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
10. Descendants: 21,098 1 13-6387289
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
11. Descendants: 173,990 13-6100148
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
18. Descendants: 15,675 1 13-6100144
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
20. Descendants: 173,990 13-6100149
Trust Created U/W/O Joseph F. Cullman, Jr.
26. Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
Trust Created by Samuel J. Bloomingdale
30. Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
Trust Created by Rita G. Bloomingdale
31. Dated 12/21/50 For The Benefit of Lucy C. Danziger: 24,086 1 13-6103585
Trust Created by Rita G. Bloomingdale
32. Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
Trust Created by Louise B. Cullman
33. Dated 12/16/43 For The Benefit of Lucy C. Danziger: 98,976 1 13-6102581
Trust Created U/W/O Frances W. Cullman
34. Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
Trust Created by Samuel J. Bloomingdale
44. Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
45. Descendants: 108,471 1 13-6102590
Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
46 Descendants: 85,479 1 13-6102592
Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
47. Descendants: 31,118 1 13-6102589
Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
48. Descendants: 46,233 1 13-6102587
Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
50. Descendants: 115,335 1 13-6102588
Trust Created by Samuel J. Bloomingdale
55. Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 111,165 1 13-6102595
Trust Created by Rita G. Bloomingdale
56. Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
Trust Created by Rita G. Bloomingdale
57. Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 1 13-6102597
Trust Created U/W/O Frances W. Cullman
58. Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr.: 61,215 1 13-6102603
Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
68. Descendants: 220,064 1 13-6102599
Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
70. Descendants: 53,898 1 13-6102600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
71. Descendants: 152,260 1 13-6102601
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
72. Descendants: 90,387 1 13-6102602
Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
73. Descendants: 7,877 13-6102598
Trust Created by Samuel J. & Rita G.Bloomingdale
76. Dated 1/10/50 For The Benefit of Susan R. Cullman: 226,190 13-6102604
Trust Created by Edgar M. Cullman & Louise B. Cullman
77. Dated 3/21/50 For The Benefit of Susan R. Cullman: 83,194 1 13-6102605
Trust Created by Samuel J. Bloomingdale
78. Dated 12/21/50 For The Benefit of Susan R. Cullman: 115,584 1 13-6102606
Trust Created by Rita G. Bloomingdale
79. Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
Trust Created by Rita G. Bloomingdale
80. Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
Trust Created U/W/O Frances W. Cullman
81. Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
85. Descendants: 116,847 1 13-6102608
Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
86. Descendants: 159,498 3-6102609
Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
88. Descendants: 60,459 1 13-6102610
Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
89. Descendants: 168,762 1 13-6102611
Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
90. Descendants: 76,419 1 13-6102612
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
------------------------------------------------
Edgar M. Cullman, not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
25. Edgar M. Cullman--personal 494,071 101 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
------------------------------------------------
Edgar M. Cullman, in his individual capacity
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
92. Samuel J. Bloomingdale Foundation 87,319 13-6099790
93. Louise B. & Edgar M. Cullman Foundation 28,451 13-6100041
95. Justus Heijmans Foundation 889 13-6272082
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
------------------------------------------------
Edgar M. Cullman, not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<PAGE>
III. TRUSTS OF WHICH LUCY C. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A'
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
46. Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants : 85,479 1 13-6102592
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants:. 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman,
III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman,
III: 90,689 1 13-6737012
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A'
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
/s/ Lucy C. Danziger
----------------------------------------------------------------------
Lucy C. Danziger, not in her individual
capacity but solely as a trustee of
the above named trusts.
29. Lucy C. Danziger--personal 363,834 1 ###-##-####
/s/ Lucy C. Danziger
----------------------------------------------------------------------
Lucy C. Danziger, in her individual capacity
91. B. Bros. Realty Limited Partnership
Lucy C. Danziger & John L. Ernst General Partners 1,039,338 1 13-3313591
/s/ Lucy C. Danziger
----------------------------------------------------------------------
Lucy C. Danziger, not in her individual capacity but solely as a
trustee of the above named trusts.
</TABLE>
<PAGE>
IV. TRUSTS OF WHICH EDGAR M. CULLMAN, JR. IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
21. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of Carolyn S. Fabrici
Family: 8,891 13-6810526
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
38 Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 6,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 15,335 1 13-6102588
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman,
Jr.: 11,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman,
Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 1 13-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr.: 61,215 1 13-6102603
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman,
III: 90,689 1 13-6737012
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
72. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 90,387 1 13-6102602
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
/s/ Edgar M. Cullman
----------------------------------------------------------------------
Edgar M. Cullman, Jr. not in his individual
capacity but solely as a trustee of
the above named trusts.
54. Edgar M. Cullman, Jr.--personal 539,252 1 ###-##-####
/s/ Edgar M. Cullman
----------------------------------------------------------------------
Edgar M. Cullman, in his individual capacity
</TABLE>
<PAGE>
V. TRUSTS OF WHICH SUSAN R. CULLMAN IS A TRUSTEE:
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman, III: 90,689 1 13-6737012
64. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
65. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 1 13-6102598
76. Trust Created by Samuel J. & Rita G. Bloomingdale
Dated 1/10/50 For The Benefit of Susan R. Cullman: 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of Susan R. Cullman: 83,194 1 13-6102605
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
</TABLE>
VII. TRUSTS OF WHICH JOHN L. ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
12. Trust Created U/W/P Susan B. Ernst
Dated 4/19/81 For The Benefit of John L. Ernst Family: 33,155 1 13-6810525
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
</TABLE>
<PAGE>
VIII. TRUST OF WHICH ALEXANDRA ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
/s/ Alexandra Ernst
------------------------------------------------------------------------
Alexandra Ernst, not in her individual
capacity but solely as a trustee of the
above named trusts.
4. Alexandra Ernst--personal 6,881 ###-##-####
/s/ Alexandra Ernst
------------------------------------------------------------------------
Alexandra Ernst, in her individual capacity
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
21. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of Carolyn S. Fabrici
Family: 8,891 13-6810526
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman, III: 32,008 1 13-6736143
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
/s/ John L. Ernst
------------------------------------------------------------------------
John L. Ernst, not in his individual
capacity but solely as a trustee of
the above named trusts
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
1. John L. Ernst--personal 26,673 1 ###-##-####
/s/ John L. Ernst
------------------------------------------------------------------------
John L. Ernst, in his individual capacity
5. Jessica P. Ernst--personal 5,556 101-66-910
/s/ John L. Ernst
------------------------------------------------------------------------
John L. Ernst, not in his individual capacity, but
as Parent of the above named minor child
22. Dorothy P. Ernst--personal
John L. Ernst, Guardian 11,909 1 065-38-791
/s/ John L. Ernst
------------------------------------------------------------------------
John L. Ernst, not in his individual
capacity but solely as Guardian for the
above named individual
Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
90. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
Descendants: 76,419 1 13-6102612
/s/ Susan R. Cullman
------------------------------------------------------------------------
Susan R. Cullman, not in her individual capacity but solely as a trustee
of the above named trusts
75. Susan R. Cullman--personal 390,165 ###-##-####
/s/ Susan R. Cullman
------------------------------------------------------------------------
Susan R. Cullman, in her individual capacity
</TABLE>
<PAGE>
VI. TRUSTS OF WHICH CAROLYN S. FABRICI IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 5,675 1 13-6100144
19. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst : 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
/s/ Carolyn S. Fabrici
------------------------------------------------------------------------
Carolyn S. Fabrici, not in her individual
capacity but solely as a trustee of the
above named trusts.
13. Carolyn S. Fabrici--personal 106,062 ###-##-####
/s/ Carolyn S. Fabrici
------------------------------------------------------------------------
Carolyn S. Fabrici, in her individual capacity
</TABLE>
<PAGE>
IX. TRUSTS OF WHICH FREDERICK M. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
12. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of John L. Ernst Family: 33,155 1 13-6810525
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
36. Trust Created by Lucy C. Danziger
Dated 12/24/69 For The Benefit of Rebecca D. Gamzon: 101,358 1 13-6345528
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
52. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of Frederick M. Danziger: 6,223 13-6159963
53. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of Richard M. Danziger: 13,336 13-6159970
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
/s/ Frederick M. Danziger
------------------------------------------------------------------------
Frederick M. Danziger, not in his individual capacity but solely as a
trustee of the above named trusts
51. Frederick M. Danziger--personal 73,538 ###-##-####
/s/ Frederick M. Danziger
------------------------------------------------------------------------
Frederick M. Danziger in his individual capacity
</TABLE>
<PAGE>
TRUSTS OF WHICH ELISSA F. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Edgar M. Cullman, III: 90,689 1 13-6737012
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
/s/ Elissa F. Cullman
------------------------------------------------------------------------
Elissa F. Cullman, not in her individual capacity but solely as a
trustee of the above named trusts
74. Elissa F. Cullman--personal 75,574 ###-##-####
/s/ Elissa F. Cullman
------------------------------------------------------------------------
Elissa F. Cullman, in her individual capacity
</TABLE>
XI. TRUSTS OF WHICH MARGOT P. ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst
Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst
Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst
Descendants: 14,199 13-6100143
/s/ Margot P. Ernst
------------------------------------------------------------------------
Margot P. Ernst, not in her individual capacity but solely as a trustee
of the above named trusts
</TABLE>
<PAGE>
XII. TRUSTS OF WHICH RICHARD M. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
36. Trust Created by Lucy C. Danziger
Dated 12/24/69 For The Benefit of Rebecca D. Gamzon: 101,358 1 13-6345528
52. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of Frederick M. Danziger: 6,223 13-6159963
53. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of Richard M. Danziger 13,336 13-6159970
/s/ Richard M. Danziger
------------------------------------------------------------------------
Richard M. Danziger, not in his individual capacity but solely as a
trustee of the above named trusts]
91. B. Bros. Realty Limited Partnership
Lucy C. Danziger & John L. Ernst General Partners 1,039,338 1 13-3313591
/s/ Lucy C. Danziger
------------------------------------------------------------------------
Lucy C. Danziger, as General Partner
/s/ John L. Ernst
------------------------------------------------------------------------
John L. Ernst, as General Partner
92. Samuel J. Bloomingdale Foundation 87,319 13-6099790
/s/ Susan R. Cullman
------------------------------------------------------------------------
Susan R. Cullman, as President
93. Louise B. & Edgar M. Cullman Foundation 28,451 13-6100041
/s/ Susan R. Cullman
------------------------------------------------------------------------
Susan R. Cullman, as President
95. Justus Heijmans Foundation 889 13-6272082
/s/ Edgar M. Cullman
------------------------------------------------------------------------
Edgar M. Cullman, as Trustee
94. Richard C. & Susan B. Ernst Foundation 53,560 13-6153761
/s/ John L. Ernst
------------------------------------------------------------------------
John L. Ernst, as President
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<C> <S> <C> <C> <C>
4. Alexandra Ernst--personal 6,881 ###-##-####
/s/ Alexandra Ernst
---------------------------------------------
6. Matthew L. Ernst--personal 5,556 ###-##-####
/s/ Matthew L. Ernst
---------------------------------------------
59. Edgar M. Cullman, III--personal 60,431 1 ###-##-####
/s/ Edgar M. Cullman
---------------------------------------------
62. Samuel B. Cullman--personal 83,550 1 ###-##-####
/s/ Samuel B. Cullman
---------------------------------------------
65. Georgina D. Cullman--personal 34,577 1 ###-##-####
/s/ Georgina D. Cullman
---------------------------------------------
82. Carolyn B. Sicher--personal 95,233 1 ###-##-####
/s/ Carolyn B. Sicher
---------------------------------------------
</TABLE>
<PAGE>
EXHIBIT D
C&E VOTING AGREEMENT
C&E VOTING AGREEMENT dated as of January 19, 2000, between Swedish Match AB,
a company organized under the laws of Sweden ("SWEDISH MATCH"), and the Persons
listed on signature pages hereof (each, a "C&E SHAREHOLDER" and, collectively,
the "C&E SHAREHOLDERS").
RECITALS
A. General Cigar Holdings, Inc. is a company organized under the laws of the
State of Delaware (the "COMPANY'). Each C&E Shareholder owns the number of
shares of Class A Common Stock, par value $0.01 per share, of the Company
(including any common stock into which such common stock may be converted or
exchanged after the date hereof, the "CLASS A COMMON STOCK") and of Class B
Common Stock, par value $0.01 per share, of the Company (including any common
stock into which such common stock may be converted or exchanged after the date
hereof, the "CLASS B COMMON STOCK" and, together with the Class A Common Stock,
the "COMMON STOCK") set forth opposite such C&E Shareholder's name on Schedule A
hereto (such shares of Common Stock, together with any other shares of capital
stock of the Company acquired by any C&E Shareholder after the date hereof and
during the term of this Agreement, being collectively referred to herein as the
"SUBJECT SHARES").
B. Concurrently with the execution and delivery of this Agreement, Swedish
Match, SM Merger Corporation, a company organized under the laws of the State of
Delaware ("SM ACQUISITION"), and the Company are entering into an Agreement and
Plan of Merger (as the same may from time to time be modified, supplemented or
restated, the "MERGER AGREEMENT") providing for the merger of SM Acquisition
with and into the Company (the "MERGER") upon the terms and subject to the
conditions set forth therein.
C. Concurrently with the execution and delivery of this Agreement, Swedish
Match and the C&E Shareholders are entering into (i) a Stock Purchase Agreement
(as the same may from time to time be modified, supplemented or restated, the
"STOCK PURCHASE AGREEMENT") providing for the purchase by Swedish Match of
3,500,000 Subject Shares immediately prior to the effective time of the Merger
(the "EFFECTIVE TIME"), all upon the terms and subject to the conditions set
forth therein, and (ii) a Shareholders' Agreement (as the same may from time to
time be modified supplemented or restated, the "SHAREHOLDERS' AGREEMENT") with
the Company governing certain of the rights, duties and obligations of the
parties thereto relating to their ownership of stock of the Company following
the Merger.
D. As a condition to entering into the Merger Agreement and the Stock
Purchase Agreement, Swedish Match has required that the C&E Shareholders enter
into this Agreement, and the C&E Shareholders desire to enter into this
Agreement to induce Swedish Match to enter into the Merger Agreement and Stock
Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF EACH C&E SHAREHOLDER. Each C&E
Shareholder, severally and not jointly, represents and warrants to Swedish
Match as follows:
(a) AUTHORITY. Such C&E Shareholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed
and delivered by such C&E Shareholder and constitutes a valid and binding
obligation of such C&E Shareholder enforceable in accordance with its
terms. If such C&E Shareholder is married and the Subject Shares of such
C&E Shareholder constitute community property or otherwise need spousal
or other approval for this Agreement to be legal, valid and binding with
respect to such Subject Shares, this Agreement has been duly authorized,
executed and delivered by, and constitutes a valid and binding agreement
of, such C&E Shareholder's spouse, enforceable against such spouse in
accordance with its terms. If such C&E Shareholder is a trust, no consent
of any beneficiary is required for the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
<PAGE>
(b) NO CONFLICTS. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
and compliance with the terms hereof will violate, conflict with or
result in a breach, or constitute a default (with or without notice of
lapse of time or both) under any provision of, any trust agreement, loan
or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or regulation
applicable to such C&E Shareholder or to such C&E Shareholder's property
or assets.
(c) THE SUBJECT SHARES. Such C&E Shareholder is the record and
beneficial owner of, or is trustee of a trust that is the record holder
of and whose beneficiaries are the beneficial owners of, and has good and
marketable title to, the Subject Shares set forth opposite such C&E
Shareholder's name on Schedule A hereto, free and clear of any mortgage,
lien, pledge, charge, encumbrance, security interest or other adverse
claim. Such C&E Shareholder does not own, of record or beneficially, any
shares of capital stock of the Company other than the Subject Shares set
forth opposite such C&E Shareholder's name on Schedule A hereto. Such C&E
Shareholder has the sole right to vote, or to dispose, of such Subject
Shares, and none of such Subject Shares is subject to any agreement,
arrangement or restriction with respect to the voting of such Subject
Shares, except as contemplated by this Agreement or the Shareholders'
Agreement. Except for the Stock Purchase Agreement and the Shareholders'
Agreement, and, if such C&E Shareholder is a trust, in accordance with
the terms of such trust, (i) there are no agreements or arrangements of
any kind, contingent or otherwise, obligating such C&E Shareholder to
sell, transfer, assign, grant a participation interest in, option pledge,
hypothecate or otherwise dispose or encumber (each, a "TRANSFER"), or
cause to be Transferred, any of the Subject Shares, and (ii) no Person
(as defined in the Merger Agreement) has any contractual or other right
or obligation to purchase or otherwise acquire any of the Subject Shares.
(d) RELIANCE BY SWEDISH MATCH. Such C&E Shareholder understands and
acknowledges that Swedish Match is entering into, and causing Swedish
Match to enter into, the Merger Agreement and the Stock Purchase
Agreement in reliance upon such C&E Shareholder's execution and delivery
of this Agreement.
(e) LITIGATION. There is no action, proceeding or investigation
pending or threatened against such C&E Shareholder that questions the
validity of this Agreement or any action taken or to be taken by such C&E
Shareholder in connection with this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF SWEDISH MATCH. Swedish Match hereby
represents and warrants to each C&E Shareholder that Swedish Match has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Swedish Match, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate
action on the part of Swedish Match. This Agreement has been duly executed
and delivered by Swedish Match and constitutes a valid and binding
obligation of Swedish Match enforceable in accordance with its terms.
Neither the execution and delivery of this Agreement, nor the consummation
of the transactions contemplated hereby and compliance with the terms hereof
will violate, conflict with or result in a breach, or constitute a default
(with or without notice or lapse of time or both) under any provision of,
the articles of association of Swedish Match, any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Swedish
Match or to Swedish Match's property or assets.
3. COVENANTS OF EACH C&E SHAREHOLDER. Until the termination of this
Agreement in accordance with Section 6, each C&E Shareholder, severally and
not jointly, agrees as follows:
2
<PAGE>
(a) At any meeting of shareholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in
any other circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the Merger and the Merger
Agreement is sought, each C&E Shareholder shall vote (or cause to be
voted) the Subject Shares (and each class thereof) in favor of the
adoption by the Company of the Merger and the approval of the Merger
Agreement and each of the transactions contemplated by the Merger
Agreement; PROVIDED that the C&E Shareholders shall vote (or cause to be
voted) the Subject Shares that are Class A Common Stock in the same
manner as the vote of the holders of a majority of the outstanding shares
of the Class A Common Stock (excluding such Subject Shares) voting as a
single class.
(b) At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which a vote,
consent or other approval of all or some of the shareholders of the
Company is sought, each C&E Shareholder shall vote (or cause to be voted)
its Subject Shares (and each class thereof) against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale or transfer of a material amount of
assets, reorganization, recapitalization, dissolution, liquidation or
winding up of or by the Company or any Acquisition Proposal (as defined
in the Merger Agreement), and (ii) any amendment of the Company's
certificate of incorporation or by-laws or other proposal or transaction
involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner delay, impede,
frustrate, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement or change in
any manner the voting rights of each class of Common Stock. Subject to
Section 4, each C&E Shareholder further agrees not to commit or agree to
take any action inconsistent with the foregoing.
(c) Except as provided in the next to the last sentence of this
Section 3(c), each C&E Shareholder agrees not to, directly or indirectly,
(i) Transfer or enter into any agreement, option or other arrangement
(including any profit sharing arrangement) with respect to the Transfer
of, any Subject Shares to any Person, other than in accordance with the
Merger Agreement, the Stock Purchase Agreement or the Shareholders'
Agreement, (ii) grant any proxies, or proxies, deposit any Subject Shares
into any voting trust or enter into any voting arrangement, whether by
proxy, voting agreement or otherwise, with respect to the Subject Shares,
other than pursuant to this Agreement and the Shareholders' Agreement, or
(iii) convert (or cause to be converted) any of the Subject Shares
consisting of Class B Common Stock into Class A Common Stock. Subject to
the next to the last sentence of this Section 3(c), each C&E Shareholder
further agrees not to commit or agree to take any of the foregoing
actions. Notwithstanding the foregoing, each C&E Shareholder shall have
the right to Transfer its Subject Shares to a Permitted Transferee (as
defined in this Section 3(c)) of such C&E Shareholder if and only if such
Permitted Transferee shall have agreed in writing, in a manner acceptable
in form and substance to Swedish Match, (i) to accept such Subject Shares
subject to the terms and conditions of this Agreement, and (ii) to be
bound by this Agreement and to agree and acknowledge that such Person
shall constitute a C&E Shareholder for all purposes of this Agreement.
"PERMITTED TRANSFEREE" means, with respect to any C&E Shareholder,
(A) any other C&E Shareholder, (B) a spouse or lineal descendant (whether
natural or adopted), sibling, parent, heir, executor, administrator,
testamentary trustee, lifetime trustee or legatee of such C&E
Shareholder, (C) any charitable organization described in section
170(c) of the U.S. Internal Revenue Code of 1986, as amended, (D) any
trust, the trustees of which include only the Persons named in clause
(A) or (B) and the beneficiaries of which include only the Persons named
in clause (A), (B) or (C), (E) any corporation, limited liability company
or partnership, the stockholders, members or general or limited partners
of which include only the Persons named in clause (A) or (B), or (F) if
such C&E
3
<PAGE>
Shareholder is a trust, the beneficiary or beneficiaries authorized or
entitled to receive distributions from such trust.
(d) Subject to the terms of Section 4, no C&E Shareholder shall, nor
shall any C&E Shareholder permit any investment banker, attorney or other
adviser or representative of any C&E Shareholder to, such, directly or
indirectly, initiate, solicit (including by way of furnishing
information), encourage or respond to or take any other action knowingly
to facilitate, any inquiries or the making of any proposal by any Person
(other than Swedish Match or any affiliate of Swedish Match) with respect
to the Company that constitutes or reasonably may be expected to lead to,
an Acquisition Proposal, or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain any Acquisition Proposal, or agree to or endorse
any Acquisition Proposal, or authorize or permit any Person acting on
behalf of such C&E Shareholder to do any of the foregoing, and no C&E
Shareholder shall, alone or together with any other Person, make an
Acquisition Proposal. If any C&E Shareholder receives any inquiry or
proposal regarding any Acquisition Proposal, such C&E Shareholder shall
promptly inform Swedish Match of such inquiry or proposal and the details
thereof.
(e) Each C&E Shareholder shall use all 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 to consummate and make effective, in the
most expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement and the Stock Purchase
Agreement, and to carry out the intent and purposes of this Agreement.
4. SHAREHOLDER CAPACITY. No Person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company shall be
deemed to make any agreement or understanding in this Agreement in such
Person's capacity as a director or officer. Each C&E Shareholder is entering
into this Agreement solely in its capacity as the record holder or
beneficial owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of, such C&E Shareholder's Subject Shares and nothing
herein shall limit or affect any actions taken by a C&E Shareholder in its
capacity as a director or officer of the Company to the extent specifically
permitted by the Merger Agreement or following the termination of the Merger
Agreement.
5. C&E REPRESENTATIVE. (a) Each C&E Shareholder hereby designates and
appoints (and each permitted Transferee of each such C&E Shareholder is
hereby deemed to have so designated and appointed) each of Edgar M. Cullman
and Edgar M. Cullman, Jr. (each, a "C&E REPRESENTATIVE"), acting jointly or
individually, as its attorneys-in-fact with full power of substitution for
each of them, to serve as the representative(s) of such C&E Shareholder to
perform all such acts as are required, authorized or contemplated by this
Agreement to be performed by such C&E Shareholder (including the voting of
the Subject Shares in accordance with Sections 3(a) and (b)), and hereby
acknowledges that each C&E Representative shall be authorized to take any
action so required, authorized or contemplated by this Agreement. Each such
C&E Shareholder further acknowledges that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive
the death or incapacity of such C&E Shareholder. Each such C&E Shareholder
hereby authorizes (and each such Permitted Transferee of such C&E
Shareholder shall be deemed to have authorized) the other parties hereto to
disregard any notices or other action taken by such C&E Shareholder pursuant
to this Agreement, except for notices and actions taken by the C&E
Representatives. Swedish Match is and will be entitled to rely on any action
so taken or any notice given by any C&E Representative and is and will be
entitled and authorized to give notices only to the C&E Representative for
any notice contemplated by this Agreement to be given to any such C&E
Shareholder. A successor to the C&E Representative may be chosen by a
majority in interest of the C&E Shareholders; PROVIDED that notice thereof
is given by the new C&E Representative to Swedish Match.
4
<PAGE>
(b) Notwithstanding the generality of Section 5(a), each C&E
Shareholder hereby constitutes and appoints each C&E Representative,
acting jointly or individually, with full power of substitution, as the
proxy pursuant to the provisions of Section 212 of the Delaware General
Corporation Law and attorney of such C&E Shareholder, and hereby
authorizes and empowers each C&E Representative, acting individually or
jointly, to represent, vote and otherwise act (by voting at any meeting
of the shareholders of the Company, by written consent in lieu thereof or
otherwise) with respect to the Subject Shares owned or held by such C&E
Shareholder regarding the matters referred to in Sections 3(a) and
(b) until the termination of this Agreement, to the same extent and with
the same effect as such C&E Shareholder might or could do under
applicable law, rules and regulations. The proxy granted pursuant to the
immediately preceding sentence is coupled with an interest and shall be
irrevocable. Each C&E Shareholder hereby revokes any and all previous
proxies or powers of attorney granted with respect to any of the Subject
Shares owned or held by such C&E Shareholder regarding the matters
referred to in Sections 3(a) and (b).
6. TERMINATION. This Agreement shall terminate (i) upon the earlier of
(A) the Effective Time and (B) the last day of the 18th full calendar month
following the date of the termination of the Merger Agreement, or (ii) at
any time upon notice by Swedish Match to the C&E Representative. No party
hereto shall be relieved from any liability for breach of this Agreement by
reason of any such termination.
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to any
principles or rules of conflicts of laws thereof.
8. JURISDICTION; WAIVER OF JURY TRIAL. (a) Each of the parties hereto
irrevocably and unconditionally (i) agrees that any legal suit, action or
proceeding brought by any party hereto arising out of or based upon this
Agreement or the transactions contemplated hereby may be brought in the
Courts of Delaware or the United States District Court for the District of
Delaware (each, a "DELAWARE COURT"), (ii) waives, to the fullest extent it
may effectively do so, any objection which it may now or hereafter have to
the laying of venue of any such proceeding brought in any Delaware Court,
and any claim that any such action or proceeding brought in any Delaware
Court has been brought in an inconvenient forum, and (iii) submits to the
non-exclusive jurisdiction of Delaware Courts in any suit, action or
proceeding. Each of the parties agrees that a judgment in any suit, action
or proceeding brought in a Delaware Court shall be conclusive and binding
upon it and may be enforced in any other courts to whose jurisdiction it is
or may be subject, by suit upon such judgment.
(b) Each of the parties agrees and acknowledges that any controversy
that may arise under this Agreement is likely to involve complicated and
difficult issues, and therefore each such party hereby irrevocably and
unconditionally waives any right such party may have to a trial by jury
in respect of any litigation directly or indirectly arising out of or
relating to this Agreement, or the breach, termination or validity of
this Agreement.
9. SPECIFIC PERFORMANCE. Each C&E Shareholder acknowledges and agrees
that (i) the covenants, obligations and agreements of such C&E Shareholder
contained in this Agreement relate to special, unique and extraordinary
matters, (ii) Swedish Match is and will be relying on such covenants in
connection with entering into the Merger Agreement and the Stock Purchase
Agreement, the performance of its obligations under the Merger Agreement and
the purchase of shares pursuant to the Stock Purchase Agreement, and (iii) a
violation of any of the terms of such covenants, obligations or agreements
will cause Swedish Match irreparable injury for which adequate remedies are
not available at law. Therefore, each C&E Shareholder agrees that Swedish
Match shall be entitled to an injunction, restraining order or such other
equitable relief (without the requirement to post bond) as a court of
competent jurisdiction may deem necessary or appropriate to restrain such
C&E Shareholder
5
<PAGE>
from committing any violation of such covenants, obligations or agreements.
These injunctive remedies are cumulative and in addition to any other rights
and remedies Swedish Match may have.
10. AMENDMENT, WAIVERS, ETC. Neither this Agreement nor any term hereof
may be amended or otherwise modified other than by an instrument in writing
signed by Swedish Match and the C&E Representative. No provision of this
Agreement may be waived, discharged or terminated other than by an
instrument in writing signed by the party against whom the enforcement of
such waiver, discharge or termination is sought.
11. ASSIGNMENT; NO THIRD PARTY BENEFICIARIES. This Agreement shall not
be assignable or otherwise transferable by a party without the prior consent
of the other parties, and any attempt to so assign or otherwise transfer
this Agreement without such consent shall be void and of no effect; PROVIDED
that (i) any Permitted Transferee acquiring any Subject Shares in accordance
with this Section 3(c) shall, upon the delivery of the documents
contemplated by Section 3(c), become a "C&E Shareholder", and (ii) Swedish
Match may, in its sole discretion, assign or transfer all or any of its
rights, interests and obligations under this Agreement to SM Acquisition or
any direct or indirect wholly-owned subsidiary of Swedish Match. This
Agreement shall be binding upon the respective heirs, successors, legal
representatives and permitted assigns of the parties hereto. Nothing in this
Agreement shall be construed as giving any Person, other than the parties
hereto and their heirs, successors, legal representatives and permitted
assigns, any right, remedy or claim under or in respect of this Agreement or
any provision hereof.
12. NOTICES. All notices, consents, requests, instructions, approvals
and other communications provided for in this Agreement shall be in writing
and shall be deemed validly given upon personal delivery or one day after
being sent by overnight courier service or by telecopy (so long as for
notices or other communications sent by telecopy, the transmitting telecopy
machine records electronic conformation of the due transmission of the
notice), at the following address or telecopy number, or at such other
address or telecopy number as a party may designate to the other parties:
(A) if to Swedish Match to:
Swedish Match AB
SE-118 85 Stockholm
Sweden
Attn: Senior Vice President
and Legal Counsel
Telecopy: (46-8) 720-7656
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn.: Paul S. Bird
Telecopy: (1-212) 909-6836;
(B) if to any C&E Shareholder to:
Edgar M. Cullman, Sr.
Edgar M. Cullman, Jr.
c/o General Cigar Holdings, Inc.
387 Park Avenue South
New York, New York 10016-8899
Telecopy: (1-212) 561-8791
with a copy to:
6
<PAGE>
Latham & Watkins
885 Third Avenue
New York, New York 10022-4802
Attn.: R. Ronald Hopkinson
Telecopy: (1-212) 751-4864.
13. REMEDIES. No failure or delay by any party in exercising any right,
power or privilege under this Agreement 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 provided herein shall be cumulative and
not exclusive of any rights or remedies provided by law.
14. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, in order to achieve the intent of the parties hereto to
the maximum extent possible. In any event, the invalidity or
unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of this
Agreement, including that provision, in any other jurisdiction.
15. INTEGRATION. This Agreement, including the Schedules hereto, the
Shareholders' Agreement and the Stock Purchase Agreement constitute the full
and entire understanding and agreement of the parties with respect to the
subject matter hereof and thereof and supersede any and all prior
understandings or agreements relating to the subject matter hereof and
thereof.
16. SECTION HEADINGS. The article and section headings of this Agreement
are for convenience of reference only and are not to be considered in
construing this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and date first above written.
SWEDISH MATCH AB
By: /s/ MASSIMO ROSSI
------------------------------------
Name:
Title:
Each of the undersigned hereby (i) acknowledges
and accepts his appointment as a C&E
Representative pursuant to Section 5(a)
and the grant of the proxy referred to in
Section 5(b), and (ii) agrees and confirms
that he will vote all Subject Shares in
accordance with Sections 3(a) and (b):
/s/ EDGAR M. CULLMAN, SR.
- -------------------------------------------
Edgar M. Cullman, Sr.
/s/ EDGAR M. CULLMAN, JR.
- -------------------------------------------
Edgar M. Cullman, Jr.
8
<PAGE>
I. TRUSTS OF WHICH LOUISE B. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst
Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst
Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst
Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of Carolyn S. Fabrici
Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of Carolyn S. Fabrici
Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
19. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Dorothy P. Ernst: 17,666 13-6100131
28. Trust Created by Rita G. Bloomingdale
Dated 11/27/31 For The Benefit of Louise B. Cullman 133,367 13-6045860
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
33. Trust Created by Louise B. Cullman
Dated 12/16/43 For The Benefit of Lucy C. Danziger: 98,976 1 13-6102581
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
41. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
42. Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants: 85,479 1 13-6102592
43. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 11,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 113-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr: 61,215 1 13-6102603
66. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
67. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
68. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants 90,387 1 13-6102602
76. Trust Created by Samuel J. & Rita G. Bloomingdale
Dated 1/10/50 For The Benefit of Susan R. Cullman 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of Susan R. Cullman 83,194 1 13-6102605
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman,
Trustees: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
83. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
84. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
85. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
Descendants: 76,419 1 13-6102612
</TABLE>
<TABLE>
<S> <C> <C>
/s/ LOUISE B. CULLMAN
-----------------------------------------
Louise B. Cullman, not in her individual
capacity but solely as a trustee of the
above named trusts
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
27. Louise B. Cullman--personal 459,716 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ LOUISE B. CULLMAN
-----------------------------------------
Louise B. Cullman, in her individual
capacity
</TABLE>
<PAGE>
II. TRUSTS OF WHICH EDGAR M. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of John L. Ernst
Descendants: 173,990 13-6100148
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Carolyn S. Fabrici
Descendants: 15,675 1 13-6100144
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Carolyn S. Fabrici
Descendants: 173,990 13-6100149
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
33. Trust Created by Louise B. Cullman
Dated 12/16/43 For The Benefit of Lucy C. Danziger: 98,976 1 13-6102581
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
46. Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants: 85,479 1 13-6102592
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 111,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Edgar M. Cullman, Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Edgar M. Cullman, Jr.: 178,667 1 13-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Edgar M. Cullman, Jr.: 61,215 1 13-6102603
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
72. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 90,387 1 13-6102602
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
76. Trust Created by Samuel J. & Rita G.Bloomingdale
Dated 1/10/50 For The Benefit of Susan R. Cullman: 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of Susan R. Cullman: 83,194 1 13-6102605
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Susan R. Cullman: 178,222 1 13-6102591
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 3-6102609
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
90. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Susan R. Cullman
Descendants: 76,419 1 13-6102612
</TABLE>
<TABLE>
<S> <C> <C>
/s/ EDGAR M. CULLMAN
-----------------------------------------
Edgar M. Cullman, not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<C> <S> <C> <C> <C>
25. Edgar M. Cullman--personal 494,071 101 ###-##-####
</TABLE>
<TABLE>
<S> <C> <C>
/s/ EDGAR M. CULLMAN
-----------------------------------------
Edgar M. Cullman, in his individual
capacity
</TABLE>
<TABLE>
<C> <S> <C> <C> <C>
92. Samuel J. Bloomingdale Foundation 87,319 13-6099790
93. Louise B. & Edgar M. Cullman Foundation 28,451 13-6100041
95. Justus Heijmans Foundation 889 13-6272082
</TABLE>
<TABLE>
<S> <C> <C>
/s/ EDGAR M. CULLMAN
-----------------------------------------
Edgar M. Cullman, not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<PAGE>
III. TRUSTS OF WHICH LUCY C. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<S> <C> <C> <C> <C>
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
30. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 129,775 1 13-6102584
31. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of Lucy C. Danziger: 24,086 1 13-6103585
32. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of Lucy C. Danziger: 171,234 13-6102586
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of David M. Danziger: 55,676 1 13-6214196
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
46. Trust Created by U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Lucy C. Danziger
Descendants: 85,479 1 13-6102592
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 115,335 1 13-6102588
60. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Edgar M. Cullman, III: 90,689 1 13-6737012
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of Samuel B. Cullman: 32,008 1 13-6736142
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<S> <C> <C> <C> <C>
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Susan R. Cullman
Descendants: 168,762 1 13-6102611
</TABLE>
<TABLE>
<S> <C>
/s/ LUCY C. DANZIGER
-------------------------------------------
Lucy C. Danziger, not in her individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
29. Lucy C. Danziger--personal 363,834 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ LUCY C. DANZIGER
-------------------------------------------
Lucy C. Danziger, in her individual capacity
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
91. B. Bros. Realty Limited Partnership
Lucy C. Danziger & John L. Ernst General Partners 1,039,338 1 13-3313591
</TABLE>
<TABLE>
<S> <C>
/s/ LUCY C. DANZIGER
-------------------------------------------
Lucy C. Danziger, not in her individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<PAGE>
IV. TRUSTS OF WHICH EDGAR M. CULLMAN, JR. IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<S> <C> <C> <C> <C>
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of Carolyn S. Fabrici
Descendants: 26,655 1 13-6896905
21. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of Carolyn S. Fabrici
Family: 8,891 13-6810526
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
34. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Lucy C. Danziger: 77,441 1 13-6102593
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of Rebecca D. Gamzon: 80,020 1 13-6585287
38 Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of David M. Danziger: 79,131 1 13-6585286
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of David M. Danziger: 71,129 1 13-6737013
45. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Lucy C. Danziger
Descendants: 108,471 1 13-6102590
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Lucy C. Danziger
Descendants: 6,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Lucy C. Danziger
Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Lucy C. Danziger
Descendants: 15,335 1 13-6102588
55. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Edgar M. Cullman, Jr.: 11,165 1 13-6102595
56. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
Edgar M. Cullman, Jr.: 44,340 13-6102596
57. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
Edgar M. Cullman, Jr.: 178,667 1 13-6102597
58. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of
Edgar M. Cullman, Jr.: 61,215 1 13-6102603
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Edgar M. Cullman, III: 90,689 1 13-6737012
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Georgina D. Cullman: 88,911 1 13-6737017
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<S> <C> <C> <C> <C>
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 53,898 1 13-6102600
71. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 152,260 1 13-6102601
72. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 90,387 1 13-6102602
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Edgar M. Cullman, Jr.
Descendants: 7,877 13-6102598
81. Trust Created U/W/O Frances W. Cullman
Dated 7/23/59 For The Benefit of Susan R. Cullman: 88,973 1 13-6102613
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of Carolyn B. Sicher: 62,237 1 13-6736147
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of Carolyn B. Sicher: 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of Susan R. Cullman
Descendants: 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of Susan R. Cullman
Descendants: 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of Susan R. Cullman
Descendants: 60,459 1 13-6102610
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
-------------------------------------------
Edgar M. Cullman, Jr. not in his individual
capacity but solely as a trustee of the
above named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
54. Edgar M. Cullman, Jr.--personal 539,252 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
-------------------------------------------
Edgar M. Cullman, in his individual capacity
</TABLE>
<PAGE>
V. TRUSTS OF WHICH SUSAN R. CULLMAN IS A TRUSTEE:
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
26. Trust Created U/W/O Joseph F. Cullman, Jr.
Dated 6/30/50 For The Benefit of Edgar M. Cullman: 339,854 13-6828719
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Rebecca D. Gamzon: 72,018 1 13-6737018
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of
David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
David M. Danziger: 71,129 1 13-6737013
47. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of
Lucy C. Danziger Descendants: 31,118 1 13-6102589
48. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of
Lucy C. Danziger Descendants: 46,233 1 13-6102587
49. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of
Lucy C. Danziger Descendants: 48,145 1 13-6100167
50. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of
Lucy C. Danziger Descendants: 115,335 1 13-6102588
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of
Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Edgar M. Cullman, III: 90,689 1 13-6737012
64. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Samuel B. Cullman: 32,008 1 13-6736142
65. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Samuel B. Cullman: 90,689 1 13-6737011
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Georgina D. Cullman: 88,911 1 13-6737017
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
67. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of
Edgar M. Cullman, Jr. Descendants: 173,270 1 13-6102598
68. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of
Edgar M. Cullman, Jr. Descendants: 220,064 1 13-6102599
69. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of
Edgar M. Cullman, Jr. Descendants: 68,497 1 13-6100165
70. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of
Edgar M. Cullman, Jr. Descendants: 53,898 1 13-6102600
73. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of
Edgar M. Cullman, Jr. Descendants: 7,877 1 13-6102598
76. Trust Created by Samuel J. & Rita G. Bloomingdale
Dated 1/10/50 For The Benefit of
Susan R. Cullman: 226,190 13-6102604
77. Trust Created by Edgar M. Cullman & Louise B. Cullman
Dated 3/21/50 For The Benefit of
Susan R. Cullman: 83,194 1 13-6102605
78. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Susan R. Cullman: 115,584 1 13-6102606
79. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
Susan R. Cullman: 52,635 1 13-6102607
80. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
Susan R. Cullman: 178,222 1 13-6102591
84. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
</TABLE>
<PAGE>
VII. TRUSTS OF WHICH JOHN L. ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of
John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of
John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of
John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of
John L. Ernst Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of
John L. Ernst Descendants: 173,990 13-6100148
12. Trust Created by Susan B. Ernst
Dated 4/19/81 For The Benefit of
John L. Ernst Family: 33,155 1 13-6810525
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of
Carolyn S. Fabrici Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of
Carolyn S. Fabrici Descendants 52,017 1 13-6100139
</TABLE>
<PAGE>
VIII. TRUST OF WHICH ALEXANDRA ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of
John L. Ernst Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of
John L. Ernst Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of
John L. Ernst Descendants: 14,199 13-6100143
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of
John L. Ernst Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of
John L. Ernst Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of
Carolyn S. Fabrici Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of
Carolyn S. Fabrici Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of
Carolyn S. Fabrici Descendants: 15,675 1 13-6100144
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Dorothy P. Ernst: 17,666 13-6100131
</TABLE>
<TABLE>
<S> <C>
/s/ ALEXANDRA ERNST
---------------------------------------------
Alexandra Ernst, not in her individual
capacity but solely as a trustee of the above
named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
4. Alexandra Ernst--personal 6,881 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ ALEXANDRA ERNST
---------------------------------------------
Alexandra Ernst, in her individual capacity
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of
Carolyn S. Fabrici Descendants: 15,675 1 13-6100144
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of
Carolyn S. Fabrici Descendants: 26,655 1 13-6896905
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of
Carolyn S. Fabrici Descendants: 173,990 13-6100149
21. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of
Carolyn S. Fabrici Family: 8,891 13-6810526
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
Dorothy P. Ernst: 17,666 13-6100134
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Dorothy P. Ernst: 17,666 13-6100131
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of
Rebecca D. Gamzon: 14,225 1 13-6736178
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of
David M. Danziger: 14,225 1 13-6736410
60. Trust Created by Edgar M. Cullman,Jr.
Dated 12/25/76 For The Benefit of
Edgar M. Cullman, III: 32,008 1 13-6736143
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Samuel B. Cullman: 32,008 1 13-6736142
83. Trust Created by Susan R. Cullman
Dated 12/25/76 For The Benefit of
Carolyn B. Sicher: 62,237 1 13-6736147
</TABLE>
<TABLE>
<S> <C>
/s/ JOHN L. ERNST
---------------------------------------------
John L. Ernst, not in his individual capacity
but solely as a trustee of the above named
trusts.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
1. John L. Ernst--personal 26,673 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ JOHN L. ERNST
---------------------------------------------
John L. Ernst, in his individual capacity
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
5. Jessica P. Ernst--personal 5,556 101-66-910
</TABLE>
<TABLE>
<S> <C>
/s/ JOHN L. ERNST
---------------------------------------------
John L. Ernst, not in his individual capacity,
but as Parent of the above named minor child
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
22. Dorothy P. Ernst--personal John L. Ernst, Guardian 11,909 1 065-38-791
</TABLE>
<TABLE>
<S> <C>
/s/ JOHN L. ERNST
---------------------------------------------
John L. Ernst, not in his individual capacity
but solely as Guardian for the above named
individual
</TABLE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
Carolyn B. Sicher:....................................... 71,129 1 13-6736170
85. Trust Created by Louise B. Cullman
Dated 1/6/53 For The Benefit of
Susan R. Cullman Descendants:............................ 116,847 1 13-6102608
86. Trust Created by Louise B. Cullman
Dated 6/30/54 For The Benefit of
Susan R. Cullman Descendants:............................ 159,498 13-6102609
87. Trust Created by Edgar M. Cullman
Dated 3/23/55 For The Benefit of
Susan R. Cullman Descendants:............................ 63,127 1 13-6100169
88. Trust Created by Louise B. Cullman
Dated 3/23/55 For The Benefit of
Susan R. Cullman Descendants:............................ 60,459 1 13-6102610
89. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of
Susan R. Cullman Descendants:............................ 168,762 1 13-6102611
90. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of
Susan R. Cullman Descendants:............................ 76,419 1 13-6102612
</TABLE>
<TABLE>
<S> <C>
/s/ SUSAN R. CULLMAN
---------------------------------------------
Susan R. Cullman, not in her individual
capacity but solely as a trustee of the above
named trusts
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
75. Susan R. Cullman--personal 390,165 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ SUSAN R. CULLMAN
---------------------------------------------
Susan R. Cullman, in her individual capacity
</TABLE>
<PAGE>
VI. TRUSTS OF WHICH CAROLYN S. FABRICI IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
10. Trust Created U/C/O/W Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of
John L. Ernst Descendants: 21,098 1 13-6387289
11. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For the Benefit of
John L. Ernst Descendants: 173,990 13-6100148
14. Trust Created by Susan B. Ernst
Dated 4/9/52 For The Benefit of
Carolyn S. Fabrici Descendants: 17,088 13-1000139
15. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
Carolyn S. Fabrici: 6,223 13-6100136
16. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Carolyn S. Fabrici: 6,735 13-6100130
17. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of
Carolyn S. Fabrici Descendants 52,017 1 13-6100139
18. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For The Benefit of
Carolyn S. Fabrici Descendants: 15,675 1 13-6100144
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of
Carolyn S. Fabrici Descendants: 26,655 1 13-6896905
20. Trust Created U/W/O Rita G. Bloomingdale
Dated 2/29/56 For The Benefit of
Carolyn S. Fabrici Descendants: 173,990 13-6100149
23. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
Dorothy P. Ernst: 17,666 13-6100134
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
24. Trust Created by Samuel J. Bloomingdale
Dated 12/21/50 For The Benefit of
Dorothy P. Ernst: 17,666 13-6100131
</TABLE>
<TABLE>
<S> <C>
/s/ CAROLYN S. FABRICI
---------------------------------------------
Carolyn S. Fabrici, not in her individual
capacity but solely as a trustee of the above
named trusts.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
13. Carolyn S. Fabrici--personal 106,062 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ CAROLYN S. FABRICI
---------------------------------------------
Carolyn S. Fabrici, in her individual capacity
</TABLE>
<PAGE>
IX. TRUSTS OF WHICH FREDERICK M. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
12. Trust Created U/W/O Susan B. Ernst
Dated 4/19/81 For The Benefit of
John L. Ernst Family: 33,155 1 13-6810525
19. Trust Created U/C/O/W Richard C. Ernst
Dated 6/19/84 For The Benefit of
Carolyn S. Fabrici Descendants: 26,655 1 13-6896905
36. Trust Created by Lucy C. Danziger
Dated 12/24/69 For The Benefit of
Rebecca D. Gamzon: 101,358 1 13-6345528
37. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of
Rebecca D. Gamzon: 80,020 1 13-6585287
38. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of
Rebecca D. Gamzon: 14,225 1 13-6736178
39. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Rebecca D. Gamzon: 72,018 1 13-6737018
41. Trust Created by Edgar M. Cullman
Dated 12/26/72 For The Benefit of
David M. Danziger: 79,131 1 13-6585286
42. Trust Created by Lucy C. Danziger
Dated 12/25/76 For The Benefit of
David M. Danziger: 14,225 1 13-6736410
43. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
David M. Danziger: 71,129 1 13-6737013
44. Trust Created by Samuel J. Bloomingdale
Dated 4/15/66 For The Benefit of
David M. Danziger: 55,676 1 13-6214196
52. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of
Frederick M. Danziger: 6,223 13-6159963
53. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of
Richard M. Danziger: 13,336 13-6159970
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ------------
<S> <C> <C> <C> <C>
66. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Georgina D. Cullman: 88,911 1 13-6737017
</TABLE>
<TABLE>
<S> <C>
/s/ FREDERICK M. DANZIGER
---------------------------------------------
Frederick M. Danziger, not in his individual
capacity but solely as a trustee of the above
named trusts
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
51. Frederick M. Danziger--personal 73,538 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ FREDERICK M. DANZIGER
---------------------------------------------
Frederick M. Danziger in his individual
capacity
</TABLE>
<PAGE>
X. TRUSTS OF WHICH ELISSA F. CULLMAN IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ----------
<S> <C> <C> <C> <C>
60. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Edgar M. Cullman, III: 32,008 1 13-6736143
61. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Edgar M. Cullman, III: 90,689 1 13-6737012
63. Trust Created by Edgar M. Cullman, Jr.
Dated 12/25/76 For The Benefit of
Samuel B. Cullman: 32,008 1 13-6736142
64. Trust Created by Edgar M. Cullman
Dated 12/23/76 For The Benefit of
Samuel B. Cullman: 90,689 1 13-6737011
</TABLE>
<TABLE>
<S> <C>
/s/ ELISSA F. CULLMAN
------------------------------------------------
Elissa F. Cullman, not in her individual
capacity but solely as a trustee of the
above named trusts
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
74. Elissa F. Cullman--personal 75,574 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ ELISSA F. CULLMAN
------------------------------------------------
Elissa F. Cullman, in her individual capacity
</TABLE>
XI. TRUSTS OF WHICH MARGOT P. ERNST IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- ----------
<S> <C> <C> <C> <C>
2. Trust Created by Rita G. Bloomingdale
Dated 12/21/50 For The Benefit of
John L. Ernst: 4,890 1 13-6100132
3. Trust Created by Rita G. Bloomingdale
Dated 6/14/51 For The Benefit of
John L. Ernst: 13,696 13-6100135
7. Trust Created by Susan B. Ernst
Dated 1/6/53 For The Benefit of John L. Ernst
Descendants: 11,469 13-6100141
8. Trust Created by Susan B. Ernst
Dated 4/9/52 For the Benefit of John L. Ernst
Descendants: 19,400 13-6100138
9. Trust Created by Samuel J. Bloomingdale
Dated 8/2/55 For the Benefit of John L. Ernst
Descendants: 14,199 13-6100143
</TABLE>
<TABLE>
<S> <C>
/s/ MARGOT P. ERNST
------------------------------------------------
Margot P. Ernst, not in her individual
capacity but solely as a trustee of the above
named trusts
</TABLE>
<PAGE>
XI. TRUSTS OF WHICH RICHARD M. DANZIGER IS A TRUSTEE
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- ----------
<S> <C> <C> <C> <C>
36. Trust Created by Lucy C. Danziger
Dated 12/24/69 For The Benefit of
Rebecca D. Gamzon: 101,358 1 13-6345528
52. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of
Frederick M. Danziger: 6,223 13-6159963
53. Trust Created by Elsie B. Paskus
Dated 8/26/64 For The Benefit of
Richard M. Danziger 13,336 13-6159970
</TABLE>
<TABLE>
<S> <C>
/s/ RICHARD M. DANZIGER
------------------------------------------------
Richard M. Danziger, not in his individual
capacity but solely as a trustee of the above
named trustees
</TABLE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
--------- -------- -----------
<S> <C> <C> <C> <C>
91. B. Bros. Realty Limited Partnership
Lucy C. Danziger & John L. Ernst
General Partners 1,039,338 1 13-3313591
</TABLE>
<TABLE>
<S> <C>
/s/ LUCY C. DANZIGER
------------------------------------------------
Lucy C. Danziger, as General Partner
/s/ JOHN L. ERNST
------------------------------------------------
John L. Ernst, as General Partner
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
92. Samuel J. Bloomingdale Foundation 87,319 13-6099790
</TABLE>
<TABLE>
<S> <C>
/s/ SUSAN R. CULLMAN
------------------------------------------------
Susan R. Cullman, as President
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
93. Louise B. & Edgar M. Cullman Foundation 28,451 13-6100041
</TABLE>
<TABLE>
<S> <C>
/s/ SUSAN R. CULLMAN
------------------------------------------------
Susan R. Cullman, as President
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
95. Justus Heijmans Foundation 889 13-6272082
</TABLE>
<TABLE>
<S> <C>
/s/ EDGAR M. CULLMAN
------------------------------------------------
Edgar M. Cullman, as Trustee
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
94. Richard C. & Susan B. Ernst Foundation 53,560 13-6153761
</TABLE>
<TABLE>
<S> <C>
/s/ JOHN L. ERNST
------------------------------------------------
John L. Ernst, as President
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"B" "A"
SHARES SHARES TAX ID#
-------- -------- -----------
<S> <C> <C> <C> <C>
4. Alexandra Ernst - personal 6,881 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ ALEXANDRA ERNST
- -------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
6. Matthew L. Ernst - personal 5,556 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ MATTHEW L. ERNST
- -------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
59. Edgard M. Cullman, III - personal 60 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ EDGARD M. CULLMAN, III
- -------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
62. Samuel B. Cullman - personal 83,550 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ SAMUEL B. CULLMAN
- -------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
65. Georgiana D. Cullman - personal 34,577 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ GEORGIANA D. CULLMAN
- -------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
82. Carolyn B. Sicher - personal 95,233 1 ###-##-####
</TABLE>
<TABLE>
<S> <C>
/s/ CAROLYN B. SICHER
- -------------------------------------------
</TABLE>
<PAGE>
EXHIBIT E
FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
GENERAL CIGAR HOLDINGS, INC.
General Cigar Holdings, Inc. (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware (the
"DGCL"), does hereby certify as follows.
1. The present name of the Corporation is General Cigar Holdings, Inc. The
Corporation was originally incorporated under the name "General Cigar Holdings,
Inc." and its original certificate of incorporation was filed with the office of
the Secretary of State of the State of Delaware on December 12, 1996. The
certificate of incorporation was amended and restated on February 3, 1997.
2. This Amended and Restated Certificate of Incorporation, having been duly
proposed by the Board of Directors of the Corporation (the "Board") and adopted
in accordance with Sections [228], 242, and 245 of the DGCL, further amends and
restates the amended and restated certificate of incorporation of the
Corporation.
3. Accordingly, the certificate of incorporation of the Corporation is
hereby further amended and restated to read in its entirety as follows (the
"Certificate of Incorporation"):
FIRST: The name of the Corporation is General Cigar Holdings, Inc.
SECOND: The address of the registered office of the Corporation in the State
of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the DGCL.
FOURTH: (a) AUTHORIZED CAPITAL STOCK. The Corporation is authorized to issue
26 million shares of capital stock, of which 25 million shares shall be shares
of common stock, par value $0.01 per share ("Common Stock"), and 1 million
shares shall be shares of preferred stock, par value $0.01 per share ("Preferred
Stock").
(b) COMMON STOCK. All shares of Common Stock shall be identical and
shall entitle the holders thereof to the same rights and privileges. Without
limiting the generality of the foregoing, except as otherwise required by
law, (i) on all matters submitted to the Corporation's stockholders, the
holders of Common Stock shall be entitled to one vote per share and
(ii) when and as divided or other distributions are declared, whether
payable in cash, in property or in securities of the Corporation, the
holders of shares of Common Stock shall be entitled to share equally, share
for share, in such dividends or other distributions.
(c) PREFERRED STOCK. The Board is expressly authorized to provide for
the issuance of all or any shares of the Preferred Stock in one or more
classes or series, and to fix for each such class or series such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions adopted by the Board
providing for the issuance of such class or series, including, without
limitation, the authority to provide that any such class or series may be
(i) subject to redemption at such time or times and at such price or prices;
(ii) entitled to receive dividends (which may be cumulative or
non-cumulative) at such rates, on such conditions, and at such times, and
payable in preference to, or in such relation to, the dividends payable on
any other class or classes or any other series; (iii) entitled to such
rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; or (iv) convertible into, or exchangeable for, shares of
any other class or classes of stock, or of any other series of the same or
any
- ------------------------
* To be revised as necessary to reflect certain provisions in the
Shareholders' Agreement.
<PAGE>
other class or classes of stock, of the Corporation at such price or prices
or at such rates of exchange and with such adjustments; all as may be stated
in such resolution or resolutions.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors.
(b) The directors shall have concurrent power with the stockholders to
adopt, amend or repeal the By-Laws of the Corporation.
(c) The number of directors of the Corporation shall be as from time to time
fixed by, or in the manner provided in, the By-Laws of the Corporation. Election
of directors need not be by written ballot unless the By-Laws so provide.
(d) No director shall be personally liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is amended
hereafter to authorize the further elimination or limitation of liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent authorized by the DGCL, as so
amended. Any repeal or modification of this Article FIFTH by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.
(c) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the DGCL, this
Certificate of Incorporation and any By-Laws adopted by the stockholders;
PROVIDED that no By-Laws hereafter adopted by the stockholders shall invalidate
any prior act of the directors which would have been valid if such By-Laws had
not been adopted.
(f) The Corporation expressly elects not to be governed by Section 203 of
the DGCL.
SIXTH: Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the DGCL) outside the State of Delaware
at such place or places as may be designated from time to time by the Board or
in the By-Laws.
SEVENTH: The Corporation shall indemnify its directors and officers to the
fullest extent authorized or permitted by law, as now or hereafter in effect,
and such right to indemnification shall continue as to a person who has ceased
to be a director or officer of the Corporation and shall inure to the benefit of
his or her heirs, executors and personal and legal representatives; PROVIDED
that, except for proceedings to enforce rights to indemnification, the
Corporation shall not be obligated to indemnify any director or officer (or his
or her heirs, executors or personal or legal representatives) in connection with
a proceeding (or part thereof) initiated by such person unless such proceeding
(or part thereof) was authorized or consented to by the Board of Directors. The
right to indemnification conferred by this Article SEVENTH shall include the
right to be paid by the Corporation the expenses incurred in defending or
otherwise participating in any proceeding in advance of its final disposition.
2
<PAGE>
The Corporation may, to the extent authorized from time to time by the Board
of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article SEVENTH to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses conferred in
this Article SEVENTH shall not be exclusive of any other right which any person
may have or hereafter acquire under this Certificate of Incorporation, the
By-Laws, any statute, agreement, vote of stockholders or disinterested directors
or otherwise.
Any repeal or modification of this Article SEVENTH by the stockholders of
the Corporation shall not adversely affect any rights to indemnification and to
the advancement of expenses of a director or officer of the Corporation existing
at the time of such repeal or modification with respect to any acts or omissions
occurring prior to such repeal or modification.
EIGHTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed in this Certificate of Incorporation, the By-Laws or the
laws of the State of Delaware, and all rights herein conferred upon stockholders
are granted subject to such reservation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be duly executed this day of .
<TABLE>
<S> <C> <C>
GENERAL CIGAR HOLDINGS, INC.
By: /s/
-----------------------------------------
Name:
Title:
</TABLE>
3
<PAGE>
ANNEX B
[LOGO]
January 19, 2000
Independent Committee of the Board of Directors
GENERAL CIGAR HOLDINGS, INC.
387 Park Avenue South
New York, New York 10016
ATTN: Mr. Dan W. Lufkin
Chairman, Independent Committee
Gentlemen:
Deutsche Bank Securities Inc. ("Deutsche Bank") has acted as financial
advisor to the Independent Committee of the Board of Directors (the "Independent
Committee") of General Cigar Holdings, Inc. (the "Company") in connection with
the proposed acquisition of a majority ownership interest in the Company by
Swedish Match A.B. ("Swedish Match") pursuant to the Agreement and Plan of
Merger, dated as of January 19, 2000, by and among Swedish Match, the Company
and SM Acquisition Corporation, an indirect wholly owned subsidiary of Swedish
Match ("Merger Sub") (the "Merger Agreement"), which provides, among other
things, for the merger of Merger Sub with and into the Company (the
"Transaction"), as a result of which the Company will become a majority-owned
subsidiary of Swedish Match.
As set forth more fully in the Merger Agreement and in the Shareholders'
Agreement dated as of January 19, 2000 by and among Swedish Match, the Company
and certain shareholders of the Company (the "C&E Shareholders") (the
"Shareholders' Agreement"), the holders of Class A or Class B Common Stock of
the Company other than the shareholders identified in the two Statements of
Beneficial Ownership on Schedule 13D with respect to the Company filed on
September 9, 1997 with the Securities and Exchange Commission (the "Public
Shareholders") will exchange their outstanding shares of common stock, par value
$0.01 per share (the "Common Stock"), of the Company for cash consideration of
$15.25 per share (the "Cash Merger Consideration"). As a result of the
Transaction, Swedish Match will own, beneficially and of record, approximately
64% of the then outstanding shares of Common Stock of the Company and the C&E
Shareholders will own, in the aggregate, approximately 36% of the then
outstanding shares of Common Stock. The terms and conditions of the Transaction
are more fully set forth in the Merger Agreement and Shareholders' Agreement.
You have requested Deutsche Bank's opinion, as investment bankers, as to the
fairness, from a financial point of view, to the Public Shareholders of the
Company of the Cash Merger Consideration.
In connection with Deutsche Bank's role as financial advisor to Independent
Committee, and in arriving at its opinion, Deutsche Bank has reviewed certain
publicly available financial and other information concerning the Company and
certain internal analyses and other information furnished to it by the Company
and the Independent Committee. Deutsche Bank has also held discussions with
members of the senior management of the Company regarding the business and
prospects of the Company. In addition, Deutsche Bank has (i) reviewed the
reported prices and trading activity for the Company's Common Stock,
(ii) compared certain financial and stock market information for the Company
with similar information for certain other companies whose securities are
publicly traded, (iii) reviewed the financial terms of certain recent business
combinations which it deemed comparable in whole or in part, (iv) reviewed the
terms of the Merger Agreement and certain related documents, and (v) performed
such other studies and analyses and considered such other factors as it deemed
appropriate.
B-1
<PAGE>
Deutsche Bank has not assumed responsibility for independent verification
of, and has not independently verified, any information, whether publicly
available or furnished to it, concerning the Company, including, without
limitation, any financial information, forecasts or projections considered in
connection with the rendering of its opinion. Accordingly, for purposes of its
opinion, Deutsche Bank has assumed and relied upon the accuracy and completeness
of all such information and Deutsche Bank has not conducted a physical
inspection of any of the properties or assets, and has not prepared or obtained
any independent evaluation or appraisal of any of the assets or liabilities, of
the Company. With respect to the financial forecasts and projections made
available to Deutsche Bank and used in its analyses, Deutsche Bank has assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
matters covered thereby. In rendering its opinion, Deutsche Bank expresses no
view as to the reasonableness of such forecasts and projections or the
assumptions on which they are based. Deutsche Bank's opinion is necessarily
based upon economic, market and other conditions as in effect on, and the
information made available to it as of, the date hereof.
For purposes of rendering its opinion, Deutsche Bank has assumed that, in
all respects material to its analysis, the representations and warranties of
Swedish Match, Merger Sub and the Company contained in the Merger Agreement are
true and correct, Swedish Match, Merger Sub and the Company will each perform
all of the covenants and agreements to be performed by them under the Merger
Agreement and related documents, and all conditions to the obligations of each
of Swedish Match, Merger Sub and the Company to consummate the Transaction will
be satisfied without any waiver thereof. Deutsche Bank has also assumed that all
material governmental, regulatory or other approvals and consents required in
connection with the consummation of the Transaction will be obtained and that in
connection with obtaining any necessary governmental, regulatory or other
approvals and consents, or any amendments, modifications or waivers to any
agreements, instruments or orders to which either Swedish Match or the Company
is a party or is subject or by which it is bound, no limitations, restrictions
or conditions will be imposed or amendments, modifications or waivers made that
would materially reduce the contemplated benefits of the Transaction to the
Public Shareholders.
In arriving at its opinion, Deutsche Bank was not authorized to solicit, and
did not solicit, interest from any party with respect to the acquisition of the
Company's shares or any of its assets.
This opinion is addressed to, and is for the use and benefit of, the
Independent Committee of the Board of Directors of the Company and is not a
recommendation to the Public Shareholders or the other stockholders of the
Company to sell their shares to Swedish Match or approve the Transaction. This
opinion is limited to the fairness, from a financial point of view, to the
Public Shareholders of the Cash Merger Consideration, and Deutsche Bank
expresses no opinion as to the merits of the underlying decision by the Company
to engage in the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to
the Independent Committee in connection with the Transaction. We are an
affiliate of Deutsche Bank AG (together with its affiliates, the "DB Group"). In
the ordinary course of business, members of the DB Group may actively trade in
the securities and other instruments and obligations of Swedish Match or the
Company for their own accounts and for the accounts of their customers.
Accordingly, the DB Group may at any time hold a long or short position in such
securities, instruments and obligations.
Based upon and subject to the foregoing, it is Deutsche Bank's opinion as
investment bankers that the Cash Merger Consideration is fair, from a financial
point of view, to the Public Shareholders of the Company.
Very truly yours,
DEUTSCHE BANK SECURITIES INC.
B-2
<PAGE>
ANNEX C
[MERRILL LYNCH LETTERHEAD]
27(th) January, 2000
Board of Directors
Swedish Match AB
Rosenlundsgatan 36
SE-118 85 Stockholm
Sweden
Members of the Board of Directors:
Swedish Match AB ("Swedish Match"), General Cigar Holdings, Inc. ("General
Cigar") and certain shareholders (the "C&E Shareholders") of General Cigar
propose to enter into a transaction (the "Transaction"), whereby:
(i) SM Merger Corporation, a wholly-owned subsidiary of Swedish Match ("SM
Merger") will be merged with and into General Cigar which shall continue
as the surviving corporation (the "Surviving Corporation") pursuant to
the terms of an Agreement and Plan of Merger dated January 19, 2000 by
and among General Cigar, Swedish Match and SM Merger (the "Merger
Agreement") pursuant to which, among other things,
(A) each outstanding share of General Cigar's Class A Common Stock, par
value $0.01 per share ("Class A Common Stock"), and Class B Common
Stock, par value $0.01 per share ("Class B Common Stock"; and
collectively with the Class A Common Stock, the "Common Stock")
(other than (x) Treasury Securities (as defined in the Merger
Agreement), (y) Roll-Over Shares (as defined below), and
(z) Dissenting Shares (as defined in the Merger Agreement), if any)
will be converted into the right to receive US$15.25 in cash;
(B) each share of Class B Common Stock held by the C&E Shareholders and
each share of Class A Common Stock held by Swedish Match as a result
of the purchase of shares of Common Stock pursuant to the Stock
Purchase Agreement (as defined below) (collectively, the "Roll-Over
Shares") will be converted into a share of common stock, par value
$0.01 per share, of the Surviving Corporation ("Surviving Corporation
Common Stock"); and
(C) the outstanding shares of SM Merger will be converted into
approximately 7.7049 million shares of Surviving Corporation Common
Stock;
(ii) Swedish Match and the C&E Shareholders will enter into a Stock Purchase
Agreement dated as of January 19, 2000 (the "Stock Purchase Agreement")
pursuant to which, among other things, the C&E Shareholders will sell to
Swedish Match, and Swedish Match will purchase, 3.5 million shares of
Common Stock at a price of US$15.00 per share; and
(iii) Swedish Match, the C&E Shareholders and General Cigar will enter into
a Shareholders' Agreement dated as of January 19, 2000 (the
"Shareholders' Agreement") pursuant to which, among other things, the C&E
Shareholders will receive certain put rights and Swedish Match will
receive certain call rights with respect to the shares of Surviving
Corporation Common Stock held by the C&E Shareholders and the parties
will agree to certain governance and other matters.
As a result of the Transaction, Swedish Match will acquire approximately
63.52% of the outstanding shares of Surviving Corporation Common Stock and will
have the rights and obligations specified in the
C-1
<PAGE>
Shareholders' Agreement with the C&E Shareholders who will own the remaining
36.48% of the outstanding shares of Surviving Corporation Common Stock. The
total cash consideration that will be paid by Swedish Match in connection with
the Transaction will be US$170.0 million (the "Consideration").
You have asked us whether, in our opinion, the Consideration to be paid by
Swedish Match pursuant to the Transaction is fair from a financial point of view
to Swedish Match.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available business and financial information
relating to General Cigar that we deemed relevant;
2. Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
General Cigar and Swedish Match, as well as the amount and timing of the
synergies expected to result from the Transaction (the "Expected
Synergies"), furnished to us by Swedish Match;
3. Conducted discussions with members of senior management and
representatives of Swedish Match and General Cigar concerning the matters
described in clauses 1 and 2 above, as well as their respective
businesses and prospects before and after giving effect to the
Transaction;
4. Reviewed the market prices and valuation multiples for the Common Stock;
5. Reviewed the results of operations of General Cigar and compared them
with those of certain publicly traded companies that we deemed relevant;
6. Reviewed the proposed financial terms of the Transaction against the
present values of invested capital based on the pro forma valuation of
General Cigar equity;
7. Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions which we deemed to be
relevant;
8. Participated in discussions and negotiations among representatives of
Swedish Match and General Cigar and their financial and legal advisors;
9. Reviewed the potential pro forma impact of the Transaction on Swedish
Match;
10. Reviewed each of the Merger Agreement, the Stock Purchase Agreement and
the Shareholders' Agreement (collectively, the "Agreements"), dated
January 19, 2000, respectively, and
11. Reviewed such other financial studies and analyses and took into account
such other matters we deemed necessary, including our assessment of
general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of General Cigar or been furnished with any such evaluation or
appraisal. In addition, we have not assumed any obligation to conduct any
physical inspection of the properties or facilities of General Cigar. With
respect to the financial forecast information and the Expected Synergies
furnished to or discussed with us by Swedish Match or General Cigar, we have
assumed that they have been reasonably prepared and reflect the best currently
available estimates and judgment of Swedish Match's management as to the
expected future financial performance of Swedish Match or General Cigar, as the
case may be.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
C-2
<PAGE>
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Transaction. In addition, we have not
made any independent evaluation of regulatory matters relating to, or litigation
or similar proceedings involving the tobacco industry generally, or to cigars in
particular, and with your consent, we have assumed that no regulatory or similar
action or litigation or similar proceeding will take place that would have a
material adverse effect on the contemplated benefits of the Transaction. In our
analysis, we have relied on the forecasts of General Cigar's management and
Swedish Match's management as to tax settlements related to the sale of General
Cigar's mass market cigar business and have not undertaken an independent
evaluation or appraisal of such forecasts.
We are acting as financial advisor to Swedish Match in connection with the
Transaction and will receive a fee from Swedish Match for our services, a
significant proportion of which is contingent upon the consummation of the
Transaction. In addition, Swedish Match has agreed to indemnify us for certain
liabilities arising out of our engagement. We are currently acting for Swedish
Match as financial advisor on other potential acquisitions and have, in the
past, provided financial advisory and financing services to Swedish Match and
may continue to do so, and have received, and may receive, fees for the
rendering of such services. In addition, in the ordinary course of our business,
we may actively trade the securities of Swedish Match for our own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is solely for the use and benefit of the Board of Directors of
Swedish Match in its evaluation of the Transaction and shall not be used for any
other purpose. Our opinion does not address the merits of the underlying
decision by Swedish Match to engage in the Transaction. This opinion is not
intended to be relied upon or confer any rights or remedies upon any employee,
creditor, shareholder or other equity holder of Swedish Match or any other
party. This opinion shall not be reproduced, disseminated, quoted, summarized or
referred to at any time, in any manner or for any purpose, nor shall any public
references to Merrill Lynch International ("Merrill Lynch") or any of its
affiliates be made by Swedish Match or any of its affiliates, without the prior
written consent of Merrill Lynch.
We are not expressing any opinion herein as to the prices at which the
shares of Swedish Match will trade following the announcement or consummation of
the Transaction.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration to be paid by Swedish Match pursuant to
the Transaction is fair from a financial point of view to Swedish Match.
Very truly yours,
MERRILL LYNCH INTERNATIONAL
By: /s/ Knut Ramel
-------------------------------------
Knut Ramel
Managing Director
Investment Banking
C-3
<PAGE>
ANNEX D
SECTION 262 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
D-1
<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective date of the
merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such
notice, demand in writing from the surviving or resulting corporation the
appraisal of such holder's shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such
holder's shares. If such notice did not notify stockholders of the effective
date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the
merger or consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second notice
D-2
<PAGE>
to all such holders on or within 10 days after such effective date;
provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the close of
business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account
D-3
<PAGE>
all relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest that the surviving
or resulting corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other pretrial
proceedings and may proceed to trial upon the appraisal prior to the final
determination of the stockholder entitled to an appraisal. Any stockholder whose
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
D-4
<PAGE>
PROXY
GENERAL CIGAR HOLDINGS, INC.
387 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10016
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF GENERAL CIGAR HOLDINGS, INC.
The undersigned stockholder of GENERAL CIGAR HOLDINGS, INC., a Delaware
corporation (the "Company"), hereby appoints Dan Lufkin, Francis T. Vincent and
Thomas C. Israel, and each of them, as proxies, each with the power to appoint
his or her substitute, and hereby authorizes each of them to represent, and to
vote as designated on the reverse side, all the shares of common stock of the
Company held of record by the undersigned on April7, 2000 at the Special Meeting
of Stockholders of the Company, to be held at Hotel Inter-Continental New York,
111 East 48th Street, New York, New York in the Whitney Room, on Monday, May8,
2000 at 10:00 a.m., local time and at all adjournments or postponements thereof
upon the following matters, as set forth in the Notice of Special Meeting of
Stockholders and proxy statement, each dated April10, 2000, copies of which have
been received by the undersigned, hereby revoking any proxy heretofore given.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE ADOPTION OF THE AGREEMENT AND PLAN OF MERGER AND FOR APPROVAL
OF THE CHARTER AMENDMENT.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE MARK
YOUR VOTES
AS INDICATED /X/
IN THIS
EXAMPLE:
The board of directors of the Company recommends a vote for the Agreement
and Plan of Merger and the related charter amendment.
<TABLE>
<S> <C>
1. Proposal to adopt the Agreement and Plan of Merger, dated as of January 19, 2000, by and
among Swedish Match AB, SM Merger Corporation and the Company, as heretofore and
hereafter amended:
/ / FOR / / AGAINST / / ABSTAIN
2. Proposal to approve the amendment to the Company's certificate of incorporation:
/ / FOR / / AGAINST / / ABSTAIN
3. The proxies are hereby authorized to vote in their discretion upon all other business as
may properly come before the Special Meeting.
</TABLE>
Please sign exactly as your name appears
on this proxy. If the shares represented
by this proxy are held by joint tenants,
both must sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.
If stockholder is a corporation, please
sign in full corporate name by President
or other authorized officer. If
stockholder is a partnership, please sign
in partnership name by authorized person.
Signature: Date: , 2000
__________________________________________
__________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED POSTAGE PREPAID ENVELOPE
