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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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GERBER PRODUCTS COMPANY
(Name of Subject Company)
GERBER PRODUCTS COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $2.50 PER SHARE
(Title of Class of Securities)
373712 10 8
(CUSIP Number of Class of Securities)
STEPHEN R. CLARK, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
445 STATE STREET
FREMONT, MICHIGAN 49413
(616) 928-2000
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
Charles W. Mulaney, Jr., Esq.
Skadden, Arps, Slate, Meagher & Flom
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Gerber Products Company, a Michigan
corporation (the "Company"), and the address of the principal executive offices
of the Company is 445 State Street, Fremont, Michigan 49413. The title of the
class of equity securities to which this statement relates is the common stock,
par value $2.50 per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by SL Sub Corp., a Delaware
corporation (the "Purchaser") and an indirectly wholly owned subsidiary of
Sandoz Ltd., a corporation organized under the laws of Switzerland ("Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1"),
dated May 27, 1994, to purchase all outstanding shares of Common Stock, together
with the associated preferred stock purchase rights (the "Rights" and, together
with the Common Stock, the "Shares") issued pursuant to the Rights Agreement,
dated as of July 25, 1990, as amended as of May 21, 1994, between the Company
and Harris Trust and Savings Bank, as Rights Agent (the "Rights Agreement"), at
a price of $53.00 per Share (such amount, or any greater amount per Share paid
pursuant to the Offer, being hereafter referred to as the "Per Share Amount",
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated May 27, 1994 (the "Offer to Purchase") and
the related Letter of Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of May 21, 1994, as amended (the "Merger Agreement"), among Parent, the
Purchaser and the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the consummation of the Offer and
satisfaction or waiver of all conditions to the Merger, the Purchaser will be
merged with and into the Company (the "Merger"), and the Company will continue
as the surviving corporation (the "Surviving Corporation"). A copy of each of
the Merger Agreement and Amendment No. 1 thereto are attached hereto as Exhibits
1.1 and 1.2, respectively, and incorporated herein by reference.
Based on the information in the Offer to Purchase, the principal executive
offices of the Purchaser are located at 608 Fifth Avenue, New York, New York
10020 and the principal executive offices of Parent are located at Lichtstrasse
35, CH-4002 Basle, Switzerland.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and its executive officers, directors or
affiliates is described in the attached Schedule I or set forth below.
Stock Options. Pursuant to the terms of the Company's Stock Ownership
Program and predecessor plans thereto (together, the "Option Plans"), all
outstanding stock options under the Option Plans, whether or not such stock
options would otherwise then be exercisable, will become immediately exercisable
upon a change in control of the Company (as defined in the Option Plans), which
would occur upon completion of the Offer. Pursuant to the Merger Agreement, all
stock options which have been granted under the Option Plans and are outstanding
at the time the Merger becomes effective (the "Effective Time"), whether or not
then exercisable, will be exchanged for, and the holder of each such option will
be entitled to receive upon surrender of such option for cancellation, cash
equal to the product of (i) the difference between the Per Share Amount and the
exercise price of each such option multiplied by (ii) the number of Shares
covered by such option.
Severance Agreements. The Company maintains severance agreements with
certain key executives (including the five persons named in the cash
compensation table which appears in Schedule I hereto). These agreements provide
for the payment of certain severance and other benefits upon termination of the
executive's employment by the Company without Cause or by the executive for Good
Reason (each as defined
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in such agreements) following a change in control of the Company (as defined in
the agreements). A change in control of the Company would occur upon completion
of the Offer. Severance payments under the severance agreements are reduced by
the amount of any severance payment provided under any employment agreement.
In November 1993, the Board of Directors of the Company (the "Board of
Directors") authorized certain amendments to the severance agreements. The
amendments (i) modified the calculation of the bonus component of the severance
payment to use the executives' target bonus award, rather than the executives'
actual award, as determined pursuant to the Company's Annual Bonus Plan; (ii)
extended the term of the agreements to a period of three years, rather than two
years, following a change in control; and (iii) provided for Severance Benefits
(as defined in the severance agreements) for four executives to be based on
three times, rather than two times, the sum of annual compensation. In January
1994, the Board of Directors approved entering into a severance agreement with
Kristina Kiley, Director of Human Resources and Corporate Secretary of the
Company. The completion of the Offer would constitute a change in control for
purposes of the severance agreements. The terms of the severance agreements, as
amended, are described in Schedule I in the section under the heading entitled
"Employee Agreements." A copy of the form of amendment to severance agreements
between the Company and certain of such key executives is attached hereto as
Exhibit 2 and incorporated herein by reference.
Severance Benefit Plan. The Company's Severance Benefit Plan provides for
the payment of certain severance and other benefits upon termination of
employment of a full-time, active employee (who is not covered under any
collective bargaining agreement) by the Company without Cause (as defined in the
plan) following a change in control of the Company (as defined in the plan).
In November 1993, the Board of Directors authorized certain amendments to
the Severance Benefit Plan. The amendments (i) extended the term of protection
to a period of three years, rather than two years, following a change in
control; (ii) established certain minimum Severance Benefits (as defined in the
plan) under the Severance Benefit Plan for eligible employees irrespective of
years of service during the three years following a change in control; and (iii)
provided for a Housing Purchase Guarantee (as defined in the plan) to
Fremont-based salaried associates terminated by the Company without Cause
following a change in control of the Company. In addition, on May 21, 1994, the
Board of Directors (i) authorized the addition of Gerber Life Insurance Company
and Hankscraft Motors to the Severance Benefit Plan as Participating
Subsidiaries (as defined in the plan) and (ii) modified the terms of the
Company's Annual Bonus Plan, Retirement Investment Plan and Stock Ownership Plan
(ESOP). The terms of the Company's Severance Benefit Plan, Annual Bonus Plan,
Retirement Investment Plan and Stock Ownership Plan (ESOP), each as amended, are
described in Schedule I. The completion of the Offer would constitute a change
in control for purposes of the Severance Benefit Plan. A copy of the amended
Severance Benefit Plan is attached hereto as Exhibit 3 and incorporated herein
by reference.
ACTUAL AND POTENTIAL CONFLICTS OF INTEREST
Indemnification of Officers and Directors. The Company's Restated Articles
of Incorporation provide that each person who is made a party to, or is involved
in, any action, suit or proceeding by reason of the fact that the person is or
was a director or officer of the Company (or was serving at the request of the
Company as a director, officer, employee or agent for another entity) while
serving in such capacity shall be indemnified and held harmless by the Company,
to the fullest extent authorized by the Michigan Business Corporation Act
("Michigan Law"), as in effect (or, to the extent indemnification is broadened,
as it may be amended) against all expense, liability or loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
to be paid in settlement) reasonably incurred by such person in connection with
such action, suit or proceeding. The Restated Articles of Incorporation further
provide that rights conferred thereby are contract rights and include the right
to be paid by the Company the expenses incurred in defending the proceedings
specified above in advance of their final disposition; provided that, if
Michigan Law requires, such payment will be made only upon delivery to the
Company by the indemnified party of an undertaking to repay all amounts so
advanced if it is ultimately determined that the person receiving such payments
is not entitled to be indemnified under the Restated Articles of Incorporation
or otherwise.
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The Restated Articles of Incorporation provide that persons entitled to be
indemnified may bring suit against the Company to recover unpaid amounts claimed
thereunder, and that if such suit is successful, the expense of bringing the
suit will be reimbursed by the Company. The Restated Articles of Incorporation
further provide that, while it is a defense to such a suit that the person
claiming indemnification has not met the applicable standards of conduct making
indemnification permissible under Michigan Law, the burden of proving the
defense is on the Company, and neither the failure of the Board of Directors to
have made a determination that indemnification is proper, nor an actual
determination that the person claiming indemnification has not met the
applicable standard of conduct, is a defense to the action or creates a
presumption that the person claiming indemnification has not met the applicable
standards of conduct.
The Restated Articles of Incorporation provide that the right to
indemnification and the payment of expenses incurred in defending a proceeding
in advance of its final disposition is not exclusive of any other right which
any person may have or acquire under any statute, provision of the Company's
Restated Articles of Incorporation or By-laws, or otherwise. In addition, the
Company may maintain insurance, at its expense, to protect itself and any of its
directors, officers, employees or agents against any expense, liability or loss,
whether or not the Company would have the power to indemnify such person against
such expense, liability or loss under Michigan Law. The Company currently
maintains such insurance.
The Merger Agreement provides that the Articles of Incorporation and
By-Laws of the Surviving Corporation shall contain provisions with respect to
indemnification no less favorable to any party indemnified thereunder than those
set forth in the Restated Articles of Incorporation and By-Laws of the Company
on the date of the Merger Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement), unless such modification is required by
law; provided that in the event any claim or claims are asserted or made within
such six-year period, all rights to indemnification in respect of any such claim
or claims shall continue until disposition of any and all such claims. The
Merger Agreement provides that Parent shall cause to be maintained in effect for
not less than three years from the Effective Time the policies of officers' and
directors' liability insurance in effect as of the date of the Merger Agreement
maintained by the Company and its subsidiaries with respect to matters occurring
at or prior to the Effective Time; provided that Parent may substitute therefor
policies of substantially the same coverage containing terms and conditions
which are no less advantageous, in any material respect, to the Company's
present or former directors, officers, employees, agents or other individuals
otherwise covered by such policies prior to the Effective Time; provided,
however, that in no event shall the Surviving Corporation be required to expend
more than an amount per year equal to 200% of the current annual premiums paid
by the Company for such insurance.
The Merger Agreement provides that in the event the Company or the
Surviving Corporation or any of their respective 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 provision shall be made so that the
successors and assigns of the Company or the Surviving Corporation, as the case
may be, or at Parent's option, Parent, shall assume the obligations set forth in
the preceding paragraph.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement. Such summary is
qualified in its entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
not later than the fifth business day from and including the date of the initial
public announcement of the Purchaser's intention to commence the Offer. The
obligation of the Purchaser to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the satisfaction of the condition that there
will be validly tendered in accordance with the terms of the Offer prior to the
expiration date of the Offer and not withdrawn a number of
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Shares representing at least a majority of the Shares outstanding on a fully
diluted basis (the "Minimum Condition"), the Regulatory Approval Condition (as
hereafter defined) and certain other conditions described below. The Purchaser
has expressly reserved the right to waive any such condition, to increase the
price per Share payable in the Offer or to make any change in the terms or
conditions of the Offer. The Purchaser and Parent have agreed, however, that
unless previously approved by the Company in writing, no change in the Offer may
be made which decreases the price per Share payable in the Offer, changes the
form of consideration to be paid, reduces the maximum number of Shares to be
purchased in the Offer or the Minimum Condition, imposes conditions to the Offer
in addition to the Minimum Condition and those other conditions set forth in the
Merger Agreement or which amends any other term of the Offer in a manner adverse
to the holders of Shares. Notwithstanding the foregoing, the Merger Agreement
provides that the Purchaser shall, and Parent has agreed to cause the Purchaser
to, extend the Offer at any time and from time to time up to November 30, 1994,
if at the initial expiration date of the Offer, or any extension thereof, the
condition to the Offer requiring approval of the Superintendent of Insurance of
the State of New York (the "Superintendent") for the acquisition of control of
Gerber Life Insurance Company, a wholly owned subsidiary of the Company ("Gerber
Life") by Parent (the "Regulatory Approval Condition"), is not satisfied or
waived; provided, that (i) such extension must be for a reasonable amount of
time in light of the circumstances related to satisfying such condition, (ii)
any extension made before August 10, 1994 may not extend the Offer beyond August
24, 1994, (iii) unless waived in writing by the Company, any extension made on
or after August 10, 1994 may not be for a period in excess of 10 Business Days
and (iv) Purchaser shall amend the Offer to cause the Offer to expire on a date
not more than 10 Business Days from the date the Regulatory Approval Condition
is met or waived if the Offer has been extended and is not due to expire within
15 Business Days of the receipt of such approval or waiver.
Certain Conditions of the Offer. The Purchaser is required to accept for
payment or pay for any Shares tendered pursuant to the Offer, and may terminate
or amend the Offer and may postpone the acceptance for payment of any Shares
tendered, if (i) immediately prior to the expiration of the Offer the Minimum
Condition shall not have been satisfied, (ii) the Regulatory Approval Condition
shall not have been satisfied (subject to the Purchaser's obligations to extend
the Offer at any time up to November 30, 1994 if the Regulatory Approval
Condition has not been satisfied or waived and to use all reasonable efforts to
obtain approval for the Merger from the Superintendent), (iii) any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") shall not have expired or been terminated prior to
the expiration of the Offer or (iv) at any time on or after May 21, 1994, and
prior to the acceptance for payment of Shares, any of the following conditions
shall exist:
(a) Any government entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order which is in effect and which (i) materially restricts, prevents or
prohibits consummation of the Offer, the Merger or any transaction
contemplated by the Merger Agreement, (ii) prohibits or limits materially
the ownership or operation by the Company, Parent or any of their
subsidiaries of all or any material portion of the business or assets of
the Company and its subsidiaries taken as a whole, or compels the Company,
Parent or any of their subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company, and its
subsidiaries taken as a whole, (iii) imposes limitations on the ability of
Parent, the Purchaser or any other subsidiary of Parent to exercise
effectively full rights of ownership of any Shares, including, without
limitation, the right to vote any Shares acquired by the Purchaser pursuant
to the Offer or otherwise on all matters properly presented to the
Company's shareholders, including, without limitation, the approval and
adoption of the Merger Agreement and the transactions contemplated thereby
or (iv) requires divestiture by Parent, the Purchaser or any other
affiliate of Parent of any Shares; provided that Parent shall have used all
reasonable efforts to cause any such decree, judgment, injunction or other
order to be vacated or lifted;
(b) The representations and warranties of the Company (without giving
effect to any materiality qualifications) contained in the Merger Agreement
shall not be true and correct as of the date of consummation of the Offer
as though made on and as of such date except (i) for changes specifically
permitted by the Merger Agreement, (ii) that those representations and
warranties which address
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matters only as of a particular date shall remain true and correct as of
such date and (iii) in any case where such failure to be true and correct
would not, in the aggregate, have a Material Adverse Effect;
(c) The Company shall not have performed or complied in all material
respects with its material obligations under the Merger Agreement to be
performed or complied with by it;
(d) The Merger Agreement shall have been terminated in accordance with
its terms;
(e) Prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board of Directors
shall have withdrawn or materially modified or changed (including by
amendment of this Schedule 14D-9) in a manner adverse to the Purchaser its
recommendation of the Offer, the Merger Agreement or the Merger; provided,
that a statement by the Board of Directors that it is neutral or unable to
take a position with respect to the Offer shall not be deemed to constitute
a withdrawal, modification or change of its recommendation of the Offer,
the Merger Agreement or the Merger; or
(f) (i) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that any person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Parent or its affiliates or any
group of which any of them is a member, shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of more
than 25% of any class or series of capital stock of the Company (including
the Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 25%
of any class or series of capital stock of the Company (including the
Shares); or (ii) any person or group shall have entered into a definitive
agreement or agreement in principle with the Company with respect to a
merger, consolidation or other business combination with the Company;
which, in the judgment of the Purchaser in any such case, and regardless of the
circumstances (including any action or omission by the Purchaser) giving rise to
any such condition, makes it inadvisable to proceed with such acceptance for
payment or payments.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with Michigan Law and the Delaware General
Corporation Law ("Delaware Law"), at the Effective Time, the Purchaser shall be
merged with and into the Company. As a result of the Merger, the separate
corporate existence of the Purchaser will cease and the Company will continue as
the Surviving Corporation and will become an indirect wholly owned subsidiary of
Parent. Upon consummation of the Merger, each issued and then outstanding Share
(other than any Shares held in the treasury of the Company or owned by the
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company) shall be cancelled and converted automatically into the right to
receive the Per Share Amount in cash (the "Merger Consideration"), payable to
the holder thereof, without interest thereon, less any required withholding
taxes, upon the surrender of the certificate formerly representing such Share.
The Merger Agreement provides that, after the Effective Time, each option
to purchase Shares (an "Option") which has been granted under the Company's
Stock Ownership Program or any predecessor plans thereto (together, the "Option
Plans") and is outstanding at the Effective Time, whether or not then
exercisable, will be exchanged for, and the holder of each such Option will be
entitled to receive upon surrender of the Option for cancellation, cash equal to
(a) the difference between the Merger Consideration and the exercise price of
each such Option, multiplied by (b) the number of Shares covered by such Option.
Pursuant to the Merger Agreement, each share of common stock, par value
$.01 per share, of the Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into one share of common stock, par value
$2.50 per share, of the Surviving Corporation.
The Merger Agreement provides that the directors of the Purchaser
immediately prior to the Effective Time will be the initial directors of the
Surviving Corporation and the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, at the Effective Time, the Restated Articles of
Incorporation of the Company will be the
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Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Restated Articles of Incorporation. The Merger
Agreement also provides that the By-laws of the Company, as in effect
immediately prior to the Effective Time, will be the By-laws of the Surviving
Corporation until thereafter amended as provided by law, the Restated Articles
of Incorporation of the Surviving Corporation and such By-laws.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase by the Purchaser of Shares pursuant to the Offer, and from time to time
thereafter, the Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of Directors as
shall give the Purchaser representation on the Board of Directors equal to the
product of the total number of directors on the Board of Directors (giving
effect to the directors elected pursuant to this sentence), multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser or any affiliate of the Purchaser following such purchase bears to the
total number of Shares then outstanding, and the Company shall, at such time,
promptly use all reasonable efforts to cause the Purchaser's designees to be
elected as directors of the Company, including increasing the size of the Board
of Directors (subject to the provisions of Article VI of the Company's Restated
Articles of Incorporation) or securing (to the extent possible) the resignations
of incumbent directors or both. The Merger Agreement also provides that, at such
times, the Company shall use all reasonable efforts to cause persons designated
by the Purchaser to constitute the same percentage as persons designated by the
Purchaser shall constitute of the Board of Directors of (i) each committee of
the Board of Directors, (ii) each board of directors of each domestic subsidiary
of the Company and (iii) each committee of each such board, in each case only to
the extent permitted by applicable law or the rules of any stock exchange on
which the Shares are listed. Notwithstanding the foregoing, until the earlier of
(i) the time the Purchaser acquires a majority of the then outstanding Shares on
a fully diluted basis and (ii) the Effective Time, the Company has agreed to use
all reasonable efforts to ensure that all the members of the Board of Directors
and each committee of the Board of Directors and such boards and committees of
such domestic subsidiaries as of the date of the Merger Agreement who are not
employees of the Company shall remain members of the Board of Directors and of
such boards and committees. The Company's obligations to appoint the Purchaser's
designees to the Board of Directors is subject to compliance with Section 14(f)
of the Exchange Act, and Rule 14f-1 promulgated thereunder.
The Merger Agreement provides that following the election of the
Purchaser's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment of the Merger Agreement or the
Restated Articles of Incorporation or By-laws of the Company, any termination of
the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of Parent or the
Purchaser or waiver of any of the Company's rights thereunder, will require the
concurrence of a majority of the directors of the Company then in office who
were directors on the date of the Merger Agreement or persons designated by such
directors and neither were designated by the Purchaser nor are employees of the
Company ("Continuing Directors"). Prior to the Effective Time, the Company and
the Purchaser will use all reasonable efforts to ensure that the Board at all
times includes at least three Continuing Directors.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including,
without limitation, representations by the Company as to the absence of certain
changes or events concerning the Company's business, compliance with law,
litigation, employee benefit plans and taxes.
Agreement with Respect to the Conduct of Business Pending the
Merger. Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
Parent shall otherwise agree in writing and except as otherwise contemplated by
the Merger Agreement, the Company and each of its subsidiaries shall conduct its
operations according to its ordinary and usual course of business consistent
with past practice and, to the extent consistent therewith, with no less
diligence and effort than would be applied in the absence of the Merger
Agreement, seek to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. The
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Merger Agreement provides that, without limiting the generality of the
foregoing, and except as otherwise permitted in the Merger Agreement, neither
the Company nor any of its subsidiaries will, without the prior written consent
of Parent, (i) except for a maximum of 1,705,537 Shares to be issued pursuant to
the terms of the Option Plans, or Shares issued pursuant to the terms of the
Company's Retirement Investment Plan or the Employee Stock Ownership Plan,
issue, sell, grant, dispose of, pledge or otherwise encumber, or authorize or
propose the issuance, sale, disposition or pledge or other encumbrance of (A)
any additional shares of capital stock of any class (including the Shares), or
any securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for any shares of capital stock, or any rights, warrants,
options (including the grant of any options under the current Stock Plans),
calls, commitments or any other agreements of any character to purchase or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), or (B) any other securities in respect of, in lieu of, or
in substitution for, Shares outstanding on the date of the Merger Agreement;
(ii) except as required pursuant to the terms of the Company's stock-based
employee benefit plans, redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding Shares; (iii)
split, combine, subdivide or reclassify any Shares or declare, set aside for
payment or pay any dividend, or make any other actual, constructive or deemed
distribution, whether in cash, stock, property or otherwise, in respect of any
Shares or otherwise make any payments to shareholders in their capacity as such,
other than the declaration and payment of regular quarterly cash dividends not
to exceed $.215 per Share in accordance with past dividend policy and except for
dividends by a wholly owned subsidiary of the Company; (iv) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its subsidiaries not constituting an inactive subsidiary (other than the
Merger); (v) adopt any amendments to its Restated Articles of Incorporation or
By-laws or alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any subsidiary not
constituting an inactive subsidiary of the Company; (vi) make any material
acquisition, by means of merger, consolidation or otherwise, or material
disposition, of assets or securities; (vii) incur any indebtedness for borrowed
money or guarantee any such indebtedness or make any loans, advances or capital
contributions to, or investments in, any other person, other than to the Company
or any wholly owned subsidiary of the Company, except for the incurrence of (A)
short term indebtedness in the ordinary course of business consistent with past
practice or (B) up to $10 million of indebtedness related to the construction of
the Company's new plant in Costa Rica; (viii) grant any increases in the
compensation of any of its directors, officers or key employees, except in the
ordinary course of business and in accordance with past practice or as may be
approved on a case by case basis by a designated representative of Parent; (ix)
pay or agree to pay any pension, retirement allowance, severance or other
employee benefit not required or contemplated by any of the existing benefit,
severance, termination, pension or employment plans, agreements or arrangements
as in effect on the date of the Merger Agreement to any such director or
officer, whether past or present; (x) enter into any new or amend any existing
employment or severance or termination agreement with any such director or
officer; (xi) except in the ordinary course of business consistent with past
practice or as may be required to comply with applicable law, become obligated
under any new pension plan, welfare plan, multiemployer plan, employee benefit
plan, severance plan, benefit arrangement, or similar plan or arrangement, which
was not in existence on the date of the Merger Agreement, or amend any such plan
or arrangement in existence on the date of the Merger Agreement if such
amendment would have the effect of materially enhancing any benefits thereunder;
(xii) make any capital expenditures or commitments for any capital expenditures,
other than capital expenditures or commitments for any capital expenditures in
amounts consistent with the Company's fiscal 1995 budget previously disclosed to
Parent; (xiii) make any material changes in its customary methods of marketing,
distributing or licensing; (xiv) take, or agree to commit to take, any action
that would make any representation or warranty of the Company contained in the
Merger Agreement inaccurate in any respect at, or as of any time prior to, the
Effective Time; or (xv) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Acquisition Proposals. The Company has agreed that the Company and its
subsidiaries and their respective officers, directors and employees will
immediately cease any existing discussions or negotiations
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with any parties other than the Purchaser and Parent with respect to any
proposal or offer for a merger, asset acquisition or other business combination
or any proposal or offer to acquire a significant equity interest in, or a
significant portion of the assets of, such other person. However, the Merger
Agreement provides that the Company may, directly or indirectly, furnish
information and access, in each case only in response to requests which were not
solicited by the Company after the date of the Merger Agreement, to any
corporation, partnership, person or other entity or group pursuant to
confidentiality agreements, and may participate in discussions and negotiate
with such person, entity or group concerning any merger, sale of assets, sale of
shares of capital stock or similar transaction involving the Company or any
subsidiary or division of the Company, if such entity or group has submitted a
bona fide written proposal to the Board of Directors relating to any such
transaction which the Board of Directors reasonably determines represents a
superior transaction to the Offer and the Merger, and if in the opinion of the
Board of Directors after consultation with independent legal counsel, the
failure to provide such information or access or to engage in such discussions
or negotiations would be inconsistent with their fiduciary duties to the
Company's shareholders under applicable law. The Company has also agreed to
notify Parent immediately if any such request or proposal, or any inquiry or
contact with any person with respect thereto, is made and keep Parent apprised
of all developments which could reasonably be expected to culminate in the Board
of Directors withdrawing, modifying or amending its recommendation of the Offer,
the Merger and the other transactions contemplated by the Merger Agreement. The
Company has also agreed not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party unless, in the opinion of the Board of Directors after consultation
with independent legal counsel, the failure to provide such release or waiver
would be inconsistent with their fiduciary duties to the Company's shareholders
under applicable law.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) if required
for the consummation of the Merger, the Merger Agreement and the transactions
contemplated thereby shall have been duly approved by the shareholders of the
Company in accordance with applicable law and the Company's Restated Articles of
Incorporation; (b) there shall not be in effect any statute, rule, regulation,
executive order, decree, ruling or injunction or other order of a court or
governmental or regulatory agency of competent jurisdiction directing that the
transactions contemplated by the Merger Agreement not be consummated or which
has the effect of making the acquisition of Shares by the Purchaser illegal;
provided, however, that prior to invoking this condition each party shall use
all reasonable efforts to have any such decree, ruling, injunction or order
vacated; (c) all governmental consents, orders and approvals legally required
for the consummation of the Merger and the transactions contemplated by the
Merger Agreement shall have been obtained and be in effect at the Effective Time
(including, but not limited to, the approval of the Superintendent and any
approvals which may be required under the insurance laws of any state in which
Gerber Life does business and such approvals and consents as may be required
under the laws of any foreign country in which the Company or any of its
subsidiaries conducts any business or owns any assets), except where the failure
to obtain any such consent would not reasonably be expected to have a Material
Adverse Effect (as defined in the Merger Agreement) on Parent (assuming the
Merger had taken place), and the waiting period under the HSR Act, shall have
expired or been terminated; and (d) the Purchaser shall have purchased Shares
pursuant to the Offer.
Termination. The Merger Agreement provides that it may be terminated and
the Offer and the Merger may be abandoned at any time prior to the Effective
Time: (a) by the mutual written consent of Parent and the Company; (b) by either
Parent or the Company if (i) any court of competent jurisdiction in the United
States or some other governmental body or regulatory authority issues an order,
decree or ruling or takes any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
becomes final and nonappealable or (ii) the Purchaser does not purchase Shares
pursuant to the Offer on or prior to November 30, 1994 (provided that the right
to terminate the Merger Agreement under clause (b) is not available to any party
whose failure to fulfill any of its obligations under the Merger Agreement
results in such failure to purchase); or (c) by the Company if (i) the Purchaser
(x) fails to commence the Offer within five days following the date of the
initial public announcement of the Offer or (y) terminates the Offer prior to
the purchase of the Shares pursuant to the Offer; (ii) the Purchaser or Parent
fails to perform in any material respect any of their material obligations under
the Merger Agreement
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<PAGE> 10
to be performed at or prior to such date of termination, which failure to
perform is incapable of being cured by November 30, 1994; (iii) any
representation or warranty of the Purchaser or Parent contained in the Merger
Agreement is or becomes untrue or incorrect (except for changes permitted by the
Merger Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date), except, in any
case, such failures to be true and correct which are not reasonably likely to
adversely effect Parent's or the Purchaser's ability to complete the Offer or
the Merger, which failure to be true and correct is incapable of being cured
prior to November 30, 1994; or (iv) the Board of Directors withdraws or
materially modifies or changes its recommendation of the Offer, the Merger
Agreement or the Merger in order to approve the execution by the Company of a
definitive agreement relating to a proposal or offer for a merger, asset
acquisition or other business combination or any proposal or offer to acquire a
significant equity interest in, or a significant portion of the assets of, the
Company or any of its subsidiaries, with any person other than Parent or the
Purchaser (an "Acquisition Proposal"), and the Board of Directors after
consultation with independent legal counsel determines that the failure to take
such action would be inconsistent with its fiduciary duties to the Company's
shareholders under applicable law. In addition, the Merger Agreement provides
that Parent may terminate the Merger Agreement prior to the purchase of Shares
pursuant to the Offer by the Purchaser if (i) the Company fails to perform in
any material respect any of its material obligations under the Merger Agreement
to be performed at or prior to such date of termination, which failure to
perform is incapable of being cured by November 30, 1994; (ii) any
representation or warranty of the Company contained in the Merger Agreement is
or becomes untrue or incorrect (except for changes permitted by the Merger
Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date), except, in any
case, such failures to be true and correct which are not reasonably likely to
have a Material Adverse Effect (as defined in the Merger Agreement) on the
Company, which failure to be true and correct is incapable of being cured prior
to November 30, 1994; (iii) an Acquisition Proposal exists and the Board of
Directors withdraws or materially modifies or changes (including by amendment of
this Schedule 14D-9) its recommendation of the Offer, the Merger Agreement or
the Merger in a manner adverse to Parent or the Purchaser; provided that a
statement by the Board of Directors that it is neutral or unable to take a
position with respect to the Offer, the Merger Agreement or the Merger shall not
be deemed to constitute a withdrawal, modification or change of its
recommendation of the Offer, the Merger Agreement or the Merger; or (iv) the
Board of Directors recommends to the shareholders of the Company an Acquisition
Proposal.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and have no effect and
there shall be no liability thereunder on the part of any party thereto or its
affiliates, directors, officers or shareholders, except under the provisions of
the Merger Agreement related to fees and expenses described below and under
certain other provisions of the Merger Agreement which survive termination.
Agreements with Respect to Employee Matters. Parent has agreed that for a
period of at least two years after the Effective Time, Parent shall cause the
Surviving Corporation to continue to maintain the Company's existing
compensation, severance, welfare and pension benefit plans, programs and
arrangements (other than any stock based plans, programs and arrangements for
which alternative incentive compensation plans will be developed during the
one-year period following the Effective Time, as described below) for the
benefit of current and former employees of the Company and its subsidiaries,
subject to such modifications as may be required by applicable law or to
maintain the tax exempt status of any such plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended.
However, the Merger Agreement provides that (i) nothing therein shall prohibit
Parent from replacing any such existing plans, programs or arrangements with
plans, programs or arrangements which provide such employees with benefits which
are not less favorable in the aggregate than the benefits that would have been
provided under the Company's existing plans, programs or arrangements to the
extent such replacement is permitted under the terms of the applicable plan,
program or arrangement and (ii) nothing therein shall obligate Parent to provide
such employees with any stock based compensation (including, without limitation,
stock options or stock appreciation rights) after the Effective Time. Parent has
further agreed to develop, during the one-year period following the Effective
Time, a new performance based incentive compensation plan for the benefit of
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<PAGE> 11
employees of the Surviving Corporation and its subsidiaries as an appropriate
substitute for the Company's current stock based plans, programs and
arrangements.
The Merger Agreement provides that all service credited to each employee by
the Company through the Effective Time shall be recognized by Parent for all
purposes, including for purposes of determining eligibility, vesting and benefit
accruals under any employee benefit plan provided by Parent, except that, to the
extent necessary to avoid duplication of benefits, amounts payable under
employee benefit plans provided by Parent may be reduced by amounts payable
under similar Company Plans with respect to the same periods of service.
Parent has agreed to cause the Surviving Corporation to honor (without
modification) and assume the employment agreements, executive termination
agreements and individual benefit arrangements between the Company and six
executive officers, all as in effect at the date of the Merger Agreement.
Agreements with Respect to Director and Officer Indemnification and
Insurance. The Merger Agreement provides that the Articles of Incorporation and
By-Laws of the Surviving Corporation shall contain provisions with respect to
indemnification no less favorable to any party indemnified thereunder than those
set forth in the Restated Articles of Incorporation and By-Laws of the Company
on the date of the Merger Agreement, which provisions shall not be amended,
repealed or otherwise modified for a period of six years after the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors or
officers of the Company in respect of actions or omissions occurring at or prior
to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement), unless such modification is required by
law; provided that in the event any claim or claims are asserted or made within
such six year period, all rights to indemnification in respect of any such claim
or claims shall continue until disposition of any and all such claims.
The Merger Agreement provides that Parent shall cause to be maintained in
effect for not less than three years from the Effective Time the policies of
officers' and directors' liability insurance in effect as of the date of the
Merger Agreement maintained by the Company and its subsidiaries with respect to
matters occurring at or prior to the Effective Time covering each such person
covered by the Company's officers' and directors' liability insurance policy
prior to the Effective Time; provided that Parent may substitute therefor
policies of substantially the same coverage containing terms and conditions
which are no less advantageous, in any material respect; provided, however, that
in no event shall the Surviving Corporation be required to expend more than an
amount per year equal to 200% of the current annual premiums paid by the Company
for such insurance (which annual premiums the Company has represented to Parent
and the Purchaser to be $251,800 in the aggregate).
Parent, the Purchaser and the Company have also agreed that in the event
the Company or the Surviving Corporation or any of their respective 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 provision shall be made so
that the successors and assigns of the Company or the Surviving Corporation, as
the case may be, or at Parent's option, Parent, shall assume the foregoing
indemnity obligations.
Additional Agreements. Pursuant to the Merger Agreement, the Company shall,
if required by applicable law in order to consummate the Merger, duly call, give
notice of, convene and hold a special meeting of its shareholders as soon as
practicable following consummation of the Offer for the purpose of considering
and taking action on the Merger Agreement and the transactions contemplated
thereby (the "Shareholders' Meeting"). If the Purchaser acquires at least a
majority of the outstanding Shares, the Purchaser will have sufficient voting
power to approve the Merger, even if no other shareholder votes in favor of the
Merger.
The Merger Agreement provides that the Company shall, if required by
applicable law in order to consummate the Merger, as soon as practicable
following consummation of the Offer, file with the Securities and Exchange
Commission (the "Commission") under the Exchange Act, and use all reasonable
efforts to have cleared by the Commission, a proxy statement and related proxy
materials (the "Proxy Statement") with respect to the Shareholders' Meeting and
cause the Proxy Statement to be mailed to shareholders of the
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<PAGE> 12
Company at the earliest practicable time. The Company has agreed, subject to its
fiduciary duties to the Company's shareholders under applicable law after
consultation with independent legal counsel, to include in the Proxy Statement
the unanimous recommendation of the Board of Directors that the shareholders of
the Company approve and adopt the Merger Agreement and the transactions
contemplated thereby and to use all reasonable efforts to obtain such approval
and adoption. Parent and the Purchaser have agreed to cause all Shares then
owned by them and their affiliates to be voted in favor of approval and adoption
of the Merger Agreement and the transactions contemplated thereby. The Merger
Agreement provides that, in the event that the Purchaser shall acquire at least
90 percent of the then outstanding Shares, Parent, the Purchaser and the Company
agree, at the request of the Purchaser, subject to certain condition (see
"Conditions to the Merger" above), to take all necessary and appropriate action
to cause the Merger to become effective as soon as reasonably practicable after
such acquisition, without a meeting of the Company's shareholders, in accordance
with Michigan Law and Delaware Law.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto shall use all reasonable efforts to take, or cause
to be taken, all action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Merger Agreement, including using
all reasonable efforts to obtain all necessary or appropriate waivers, consents
and approvals, and to effect all necessary registrations, filings and
submissions and to lift any injunction or other legal bar to the Merger (and, in
such case, to proceed with the Merger as expeditiously as possible), subject,
however, to the requisite votes of the shareholders of the Company, the
Purchaser and Parent. Notwithstanding the foregoing, the Company shall not be
obligated to use all reasonable efforts or take any action pursuant to the above
described provisions if, in the opinion of the Board of Directors after
consultation with independent legal counsel, such actions would be inconsistent
with its fiduciary duties to the Company's shareholders under applicable law.
Fees and Expenses. The Merger Agreement provides that in the event that the
Merger Agreement is terminated (a) by either Parent or the Company, if the
Purchaser fails to purchase Shares pursuant to the Offer on or prior to November
30, 1994 and at the time of such termination (i) the Minimum Condition has not
been satisfied and (ii) an Acquisition Proposal exists; (b) by Parent prior to
the purchase of Shares pursuant to the Offer by the Purchaser if (i) an
Acquisition Proposal for the Company exists and the Board of Directors withdraws
or materially modifies or changes (including by amendment of this Schedule
14D-9) its recommendation of the Offer, the Merger Agreement or the Merger in a
manner adverse to Parent or the Purchaser (provided that a statement by the
Board of Directors that it is neutral or unable to take a position with respect
to the Offer, the Merger Agreement or the Merger shall not be deemed to
constitute a withdrawal, modification or change of its recommendation of the
Offer, the Merger Agreement or the Merger), or (ii) the Board of Directors
recommends to the shareholders of the Company an Acquisition Proposal for the
Company; or (c) by the Company if the Board of Directors withdraws or materially
modifies or changes its recommendation of the Offer, the Merger Agreement or the
Merger in order to approve the execution by the Company of a definitive
agreement relating to the Acquisition Proposal for the Company and the Board of
Directors after consultation with independent legal counsel determines that the
failure to take such action would be inconsistent with its fiduciary duties to
the Company's shareholders under applicable law, the Company shall pay to Parent
$70 million.
The Company has also agreed that if the Merger Agreement is terminated by
Parent prior to the purchase of Shares pursuant to the Offer by the Purchaser in
the event that (i) the Company shall have failed to perform in any material
respect any of its material obligations under the Merger Agreement to be
performed at or prior to such date of termination, which failure to perform is
incapable of being cured by November 30, 1994, or (ii) any representation or
warranty of the Company contained in the Merger Agreement shall not be true and
correct (except for changes permitted by the Merger Agreement and those
representations which address matters only as of a particular date shall remain
true and correct as of such date), except, in any case, such failures to be true
and correct which are not reasonably likely to have a Material Adverse Effect on
the Company; provided that such failure to be true and correct is incapable of
being cured prior to November 30, 1994, the Company shall reimburse Parent and
the Purchaser for up to $15 million, in the aggregate, of their actual out of
pocket expenses incurred in connection with the Merger
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<PAGE> 13
Agreement and the Offer (including, without limitation, legal fees, financial
advisor fees, financing commitment fees and printer fees).
Except as described in the preceding two paragraphs, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such costs or
expenses, whether or not the Offer and the Merger are consummated; provided that
the Surviving Corporation shall pay, with funds of the Company and not with
funds provided by Parent, any and all property or transfer taxes imposed on the
Surviving Corporation or any gains taxes.
Extension, Waiver and Amendment. The Merger Agreement provides that, at any
time prior to the Effective Time, each of Parent, the Purchaser and the Company
(by action of the Continuing Directors) may (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties of the other party
contained in the Merger Agreement or in any document, certificate or writing
delivered pursuant to the Merger Agreement or (iii) waive compliance by the
other party with any of the agreements or conditions contained in the Merger
Agreement. Any agreement on the part of Parent, the Purchaser or the Company to
any such extension or waiver shall be valid only if set forth in any instrument
in writing signed on behalf of such party. Subject to applicable law, at any
time prior to the Effective Time, Parent, the Purchaser and the Company (by
action of the Continuing Directors) may modify or amend the Merger Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties; provided, however, that after approval of the Merger
Agreement by the shareholders of the Company, no amendment shall be made which
changes the consideration payable in the Merger or adversely affects the rights
of the Company's shareholders under the Merger Agreement without the approval of
such shareholders.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
The Board of Directors has unanimously approved the Merger Agreement and
the transactions contemplated thereby and determined that each of the Offer and
the Merger is fair to, and in the best interests of, the shareholders of the
Company. The Board of Directors unanimously recommends that all holders of
Shares accept the Offer and tender their Shares pursuant to the Offer.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION.
As reported to the Company's shareholders in the Company's 1993 Annual
Report, the Company's U.S. baby food business had a difficult year in 1993 and
extending the Company's franchise in the international arena was desirable for
future growth. As a result, the Board of Directors and the Company's senior
management ("Management") have been actively studying the current and future
state of the baby food market, the Company's strategic position, near and
long-term prospects and the possibility that the Company should conduct a
systematic review of its strategic alternatives, including alternatives to
remaining an independent company, in order to increase shareholder value.
On November 13, 1993, representatives of the Company met with its outside
legal advisors and Goldman, Sachs & Co. ("Goldman Sachs") and Wasserstein
Perella & Co., Inc. ("Wasserstein Perella") to discuss various strategic
alternatives for the Company, including potential companies with which to pursue
strategic transactions that would best serve the Company's shareholders.
At meetings held in November 1993, the Board of Directors authorized
Management to retain outside financial advisors with respect to the
consideration and implementation of strategic alternatives for the Company. In
December 1993, Goldman Sachs and Wasserstein Perella were retained.
During the period from December 1993 through early May 1994, Management and
the Company's financial advisors approached a number of companies on a
confidential basis to discuss their interest in entering into a strategic
transaction with the Company. Certain of these companies entered into
confidentiality and standstill agreements with the Company and received
financial and other information regarding the Company in order to conduct a due
diligence review of the Company.
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On April 19, 1994, representatives of Parent contacted the Company's
financial advisors to discuss a possible business combination with the Company.
On April 21, 1994, Mr. Alfred Piergallini, Chairman of the Board, President
and Chief Executive Officer of the Company received a telephone call from Dr.
Marc Moret, Chairman of the Board of Parent expressing Parent's interest in
exploring a business combination with the Company. It was tentatively agreed
that representatives of the parties would meet in Chicago for more detailed
discussions.
On April 27, 1994, representatives of the Company met with representatives
of Parent in order to provide general information related to the Company. On
April 29, 1994, the Company and Parent entered into a confidentiality and
standstill agreement. On May 2, 1994, representatives of the Company met with
representatives of Parent in order to provide Parent with detailed information
related to the Company. On May 4, 1994, Parent began its due diligence review of
financial and other information regarding the Company.
During the week of May 9, 1994, representatives of the Company indicated to
Parent and other parties that, although no determination had been made to sell
the Company, the Company was willing to consider proposals related to potential
transactions with the Company and requested that proposals be submitted on May
18, 1994. On May 18, 1994, the Company received and initially evaluated
proposals from Parent and other interested parties. The Parent's proposal
contemplated acceptance of its terms by the Company no later than May 22, 1994.
After the Company further reviewed the proposals with its legal and financial
advisors, the Company's advisors contacted Parent and the other interested
parties to solicit their final proposals on May 19, 1994. After receiving and
evaluating revised proposals with its legal and financial advisors, the Company
began negotiating a definitive agreement with Parent on May 19, 1994.
Negotiations continued through May 21, 1994, culminating in the Company and
Parent agreeing upon a form of definitive agreement to be presented for review
by the Board of Directors at a meeting scheduled for May 21, 1994.
On May 21, 1994, a meeting of the Board of Directors was held in Chicago.
After a report by the Compensation Committee of the Board of Directors, review
and approval by the Board of Directors of amendments to certain employee benefit
plans and review of the Company's fiscal 1994 financial results, the terms of
the proposed transaction and related merger agreement were presented to and
reviewed by the Board of Directors. Goldman Sachs and Wasserstein Perella made a
presentation to the Board of Directors and each delivered its opinion as to the
fairness of the $53.00 per Share cash consideration to be received in the Offer
and the Merger to the holders of the outstanding Shares. The Board of Directors
analyzed and discussed the Offer, the Merger Agreement and the Merger and
reviewed proposed resolutions related to the transaction. After discussion and
further analysis, the Board of Directors unanimously approved the Merger
Agreement and the transactions contemplated thereby and unanimously recommended
that all holders of Shares accept the Offer and tender their Shares pursuant to
the Offer. With respect to the Merger, the Board of Directors unanimously
recommended that, if a shareholder vote is required by applicable law, the
shareholders of the Company vote in favor of approval and adoption of the Merger
Agreement and the Merger. A copy of a press release announcing the transaction
is attached hereto as Exhibit 5 and incorporated herein by reference. A copy of
a letter to shareholders of the Company, which accompanies this Schedule 14D-9,
is attached hereto as Exhibit 6 and incorporated herein by reference.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders of Shares tender their Shares pursuant to the
Offer, the Board of Directors considered a number of factors including:
(i) the terms of the Merger Agreement;
(ii) presentations by Management of the Company (at such meeting and
at previous Board of Directors' meetings) regarding the financial
condition, results of operations, business and prospects of the Company,
including the prospects if the Company were to remain independent;
(iii) the results of the process undertaken to identify and solicit
proposals from third parties to enter into a strategic transaction with the
Company;
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(iv) the trading price of the Shares over the last three years and
that the $53.00 per Share Offer price represents a premium of approximately
53% over the closing sales price for the Shares on the New York Stock
Exchange (the "NYSE") on May 20, 1994, the last trading day prior to the
public announcement of the execution of the Merger Agreement;
(v) the presentations of Goldman Sachs and Wasserstein Perella at the
May 21, 1994 Board of Directors' meeting and the opinions of Goldman Sachs
and Wasserstein Perella, each to the effect that as of the date of the
opinion, the $53.00 per Share cash consideration to be received by the
holders of the Shares in the transactions contemplated by the Merger
Agreement is fair to such holders. Copies of the opinions of Goldman Sachs
and Wasserstein Perella, which set forth the procedures followed, the
factors considered and the assumptions made by Goldman Sachs and
Wasserstein Perella, are attached hereto and filed as Exhibits 7.1 and 7.2,
respectively, and incorporated herein by reference. SHAREHOLDERS ARE URGED
TO READ THE OPINIONS OF GOLDMAN SACHS AND WASSERSTEIN PERELLA CAREFULLY IN
THEIR ENTIRETY;
(vi) that the Merger Agreement permits the Company in the exercise of
the fiduciary duties of the Board of Directors to furnish nonpublic
information and access in response to requests which were not solicited by
the Company after the date of the Merger Agreement to third parties
pursuant to confidentiality agreements, and to participate in discussions
and negotiations with any third party that has submitted a bona fide
written Acquisition Proposal to the Company which the Board of Directors
determines is superior to the Offer and the Merger, or to waive any
confidentiality or standstill agreements entered into by the Company;
(vii) the termination provisions of the Merger Agreement, which were a
condition to Parent's proposal, providing that Parent could be entitled to
(x) a fee of $70 million upon the termination of the Merger Agreement under
certain circumstances, including the modification or withdrawal of the
Board of Directors' recommendation with respect to the Offer and the Merger
in the presence of an Acquisition Proposal for the Company and (y)
reimbursement of expenses up to $15 million upon a termination of the
Merger Agreement by Parent related to a breach of the representations and
warranties or covenants by the Company contained in the Merger Agreement;
and
(xiii) the representation of Parent and the Purchaser that they have
sufficient funds available to them to consummate the Offer and the Merger.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Goldman Sachs and Wasserstein Perella have been retained by the Company to
act as financial advisors to the Company with respect to the Offer, the Merger
and matters arising in connection therewith. Pursuant to a letter agreement,
dated December 6, 1993, between the Company and each of Goldman Sachs and
Wasserstein Perella, if the Offer and the Merger are consummated, the Company
will pay Goldman Sachs and Wasserstein Perella, for their services in connection
with the foregoing matters, an aggregate fee of approximately $18.7 million,
which amount represents 0.50% of the aggregate consideration (as defined in the
letter agreement) to be paid upon the consummation of the Offer and the Merger,
to be paid in equal portions to each of Goldman Sachs and Wasserstein Perella.
The Company has also agreed to reimburse each of Goldman Sachs and Wasserstein
Perella for its reasonable out-of-pocket expenses, including the reasonable fees
and expenses of its counsel, and to indemnify each of Goldman Sachs and
Wasserstein Perella against certain liabilities, including liabilities arising
under the federal securities laws.
Goldman Sachs and Wasserstein Perella have provided certain investment
banking services to the Company and Parent from time to time for which they have
received customary compensation. In the ordinary course of its business, each of
Goldman Sachs and Wasserstein Perella may from time to time effect transactions
and hold positions in securities of the Company and Parent.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for (i) awards of Shares pursuant to the Company's employee
benefit plans described under the heading "Executive Management Compensation" of
Schedule I hereto and (ii) an aggregate of 22,825 Shares that were purchased at
an average price of $30.08 per share by the trustees under the Company's
Retirement Investment Plan and Stock Ownership Plan, no transactions in the
Shares have been effected during the past 60 days by the Company or, to the best
of the Company's knowledge, by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, except for (i) Shares the sale
of which may result in liability for the holder(s) under Section 16(b) of the
Exchange Act, (ii) Shares which are subject to restrictions on transfer and
(iii) gifts of Shares to family members or charitable organizations, each
executive officer, director and affiliate of the Company currently intends to
tender all Shares over which he or she has sole dispositive power to the
Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth above or in Items 3(b) and 4(b), the Company is not
engaged in any negotiation in response to the Offer which relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Items 3(b) or 4 above, there are no
transactions, Board of Directors' resolutions, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<S> <C>
Exhibit 1.1 Agreement and Plan of Merger, dated as of May 21, 1994, by and among Sandoz
Ltd., SL Sub Corp. and Gerber Products Company
Exhibit 1.2 Amendment No. 1, dated as of May 27, 1994, to the Agreement and Plan of Merger,
dated as of May 21, 1994, by and among Sandoz Ltd., SL Sub Corp. and Gerber
Products Company
Exhibit 2 Form of Amendment to Severance Agreements between Gerber Products Company and
certain key executives
Exhibit 3 Gerber Products Company Severance Benefits Plan, as amended May 21, 1994
Exhibit 4 Confidentiality Agreement, dated April 29, 1994, between Gerber Products Company
and Sandoz Corporation
Exhibit 5 Press Release issued jointly by Gerber Products Company and Sandoz Ltd. dated
May 23, 1994
Exhibit 6 Letter to Shareholders of Gerber Products Company dated May 27, 1994*
Exhibit 7.1 Opinion of Goldman, Sachs & Co. dated May 21, 1994*
Exhibit 7.2 Opinion of Wasserstein Perella & Co., Inc. dated May 21, 1994*
</TABLE>
- -------------------------
* Included in copies mailed to shareholders.
16
<PAGE> 17
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 27, 1994 GERBER PRODUCTS COMPANY
By /s/ STEPHEN R. CLARK
------------------------------------
Stephen R. Clark
Vice President and General Counsel
17
<PAGE> 18
SCHEDULE I
GERBER PRODUCTS COMPANY
445 STATE STREET
FREMONT, MICHIGAN 49413
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
-------------------------
This Information Statement is being mailed on or about May 27, 1994 as a
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about May 23, 1994. You are receiving this Information Statement
in connection with the possible election of persons designated by the Purchaser
to a majority of the seats on the Board of Directors of the Company. The Merger
Agreement requires the Company to use all reasonable efforts to cause the
Purchaser Designees (as defined below) to be elected to the Board of Directors
under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. See
"Board of Directors and Executive Officers -- Right to Designate Directors; The
Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
27, 1994. The Offer is scheduled to expire at 5:00 p.m., New York City time, on
Thursday, June 30, 1994 unless the Offer is extended.
The information contained in this Information Statement concerning the
Purchaser and the Purchaser Designees has been furnished to the Company by the
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of May 21, 1994, there were 69,519,935
Shares outstanding. The Board of Directors currently consists of nine members
and there is currently one vacancy on the Board of Directors. Each director
holds office until such director's successor is elected and qualified or until
such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer, and from time to time thereafter, the
Purchaser shall be entitled to designate up to such number of directors (the
"Purchaser Designees"), rounded up to the next whole number, on the Company's
Board of Directors as shall give the Purchaser representation equal to the
product of the total number of directors on the Board of Directors (giving
effect to the directors elected pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser or any affiliate of the Purchaser bears to the total number of Shares
then outstanding, and the Company shall, at such time, promptly use all
reasonable efforts to cause the Purchaser Designees to be elected as directors
of the Company, including increasing the size of the Board of Directors (subject
to the provisions of Article VI of the Company's Restated Articles of
Incorporation) or securing (to the extent possible) the resignations of
incumbent directors or both. At such times, the Company shall use all reasonable
efforts to cause persons
I-1
<PAGE> 19
designated by the Purchaser to constitute the same percentage as persons
designated by the Purchaser shall constitute of the Board of Directors of (i)
each committee of the Board of Directors, (ii) each board of directors of each
domestic subsidiary of the Company and (iii) each committee of each such board,
in each case only to the extent permitted by applicable law or the rules of any
stock exchange on which the Shares are listed. Notwithstanding the foregoing,
until the earlier of (i) the time the Purchaser acquires a majority of the then
outstanding Shares on a fully diluted basis and (ii) the Effective Time, the
Company shall use all reasonable efforts to ensure that all the members of the
Board of Directors and each committee of the Board of Directors and such boards
and committees of such domestic subsidiaries as of the date of the Merger
Agreement who are not employees of the Company shall remain members of the Board
of Directors and of such boards and committees. In addition, prior to the
Effective Time, the Company and the Purchaser shall use all reasonable efforts
to ensure that the Board of Directors at all times includes at least three
directors who were directors on the date of the Merger Agreement or persons
designated by such directors and neither were designated by Purchaser nor are
employees of the Company.
The Purchaser has informed the Company that each of the Purchaser Designees
listed below has consented to act as a director.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a majority of the Shares pursuant to
the Offer, which purchase cannot be earlier than June 30, 1994, and that, upon
assuming office, the Purchaser Designees will thereafter constitute at least a
majority of the Board of Directors.
The Board of Directors is divided into three classes serving staggered
terms in accordance with the Company's Restated Articles of Incorporation.
Biographical information concerning each of the Purchaser Designees,
directors and executive officers is presented on the following pages.
PURCHASER DESIGNEES
Dr. Rolf W. Schweizer, Age 64; a director of Parent for more than five
years; Chief Executive Officer of Parent since 1994; held various positions with
the Sandoz Group for the past five years; Dr. Schweizer is also a director of
Swiss Bank Corporation.
Dr. Urs. Barlocher, Age 52; head of Pharma Division of Parent since 1993;
held various positions with the Sandoz Group for the past five years.
Dr. Raymund Breu, Age 49; Chief Financial Officer of Parent since 1993;
held various positions with the Sandoz Group for the past five years.
Alexandre F. Jetzer, Age 53; head of Management Resources and International
Coordination of Parent since 1993; held various positions with the Sandoz Group
for the past five years.
Heinz Imhof, Age 52; Director, Chairman and President of Purchaser since
May 21, 1994; Vice Chairman and Chief Executive Officer of Parent since 1993;
held various positions with the Sandoz Group for the past five years.
Robert L. Thompson, Jr., Age 49; Director, Vice President and Secretary of
Purchaser since May 21, 1994; Vice President, General Counsel and Secretary of
Parent since 1989; Mr. Thompson is also a director of the Organization for
International Investment since December 7, 1993.
Alfred A. Piergallini, Age 47; a director of the Company since 1989;
Chairman of the Board, President and Chief Executive Officer of the Company
since January 1993; Chairman of the Board and Chief Executive Officer of the
Company from May 1992 to January 1993; Chairman of the Board, President and
Chief Executive Officer of the Company from January 1990 to May 1992; and
President and Chief Operating Officer of the Company from April 1989 to January
1990. Mr. Piergallini is also a director of Comerica, Incorporated.
I-2
<PAGE> 20
None of the Purchaser Designees (i) is currently a director of, or holds
any position with, the Company (other than Mr. Piergallini), (ii) has a familial
relationship with any of the directors or executive officers of the Company or
(iii) to the best knowledge of the Purchaser, beneficially owns any securities
(or rights to acquire any securities) of the Company (other than Mr.
Piergallini). The Company has been advised by the Purchaser that, to the best of
the Purchaser's knowledge, none of the Purchaser Designees has been involved in
any transactions with the Company or any of its directors, executive officers or
affiliates which are required to be disclosed pursuant to the rules and
regulations of the Commission, except as may be disclosed herein or in the
Schedule 14D-9.
DIRECTORS
Robert B. Carlson, Age 64; a director since 1987; Consultant, Right
Associates since April 1991; Chairman of the Board of Crowley, Milner and
Company (a chain of retail department stores) from March 1988 to April 1991.
Harrington M. Cummings, Age 64; a director since 1974; private investor.
Mr. Cummings is a brother-in-law of Daniel F. Gerber.
Charles H. Curry, Age 47; a director since 1991; President of The Oreheus
Connection (an advertising and marketing firm specializing in culturally diverse
audiences) since November 1993; President and Chief Operating Officer for
Burrell Communications Group (advertising) from August 1989 to November 1993;
and Senior Vice President and Director of Account Services of Burrell
Communications Group from April 1988 to August 1989; prior thereto he was
associated with Marketing Corporation of America as a partner.
Daniel F. Gerber, Age 53; a director since 1967; poet, novelist,
journalist. Mr. Gerber is a brother-in-law of Harrington M. Cummings.
Richard L. McAuliffe, Age 59; a director since 1975; Treasurer, Evangelical
Lutheran Church in America since February, 1992; Managing Agent, Resolution
Trust Corporation from February, 1991 to February 1992; Executive Vice President
and Chief Financial Officer, Harris Bankcorp, Inc., and Harris Trust and Savings
Bank from 1982 to October 1990.
Alfred A. Piergallini, Age 47; a director since 1989; Chairman of the
Board, President and Chief Executive Officer since January 1993; Chairman of the
Board and Chief Executive Officer from May 1992 to January 1993; Chairman of the
Board, President and Chief Executive Officer from January 1990 to May 1992; and
President and Chief Operating Officer from April 1989 to January 1990. Mr.
Piergallini is also a director of Comerica, Incorporated.
Fred K. Schomer, Age 54; a director since 1989, Executive Vice President
and Chief Financial Officer since November 1988. Mr. Schomer is also a director
of Gantos, Inc.
Gloria S. Spitz, Age 62; a director since 1976; Senior Vice President,
Burson-Marsteller (public relations) since October 1991; Vice President/Group
Manager, Burson-Marsteller from March 1984 to October 1991.
Bonita W. Wyse, Age 48; a director since 1981; Dean, College of Family
Life, Utah State University since July 1984.
EXECUTIVE OFFICERS
Alfred A. Piergallini, Age 47; Chairman of the Board, President and Chief
Executive Officer from January 14, 1993 to present; Chairman of the Board and
Chief Executive Officer from May 28, 1992 to January 14, 1993; Chairman of the
Board, President and Chief Executive Officer from January 1, 1990 to May 28,
1992; President and Chief Operating Officer from April 17, 1989 to January 1,
1990; Prior thereto he was associated with The Carnation Company.
Fred K. Schomer, Age 54; Executive Vice President and Chief Financial
Officer from November 28, 1988 to present.
I-3
<PAGE> 21
Jose A. Rodriguez, Age 57; President, International Division from September
20, 1993 to present; President, Quaker Europe from May 1, 1985 to October 31,
1991.
Stephen R. Clark, Age 37; Vice President, General Counsel from November 8,
1989 to present; General Counsel from January 1, 1988 to November 8, 1989.
Timothy J. Croasdaile, Age 47; Vice President, Investor Relations and
Corporate Affairs from September 30, 1991 to present; Prior thereto he was
associated with Itel Corporation and Bell & Howell Co.
C. Simon Thompson, Age 52; Vice President, Treasurer from December 1, 1993
to present; Employed by C. Simon Thompson & Associates Limited from August 1,
1991 to December 1, 1993; Group Treasurer and President, Trafalgar House Group
Finance plc. from August 1, 1988 to August 1, 1991.
Dennis G. Tischler, Age 51; Vice President, Tax from May 28, 1992 to
present; Director, Tax from September 17, 1990 to May 28, 1992; Prior thereto he
was associated with TRW, Inc.
Craig G. Wassenaar, Age 38; Corporate Comptroller from June 1, 1992 to
present; Prior thereto he was associated with Ernst & Young.
Kristina Kiley, Age 43; Director -- Human Resources and Corporate Secretary
from January 10, 1994 to present; Corporate Secretary, and Associate General
Counsel from March 8, 1993 to January 9, 1994; Associate General
Counsel/Assistant Secretary from January 1, 1989 to March 8, 1993.
There is no family relationship between any of the above-named officers of
the Company.
All executive officers of the Company are elected annually at the meeting
of its Board of Directors following the annual meeting of shareholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Based on information available to the Company, as of February 11, 1994,
5,291,400 shares of Common Stock, representing 7.6% of the shares outstanding,
were held by Southeastern Asset Management, Inc., 860 Ridgelake Boulevard, Suite
301, Memphis, Tennessee 38120.(1)
The following table sets forth the shares of Common Stock beneficially
owned as of May 8, 1994 by the Company's directors, those executive officers
identified in "Executive Management Compensation," and the directors and all
executive officers as a group.
<TABLE>
<CAPTION>
NAME SHARES OF COMMON STOCK(1)
----------------------------------------------------------------------------------
<S> <C>
Robert B. Carlson........................................ 21,396
Harrington M. Cummings................................... 999,848(2)
Charles H. Curry......................................... 9,360
Daniel F. Gerber......................................... 810,258(3)
Richard L. McAuliffe..................................... 40,392
Alfred A. Piergallini.................................... 241,557
Fred K. Schomer.......................................... 109,225
Gloria S. Spitz.......................................... 16,340
Bonita W. Wyse........................................... 27,798
Jose A. Rodriguez........................................ 4,601
Stephen R. Clark......................................... 45,307
Timothy J. Croasdaile.................................... 22,940
All directors and executive officers as a group (16
persons including those listed above).................. 1,980,510
</TABLE>
- -------------------------
(1) This information is based on a Schedule 13G dated February 11, 1994. Of the
shares reported, Southeastern Asset Management, Inc. has sole voting power
over 4,281,300 shares, shared voting power over 680,000 shares, no voting
power over 330,100 shares, sole dispositive power over 4,539,300 shares,
shared dispositive power over 680,000 shares and no dispositive power over
72,100 shares.
I-4
<PAGE> 22
(2) With the exception of Messrs. Gerber and Cummings, none of the directors
owns more than 1% of the outstanding shares of Common Stock. All directors
and executive officers as a group own 2.8% of the outstanding shares.
Shares listed as beneficially owned include shares allocated under the
Company's Retirement Investment Plan, Stock Ownership Plan and Stock
Ownership Program. Such figures also include shares subject to stock
options granted under the Company's current and former stock option plans
exercisable within 60 days following May 8, 1994, which are as follows:
R.B. Carlson, 12,000; H.M. Cummings, 12,000; C.H. Curry, 8,000; R.L.
McAuliffe, 28,000; A.A. Piergallini, 111,016; F.K. Schomer, 65,970; G.S.
Spitz, 10,000; B.W. Wyse, 12,000; S.R. Clark, 30,057; T.J. Croasdaile,
13,557; and for all directors and executive officers as a group, 325,764.
Such shares also include shares held jointly with a spouse or by a spouse
alone as follows: R.B. Carlson, 1,200; A.A. Piergallini, 6,000; F.K.
Schomer, 7,231; G.S. Spitz, 1,700; and T.J. Croasdaile, 325. All directors
and executive officers as a group had sole voting and investment power as
to 774,628 shares and shared voting and investment power as to 859,928
shares.
(3) Mr. Cummings beneficially owns 1.4% of the outstanding shares of Common
Stock. Includes 144,376 shares held by Mr. Cummings for the benefit of his
children, 405,904 shares held in the trusts of which Mr. Cummings is one of
the trustees (Mr. Gerber is also a trustee and the shares are also included
as being beneficially owned by Mr. Gerber), and 437,568 shares held in
three funds of which Mr. Cummings and his wife are trustees. Mr. Cummings
has sole voting and investment power with respect to 144,376 shares and
shares voting and investment power with respect to 843,472 shares. Also
includes 12,000 shares subject to currently exercisable stock options
granted under the Company's Stock Option Plan for Non-Employee Directors,
which plan has been discontinued.
(4) Mr. Gerber beneficially owns 1.2% of the outstanding shares of Common Stock.
Includes 405,904 shares held in trusts of which Mr. Gerber is one of the
trustees and as to which he shares voting and investment power (Mr.
Cummings is also a trustee and the shares are also included as being
beneficially owned by Mr. Cummings), and 404,354 shares held by Mr. Gerber
individually as to which he has sole voting and investment power.
THE BOARD OF DIRECTORS AND STANDING COMMITTEES OF THE BOARD
The Board of Directors held nine meetings during fiscal year 1994. No
director attended less than 89% of the aggregate number of meetings of the Board
and Board committees on which the director served.
The executive committee, which held one meeting during the year, consisted
of Messrs. Cummings, Curry, Gerber, Piergallini and Schomer. The committee may
exercise all the powers of the Board when the Board is not in session, except as
otherwise provided in the Restated Articles of Incorporation.
The audit committee, which held two meetings during the year, consisted of
Messrs. Carlson, Cummings, Curry, Gerber and McAuliffe, Ms. Spitz and Dr. Wyse.
The committee's responsibilities include recommending to the full Board the
selection of the Company's independent auditors; discussing the arrangements for
the proposed scope, and the results of the annual audit with management and the
independent auditors; reviewing the scope of non-audit professional services
provided by the independent auditors; obtaining from both management and the
independent auditors their observations on the Company's system of internal
accounting controls; and reviewing the overall activities and recommendations of
the Company's internal auditors.
The management development and compensation committee, which held four
meetings during the year, consisted of Messrs. Carlson, Cummings, Curry, Gerber
and McAuliffe, Ms. Spitz and Dr. Wyse. The committee advises management on
matters pertaining to management development and corporate organizational
planning; monitors compensation arrangements for management employees for
consistency with corporate objectives and shareholders' interests; approves
salaries of officers who are members of the executive committee; and administers
many of the Company's executive benefit plans.
The nominating committee, which held one meeting during the year, consisted
of Messrs. Carlson, Cummings, Curry, Gerber and McAuliffe, Ms. Spitz and Dr.
Wyse. The committee is responsible for the
I-5
<PAGE> 23
selection of potential candidates for membership on the Board of Directors and
periodic review of compensation of directors. Shareholders wishing to nominate
director candidates for consideration by the committee may do so by writing to
the secretary of the Company giving the candidate's name, biographical data, and
qualifications. The bylaws of the Company require that notice of nominations by
shareholders of persons for election as directors at annual meetings of the
Company be delivered to the Company not less than fifty nor more than
seventy-five days prior to the date of the meeting; provided that, if less than
sixty-five days' notice or prior public disclosure of the date of the meeting is
given or made to shareholders, notice by the shareholder must be received by the
Company not later than the fifteenth day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure was made,
whichever first occurs.
The corporate governance review committee, which was made a standing
committee and had three meetings in the last year, consisted of Messrs. Carlson,
Cummings, Curry, Gerber and McAuliffe, Ms. Spitz and Dr. Wyse. The committee's
responsibilities include reviewing the Company's governance structure and the
functioning of the Board and recommending such changes as the committee deems to
be in the best interests of the Company and its shareholders.
The Company retained Burson-Marsteller, of which Ms. Spitz is an officer,
to provide certain public relations services in the fiscal year ended March 31,
1994.
Directors who are not employees of the Company are currently paid fees
which are comprised of a combination of cash and shares of common stock.
Quarterly cash payments of $9,275 are made to each director, or $9,775 in the
case of committee chairmen, which amounts may be deferred, at the election of
the director, until such director ceases to serve on the Board. Upon the
termination of the service of such a director within the two-year period
immediately following a change in control of the Company (as defined in the
Company's Outside Directors' Fee Plan), any balance in the director's deferred
cash account will be paid to the director in a single lump-sum payment. A change
in control would occur upon completion of the Offer. The Non-Employee Directors
Stock Accumulation Plan, established within the Company's Stock Ownership
Program, provides for an annual grant of 580 shares of common stock to each
non-employee director on the first business day following the annual meeting of
shareholders. Such shares are not transferable until the director ceases to
serve on the Board for any reason, except that all shares become freely
transferable upon a change of control of the Company (as defined in such plan),
which would occur upon the completion of the Offer. The plan also provides that
upon initial election or appointment to the Board, each non-employee director
will receive a stock option to purchase 8,000 shares of common stock at an
exercise price of 85% of the stock's fair market value on the date of grant.
Under the Stock Option Plan for Non-Employee Directors which was discontinued
upon the implementation of the Non-Employee Directors Stock Accumulation Plan,
directors received annual stock options to purchase shares of common stock. All
options become exercisable upon a change in control of the Company (as defined
in the Stock Option Plan for Non-Employee Directors), which would occur upon the
completion of the Offer. No directors exercised any options during 1994. As of
May 8, 1994, current directors held options for 82,000 shares.
I-6
<PAGE> 24
EXECUTIVE MANAGEMENT COMPENSATION
SUMMARY OF EXECUTIVE MANAGEMENT COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM EQUITY
BASED COMPENSATION
ANNUAL COMPENSATION --------------------
- ------------------------------------------------------------------------------------------------------------
ANNUAL BONUS
----------------------------
FORM OF OTHER RESTRICTED STOCK
PAYMENT(2) ANNUAL AWARDS(4)
TOTAL ----------------- COMPEN- --------------------
EXECUTIVE POSITION FY SALARY AWARD CASH SHARES SATION(3) SHARES VALUE(5)(6)
- ----------------------- ------------------------ --- -------- -------- -------- ------ ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A.A. Piergallini....... Chairman, Pres. and CEO 94 $506,000 $392,555 $314,036 2,746 --79,880 8,636 $ 264,478
93 506,000 0 0 0 -- 5,000 154,400
92 466,400 280,959 280,959 0 $ 3,334 115,023
F.K. Schomer........... Exec. V.P. and CFO 94 269,346(1) 164,273 82,141 2,775 -- 3,182 97,449
93 269,346(1) 0 0 0 -- 1,666 51,446
92 253,088 145,880 58,348 2,656 -- 2,000 69,000
J.A. Rodriguez(11)..... Pres., International 94 132,692 13,726 10,981 96 -- 1,046 32,034
Division 93 -- -- -- -- -- -- --
92 -- -- -- -- -- -- --
S.R. Clark............. V.P. and General Counsel 94 171,160 81,179 64,938 568 -- 2,091 64,037
93 153,817 0 0 0 -- 834 25,754
92 143,495 50,424 20,170 918 -- 1,500 51,750
T.J. Croasdaile........ V.P. Investor Relations 94 161,000 73,824 59,070 516 -- 1,364 41,773
and Corp. Affairs 93 160,583 0 0 0 -- 334 10,314
92 78,600 27,000 27,000 0 8,278 1,000 34,500
<CAPTION>
- ----------------------- LONG-TERM INCENTIVE PAYOUTS
PERFORMANCE SHARES/UNITS TOTAL COMPENSATION
EARNED ------------------------------
---------------------------- ALL SHARES EARNED
NO. OF TOTAL FORM OF PAYMENT OTHER AND AWARDED
OPTIONS PAYOUT ----------------- COMPEN- -----------------
EXECUTIVE GRANTED(7) VALUE SHARES CASH(8) SATION(9) CASH(10) SHARES VALUE(5)
- ----------------------- ---------- -------- ------ -------- ------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A.A. Piergallini....... 86,364 $578,393 12,636 $191,415 $40,614 $1,043,978 24,018 $735,551
40,107 560,515 13,814 133,939 39,364 671,005 18,814 580,976
16,666 938,912 20,316 238,010 54,177 1,029,228 23,650 815,925
F.K. Schomer........... 31,818 199,593 4,360 66,068 19,227 428,778 10,317 315,958
8,334 181,774 4,618 39,170 19,035 318,804 6,284 194,050
0 333,725 7,350 80,150 26,115 407,685 12,006 414,207
J.A. Rodriguez(11)..... 10,454 -- -- -- 4,777 143,673 1,142 34,974
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
S.R. Clark............. 20,909 81,059 1,772 26,791 10,109 267,450 4,431 135,699
4,166 20,597 667 0 5,603 153,817 1,501 46,351
0 30,774 892 0 8,038 165,993 3,310 114,285
T.J. Croasdaile........ 13,636 -- -- -- 5,796 220,070 1,880 57,575
1,666 -- -- -- 6,158 160,585 334 10,314
2,800 -- -- -- 2,830 105,600 1,000 34,500
--
</TABLE>
- -------------------------
(1) Includes lump sum payment in lieu of base salary increases.
(2) Under the Company's annual bonus plan, executives may elect to receive 20%
- 100% of an award in shares of common stock, although in fiscal year 1994
certain executives were required to receive at least 20% of their annual
bonus in shares. Those shares relating to 20% of the bonus required to be
received in shares were valued at $28.5938 (the average sales price over a
specified period); elected shares were valued at $30.3063. Premium shares
equal to 4% of the stock award were granted each year (through the fifth
year) following the award provided that if the executive sold any shares of
common stock the right to further premium shares under the award was
forfeited. In each of 1994 and 1993, 107 premium shares were awarded to
F.K. Schomer and 37 shares to S.R. Clark based on stock awards made in
1992..
(3) While each of the executives received certain perquisites and other
benefits in the year shown, in accordance with SEC regulations, the value
of these benefits are not shown since they did not exceed in the aggregate
the lesser of $50,000 or 10% of the individual's salary and bonus in those
years with the exception of Messrs. Piergallini and Croasdaile in 1992. Of
the amounts shown for Messrs. Piergallini and Croasdaile in 1992, $74,342
and $8,278, respectfully, were paid as reimbursement for certain moving
expenses incurred in connection with Mr. Piergallini's election as chief
executive officer and Mr. Croasdaile's initial employment with the Company.
(4) Except as described below, the shares shown in this column are restricted
shares awarded in combination with stock options. Restricted shares equal
to 10% of the 1994 option grant and 20% of the 1993 and 1992 option grant
are awarded to senior executives with an option and are subject to
forfeiture if the shares acquired upon the exercise of the option are sold
or transferred or the executive ceases to be employed by the Company. See
"Stock Options." The shares awarded in 1992 to Messrs. Schomer, Clark and
Croasdaile were restricted shares subject to forfeiture if the executive
terminates employment.
(5) Value was determined by multiplying total share awarded or earned by the
closing price of common stock as of the last day of each fiscal year:
$30.625 for 1994; $30.88 for 1993; and $34.50 for 1992.
(6) The aggregate restricted share holdings as of March 31, 1994 and the value
as of the date were as follows: A.A. Piergallini 73,737 shares
($2,258,196); F.K. Schomer, 19,039 shares ($583,069); J.A. Rodriguez, 4,335
shares ($132,759); S.R. Clark 8,394 shares ($257,066) and T.J. Croasdaile,
5,457 shares ($167,121). These restricted shares include restricted stock
awards and performance shares that are subject to continuing restrictions.
The values shown are market value as of year end, without giving effect to
the diminution in value attributable to the restrictions. Dividends on
restricted shares are paid at the same rate as the dividends paid on common
stock generally. However, in the case of performance shares and certain
restricted shares the dividends are accrued and subject to forfeiture if
the shares are forfeited.
(7) See "Stock Options" for a description of the terms of the options and their
valuation.
(8) Reflects actual cash paid for units earned during each fiscal year.
(9) Includes Company contributions to the Stock Ownership Plan and dividends
accrued on certain restricted and performance shares.
(10) Includes all cash received except Company contributions to the Stock
Ownership Plan and the reimbursement of the moving expenses of Messrs.
Piergallini and Croasdaile.
(11) Mr. Rodriguez was first employed by the Company in September, 1993. The
compensation shown for 1994 is for the period beginning on the date of
employment through the end of the fiscal year.
I-7
<PAGE> 25
STOCK OPTIONS
Set forth below is certain information concerning stock options granted to
the Company's senior executives during the previous year. For purposes of
valuing the options, companies may choose between (i) using a hypothetical value
based upon a stock appreciation of 5% and 10% over the term of the option or
(ii) a grant-date valuation approach. The Black-Scholes "grant-date" option
pricing model is widely used by compensation experts and is also utilized by the
Company and the Board's management development and compensation committee in
connection with option grants. The Company believes that the Black-Scholes Model
provides meaningful information that enables shareholders to better understand
the relationship of option grants to an executive's total compensation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF
TOTAL OPTIONS GRANT-DATE
GRANTED PRESENT VALUE
OPTIONS TO ALL EXERCISE EXPIRATION (BLACK-SCHOLES
EXECUTIVE GRANTED(1) ASSOCIATES(2) PRICE DATE MODEL)(3)
- ------------------------------------- ---------- ------------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C>
A.A. Piergallini..................... 40,909 5.26% $31.0000 5/03/98 $203,318
45,455 5.84 28.5938 3/29/99 486,369
F.K. Schomer......................... 13,636 1.76 31.0000 5/03/98 67,771
18,182 2.34 28.5938 3/29/99 194,547
J.A. Rodriguez....................... 6,818 0.85 31.0000 9/23/98 33,885
3,636 0.45 28.5938 3/29/99 38,927
S.R. Clark........................... 9,091 1.17 31.0000 5/03/98 45,182
11,818 1.53 28.5938 3/29/99 126,453
T.J. Croasdaile...................... 9,091 1.17 31.0000 5/03/98 45,182
4,545 0.63 28.5938 3/29/99 48,632
</TABLE>
- -------------------------
(1) All options are non-qualified and were granted at a price in excess of fair
market value on the date of grant in the case of options with expiration
dates in 1998 and at the average closing sales price of the common stock
during a 30-day period preceding the grant in the case of options with
expiration dates in 1999. Each option is fully exercisable on the first
anniversary of the date of grant and includes the right to pay the exercise
price in cash or with shares owned for six months and the options with
expiration dates in 1998 have the right to receive a "reload option," under
certain circumstances.
Reload options are granted upon the exercise of an original option within
two years of the grant of such option. A "reload" option (a) is an option
to purchase a number of shares of stock equal to the number of shares the
executive returns to the Company as payment of the exercise price for a
previously granted option (the "reload" in effect replaces the number of
shares surrendered to exercise the option, so that the total number of
shares and options held by the executive is maintained at the same level);
(b) has an exercise price equal to the fair market value on the date the
"reload option" is granted; (c) has a term limited to the remaining term of
the option that was exercised; and (d) is exercisable six months after the
date the reload is granted.
Restricted shares representing an additional 10% of the option grant are
awarded in combination with the options (except reload options). The
restrictions lapse over a three-year period following the exercise of the
option provided that the shares acquired upon such exercise are not sold or
transferred and the individual continues to be employed with the Company
during that period.
All options become exercisable and all restrictions on shares lapse upon a
change of control of the Company, which would occur upon completion of the
Offer.
(2) Percentages represent the number of shares subject to the option granted as
compared to the shares subject to all options granted in fiscal year 1994.
I-8
<PAGE> 26
(3) All stock option valuation methods, including the Black-Scholes method,
require a prediction about the future stock price. The following assumptions
were used for purposes of calculating the Grant Date Present Value shown in
the table: (i) all options were assumed to have terms of five years, (ii)
for options which expire in 1998, the assumptions were a volatility of
.2548, a dividend yield of 3.02% and an interest rate of 5.05%; and (iii)
for options which expire in 1999, the assumptions were a volatility of
.3007, a dividend yield of 2.67% and an interest rate of 6.18%. Of course,
the ultimate value of the options will depend upon the Company's performance
and the stock price during the applicable period.
TOTAL OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF OPTIONS AT VALUE OF IN-THE-MONEY
FY-END OPTIONS AT FY-END(2)
SHARES ACQUIRED VALUE REALIZED ---------------------------- ----------------------------
EXECUTIVE ON EXERCISE(1) ON EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A.A. Piergallini..... -- -- 70,107 86,364 $ 436,529 $39,203
F.K. Schomer......... -- -- 52,334 31,818 741,430 17,897
J.A. Rodriguez....... -- -- -- 10,454 -- 255
S.R. Clark........... -- -- 20,966 20,909 287,807 11,448
T.J. Croasdaile...... -- -- 4,466 13,636 6,431 --
</TABLE>
- -------------------------
(1) No options were exercised by the named executive officers during the last
fiscal year.
(2) Value represents the fair market value as of March 31, 1994 of the shares
subject to the option less the exercise price of the option.
LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARES/UNITS AWARDED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARE/UNIT PAYOUTS
PERFORMANCE --------------------------------------------------------------
SHARES AND
UNITS AWARDED(1) PERFORMANCE THRESHOLD(3) TARGET(3) MAXIMUM(3)
------------------ CYCLE PRIOR ------------------ ------------------ ------------------
EXECUTIVE SHARES UNITS(2) TO PAYOUT SHARES UNITS SHARES UNITS SHARES UNITS
- ---------------- ------ -------- ----------- ------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A.A.
Piergallini... 6,263 3,132 3yrs (1996) 626 313 6,263 3,132 12,526 6,264
7,159 3,580 3yrs (1997) 716 358 7,159 3,580 14,318 7,160
F.K. Schomer.... 2,002 1,001 3yrs (1996) 200 100 2,002 1,001 4,004 2,002
2,279 1,139 3yrs (1997) 228 114 2,279 1,139 4,558 2,278
J.A.
Rodriguez..... 1,406 703 3yrs (1996) 141 70 1,406 703 2,812 1,406
1,883 942 3yrs (1997) 188 94 1,883 942 3,766 1,884
S.R. Clark...... 918 459 3yrs (1996) 92 46 918 459 1,836 918
1,377 688 3yrs (1997) 138 69 1,377 688 2,754 1,376
T.J.
Croasdaile.... 906 453 3yrs (1996) 91 45 906 453 1,812 906
1,031 516 3yrs (1997) 103 52 1,031 516 2,062 1,032
</TABLE>
- -------------------------
(1) Pursuant to certain recently adopted tax provisions, the Company began
awarding option and performance shares/units immediately prior to each
fiscal year, rather than shortly after a fiscal year as had been the case.
Accordingly, the table shows two awards for each executive officer, the
first made in May 1993 for cycles ending in 1996 and the second in March
1994 for cycles ending in 1997.
(2) Share units earned will be paid in cash at the end of the performance cycle
based upon the average sales price during the last 20 days in April
following the end of the last fiscal year in the cycle.
(3) The payouts are dependent on two performance goals which are given relative
weights by the management development and compensation committee: (i) the
attainment of specified levels of cumulative net earnings and (ii) the
achievement of certain rankings in the peer Company group
I-9
<PAGE> 27
(comprised of 10 companies in the food industry) based upon return on
capital. The target will be achieved if the targeted cumulative net
earnings is attained and the Company's ranking in the peer Company group is
in the 75th percentile on the basis of return on capital. The threshold
will be earned if approximately 90% of the targeted cumulative net earnings
is attained and the Company ranks at the median of the peer group on the
basis of return on capital. No shares or units will be earned if
performance is below the threshold. The maximum will be earned if
approximately 110% of the targeted cumulative net earnings are attained and
the Company ranks in the 100th percentile of the peer group on the basis of
return on capital. The management development and compensation committee
also retains discretion under the Stock Ownership Program to make such
other long-term incentive awards as it deems appropriate. If a change of
control of the Company (as defined in the Stock Ownership Program) occurs,
all restrictions on Long-Term Incentive Grants (both shares and units) will
lapse.
SUMMARY OF COMPENSATION PLANS
ANNUAL BONUS PLAN
The objectives of the Annual Bonus Plan are to motivate and reward the
accomplishment of corporate and operating unit annual objectives, reinforce a
strong performance orientation with differentiation and variability in
individual awards based on contributions to business results and provide a fully
competitive compensation package which will attract, reward and retain
individuals of the highest quality. As a pay-for-performance plan, year-end cash
bonus awards are paid only upon the achievement of performance objectives
established for the fiscal year, and no bonuses are paid if a minimum threshold
is not met. Participants may have two performance components: (1) corporate
and/or operating unit financial performance (specific measurements are defined
each year and threshold, target and maximum performance levels are established
to reflect the Company's objectives) and (2) key individual objectives, which
represent critical end results for the management position. A weighting is
established based on the relative importance of each performance component.
Appropriate performance objectives are established for each fiscal year in
support of the Company's annual strategic plan. In fiscal year 1994, the
corporate performance objectives consisted of targets on net earnings and return
on equity.
If a change in control of the Company (as defined in the Annual Bonus Plan)
occurs during a fiscal year, a pro-rata lump-sum payment of the target bonus
with respect to such fiscal year will be made as soon as possible thereafter. On
May 21, 1994, the Board of Directors adopted a resolution providing that, upon
the occurrence of certain changes in control (as defined in the plan), any
participant who previously elected to receive part or all of a bonus award in
shares of Common Stock and who has not yet received all the "premium shares" (as
defined in the plan) in connection with such bonus award(s) shall be paid, in
cash, an amount equal to the aggregate amount which would have been received
for, or with respect to, such premium shares if they had participated in the
change in control transaction. The completion of the Offer would constitute such
a change in control of the Company for purposes of the Annual Bonus Plan.
STOCK OWNERSHIP PROGRAM
The purpose of the Stock Ownership Program is to encourage and create
significant ownership of Company stock by key employees, as well as non-employee
members of the Board of Directors, thereby promoting a close alignment of
interests between the Company's management, its Board of Directors and its
shareholders, as well as attracting and retaining outstanding management.
Key Employee Stock Option and Award Plan. The management development and
compensation committee is empowered, within certain limitations, to make grants
of stock options, stock appreciation rights, and performance and restricted
stock awards and stock equivalents.
Stock Options. Stock options align the interests of associates and
shareholders by providing value to the associate when the stock price increases.
During the year, options were granted to 496 associates.
I-10
<PAGE> 28
Performance Shares. Performance shares are pay-for-performance incentive
awards that compensate senior executives for attaining corporate and divisional
performance targets under the Company's long-term incentive program. Certain
corporate performance targets include a specified compounded annual net sales
growth rate and return on capital ratios as compared to those ratios achieved by
the selected food industry group. Appropriate performance targets are defined
prior to each cycle in support of the Company's long-term strategic plan.
Weightings will be established for each participant to reflect the relative
importance of corporate and the operating unit(s) in appropriately reinforcing
the intended management role. In addition, the management development and
compensation committee retains discretion to make such other awards as it deems
appropriate. On May 21, 1994, the committee granted additional discretionary
awards to certain current employees of the Company.
Restricted Stock. The committee awards restricted stock in connection with
the grant of certain options to senior executives. The restricted stock is
intended to encourage retention of shares acquired upon exercise of the option.
The committee has also made grants of restricted stock from time to time to
a limited number of senior executives as an important long-term retention
device. The shares cannot be transferred until they vest, with vesting occurring
over an extended period of time and contingent on the participant's continued
employment. Each participant has all of the rights and privileges of a
shareholder with respect to the shares, other than the ability to transfer the
shares, including the right to receive any cash or stock dividends declared with
respect to the stock and voting rights.
Upon a change of control of the Company (as defined in the applicable
plans), all outstanding stock options become exercisable and the restrictions
lapse on all grants made under the Stock Ownership Program (including any
restricted shares and share units). Under each applicable plan, the completion
of the Offer would constitute a change of control of the Company.
RETIREMENT INVESTMENT PLAN AND STOCK OWNERSHIP PLAN (ESOP)
Under the Retirement Investment Plan, associates of the Company may
contribute up to 15% of pay and contributions of up to 6% are supplemented by
Company contributions to the Company's ESOP at a rate of 60 cents for each
dollar contributed. Eligible executives whose contributions to the Retirement
Investment Plan are reduced because of certain statutory limits are permitted to
make similar contributions to the Company's Supplemental Executive Retirement
Plan ("SERP").
The Company makes contributions to the Stock Ownership Plan, on behalf of
eligible Retirement Investment Plan participants in the plan, in an amount equal
to 60 cents for each dollar contributed by the participant to the Retirement
Investment Plan. Approximately 3,500 associates participate. Additional
supplemental allocations may be made to participants subject to the attainment
of certain corporate performance goals. Allocations are subject to vesting
provisions. During the last fiscal year, the Company contributed $2,975,454 in
common stock to all associates under the ESOP. Eligible executives who
contribute to the SERP also receive Company contributions (in the form of cash
rather than common stock) equal to 60 cents for each dollar contributed.
On May 21, 1994, the Board of Directors approved a resolution providing
that a participant in the Company's Retirement Investment Plan or Stock
Ownership Plan (ESOP) shall become fully vested in such participant's Company
Contribution Account or Investment and Stock Accounts, respectively, upon an
involuntary termination of employment without cause (as defined in the plans)
within the three-year period immediately following any change in control (as
defined in the plans), provided such participant was employed by the Company on
the date of the change in control. The completion of the Offer would constitute
a change in control of the Company for purposes of these plans.
RETIREMENT PLANS
All full-time salaried associates and certain hourly associates participate
in the Company's Retirement Plan funded entirely by the Company which provides
annual pension benefits at age 65. Under the
I-11
<PAGE> 29
employment agreement with Mr. Schomer, the Company will pay Mr. Schomer
additional retirement benefits determined by crediting Mr. Schomer with an
additional five years of service. The annual pension benefit that can be earned
under the Retirement Plan is subject to various limits on covered compensation
and on the amount of the benefit itself. An eligible executive who retires under
the Retirement Plan also receives from the SERP a benefit equal to the greater
of (i) the pension benefit that the executive would have earned under the
Retirement Plan but for the various limits that apply and (ii) a pension benefit
earned under a separate SERP formula. The SERP pension benefit is reduced by the
actual amount of pension benefits provided by the Retirement Plan, by contract
and by other retirement benefits. Under the SERP, participants become fully
vested (even if they are not yet eligible to retire under the Retirement Plan)
if their employment is terminated within two years following a change in control
of the Company.
The following table shows the estimated annual pension benefits payable
upon retirement at age 65 based on 1994 covered compensation tables under the
"final average annual pay" excess formula:
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ------------------------------------------------------------
ANNUAL PAY 15 20 25 30 35
- ------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 150,000 $ 31,562 $ 42,083 $ 52,603 $ 63,124 $ 73,644
$ 300,000 $ 65,312 $ 87,083 $108,853 $130,624 $152,394
$ 400,000 $ 87,812 $117,083 $146,353 $175,624 $204,894
$ 500,000 $110,312 $147,083 $183,853 $220,624 $257,394
$ 600,000 $132,812 $177,083 $221,353 $265,624 $309,894
$ 700,000 $155,312 $207,083 $258,853 $310,624 $362,394
</TABLE>
As of May 1, 1994, credited years of participation under the Retirement
Plan for the executive officers named in the Summary Compensation Table were:
A.A. Piergallini, 4 1/3 years; F.K. Schomer, 10 1/3 years; J.A. Rodriguez, 0
year; S.R. Clark, 10 1/3 years and T.J. Croasdaile, 2 1/2 years. The
compensation covered by the Retirement Plan is the amounts shown in the Summary
of Executive Compensation Table as Salary and Annual Bonus.
Under the SERP, the following are estimated annual benefits payable upon
retirement at age 65 (or upon termination of employment within two years
following a change in control of the Company) based on certain projections as to
increases in compensation: A.A. Piergallini, $886,660; F.K. Schomer, $253,080;
J.A. Rodriguez, $60,412; S.R. Clark, $462,410; T.J. Croasdaile, $148,785.
EMPLOYEE AGREEMENTS
The Company has employment agreements with Messrs. Piergallini and Schomer,
the terms of which end on March 31, 1997. The agreements provide for certain
payments in the event of termination of the agreement by the Company without
cause.
The Company maintains severance agreements with certain key employees
(including the five executive officers named in the cash compensation table)
providing for guaranteed severance payments equal to two times (three times in
the case of four executive officers) the sum of annual compensation (including
amounts paid under the Company's Annual Bonus Plan), a cash payment in lieu of
outstanding options, outplacement assistance and legal fees, and continuation of
life and health insurance benefits for 24 months (36 months in the case of four
executive officers) if there is a change in control of the Company and the
employee is terminated within three years thereafter. A change in control is
deemed to occur upon the acquisition by a person of 25% or more of the Company's
voting stock, a change in the composition of the Company's Board of Directors or
a merger or consolidation of the Company. Severance payments are reduced by the
amount of any severance payment provided under any employment agreement. These
agreements also provide for a cash payment of the amount necessary to compensate
the employees for any costs resulting from the imposition of excise taxes
payable under the Internal Revenue Code.
In November 1993, the Board of Directors authorized certain amendments to
the agreements. The amendments (i) modified the calculation of the bonus
component of the severance payment to use the executives' target bonus award,
rather than the executives' actual award, as determined pursuant to the
I-12
<PAGE> 30
Annual Bonus Plan; (ii) extended the term of the agreements to a period of three
years, rather than two years, following a change in control; and (iii) provided
for Severance Benefits (as defined in the agreements) for four executives to be
based on three times, rather than two times, the sum of annual compensation. In
January 1994, the Board of Directors approved entering into a severance
agreement with Kristina Kiley, Director of Human Resources and Corporate
Secretary of the Company. The completion of the Offer would constitute a change
in control for purposes of the severance agreements.
SEVERANCE BENEFITS PLAN
The Company's Severance Benefits Plan provides for the payment of certain
severance and other benefits upon termination of employment of a full-time,
active employee (who is not covered under any collective bargaining agreement)
by the Company without Cause (as defined in the plan). Eligible employees are
entitled to receive increased severance and other benefits upon termination by
the Company without Cause following a change in control of the Company (as
defined in the plan).
In November 1993, the Board of Directors authorized certain amendments to
the Severance Benefits Plan. The amendments (i) extended the term of protection
to a period of three years, rather than two years, following a change in
control; (ii) established certain minimum Severance Benefits (as defined in the
plan) for eligible employees irrespective of years of service under the
Severance Benefits Plan during the three years following a change in control;
and (iii) provided for a Housing Purchase Guarantee (as defined in the plan) to
Fremont-based salaried associates terminated by the Company without Cause
following a change in control of the Company. In addition, on May 21, 1994, the
Board of Directors authorized the addition of Gerber Life Insurance Company and
Hankscraft Motors to the Severance Benefits Plan as Participating Subsidiaries
(as defined in the plan). The completion of the Offer would constitute a change
in control for purposes of the Severance Benefits Plan.
SUPPLEMENTAL RETIREMENT BENEFIT TRUST AGREEMENT
The purpose of the Company's Supplemental Retirement Benefit Trust
Agreement ("Trust Agreement") is to assure the availability of funds for the
payment of certain amounts that may become due pursuant to the Company's
Supplemental Executive Retirement Plan, Elective Deferral Plan for Senior
Management and certain designated employee and severance agreements
(collectively, the "Plans").
The Trust provides that, within 30 days of the occurrence of a potential
change in control (as defined in the Trust Agreement), the Company is required
to fund the trust in an amount in cash or marketable securities having a fair
market value equal to the present value of the amount sufficient to meet the
Company's obligations under the Plans assuming (i) the occurrence of a change in
control and (ii) the immediate termination of the employment of the participants
in the Plans in such a manner as to produce the maximum benefits under such
Plans. The execution of the Merger Agreement constituted a potential change in
control for purposes of the Trust Agreement.
COMPLIANCE WITH THE SECURITIES EXCHANGE ACT
The Company's executive officers and directors are required under the
Securities Exchange Act of 1934 to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Copies of those reports must also be furnished to the Company.
Based solely on a review of the copies of reports furnished to the Company
and written representations that no other reports were required, the Company
believes that during the preceding year all required filings applicable to
executive officers and directors had been made with the exception of the annual
filing on Form 5 to be made by Mr. Cipollaro, a former executive officer of the
Company, whose employment by the Company ceased in September 1993.
I-13
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ------------ -------------------------------------------------------------------- ------------
<S> <C> <C>
Exhibit 1.1 Agreement and Plan of Merger, dated as of May 21, 1994, by and among
Sandoz Ltd., SL Sub Corp. and Gerber Products Company...............
Exhibit 1.2 Amendment No. 1, dated as of May 27, 1994, to the Agreement and Plan
of Merger, dated as of May 21, 1994.................................
Exhibit 2 Form of Amendment to Severance Agreements between Gerber Products
Company and certain key executives..................................
Exhibit 3 Gerber Products Company Severance Benefits Plan, as amended May 21,
1994................................................................
Exhibit 4 Confidentiality Agreement, dated April 29, 1994, between Gerber
Products Company and Sandoz Corporation.............................
Exhibit 5 Press Release issued jointly by Gerber Products Company and Sandoz
Ltd. dated May 23, 1994.............................................
Exhibit 6 Letter to Shareholders of Gerber Products Company dated May 27,
1994*...............................................................
Exhibit 7.1 Opinion of Goldman, Sachs & Co. dated May 21, 1994*.................
Exhibit 7.2 Opinion of Wasserstein Perella & Co., Inc. dated May 21, 1994*......
</TABLE>
- -------------------------
* Included in copies mailed to shareholders.
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SANDOZ LTD.
SL SUB CORP.
and
GERBER PRODUCTS COMPANY
May 21, 1994
<PAGE> 2
TABLE OF CONTENTS
PAGE
----
RECITALS
ARTICLE I
THE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Offer . . . . . . . . . . . . . . . . . 2
1.2 Company Action . . . . . . . . . . . . . . . 3
ARTICLE II
THE MERGER; EFFECTIVE TIME; CLOSING . . . . . . . . . . . . . . . . 5
2.1 The Merger . . . . . . . . . . . . . . . . . 5
2.2 Effective Time . . . . . . . . . . . . . . . 5
2.3 Closing . . . . . . . . . . . . . . . . . . 6
ARTICLE III
SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Articles of Incorporation . . . . . . . . . 6
3.2 By-Laws . . . . . . . . . . . . . . . . . . 6
3.3 Directors . . . . . . . . . . . . . . . . . 6
3.4 Officers . . . . . . . . . . . . . . . . . . 6
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER . . . . . . . . . . . . . . . . . 7
4.1 Share Consideration for the
Merger; Conversion or Cancella-
tion of Shares in the Merger . . . . . . . . 7
4.2 Shareholders' Meeting . . . . . . . . . . . 8
4.3 Payment for Shares in the Merger . . . . . . 9
4.4 Transfer of Shares After the
Effective Time . . . . . . . . . . . . . . . 11
4.5 Stock Options . . . . . . . . . . . . . . . 11
i
<PAGE> 3
PAGE
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . 11
5.1 Corporate Organization and
Qualification . . . . . . . . . . . . . . . 11
5.2 Capitalization . . . . . . . . . . . . . . 12
5.3 Authority Relative to This
Agreement . . . . . . . . . . . . . . . . . 13
5.4 Consents and Approvals; No
Violation . . . . . . . . . . . . . . . . . 13
5.5 Compliance . . . . . . . . . . . . . . . . 15
5.6 SEC Reports; Financial
Statements . . . . . . . . . . . . . . . . 15
5.7 Absence of Certain Changes or
Events . . . . . . . . . . . . . . . . . . 17
5.8 Litigation . . . . . . . . . . . . . . . . 18
5.9 Proxy Statement; Offer
Documents . . . . . . . . . . . . . . . . . 18
5.10 Taxes . . . . . . . . . . . . . . . . . . . 19
5.11 Employee Benefit Plans; Labor
Matters . . . . . . . . . . . . . . . . . . 19
5.12 Environmental Laws and
Regulations . . . . . . . . . . . . . . . . 21
5.13 Tangible Property . . . . . . . . . . . . . 21
5.14 Intangible Property . . . . . . . . . . . . 22
5.15 Certain Agreements . . . . . . . . . . . . 22
5.16 Brokers and Finders . . . . . . . . . . . . 22
5.17 Opinions of Financial Advisors . . . . . . 23
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND
NEWCO . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Corporate Organization and
Qualification . . . . . . . . . . . . . . . 23
6.2 Authority Relative to This
Agreement . . . . . . . . . . . . . . . . . 23
6.3 Consents and Approvals; No
Violation . . . . . . . . . . . . . . . . . 24
6.4 Annual Report; Financial
Statements . . . . . . . . . . . . . . . . 25
6.5 Proxy Statement; Schedule
14-D-9 . . . . . . . . . . . . . . . . . . 25
6.6 Financing . . . . . . . . . . . . . . . . . 25
6.7 Interim Operations of Newco . . . . . . . . 25
ii
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PAGE
----
6.8 Brokers and Finders . . . . . . . . . . . . 25
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . 26
7.1 Conduct of Business of the
Company . . . . . . . . . . . . . . . . . . 26
7.2 Acquisition Proposals . . . . . . . . . . . 29
7.3 All Reasonable Efforts . . . . . . . . . . . 30
7.4 Access to Information . . . . . . . . . . . 31
7.5 Publicity . . . . . . . . . . . . . . . . . 32
7.6 Indemnification of Directors and
Officers . . . . . . . . . . . . . . . . . . 32
7.7 Filings under the NYIC . . . . . . . . . . . 33
7.8 Employees . . . . . . . . . . . . . . . . . 33
7.9 Company Board Representation;
Section 14(f) . . . . . . . . . . . . . . . 35
7.10 Notification of Certain
Matters . . . . . . . . . . . . . . . . . . 36
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . 37
8.1 Condition to Each Party's Obliga-
tions to Effect the Merger . . . . . . . . . 37
ARTICLE IX
TERMINATION; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . 38
9.1 Termination by Mutual Consent . . . . . . . 38
9.2 Termination by Either Parent
or the Company . . . . . . . . . . . . . . . 38
9.3 Termination by Parent . . . . . . . . . . . 38
9.4 Termination by the Company . . . . . . . . . 39
9.5 Effect of Termination . . . . . . . . . . . 40
9.6 Extension; Waiver . . . . . . . . . . . . . 40
ARTICLE X
MISCELLANEOUS AND GENERAL . . . . . . . . . . . . . . . . . . . . . 40
10.1 Payment of Expenses
and other Payments . . . . . . . . . . . . 40
10.2 Survival of Representations
and Warranties; Survival of
Confidentiality . . . . . . . . . . . . . 41
iii
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PAGE
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10.3 Modification or Amendment . . . . . . . . 41
10.4 Waiver of Conditions . . . . . . . . . . . 42
10.5 Counterparts . . . . . . . . . . . . . . . 42
10.6 Governing Law . . . . . . . . . . . . . . 42
10.7 Notices . . . . . . . . . . . . . . . . . 42
10.8 Entire Agreement; Assignment . . . . . . . 43
10.9 Parties in Interest . . . . . . . . . . . 43
10.10 Certain Definitions . . . . . . . . . . . 44
10.11 Obligation of Parent . . . . . . . . . . . 44
10.12 Validity . . . . . . . . . . . . . . . . . 45
10.13 Captions . . . . . . . . . . . . . . . . . 45
10.14 Specific Performance . . . . . . . . . . . 45
ANNEX A
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of May 21,
1994, by and among Sandoz Ltd., a corporation organized under the laws of
Switzerland ("Parent"), SL Sub Corp., a Delaware corporation and an indirect
wholly owned subsidiary of Parent ("Newco"), and Gerber Products Company, a
Michigan corporation (the "Company").
RECITALS
WHEREAS, the Board of Directors of the Company, including all of the
disinterested directors of the Company, has, subject to the conditions of this
Agreement, determined that each of the Offer and the Merger (each as defined
below) is in the best interests of the shareholders of the Company and approved
and adopted this Agreement and the transactions contemplated hereby; and
WHEREAS, in furtherance thereof, it is proposed that Newco shall make a
tender offer (the "Offer") to acquire all of the outstanding shares of common
stock, par value $2.50 per share, of the Company (the "Shares"), together with
the associated Rights (as hereafter defined), at a price of $53.00 per Share
(such amount, or any greater amount per Share paid pursuant to the Offer, being
hereinafter referred to as the "Per Share Amount"), net to the seller in cash,
in accordance with the terms and subject to the conditions of this Agreement;
and
WHEREAS, Parent, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, Parent,
Newco and the Company hereby agree as follows:
<PAGE> 7
ARTICLE I
THE OFFER
1.1 The Offer. (a) Provided that this Agreement shall not have been
terminated in accordance with Article IX and none of the events or conditions
set forth in Annex A shall have occurred and be existing, Newco shall commence
the Offer not later than the fifth business day from and including the date of
initial public announcement of this Agreement. Newco shall accept for payment
Shares which have been validly tendered and not withdrawn pursuant to the Offer
at the earliest practicable time following expiration of the Offer that all
conditions to the Offer shall have been satisfied or waived by Newco. The
obligation of Newco to commence the Offer shall be subject only to the
conditions set forth in Annex A hereto, and the obligation of Newco to accept
for payment, purchase and pay for Shares tendered pursuant to the Offer shall be
subject only to such conditions and to the further condition that a number of
Shares representing not less than a majority of the Shares outstanding on a
fully diluted basis shall have been validly tendered and not withdrawn prior to
the expiration of the Offer (the "Minimum Condition"). Newco expressly reserves
the right to waive any such condition, to increase the price per Share payable
in the Offer and to make any other changes in the terms and conditions of the
Offer; provided, however, that unless previously approved by the Company in
writing, no change in the Offer may be made (i) which decreases the price per
Share payable in the Offer, (ii) which changes the form of consideration to be
paid in the Offer, (iii) which reduces the maximum number of Shares to be
purchased in the Offer or the Minimum Condition, (iv) which imposes conditions
to the Offer in addition to those set forth in Annex A hereto or which modifies
the conditions set forth in Annex A or (v) which amends any other term of the
Offer in a manner adverse to the holders of the Shares. Notwithstanding the
foregoing, Newco shall, and Parent agrees to cause Newco to, extend the Offer at
any time up to November 30, 1994 for one or more periods of not more than 10
Business Days, if at the initial expiration date of the Offer, or any extension
thereof, the condition to the Offer requiring approval of the New York
Department (as defined herein) for Parent's indirect acquisition of GLIC (as
defined herein) is not satisfied or waived. Subject to the terms
2
<PAGE> 8
and conditions of the Offer and this Agreement, Newco shall, and Parent shall
cause Newco to, pay for all Shares validly tendered and not withdrawn pursuant
to the Offer that Newco becomes obligated to purchase pursuant to the Offer as
soon as practicable after the expiration of the Offer.
(b) As soon as practicable on the date of commencement of the Offer,
Newco shall file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer (together
with any supplements or amendments thereto, the "Offer Documents"). The Offer
Documents will comply in all material respects with the provisions of applicable
federal securities laws. Parent, Newco and the Company each agree to correct
promptly any information provided by them for use in the Offer Documents if and
to the extent that it shall have become false or misleading in any material
respect and Newco further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given an
opportunity to review and comment upon the Offer Documents and any amendments
thereto prior to the filing thereof with the SEC.
1.2 Company Action. (a) The Company hereby approves of and consents
to the Offer and represents that the Board of Directors, including all of the
disinterested directors, at a meeting duly called and held, has, subject to the
terms and conditions set forth herein, unanimously (i) approved this Agreement
and the transactions contemplated hereby, including the Offer and the Merger,
and that such approval constitutes approval of the Offer, this Agreement and the
Merger for purposes of (A) Section 775 through Section 784 of the Business
Corporation Act of the State of Michigan (the "BCA"), (B) Article VIII of the
Company's Restated Articles of Incorporation and (C) the Rights Agreement (as
herein defined in Section 4.1(a)), and (ii) resolved to recommend that the
shareholders of the Company accept the Offer, tender their Shares thereunder to
Newco and approve and adopt this Agreement and the Merger; provided, that such
recommendation may be withdrawn, modified or amended if in the opinion of the
Board of Directors, after consultation
3
<PAGE> 9
with independent legal counsel, such recommendation would be inconsistent with
its fiduciary duties to the Company's shareholders under applicable law. The
Company consents to the inclusion of such recommendation and approval in the
Offer Documents.
(b) The Company hereby agrees to file with the SEC as soon as
practicable on the date of commencement of the Offer a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "Schedule 14D-9") containing the
recommendation described in Section 1.2(a). The Schedule 14D-9 will comply in
all material respects with the provisions of applicable federal securities
laws. The Company, Parent and Newco each agree promptly to correct any
information provided by them for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to the holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. Notwithstanding anything to the contrary in this Agreement,
the Board of Directors may withdraw, modify or amend its recommendation if in
the opinion of the Board of Directors, after consultation with independent
legal counsel, such recommendation would be inconsistent with its fiduciary
duties to the Company's shareholders under applicable law. Any such
withdrawal, modification or amendment shall not constitute a breach of this
Agreement.
(c) In connection with the Offer, the Company shall promptly furnish
Parent and Newco with mailing labels, security position listings and any
available listing or computer files containing the names and addresses of the
record holders of the Shares as of a recent date and shall furnish Newco with
such additional information and assistance (including, without limitation,
updated lists of shareholders, mailing labels and lists of securities positions)
as Newco or its agents may reasonably request in communicating the Offer to the
record and beneficial holders of Shares. Subject to the requirements of
applicable law, and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Offer or the
Merger, Parent, Newco and their affiliates, associ-
4
<PAGE> 10
ates, agents and advisors shall use the information contained in any such
labels, listings and files only in connection with the Offer and the Merger,
and, if this Agreement shall be terminated, will deliver to the Company all
copies of such information then in their possession.
ARTICLE II
THE MERGER; EFFECTIVE TIME; CLOSING
2.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 2.2), the Company and
Newco shall consummate a merger (the "Merger") pursuant to which (a) Newco shall
be merged with and into the Company and the separate corporate existence of
Newco shall thereupon cease, (b) the Company shall be the successor or surviving
corporation in the Merger and shall continue to be governed by the laws of the
State of Michigan, and (c) the separate corporate existence of the Company with
all its rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The corporation surviving the Merger is sometimes
hereinafter referred to as the "Surviving Corporation." The Merger shall have
the effects set forth in the BCA and the Delaware General Corporation Law (the
"DGCL").
2.2 Effective Time. Parent, Newco and the Company will cause an
appropriate Certificate of Merger (the "Certificate of Merger") to be executed
and filed on the date of the Closing (as defined in Section 2.3) (or on such
other date as Parent and the Company may agree) with the Michigan Department of
Commerce, Corporation and Securities Bureau, Corporation Division as provided in
the BCA and the Secretary of State of the State of Delaware as provided in the
DGCL. The Merger shall become effective on the date on which the Certificate of
Merger has been duly filed with the Michigan Department of Commerce,
Corporations and Securities Bureau, Corporation Division and the Secretary of
State of the State of Delaware or such time as is agreed upon by the parties and
specified in the Certificate of Merger, and such time is hereinafter referred to
as the "Effective Time."
5
<PAGE> 11
2.3 Closing. The closing of the Merger (the "Closing") shall take
place (a) at the offices of Skadden, Arps, Slate, Meagher & Flom, 333 West
Wacker Drive, Chicago, Illinois, at 10:00 a.m. on the first business day
following the date on which the last of the conditions set forth in Article VIII
hereof shall be fulfilled or waived in accordance with this Agreement or (b) at
such other place, time and date as Parent and the Company may agree.
ARTICLE III
SURVIVING CORPORATION
3.1 Articles of Incorporation. The Restated Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Restated Articles of
Incorporation.
3.2 By-Laws. The By-Laws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-Laws of the Surviving Corporation
until thereafter amended as provided by law, the Restated Articles of
Incorporation of the Surviving Corporation and such By-Laws.
3.3 Directors. The directors of Newco at the Effective Time shall,
from and after the Effective Time, be the initial directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws.
3.4 Officers. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the initial officers of the
Surviving Corporation until their successors have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws.
6
<PAGE> 12
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF
SHARES IN THE MERGER
4.1 Share Consideration for the Merger; Conversion or Cancellation of
Shares in the Merger. At the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any Shares or capital stock of
Newco:
(a) Each Share, together with the associated right to purchase
shares of Series A Junior Participating Preferred Stock (the "Rights"),
pursuant to the Rights Agreement, dated as of July 25, 1990, by and between the
Company and Harris Trust and Savings Bank, as Rights Agent (the "Rights
Agreement"), issued and outstanding immediately prior to the Effective Time
(other than Shares and Rights to be cancelled and retired pursuant to Section
4.1(b)) shall, by virtue of the Merger and without any action on the part of
Newco, the Company or the holder thereof, be cancelled and extinguished and
converted into the right to receive, pursuant to Section 4.3, the Per Share
Amount in cash (the "Merger Consideration"), payable to the holder thereof,
without interest thereon, less any required withholding of taxes, upon the
surrender of the certificate formerly representing such Share.
(b) At the Effective Time, each Share and Right, if any, issued and
outstanding and owned by any of Parent, Newco or any direct or indirect wholly
owned subsidiary of Parent, or any of the Company's direct or indirect wholly
owned subsidiaries or authorized but unissued or treasury shares held by the
Company immediately prior to the Effective Time shall cease to be outstanding,
be cancelled and retired without payment of any consideration therefor and
cease to exist.
(c) At the Effective Time, each share of common stock of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
7
<PAGE> 13
4.2 Shareholders' Meeting. (a) The Company, acting through the
Board of Directors, shall, if required by applicable law in order to consummate
the Merger:
(i) duly call, give notice of, convene and hold a special
meeting of its shareholders (the "Shareholders Meeting"), to be held as
soon as practicable after Newco shall have purchased Shares pursuant to
the Offer, for the purpose of considering and taking action upon this
Agreement and the transactions contemplated hereby;
(ii) prepare and file the Proxy Statement (as defined in
Section 5.9 hereof) with the SEC as promptly as practicable after the
purchase of Shares by Newco pursuant to the Offer;
(iii) include in the Proxy Statement the unanimous
recommendation of the Board of Directors that shareholders of the
Company vote in favor of the approval and adoption of this Agreement
and the transactions contemplated hereby unless, in the opinion of
the Board of Directors after consultation with independent legal
counsel, the inclusion of such recommendation would be inconsistent
with its fiduciary duties to the Company's shareholders under
applicable law; and
(iv) use all reasonable efforts (A) to obtain and furnish the
information required to be included by it in the Proxy Statement and,
after consultation with Parent and Newco, respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof and cause the Proxy Statement to be mailed
to its shareholders at the earliest practicable time following the
expiration or termination of the Offer and (B) to obtain the necessary
approvals by its shareholders of this Agreement and the transactions
contemplated hereby unless, in the opinion of the Board of Directors
after consultation with independent legal counsel, obtaining such
approvals would be inconsistent with its
8
<PAGE> 14
fiduciary duties to the Company's shareholders under applicable law.
At such meeting, Parent, Newco and their affiliates will vote all Shares
owned by them in favor of approval and adoption of this Agreement and the
transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that Newco shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Newco, subject to Article VIII, to take all necessary
and appropriate action to cause the Merger to become effective, in accordance
with Section 711 of the BCA and Section 253 of the DGCL, as soon as reasonably
practicable after such acquisition, without a meeting of the shareholders of the
Company.
4.3 Payment for Shares in the Merger. The manner of making payment
for Shares in the Merger shall be as follows:
(a) At the Effective Time, Newco shall make available to a bank or
trust company located in the United States with assets in excess of $500,000,000
selected by Parent after consultation with the Company (the "Paying Agent"), for
the benefit of the holders of Shares, the funds necessary to make the payments
contemplated by Section 4.1 (the "Exchange Fund"). The Paying Agent shall,
pursuant to irrevocable instructions, deliver the Merger Consideration out of
the Exchange Fund. The Exchange Fund, other than any interest thereon (which
shall be retained by Parent), shall not be used for any other purpose.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each holder of record of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares, other than holders
of certificates which represent Shares cancelled and retired pursuant to Section
4.1(b) (the "Certificates"), (i) a form of 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 (ii) instructions for use in effecting the surrender of the
Certificates for payment therefor.
9
<PAGE> 15
Upon surrender of Certificates for cancellation to the Paying Agent, together
with such letter of transmittal duly completed and executed and any other
documents required by such instructions, the holder of such Certificates shall
be entitled to receive for each of the Shares formerly represented by such
Certificates the Merger Consideration, without any interest thereon, less any
required withholding of taxes, and the Certificates so surrendered shall
forthwith be cancelled. If payment is to be made to a person other than the
person in whose name a Certificate so surrendered is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such payment shall pay to the
Paying Agent any transfer or other taxes required by reason of the payment to a
person other than the registered holder of the Certificate surrendered, or
shall establish to the satisfaction of the Paying Agent that such tax has been
paid or is not applicable. Until surrendered in accordance with the provisions
of this Section 4.3(b), each Certificate (other than Certificates representing
Shares held in the Company's treasury or by Newco, or by any subsidiary of the
Company or Newco) shall represent for all purposes only the right to receive
for each Share represented thereby the Merger Consideration.
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Certificates (including, without limitation, all
interest and other income received by the Paying Agent in respect of all funds
made available to it), and thereafter such holders shall be entitled to look
only to the Surviving Corporation (subject to abandoned property, escheat and
other similar laws) as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Certificate for any Merger
Consideration delivered in respect of such Certificate or the Shares formerly
represented thereby to a public official pursuant to any abandoned property,
escheat or other similar law.
10
<PAGE> 16
4.4 Transfer of Shares After the Effective Time. No transfers of
Shares shall be made on the stock transfer books of the Company after the close
of business on the day prior to the date of the Effective Time.
4.5 Stock Options. After the Effective Time, each option ("Option")
which has been granted under the Company's Stock Ownership Program or any
predecessor plans thereto (together, the "Option Plans") and is outstanding at
the Effective Time, whether or not then exercisable, will be exchanged for, and
the holder of each such Option will be entitled to receive upon surrender of the
Option for cancellation, cash equal to the product of the following:
(a) the difference between the Per Share Amount and the exercise
price of each such Option; times
(b) the number of Shares covered by such Option.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Newco that:
5.1 Corporate Organization and Qualification. Each of the Company
and its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of incorporation and
is qualified and in good standing as a foreign corporation in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by it
require such qualification, except where failure to so qualify or be in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect (as hereinafter defined in Section 10.10). Each of the Company and its
subsidiaries has all requisite power and authority (corporate or otherwise) to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to have such power and authority would
not have a Material Adverse Effect. The Company has heretofore made available
to Parent complete and correct copies of its Restated
11
<PAGE> 17
Articles of Incorporation and By-Laws. Such Restated Articles of Incorporation
and By-Laws are in full force and effect and the Company is not in violation of
any provision of its Restated Articles of Incorporation or By-Laws. Set forth
on Schedule 5.1 is a true and complete list of all direct and indirect
subsidiaries of the Company, setting forth, for each subsidiary, its name, its
jurisdiction of organization and the percentage ownership of its authorized
capital stock or other equity interests by the Company and its subsidiaries.
5.2 Capitalization. The authorized capital stock of the Company
consists of (i) 200,000,000 Shares, of which 69,519,935 Shares are issued and
outstanding (without taking into account any changes as a result of the issuance
of shares pursuant to the exercise of outstanding options or the issuance of up
to 15,000 shares pursuant to the Company's Stock Ownership Plan or Annual Bonus
Plan) and (ii) 5,000,000 shares of preferred stock, par value $1.00 per share,
none of which is issued or outstanding. All of the outstanding shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and were not issued in violation of any
preemptive rights. As of the date hereof, options to acquire 1,705,537 Shares
were outstanding. Except as set forth on Schedule 5.1 or 5.2, (i) as of the
date hereof all outstanding shares of capital stock of the Company's
subsidiaries have been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights and (ii)
except as would not have a Material Adverse Effect, are owned by the Company or
a direct or indirect wholly owned subsidiary of the Company, free and clear of
all liens, charges, encumbrances, claims, rights of first refusal, limitations
on voting rights and options of any nature. Except as set forth above and on
Schedule 5.2, there are not as of the date hereof any outstanding or authorized
options, warrants, calls, rights (including preemptive rights), commitments or
any other agreements of any character which the Company or any of its
Significant Subsidiaries or, except as would not have a Material Adverse Effect,
any of its other subsidiaries is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock
12
<PAGE> 18
of the Company or any of its subsidiaries, or to provide funds to, or make a
investment (in the form of a loan, capital contribution or otherwise) in, any
of the Company's subsidiaries or any other person.
5.3 Authority Relative to This Agreement. (a) The Company has the
requisite power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of the Company and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the shareholders of the Company, including Newco, in accordance
with Section 703a of the BCA and the Company's Restated Articles of
Incorporation). This Agreement has been duly and validly executed and delivered
by the Company and, assuming this Agreement constitutes the valid and binding
agreement of Parent and Newco, constitutes the valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms,
except that the enforcement hereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement, including the Offer, the acquisition of Shares pursuant to the Offer
and the Merger, including but not limited to, all actions required to render the
provisions of Section 775 through Section 784 of the BCA restricting business
combinations with "interested shareholders" and Article VIII of the Company's
Restated Articles of Incorporation inapplicable to such transactions. The
Company has taken all action necessary to opt out of Sections 790 through 799 of
the BCA.
5.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor
13
<PAGE> 19
the consummation by the Company of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of the respective
Articles of Incorporation or By-Laws of the Company or any of its Significant
Subsidiaries; (b) except as set forth on Schedule 5.4(b), require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) pursuant to the applicable requirements
of the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), and the Exchange Act, (iii) the
filing of the Certificate of Merger pursuant to the BCA and the DGCL and
appropriate documents with the relevant authorities of other states in which
the Company or any of its subsidiaries is authorized to do business, (iv) in
connection with any state or local tax which is attributable to the beneficial
ownership of the Company's or its subsidiaries' real property, if any
(collectively, the "Gains Taxes"), (v) as may be required by any applicable
state securities or "blue sky" laws or state takeover laws, (vi) the approval
of the Insurance Department of the State of New York (the "New York
Department") and such filings and consents which may be required under the
insurance laws of any state in which Gerber Life Insurance Company ("GLIC")
does business, (vii) such filings, consents, approvals, orders, registrations
and declarations as may be required under the laws of any foreign country in
which the Company or any of its subsidiaries conducts any business or owns any
assets or (viii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
in the aggregate have a Material Adverse Effect; (c) except as set forth on
Schedule 5.4(c), result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration or lien or other charge or
encumbrance) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, lease, permit, franchise, license, agreement or
other instrument or obligation to which the Company or any of its subsidiaries
or any of their assets may be bound or affected, except for such violations,
breaches and defaults (or rights of termination, cancellation or acceleration
or lien or
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other charge or encumbrance) as to which requisite waivers or consents have
been obtained or which, individually or in the aggregate, would not have a
Material Adverse Effect; or (d) assuming the consents, approvals,
authorizations or permits and filings or notifications referred to in this
Section 5.4 are duly and timely obtained or made and, with respect to the
Merger, the approval of this Agreement by the Company's shareholders has been
obtained, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or to any of
their respective assets, except for violations which would not individually or
in the aggregate have a Material Adverse Effect.
5.5 Compliance. Neither the Company nor any of its subsidiaries is
in conflict with, or in default or violation of, (i) any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company or any
of its subsidiaries or by which any property or asset of the Company or any of
its subsidiaries is bound or affected, or (ii) any note, bond, mortgage,
indenture, lease, permit, franchise, license, agreement or other instrument or
obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any property or asset of the
Company or any of its subsidiaries is bound or affected, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
5.6 SEC Reports; Financial Statements.
(a) The Company has filed all forms, reports and documents required
to be filed by it with the SEC since March 31, 1993 pursuant to the federal
securities laws and the SEC rules and regulations thereunder, all of which, as
of their respective dates, complied in all material respects with all applicable
requirements of the Securities Act and the Exchange Act (collectively, the
"Company SEC Reports"). None of the Company SEC Reports, including, without
limitation, any financial statements or schedules included therein, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a 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. None of the
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<PAGE> 21
Company's subsidiaries is required to register any of its outstanding
securities under the Securities Act or the Exchange Act.
(b) The consolidated statements of financial position and the related
consolidated statements of operations, shareholders' equity and cash flows
(including the related notes thereto) of the Company for the fiscal year ended
March 31, 1994 set forth on Schedule 5.6(b) hereto (including the related notes
thereto, the "1994 Financial Statements") comply in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods
(except as otherwise noted therein), and present fairly the consolidated
financial position of the Company and its consolidated subsidiaries as of their
respective dates, and the consolidated results of their operations and their
cash flows for the periods presented therein.
(c) Except as set forth in the 1994 Financial Statements, neither
the Company nor any of its subsidiaries has any liability or obligation of any
nature (whether accrued, absolute, contingent or otherwise) which would be
required to be reflected on a balance sheet, or in the notes thereto, prepared
in accordance with generally accepted accounting principles, except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice since March 31, 1994 which would not, individually
or in the aggregate, have a Material Adverse Effect. Set forth on Schedule
5.6(c) is a description, as of the date hereof, of all interest rate and
currency exchange agreements and all uncovered commodities trading positions in
excess of normal supply requirements.
(d) The Company has delivered to Parent true and complete copies of
(i) the annual statement of GLIC filed with the New York Department for the year
ended December 31, 1993, together with all related notes, exhibits and schedules
thereto (the "GLIC Annual Statement"), and (ii) the audited statutory basis
balance sheet of GLIC for the year ended December 31, 1993, and the related
audited statutory basis statements of operations, changes in capital stock and
surplus and cash
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<PAGE> 22
flows, together with all related notes, accompanied by the report thereon of
Ernst & Young, GLIC's independent auditors (the "GLIC Audited Statements").
Except as would not result in a Material Adverse Effect, the GLIC Annual
Statement and the GLIC Audited Statements were prepared in accordance with
statutory accounting principles applied on a basis consistent with prior
periods (except as otherwise noted therein) and present fairly the statutory
assets, liabilities, capital and surplus, results of operations and cash flows
of GLIC as of the date thereof or for the period covered thereby. The GLIC
Annual Statement complied on its date of filing with the New York Insurance
Code (the "NYIC") and the rules and regulations of the New York Department
promulgated thereunder, except for any failure to comply which would not result
in a Material Adverse Effect.
(e) All reserves reflected in the GLIC Annual Statement (i) were
determined in accordance with commonly accepted actuarial standards consistently
applied, (ii) met in all material respects the requirements of the NYIC and the
rules and regulations of the New York Department promulgated thereunder and the
insurance laws and regulations of each other jurisdiction in which GLIC is
licensed to write life insurance and (iii) reflected the related reinsurance,
coinsurance and other similar agreements to which GLIC is a party. Except as
would not have a Material Adverse Effect, adequate provision for all such
reserve liabilities has been made (under commonly accepted actuarial standards
consistently applied and through reinsurance, coinsurance or other similar
agreements) to cover the total amount of all reasonably anticipated matured and
unmatured benefits, claims and other liabilities of GLIC under all insurance
policies under which GLIC has any liability (including, without limitation, any
liability arising out of or as a result of any reinsurance, coinsurance or other
similar agreement) on the date of the GLIC Annual Statement based on commonly
accepted actuarial assumptions as to future contingencies which are reasonable
and appropriate under the circumstances.
5.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports, as reflected on the 1994 Financial Statements, as set forth
on Schedule 5.7 or contemplated by this Agreement, since March 31, 1993, the
business of the Company has been car-
17
<PAGE> 23
ried on only in the ordinary and usual course and in a manner consistent with
past practice, and there has not been (i) any change in the business,
operations, properties, condition (financial or otherwise) or assets or
liabilities (including, without limitation, contingent liabilities) of the
Company or any of its subsidiaries having, individually or in the aggregate, a
Material Adverse Effect, (ii) any damage, destruction or loss (whether or not
covered by insurance) with respect to any property or asset of the Company or
any of its subsidiaries and having, individually or in the aggregate, a
Material Adverse Effect, (iii) any change by the Company in its accounting
methods, principles or practices, (iv) any revaluation by the Company of any
assets (including, without limitation, any writing down of the value of
inventory or writing off of notes or accounts receivable), other than in the
ordinary course of business consistent with past practice, (v) any declaration,
setting aside or payment of any dividend or distribution in respect of any
capital stock of the Company (other than the declaration and payment of regular
quarterly dividends of $.215 per Share in accordance with past dividend policy)
or any redemption, purchase or other acquisition of any of its securities or
(vi) any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Company or any of its subsidiaries, except in the ordinary course of
business consistent with past practice.
5.8 Litigation. The Company SEC Reports or the 1994 Financial
Statements accurately disclose in all material respects as of the date of this
Agreement all actions, claims, suits, proceedings and governmental
investigations pending or, to the knowledge of the Company, threatened, which
(i) are required to be disclosed therein by the Securities Act and the Exchange
Act or (ii) individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect.
5.9 Proxy Statement; Offer Documents. Any proxy, information
statement or similar materials dis-
18
<PAGE> 24
tributed to the Company's shareholders in connection with the Merger, including
any amendments or supplements thereto (the "Proxy Statement"), will comply in
all material respects with applicable federal securities laws, and will not, at
the date the Proxy Statement (or any amendment or supplement thereto) is first
mailed to shareholders of the Company, at the time of the Shareholders Meeting
or at the Effective Time, 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 or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies for the
Shareholders Meeting which shall have become false or misleading, except that
no representation is made by the Company with respect to information supplied
by Newco or Parent for inclusion in the Proxy Statement. None of the
information supplied by the Company in writing for inclusion in the Offer
Documents or contained in the Schedule 14D-9 will, at the respective times that
the Offer Documents and the Schedule 14D-9 or any amendments or supplements
thereto are filed with the SEC and are first published or sent or given to
holders of Shares, 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. The Schedule 14D-9 will comply in all material
respects with applicable federal securities laws.
5.10 Taxes. Since April 1, 1990, the Company and its subsidiaries
have filed when due all Federal, state, local and foreign income tax returns
that any of them is required to file ("Tax Returns") other than those Tax
Returns the failure of which to file would not have a Material Adverse Effect
and have paid all taxes shown on those returns. The Company has delivered or
made available to Parent true and complete copies of its Federal income tax
returns for each of the three years ended March 31, 1991 through 1993.
5.11 Employee Benefit Plans; Labor Matters. (a) With respect to
the employee benefit plans, programs and arrangements maintained or contributed
to by the Company or any of its United States subsidiaries (the
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<PAGE> 25
"Company Plans"), except as set forth on Schedule 5.11, the Company SEC Reports
or the 1994 Financial Statements and except as would not individually or in the
aggregate have a Material Adverse Effect: (i) each Company Plan intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), has received a favorable determination letter from the Internal
Revenue Service (the "IRS") that it is so qualified and nothing has occurred
since the date of such letter that could reasonably be expected to affect the
qualified status of such Company Plan; (ii) each Company Plan has been operated
in all material respects in accordance with its terms and the requirements of
applicable law; (iii) neither the Company nor any of its United States
subsidiaries has incurred any direct or indirect liability under, arising out
of or by operation of Title IV of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), in connection with the termination of, or
withdrawal from, any Company Plan or other retirement plan or arrangement, and
no fact or event exists that could reasonably be expected to give rise to any
liability. Except as set forth on Schedule 5.11 or the Company SEC Reports, or
the 1994 Financial Statements the aggregate accumulated benefit obligations of
each Company Plan subject to Title IV of ERISA (as of the date of the most
recent actuarial valuation prepared for such Company Plan) do not exceed the
fair market value of the assets of such Company Plan (as of the date of such
valuation).
(b) With respect to each Company Plan subject to non-United States
law (a "Foreign Plan") and any government-sponsored employee benefit
arrangement to which the Company or any of its subsidiaries must contribute
under applicable non-United States law (a "Foreign Governmental Scheme"),
except as would not individually or in the aggregate have a Material Adverse
Effect, (i) any employer or employee contributions required by law or by the
terms of any Foreign Plan or Foreign Government Scheme have been made, or, if
applicable, accrued in accordance with normal accounting practices, (ii) the
fair market value of the assets of each funded Foreign Plan, or the liability
of each insurer for any Foreign Plan funded through insurance or the book
reserve established for any Foreign Plan, together with any accrued
contributions, is sufficient to procure or provide for the accrued benefit
obligations with respect to all
20
<PAGE> 26
current and former participants in such plan according to the actuarial
assumptions and valuations most recently used to determine employer
contributions to such Foreign Plan and no transaction contemplated by this
Agreement shall cause such assets, book reserves or insurance obligations to be
less than such benefit obligations, and (iii) each Foreign Plan required to be
registered has been registered and has been maintained in good standing with
applicable regulatory authorities.
(c) The Company has made available to Parent all collective bargaining
or other labor union contracts to which the Company or any of its Significant
Subsidiaries is a party applicable to persons employed by the Company or its
Significant Subsidiaries as of the date of this Agreement. As of the date of
this Agreement, there is no pending or threatened in writing labor dispute,
strike or work stoppage against the Company or any of its subsidiaries which may
interfere with the respective business activities of the Company or its
subsidiaries, except where such dispute, strike or work stoppage would not have
a Material Adverse Effect.
5.12 Environmental Laws and Regulations. Except as publicly disclosed
by the Company, (i) the Company and each of its subsidiaries is in compliance
with all applicable federal, state, local and foreign laws and regulations
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) (collectively, "Environmental Laws"), except for
non-compliance that individually or in the aggregate would not have a Material
Adverse Effect and (ii) neither the Company nor any of its subsidiaries has
received written notice of, or, to the knowledge of the Company, is the subject
of, any action, cause of action, claim, investigation, demand or notice by any
person or entity alleging liability under or non-compliance with any
Environmental Law (an "Environmental Claim") which is reasonably likely to have
a Material Adverse Effect.
5.13 Tangible Property. The Company and its subsidiaries have
sufficient title to all their properties and assets to conduct their respective
businesses as currently conducted or as contemplated to be conducted,
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<PAGE> 27
with only such exceptions as individually or in the aggregate would not have a
Material Adverse Effect.
5.14 Intangible Property. Except as set forth on Schedule 5.14, (i)
the Company or a subsidiary of the Company is the owner of all items of
intangible property, including, without limitation, trademarks and service marks
(whether or not registered), trade names, brand names, patents and copyrights,
which are material to the business of the Company as currently conducted, taken
as a whole, and (ii) the Company or a subsidiary of the Company is the owner of,
or a licensee under a valid license for, all other items of intangible property
which are used in the business of the Company and its subsidiaries as currently
conducted except where the failure to own or have a valid license to such other
intangible property would not have a Material Adverse Effect. Except as
disclosed on Schedule 5.14, there are no claims pending or, to the Company's
knowledge, threatened, that the Company or any subsidiary is in violation of any
such intangible property rights of any third party which is reasonably likely to
have a Material Adverse Effect.
5.15 Certain Agreements. Except as set forth on Schedule 5.15,
neither the Company nor any of its subsidiaries is a party to, or bound by, any
contract or agreement that materially limits the ability of the Company directly
or through any of its subsidiaries to compete in any line of business or with
any person or in any geographic area or during any period of time.
5.16 Brokers and Finders. Except for the fees and expenses payable
to Goldman, Sachs & Co. and Wasserstein Perella & Co., Inc., which fees and
expenses are reflected in their agreements with the Company, true and complete
copies of which have been furnished to Parent, the Company has not employed any
investment banker, broker, finder, consultant or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
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<PAGE> 28
5.17 Opinions of Financial Advisors. The Company has received the
opinions of Goldman, Sachs & Co. and Wasserstein Perella & Co., Inc., to the
effect that the consideration to be received by the shareholders of the Company
pursuant to the Offer and the Merger is fair to such shareholders from a
financial point of view, a copy of which opinions will be delivered to Parent
upon receipt.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT
AND NEWCO
Each of Parent and Newco represent and warrant jointly and severally to
the Company that:
6.1 Corporate Organization and Qualification. Each of Parent and
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation.
6.2 Authority Relative to This Agreement. Each of Parent and Newco
has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement and the consummation by Parent and Newco of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of Parent and Newco and by the shareholders of Newco, and no
other corporate proceedings on the part of Parent and Newco are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of
Parent and Newco and, assuming this Agreement constitutes the valid and binding
agreement of the Company, constitutes the valid and binding agreement of each of
Parent and Newco, enforceable against each of them in accordance with its terms,
except that the enforcement hereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
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<PAGE> 29
6.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Parent or Newco nor the consummation by Parent and
Newco of the transactions contemplated hereby will (a) conflict with or result
in any breach of any provision of the Articles of Incorporation or the By-Laws,
respectively, of Parent or Newco; (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (i) in connection with the applicable
requirements of the HSR Act, (ii) pursuant to the applicable requirements of the
Exchange Act, (iii) the filing of the Certificate of Merger pursuant to the BCA
and DGCL and appropriate documents with the relevant authorities of other states
in which Parent is authorized to do business, (iv) as may be required by any
applicable state securities or "blue sky" laws or state takeover laws, (v) the
approval of the New York Department in connection with the indirect acquisition
by Parent of GLIC and such filings and consents which may be required under the
insurance laws of any state in which GLIC does business, and (vi) such filings,
consents, approvals, orders, registrations, declarations and filings as may be
required under the laws of any foreign country in which Parent or any of its
subsidiaries conducts any business or owns any assets; (c) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration or lien or other charge or encumbrance) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, permit,
franchise, license, agreement or other instrument or obligation to which Parent
or Newco may be bound, except for such violations, breaches and defaults (or
rights of termination, cancellation or acceleration or lien or other charge or
encumbrance) as to which requisite waivers or consents have been obtained or
which, in the aggregate, would not prevent or materially delay the consummation
of the transactions contemplated by this Agreement; or (d) assuming the
consents, approvals, authorizations or permits and filings or notifications
referred to in this Section 6.3 are duly and timely obtained or made, violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Parent or Newco or to any of their respective assets, except for violations
which would not prevent or materi-
24
<PAGE> 30
ally delay the consummation of the transactions contemplated by this Agreement.
6.4 Annual Report; Financial Statements. Parent has delivered to the
Company true and complete copies of Parent's 1993 Annual Report. The
consolidated balance sheet and the related consolidated statement of income
(including the related notes thereto) of Parent included in Parent's 1993 Annual
Report have been prepared in accordance with the accounting standards described
therein.
6.5 Proxy Statement; Schedule 14D-9. None of the information supplied
by Parent or Newco in writing for inclusion in the Proxy Statement or the
Schedule 14D-9 will, at the respective times that the Proxy Statement and the
Schedule 14D-9 or any amendments or supplements thereto are filed with the SEC
and are first published or sent or given to holders of Shares, and in the case
of the Proxy Statement, at the time that it or any amendment or supplement
thereto is mailed to the Company's shareholders, at the time of the
Shareholders' Meeting or at the Effective Time, 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 are made, not misleading.
6.6 Financing. Either Parent or Newco has sufficient funds available
to purchase all of the Shares outstanding on a fully diluted basis and to pay
all fees and expenses related to the transactions contemplated by this
Agreement.
6.7 Interim Operations of Newco. Newco was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
6.8 Brokers and Finders. Except for the fees and expenses payable to
Morgan Stanley & Co. Incorporated, which fees and expenses are reflected in its
agreement with Parent, a true and correct copy of which has been furnished to
the Company, Parent has not employed any investment banker, broker, finder,
consultant or
25
<PAGE> 31
intermediary in connection with the transactions contemplated by this Agreement
which would be entitled to any investment banking, brokerage, finder's or
similar fee or commission in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1 Conduct of Business of the Company.
(a) Except as set forth on Schedule 7.1(a), the Company agrees that
during the period from the date of this Agreement to the Effective Time (unless
Parent shall otherwise agree in writing and except as otherwise contemplated by
this Agreement), the Company will, and will cause each of its subsidiaries to,
conduct its operations according to its ordinary and usual course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Without limiting the generality of the
foregoing, and except as otherwise permitted in this Agreement prior to the
Effective Time or as set forth in Schedule 7.1, neither the Company nor any of
its subsidiaries will, without the prior written consent of Parent:
(i) except for a maximum of 1,705,537 Shares (together with
associated Rights) to be issued pursuant to the terms of the Company's
Stock Ownership Program (or its predecessor plans), the Gerber Company
Retirement Investment Plan or the Company's Employee Stock Ownership
Plan, issue, sell, grant, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any additional shares of capital stock of any
26
<PAGE> 32
class (including the Shares), or any securities or rights
convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of capital stock, or any rights, warrants,
options (including the grant of any options under the current Stock
Plans), calls, commitments or any other agreements of any character to
purchase or acquire any shares of capital stock or any securities or
rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock, or any other ownership
interest (including, without limitation, any phantom interest), or (B)
any other securities in respect of, in lieu of, or in substitution for,
Shares outstanding on the date hereof;
(ii) except as required pursuant to the terms of the
Company's stock-based employee benefit plans, redeem, purchase or
otherwise acquire, or propose to redeem, purchase or otherwise acquire,
any of its outstanding Shares;
(iii) split, combine, subdivide or reclassify any Shares or
declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution, whether in cash, stock,
property or otherwise, in respect of any Shares or otherwise make any
payments to shareholders in their capacity as such, other than the
declaration and payment of regular quarterly cash dividends not to
exceed $.215 per Share in accordance with past dividend policy and
except for dividends by a wholly owned subsidiary of the Company;
(iv) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company or any of its subsidiaries not
constituting an inactive subsidiary (other than the Merger);
(v) adopt any amendments to its Restated Articles of
Incorporation or By-Laws
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<PAGE> 33
or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or
ownership of any subsidiary not constituting an inactive subsidiary of
the Company;
(vi) make any material acquisition, by means of merger,
consolidation or otherwise, or material disposition, of assets or
securities;
(vii) incur any indebtedness for borrowed money or guarantee
any such indebtedness or make any loans, advances or capital
contributions to, or investments in, any other person, other than to
the Company or any wholly owned subsidiary of the Company, except for
the incurrence of (A) short term indebtedness in the ordinary course of
business consistent with past practice or (B) up to $10,000,000 of
indebtedness related to the construction of the Company's new plant in
Costa Rica;
(viii) grant any increases in the compensation of any of its
directors, officers or key employees, except in the ordinary course of
business and in accordance with past practice or as may be approved on
a case by case basis by a designated representative of the Parent;
(ix) pay or agree to pay any pension, retirement allowance,
severance or other employee benefit not required or contemplated by any
of the existing benefit, severance, termination, pension or employment
plans, agreements or arrangements as in effect on the date hereof to
any such director or officer, whether past or present;
(x) enter into any new or amend any existing employment or
severance or termination agreement with any such director or officer;
(xi) except in the ordinary course of business consistent
with past prac-
28
<PAGE> 34
tice or as may be required to comply with applicable law, become
obligated under any new pension plan, welfare plan, multiemployer plan,
employee benefit plan, severance plan, benefit arrangement, or similar
plan or arrangement, which was not in existence on the date hereof, or
amend any such plan or arrangement in existence on the date hereof if
such amendment would have the effect of materially enhancing any
benefits thereunder;
(xii) make any capital expenditures or commitments for any
capital expenditures, other than capital expenditures or commitments
for any capital expenditures in amounts consistent with the Company's
fiscal 1995 budget previously disclosed to Parent;
(xiii) make any material changes in its customary methods of
marketing, distributing or licensing;
(xiv) take, or agree to commit to take, any action that would
make any representation or warranty of the Company contained herein
inaccurate in any respect at, or as of any time prior to, the Effective
Time; or
(xv) authorize, recommend, propose or announce an intention
to do any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
7.2 Acquisition Proposals. The Company and its subsidiaries and
their respective officers, directors and employees will immediately cease any
existing discussions or negotiations with any parties conducted heretofore with
respect to any Acquisition Proposal (as hereinafter defined in Section 10.10).
The Company may, directly or indirectly, furnish information and access, in each
case only in response to requests which were not solicited by the Company after
the date of this Agreement, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may participate in
discussions and negotiate with such entity or group concerning any merger, sale
of
29
<PAGE> 35
assets, sale of shares of capital stock or similar transaction involving the
Company or any subsidiary or division of the Company, if such entity or group
has submitted a bona fide written proposal to the Board of Directors relating
to any such transaction which the Board reasonably determines represents a
superior transaction to the Offer and the Merger, and if, in the opinion of the
Board of Directors after consultation with independent legal counsel, the
failure to provide such information or access or to engage in such discussions
or negotiations would be inconsistent with their fiduciary duties to the
Company's shareholders under applicable law. The Company shall notify Parent
immediately if any such request or proposal, or any inquiry or contact with any
person with respect thereto, is made and shall keep Parent apprised of all
developments which could reasonably be expected to culminate in the Board
withdrawing, modifying or amending its recommendation of the Offer, the Merger
and the other transactions contemplated by this Agreement. The Company agrees
not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party unless,
in the opinion of the Board of Directors after consultation with independent
legal counsel, the failure to provide such release or waiver would be
inconsistent with their fiduciary duties to the Company's shareholders under
applicable law.
7.3 All Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including using all reasonable
efforts to obtain all necessary or appropriate waivers, consents and approvals,
and to effect all necessary registrations, filings and submissions (including,
but not limited to, (i) filings under the HSR Act and any other submissions
requested by the Federal Trade Commission or Department of Justice, (ii) filings
and consents required under the NYIC and any filings or consents which may be
required under the insurance laws of any state in which GLIC does business and
(iii) such filings, consents, approvals, orders registrations and declarations
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<PAGE> 36
as may be required under the laws of any foreign country in which the Company
or any of its subsidiaries conducts any business or owns any assets) and to
lift any injunction or other legal bar to the Merger (and, in such case, to
proceed with the Merger as expeditiously as possible), subject, however, to the
requisite votes of the shareholders of any or all of the Company, Newco and
Parent.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to use all reasonable efforts or take any action pursuant to this Section 7.3
if, in the opinion of the Board of Directors after consultation with independent
legal counsel, such actions would be inconsistent with their fiduciary duties to
the Company's shareholders under applicable law.
7.4 Access to Information.
(a) Upon reasonable notice, the Company shall (and shall cause each
of its subsidiaries to) afford to officers, directors, employees, counsel,
accountants and other authorized representatives of Parent ("Representatives"),
in order to evaluate the transactions contemplated by this Agreement, reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to its properties, officers, directors, employees, counsel,
accountants and other representatives, books and records and, during such
period, shall (and shall cause each of its subsidiaries to) furnish promptly to
such Representatives all information concerning its business, properties and
personnel and all financial operating and other data as may reasonably be
requested. Parent agrees that it will not, and will cause its Representatives
not to, use any information obtained pursuant to this Section 7.4 for any
purpose unrelated to the consummation of the transactions contemplated by this
Agreement.
(b) The Confidentiality Agreement previously entered into between the
Company and Parent (the "Confidentiality Agreement") shall apply with respect to
information furnished by the Company, its subsidiaries and the Company's
officers, directors, employees, counsel, accountants and other authorized
representatives hereunder.
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(c) No investigation pursuant to this Section 7.4 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
7.5 Publicity. The parties will consult with each other and will
mutually agree upon any press releases or public announcements pertaining to the
Offer or the Merger and shall not issue any such press releases or make any such
public announcements prior to such consultation and agreement, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange, in which case the party proposing to
issue such press release or make such public announcement shall use all
reasonable efforts to consult in good faith with the other party before issuing
any such press releases or making any such public announcements.
7.6 Indemnification of Directors and Officers.
(a) The Articles of Incorporation and By-Laws of the Surviving
Corporation shall contain provisions with respect to indemnification no less
favorable to any party indemnified thereunder than those set forth in the
Restated Articles of Incorporation and By-Laws of the Company on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any time
prior to the Effective Time were directors or officers of the Company in respect
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by law; provided, that in the event any claim or
claims are asserted or made within such six year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims.
(b) Parent shall cause to be maintained in effect for the Indemnified
Parties (as defined below) for not less than three years the current policies of
directors' and officers' liability insurance maintained by the Company and the
Company's subsidiaries with respect to matters occurring at or prior to the
Effective
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<PAGE> 38
Time (including, without limitation, the transactions contemplated by this
Agreement); provided, that Parent may substitute therefor policies of
substantially the same coverage containing terms and conditions which are no
less advantageous, in any material respect, to the Company's present or former
directors, officers, employees, agents or other individuals otherwise covered
by such insurance policies prior to the Effective Time (the "Indemnified
Parties"); provided, however, that in no event shall the Surviving Corporation
be required to expend pursuant to this Section 7.6(b) more than an amount per
year equal to 200% of current annual premiums paid by the Company for such
insurance (which premiums the Company represents and warrants to be $251,800 in
the aggregate). In the event that, but for the proviso to the immediately
preceding sentence, the Surviving Corporation would be required to expend more
than 200% of current annual premiums, pursuant to this Section 7.6(b), the
Surviving Corporation shall nonetheless purchase the maximum amount of such
insurance obtainable by payment of annual premiums equal to 200% of current
annual premiums.
(c) In the event the Company or the Surviving Corporation or any of
their respective 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
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, or at Parent's option, Parent, shall
assume the obligations set forth in this Section 7.6.
7.7 Filings under the NYIC. Parent shall promptly file a Form A with
the New York Department pursuant to the NYIC and shall use all reasonable
efforts to obtain approval for the Merger from the New York Department and the
Company shall use all reasonable efforts to cooperate with Parent in preparing
such filing and obtaining such approval.
7.8 Employees.
(a) For a period of at least two years after the Effective Time,
Parent shall cause the Surviving Corporation to continue to maintain the
Company's
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existing compensation, severance, welfare and pension benefit plans, programs
and arrangements (other than any stock based plans, programs and arrangements
for which alternative incentive compensation plans will be put into effect
pursuant to paragraph (b) below) for the benefit of current and former
employees of the Company and its subsidiaries (subject to such modification as
may be required by applicable law or to maintain the tax exempt status of any
such plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code), provided that (i) nothing herein shall prohibit Parent
from replacing any such existing plan or plans, program(s) or arrangement(s)
with a plan or plans, program(s) or arrangement(s) which provide such employees
with benefits which are not less favorable in the aggregate than the benefits
that would have been provided under the Company's existing plan(s), program(s)
or arrangement(s) to the extent such replacement is permitted under the terms
of the applicable plan, program or arrangement and (ii) nothing herein shall
obligate Parent to provide such employees with any stock based compensation
(including, without limitation, stock options or stock appreciation rights)
after the Effective Time.
(b) In the light of Parent's desire that the Surviving Corporation
provide appropriate employee incentives in the future, Parent agrees to develop
during the one-year period following the Effective Time a new performance based
incentive compensation plan for the benefit of employees of the Surviving
Corporation and its subsidiaries as an appropriate substitute for the Company's
current stock based plans, programs and arrangements.
(c) All service credited to each employee by the Company through the
Effective Time shall be recognized by Parent for all purposes, including for
purposes of eligibility, vesting and benefit accruals under any employee benefit
plan provided by Parent for the benefit of the employees; provided, however,
that, to the extent necessary to avoid duplication of benefits, amounts payable
under employee benefit plans provided by Parent may be reduced by amounts
payable under similar Company Plans with respect to the same periods of service.
(d) Individual Agreements. Parent hereby agrees to cause the
Surviving Corporation to honor (with-
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out modification) and assume the employment agreements, executive termination
agreements and individual benefit arrangements listed on Schedule 7.8(d), all
as in effect at the date hereof.
7.9 Company Board Representation; Section 14(f).
(a) Promptly upon the purchase by Newco of Shares pursuant to the
Offer, and from time to time thereafter, and subject to the last sentence of
Section 7.9(c), Newco shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of Directors of
the Company as shall give Newco representation on the Board of Directors of
the Company equal to the product of the total number of directors on the Board
of Directors of the Company (giving effect to the directors elected pursuant to
this sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Newco or any affiliate of Newco following such purchase
bears to the total number of Shares then outstanding, and the Company shall,
at such time, promptly use all reasonable efforts to cause Newco's designees to
be elected as directors of the Company, including increasing the size of the
Board of Directors of the Company (subject to the provisions of Article VI of
the Company's Restated Articles of Incorporation) or securing (to the extent
possible) the resignations of incumbent directors or both. At such times, the
Company shall use all reasonable efforts to cause persons designated by Newco to
constitute the same percentage as persons designated by Newco shall constitute
of the Board of Directors of the Company of (i) each committee of the Board of
Directors of the Company, (ii) each board of directors of each domestic
subsidiary and (iii) each committee of each such board, in each case only to the
extent permitted by applicable law or the rules of any stock exchange on which
the Shares are listed. Notwithstanding the foregoing, until the earlier of (i)
the time Newco acquires a majority of the then outstanding Shares on a fully
diluted basis and (ii) the Effective Time, the Company shall use all reasonable
efforts to ensure that all the members of the Board of Directors of the Company
and each committee of the Board of Directors of the Company and such boards and
committees of the domestic subsidiaries as of the date hereof who are not
employees of the Company shall remain members of the Board of
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<PAGE> 41
Directors of the Company and of such boards and committees.
(b) The Company's obligation to appoint designees to the Board of
Directors of the Company shall be subject to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. The Company shall promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under this Section 7.9 and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill such obligations. Parent
or Newco shall supply to the Company and be solely responsible for any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1.
(c) Following the election of designees of Newco pursuant to this
Section 7.9, prior to the Effective Time, any amendment of this Agreement or the
Articles of Incorporation or By-laws of the Company, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Newco or waiver
of any of the Company's rights hereunder shall require the concurrence of a
majority of the directors of the Company then in office who are directors as of
the date hereof or persons designated by such directors and neither were
designated by Newco nor are employees of the Company ("Continuing Directors").
Prior to the Effective Time, the Company and Newco shall use all reasonable
efforts to ensure that the Company's Board of Directors at all times includes at
least three Continuing Directors.
7.10 Notification of Certain Matters. The Company shall give prompt
written notice to Parent, and Parent shall give prompt written notice to the
Company, of (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which would cause any representation or warranty contained
in this Agreement to be untrue or inaccurate and (ii) any failure by the
Company, Parent or Newco, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursu-
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<PAGE> 42
ant to this Section 7.10 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Each Party's Obligations to Effect the Merger. The
respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) Shareholder Approval. If required for the consummation of the
Merger, this Agreement and the transactions contemplated hereby shall have been
duly approved by the shareholders of the Company in accordance with applicable
law and the Restated Articles of Incorporation of the Company; provided that
Parent and Newco shall vote all of their Shares in favor of the Merger.
(b) Injunction. There shall not be in effect any statute, rule,
regulation, executive order, decree, ruling or injunction or other order of a
court or governmental or regulatory agency of competent jurisdiction directing
that the transactions contemplated herein not be consummated or which has the
effect of making the acquisition of shares by Newco illegal; provided, however,
that prior to invoking this condition each party shall use all reasonable
efforts to have any such decree, ruling, injunction or order vacated.
(c) Governmental Filings and Consents. All governmental consents,
orders and approvals legally required for the consummation of the Merger and the
transactions contemplated hereby shall have been obtained and be in effect at
the Effective Time (including, but not limited to, the approval of the New York
Department and any approvals which may be required under the insurance laws of
any state in which GLIC does business and such approvals and consents as may be
required under the laws of any foreign country in which the Company or any of
its subsidiaries conducts any business or owns any assets), except where the
failure to obtain any such consent would not reasonably be expected to have a
Material
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Adverse Effect on Parent (assuming the Merger had taken place), and the waiting
periods under the HSR Act shall have expired or been terminated.
(d) The Offer. Newco shall have purchased Shares pursuant to the
Offer.
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
9.1 Termination by Mutual Consent. This Agreement may be terminated
and the Offer and the Merger may be abandoned at any time prior to the Effective
Time, by the mutual written consent of Parent and the Company.
9.2 Termination by Either Parent or the Company. This Agreement may
be terminated and the Offer and the Merger may be abandoned by Parent or the
Company if (i) any court of competent jurisdiction in the United States or some
other governmental body or regulatory authority shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable or (ii) Newco shall not have purchased
Shares pursuant to the Offer on or prior to November 30, 1994; provided, that
the right to terminate this Agreement pursuant to this Section 9.2 shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement results in such failure to purchase.
9.3 Termination by Parent. This Agreement may be terminated by
Parent prior to the purchase of Shares pursuant to the Offer by Newco, if (i)
the Company shall have failed to perform in any material respect any of its
material obligations under this Agreement to be performed at or prior to such
date of termination, which failure to perform is incapable of being cured by
November 30, 1994; (ii) any representation or warranty of the Company contained
in this Agreement shall not be true and correct (except for changes permitted by
this Agreement and those representations which address matters only as of a
particular date shall remain true and correct as of such date), except, in any
case, such failures to be true and
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<PAGE> 44
correct which are not reasonably likely to have Material Adverse Effect on the
Company; provided, that such failure to be true and correct is incapable of
being cured prior to November 30, 1994; or (iii) an Acquisition Proposal for
the Company exists and the Board of Directors of the Company withdraws or
materially modifies or changes (including by amendment of the Schedule 14D-9)
its recommendation of the Offer, this Agreement or the Merger in a manner
adverse to Parent or Newco; provided, that a statement by the Board of
Directors of the Company that it is neutral or unable to take a position with
respect to the Offer, this Agreement or the Merger shall not be deemed to
constitute a withdrawal, modification or change of its recommendation of the
Offer, this Agreement or the Merger; or (iv) the Board of Directors of the
Company recommends to the shareholders of the Company an Acquisition Proposal
for the Company.
9.4 Termination by the Company. This Agreement may be terminated by
the Company and the Offer and the Merger may be abandoned at any time prior to
the Effective Time if (i) Newco shall have (x) failed to commence the Offer
within five days following the date of the initial public announcement of the
Offer or (y) terminated the Offer prior to the purchase of the Shares pursuant
to the Offer; (ii) Newco or Parent shall have failed to perform in any material
respect any of their material obligations under this Agreement to be performed
at or prior to such date of termination, which failure to perform is incapable
of being cured by November 30, 1994; (iii) any representation or warranty of
Newco or Parent contained in this Agreement shall not be true and correct
(except for changes permitted by this Agreement and those representations which
address matters only as of a particular date shall remain true and correct as of
such date), except, in any case, such failures to be true and correct which are
not reasonably likely to adversely effect Parent's or Newco's ability to
complete the Offer or the Merger; provided, that such failure to be true and
correct is incapable of being cured prior to November 30, 1994; or (iv) the
Board of Directors of the Company withdraws or materially modifies or changes
its recommendation of the Offer, this Agreement or the Merger in order to
approve the execution by the Company of a definitive agreement relating to an
Acquisition Proposal for the Company and the Board of Directors of the Company
after consultation with independent legal counsel determines
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<PAGE> 45
that the failure to take such action would be inconsistent with its fiduciary
duties to the Company's shareholders under applicable law.
9.5 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Article IX, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, officers or shareholders, other
than the provisions of this Section 9.5 and the provisions of Sections 10.1 and
10.2, the last sentence of Section 7.4(a) and Section 7.4(b). Nothing contained
in this Section 9.5 shall relieve any party from liability for any breach of
this Agreement.
9.6 Extension; Waiver. At any time prior the Effective Time, each of
Parent, Newco and the Company may (i) extend the time for the performance of any
of the obligations or other acts of the other party, (ii) waive any inaccuracies
in the representations and warranties of the other party contained herein or in
any document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of either party hereto to any such extension
or waiver shall be valid only if set forth in any instrument in writing signed
on behalf of such party. The failure of either party hereto to assert any of
its rights hereunder shall not constitute a waiver of such rights.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1 Payment of Expenses and Other Payments.
(a) Whether or not the Offer and the Merger shall be consummated,
each party hereto shall pay its own expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby, provided that the Surviving Corporation
shall pay, with funds of the Company and not with funds provided by Parent,
any and all
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property or transfer taxes imposed on the Surviving Corporation or any Gains
Taxes.
(b) The Company agrees that if this Agreement is terminated
pursuant to (i) Section 9.2(ii) and at the time of such termination (x) the
Minimum Condition had not been satisfied and (y) an Acquisition Proposal
existed; (ii) Section 9.3(iii); (iii) Section 9.3(iv); or (iv) Section 9.4(iv),
the Company shall pay to Parent an amount equal to $70 million. Such payment
shall be made as promptly as practicable but in no event later than the third
business day following termination of this Agreement and shall be made by wire
transfer of immediately available funds to an account designated by Parent.
(c) The Company agrees that if this Agreement is terminated pursuant
to Section 9.3(i) or Section 9.3(ii), the Company shall reimburse Parent and
Newco for up to $15 million, in the aggregate, of their actual out of pocket
expenses incurred in connection with the Agreement and the Offer (including,
without limitation, legal fees, financial advisor fees, financing commitment
fees and printer fees). Such payments shall be made as promptly as practicable
but in no event later than the third business day following the Company's
receipt of documentation evidencing such expenses, by wire transfer of
immediately available funds to an account designated by Parent.
10.2 Survival of Representations and Warranties; Survival of
Confidentiality. The representations and warranties made herein shall not
survive beyond the earlier of (i) termination of this Agreement or (ii) the
Effective Time. This Section 10.2 shall not limit any covenant or agreement of
the parties hereto which by its terms contemplates performance after the
Effective Time. The Confidentiality Agreement shall survive any termination of
this Agreement, and the provisions of such Confidentiality Agreement shall apply
to all information and material delivered by any party hereunder.
10.3 Modification or Amendment. Subject to the applicable provisions
of the BCA and the DGCL, at any time prior to the Effective Time, the parties
hereto may modify or amend this Agreement, by written agreement executed and
delivered by duly authorized officers of the
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respective parties; provided, however, that after approval of this Agreement by
the shareholders of the Company, no amendment shall be made which changes the
consideration payable in the Merger or adversely affects the rights of the
Company's shareholders hereunder without the approval of such shareholders.
10.4 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.5 Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts shall
together constitute the same agreement.
10.6 Governing Law. Except to the extent the BCA and the DGCL are
mandatorily applicable to the rights of the stockholders of the Company and
Newco, respectively, this Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts
executed in and to be performed within that state.
10.7 Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by registered or certified mail, postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:
(a) If to the Company, to
Gerber Products Company
445 State Street
Fremont, Michigan 49413
(616) 928-2000
(616) 928-2963 (telecopier)
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with a copy to:
Charles W. Mulaney, Esq.
Skadden, Arps, Slate, Meagher
& Flom
333 West Wacker Drive
Chicago, Illinois 60606
(312) 407-0700 (telephone)
(312) 407-0411 (telecopier)
(b) If to Parent or Newco, to
Sandoz Corporation
608 Fifth Avenue
New York, New York 10020
(212) 307-1122 (telephone)
(212) 246-0185 (telecopier)
with a copy to:
David W. Heleniak, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
(212) 848-4000 (telephone)
(212) 848-7179 (telecopier)
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
10.8 Entire Agreement; Assignment. This Agreement and the
Confidentiality Agreement (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof, and (b) shall not be assigned
by operation of law or otherwise, except that Parent and Newco may assign all or
any of their rights and obligations hereunder to any direct or indirect wholly
owned subsidiary of Parent provided that no such assignment shall relieve the
assigning party of its obligations hereunder.
10.9 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and
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assigns. Nothing in this Agreement, express or implied, other than the right
to receive the consideration payable in the Merger pursuant to Article IV
hereof is intended to or shall confer upon any other person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement; provided, however, that the provisions of Section 7.6 shall inure to
the benefit of and be enforceable by the Indemnified Parties.
10.10 Certain Definitions. As used herein:
(a) "Significant Subsidiary" shall have the meaning ascribed to it
under Rule 1-02 of Regulation S-X of the SEC.
(b) "subsidiary" shall mean, when used with reference to any entity,
any corporation a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity and Gerber de Venezuela.
(c) "Material Adverse Effect" shall mean any adverse change in the
financial condition, business or results of operations of the Company or any of
its subsidiaries or Parent or any of its subsidiaries, as the case may be, which
is material to the Company and its subsidiaries, taken as a whole, or Parent and
its subsidiaries, taken as a whole, as the case may be, other than any change or
effect arising out of general economic conditions unrelated to any business in
which the Company or Parent is engaged.
(d) "Acquisition Proposal" means any proposal or offer for a merger,
asset acquisition or other business combination involving a person or any
proposal or offer to acquire a significant equity interest in, or a significant
portion of the assets of, such person other than the transactions contemplated
by this Agreement.
10.11 Obligation of Parent. Whenever this Agreement requires Newco
to take any action, such requirement shall be deemed to include an undertaking
on the part of Parent to cause Newco to take such action and a guarantee of the
performance thereof.
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10.12 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
10.13 Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
10.14 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with its terms and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
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<PAGE> 51
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
Attest: GERBER PRODUCTS COMPANY
________________________ By: /s/ Alfred Piergallini
Name: Alfred Piergallini
Title: Chairman, CEO and
President
Attest: SANDOZ LTD.
________________________ By: /s/ Dr. Marc Moret
Name: Dr. Marc Moret
Title: Chairman of the
Board
By: /s/ Dr. Rolf Schweizer
Name: Dr. Rolf Schweizer
Title: Chief Executive
Officer
Attest: SL SUB CORP.
________________________ By: /s/ Heinz Imhof
Name: Heinz Imhof
Title: President
<PAGE> 52
ANNEX A
THE CAPITALIZED TERMS USED HEREIN HAVE THE
MEANINGS SET FORTH IN THE AGREEMENT AND
PLAN OF MERGER TO WHICH THIS
ANNEX A IS ATTACHED
Notwithstanding any other provisions of the Offer, Newco shall not be
required to accept for payment or pay for any Shares, and may terminate or amend
the Offer and may postpone the acceptance for payment of any Shares tendered if
(i) immediately prior to the expiration of the Offer the Minimum Condition shall
not have been satisfied, (ii) any applicable waiting period under the HSR Act
shall not have expired or been terminated prior to the expiration of the Offer
or (iii) subject to Newco's obligations set forth in Sections 1.1 and 7.7 of the
Agreement, the indirect acquisition of GLIC by the Parent shall not have been
approved by the New York Department or (iv) at any time on or after the date of
this Agreement and prior to the acceptance for payment of Shares, any of the
following conditions exist:
(a) Any government entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
which is in effect and which (i) materially restricts, prevents or prohibits
consummation of the Offer, the Merger or any transaction contemplated by the
Agreement, (ii) prohibits or limits materially the ownership or operation by the
Company, Parent or any of their subsidiaries of all or any material portion of
the business or assets of the Company and its subsidiaries taken as a whole, or
compels the Company, Parent or any of their subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the Company
and its subsidiaries taken as a whole, (iii) imposes limitations on the ability
of Parent, Newco or any other subsidiary of Parent to exercise effectively full
rights of ownership of any Shares, including, without limitation, the right to
vote any Shares acquired by Newco pursuant to the Offer or otherwise on all
matters properly presented to the Company's shareholders, including, without
limitation, the approval and adoption of this Agreement and the
A-1
<PAGE> 53
transactions contemplated hereby or (iv) requires divestiture by Parent, Newco
or any other affiliate of Parent of any Shares; provided that Parent shall have
used all reasonable efforts to cause any such decree, judgment, injunction or
other order to be vacated or lifted;
(b) The representations and warranties of the Company (without giving
effect to any materiality qualifications) contained in the Agreement shall not
be true and correct as of the date of consummation of the Offer as though made
on and as of such date except (i) for changes specifically permitted by the
Agreement, (ii) that those representations and warranties which address matters
only as of a particular date shall remain true and correct as of such date) and
(iii) in any case where such failure to be true and correct which would not, in
the aggregate, have a Material Adverse Effect;
(c) The Company shall not have performed or complied in all material
respects with its material obligations under the Agreement to be performed or
complied with by it;
(d) The Merger Agreement shall have been terminated in accordance
with its terms;
(e) Prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board of Directors of the
Company shall have withdrawn or materially modified or changed (including by
amendment of the Schedule 14D-9) in a manner adverse to Newco its recommendation
of the Offer, this Agreement or the Merger; provided, that a statement by the
Board of Directors of the Company that it is neutral or unable to take a
position with respect to the Offer shall not be deemed to constitute a
withdrawal, modification or change of its recommendation of the Offer, this
Agreement or the Merger; or
(f) (i) it shall have been publicly disclosed or Newco shall have
otherwise learned that any person or "group" (as defined in Section 13(d)(3) of
the Exchange Act), other than Parent or its affiliates or any group of which any
of them is a member, shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than 25% of
any class or series of capital stock of the Company
A-2
<PAGE> 54
(including the Shares), through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted an option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 25% of
any class or series of capital stock of the Company (including the Shares); or
(ii) any person or group shall have entered into a definitive agreement or
agreement in principle with the Company with respect to a merger, consolidation
or other business combination with the Company;
and, in the judgment of Newco in any such case, and regardless of the
circumstances (including any action or omission by Newco) giving rise to any
such condition, makes it inadvisable to proceed with such acceptance for
payment or payments.
The foregoing conditions are for the sole benefit of Newco and
Parent and may be asserted by Newco or Parent regardless of the circumstances
giving rise to any such condition or may be waived by Newco or Parent in whole
or in part at any time and from time to time in their discretion. The failure
by Newco or Parent at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right; the waiver of any such right with
respect to particular facts and other circumstances shall not be deemed a
waiver with respect to any other facts and circumstances; and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time.
A-3
<PAGE> 1
AMENDMENT NO. 1, dated as of May 27, 1994 (this "Amendment"),
to the Agreement and Plan of Merger, dated as of May 21, 1994, by and among
SANDOZ LTD., a corporation organized under the laws of Switzerland ("Parent"),
SL SUB CORP., a Delaware corporation and an indirect wholly owned subsidiary of
Parent ("Newco"), and Gerber Products Company, a Michigan corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, Parent, Newco and the Company have entered into an
Agreement and Plan of Merger, dated as of May 21, 1994 (the "Merger Agreement";
capitalized terms not defined herein have the meanings ascribed to them in the
Merger Agreement); and
WHEREAS, Parent, Newco and the Company desire to amend the
Merger Agreement as set forth herein.
NOW THEREFORE, in consideration of the premises and of the
mutual agreements and understandings hereinafter set forth, the parties hereto
agree as follows:
SECTION 1. Amendments to Merger Agreement. The Merger
Agreement is, effective as of the date hereof, hereby amended by deleting the
fifth sentence of Section 1.1(a) in its entirety and replacing such sentence
with the following two sentences:
"Notwithstanding the foregoing, Newco shall, and Parent agrees
to cause Newco to, extend the Offer at any time and from time
to time up to November 30, 1994 if at the initial expiration
date of the Offer, or any extension thereof, the condition to
the Offer requiring approval of the New York Department (as
defined herein) for Parent's indirect acquisition of GLIC (as
defined herein) (the "Insurance Condition") is not satisfied
or waived; provided that (i) any such extension shall be for
only such period as Newco shall determine is reasonably
necessary in light of the circumstances then prevailing
related to satisfying such condition, (ii) any extension to be
made before August 10, 1994 may not extend the Offer beyond
August 24, 1994 and (iii) unless waived in writing by the
Company, any extension to be made on or after August 10, 1994
may not be for a period in excess of 10 Business Days. If the
Insurance Condition has been satisfied or waived after June 30,
1994 and the Offer is not due to expire within 15 Business
Days of the date the Insurance Condition was satisfied or
waived, to the extent permitted by applicable law, Newco shall
promptly amend the Offer to cause the Offer to expire on a
date not more than 10 Business Days from the date of such
amendment."
<PAGE> 2
2
SECTION 2. Effect of Amendment. Except as and to the extent
modified by this Amendment, the Merger Agreement shall remain in full force and
effect in all respects.
SECTION 3. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed entirely within such
state.
SECTION 4. Counterparts. This Amendment may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 1 to the Merger Agreement to be executed by their respective duly
authorized officers as of the date first above written.
Attest: GERBER PRODUCTS COMPANY
/S/ By: /S/ STEPHEN R. CLARKE
- --------------------- ---------------------------
Name: Stephen R. Clarke
Title: Vice President
Attest: SANDOZ LTD.
/S/ By: /S/ WERNER WIDNER
- --------------------- ---------------------------
Name: Werner Widner
Title: Assistant Vice President
/S/ By: /S/ DR. MARTIN CH. BATZER
- --------------------- ---------------------------
Name: Dr. Martin Ch. Batzer
Title: Assistant Vice President
Attest: SL SUB CORP.
/S/ By: /S/ ROBERT L. THOMPSON, JR.
- --------------------- ---------------------------
Name: Robert L. Thompson, Jr.
Title: Vice President and
Secretary
<PAGE> 1
Exhibit 2
[Form of Amendment to Severance Agreements]
[Date]
Re: Amendment of the Letter Agreement,
dated , between
Company and [Employee]
(the 'Change in Control Agreement')
Dear [Employee]:
This letter agreement will confirm the mutual understanding and
agreement between you and Gerber Products Company (the 'Company') regarding
the amendment of your Change in Control Agreement which has been approved by
the Board of Directors of the Company.
1. The last proviso of the first sentence of Section 1 of your
Change in Control Agreement is hereby amended and replaced in its entirety with
the following:
; provided, further, if a change in control of the Company shall have
occurred during the original or extended term of this Agreement, this
Agreement shall continue in effect for a period of not less than
thirty-six (36) months beyond the month in which such change in control
occurred.
2. Section 4 (iii) (b) of your Change in Control Agreement is
hereby amended and replaced in its entirety with the following:
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay to you a lump
sum severance payment (together with the payments provided in Sections 4
(iii) (c), (d), (e) and (g), the 'Severance Payments') equal to [three
hundred percent (300%)] two hundred percent (200%) of the sum of (x) the
<PAGE> 2
greater of (i) your annual base salary in effect on the Date of
Termination or (ii) your annual base salary in effect immediately prior to
the change in control of the Company, plus (y) the greater of (i) an
amount equal to your target bonus award as determined pursuant to the
Company's Annual Bonus Plan as effective April 1, 1990 and amended from
time to time (the 'Bonus Plan') based upon your annualized base salary in
effect on the Date of Termination (in lieu of your 'accumulated base
salary' as set forth in Section E of the Bonus Plan as of November 22,
1993) or (ii) an amount equal to your target bonus award as determined
pursuant to the Bonus Plan based upon your annualized base salary in
effect immediately prior to the change in control of the Company (in lieu
of your 'accumulated base salary' as set forth in Section E of the Bonus
Plan as of November 22, 1993);
[3. Section 4 (iii) (e) of your Change in Control Agreement is
hereby amended and replaced in its entirety with the following:
(e) for a thirty-six (36) month period after such termination,
the Company shall arrange to provide you with life and health insurance
benefits substantially similar to those which you were receiving
immediately prior to the Notice of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable
by you pursuant to this Section 4 (iii) (e), if an equivalent benefit is
actually received by you during the thirty-six (36) month period following
your termination. Any such benefit actually received by you shall be
reported to the Company;]
[4.] 3. The first sentence of Section 4 (vi) of your Change in
Control Agreement is hereby amended and replaced in its entirety with the
following:
The payments and benefits provided for in this Section 4 shall not
affect your right to receive any payments or benefits which you are
2
<PAGE> 3
entitled to receive under the Company's Severance
Benefits Plan; provided, that the payments and
benefits provided for in this Section 4 shall be
reduced by the amount of any payments and benefits
which you receive pursuant to substantially similar
provisions under the Company's Severance Benefits Plan.
All other provisions of your Change in Control
Agreement shall remain in full force and effect. This Amendment to your Change
in Control Agreement shall be effective as of the date set forth above.
If this letter sets forth our agreement, kindly sign
and return to the Company the enclosed copy of this letter.
Sincerely,
Gerber Products Company
By:
---------------------
Name:
Title
Agreed to and accepted
this day of
199
- --------------------------
[Employee]
3
<PAGE> 1
GERBER PRODUCTS COMPANY SEVERANCE BENEFITS PLAN
SECTION I
Name, Effective Date and Purpose
The Gerber Products Company Severance Benefits Plan (hereinafter referred to as
the "Plan") was originally adopted effective August 1, 1988, amended and
restated as of October 1, 1990, amended and restated as of December 1, 1993, and
is hereby amended and restated as of May 21, 1994. Gerber Products Company,
including its current and future operating divisions, and certain subsidiaries
indicated on Appendix A who participate in the Plan with the consent of the
Executive Committee of the Board of Directors of Gerber Products Company
(hereinafter referred to as "the Company"), is aware of the hardship created
when employees are involuntarily terminated for reasons beyond their control and
must seek alternative employment. This Plan describes the various benefits which
may be available to certain employees upon the occurrence of specific events to
ease the transition to other employment. The various benefits provided hereunder
are not to be considered benefits of employment. Rather, they are provided in
consideration of the employee's voluntary execution of a release of certain
claims against the Company arising out of the employee's employment with, or
termination of employment from the Company. This Plan supersedes any and all
prior plans or policies, written or unwritten, with respect to the subjects
covered. Nothing contained in this Plan shall be construed as a contract of
employment between the Company and any employee or as a right of any employee to
be continued in the employment of the Company or as a limitation of the right of
the Company to discharge any of its employees with or without cause. Moreover,
the use of a "cause" standard to determine benefit eligibility under the Plan is
used for that sole purpose and the implementation, use and adoption of this
standard for this purpose does not in any way modify the at-will employment
relationship that exists between any employee and the Company.
SECTION II
Eligibility
A. Eligible Employees
Employees eligible to participate in this Plan (individually, an
"Employee") shall be determined in accordance with Appendix B.
B. Eligible Events
Subject to subsection C of this Section II, severance benefits will be
provided when an Employee is involuntarily terminated without cause (unless
such involuntary termination is due to the Company policy regarding
executive retirement). A temporary layoff (i.e., a layoff during which the
Employee remains eligible for recall and which lasts no longer than six
months) will not be considered an involuntary termination for purposes of
this Plan.
The word "cause," as used in this Plan, means good and sufficient reason, as
determined by the Company, including, but not limited to, (i) the Employee's
violation of any rule or regulation that may be established from time to time
for the conduct of the Company's business, (ii) any condition or act of the
Employee which hampers, or interferes with, the conduct of the Company's
business (including, but not limited to, intoxication, possession or use of
drugs, absenteeism or poor job performance), (iii) insubordination, or (iv) any
willful failure by the Employee to perform any agreement, duty or obligation.
C. Circumstances Which Do Not Warrant Payment of Severance Benefits.
Notwithstanding subsection B of this Section II, no severance benefits will
be provided when the involuntary termination without cause occurs under the
following circumstances:
1. the death or disability of the Employee;
<PAGE> 2
2. the refusal of the Employee to accept substantially similar employment
by the Company at the Employee's then-current place of employment;
3. the refusal of the Employee to accept a transfer for substantially
similar employment to another Company facility, business or operation
which is located within fifty miles of the Employee's then-current place
of employment; or
4. the sale or closing of the facility, or discontinuance or sale of an
operation or business in which the Employee works; provided, however,
that severance benefits will be provided when an involuntary termination
without cause occurs within the three-year period immediately following
a Change in Control of the Company in connnection with the closing of
the facility or the discontinuance of an operation or business in which
the Employee works. For purposes of the preceding sentence, the sale of
a subsidiary does not constitute a closing of a facility or the
discontinuance of an operation or business unless the Employee's
employment with the subsidiary or any surviving corporation, is
involuntarily terminated without cause within such 3-year period.
D. Definition of Change in Control
For purposes of this Plan, a "Change in Control" shall be deemed to
have occurred if
(a) any "person," as such term is defined in Section 3(a)(9) and modified
and used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than the Company), any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company (or of any subsidiary of the Company), or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities, unless such
beneficial ownership is acquired in connection with a transaction
described in clause (c)(2) of this definition;
(b) during any period of two consecutive years (not including any period
prior to the adoption of this amended and restated Plan), individuals
who at the beginning of such period constitute the Board of Directors
of the Company (the "Board"), and any new director (other than a
director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (a), (c) or (d)
of this definition) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved cease for any reason
to constitute at least a majority thereof;
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (1) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 75% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or
(2) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
defined in clause (a) of this definition but without the exceptions
given therein) acquires 50% or more of the combined voting power of the
Company then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
2
<PAGE> 3
SECTION III
Severance Benefits
An Employee entitled to severance benefits will receive severance benefits
determined in accordance with Appendixes B and C for the respective Employee's
category.
A. Severance Payments
1. Method of Payment.
Severance payments determined pursuant to the Schedule of Severance
Payments on Appendix B will be made periodically on the same basis as
the Employee's regular pay schedule; provided, however, that if the
Employee requests that the total severance payment be made in a lump-sum
payment, the Committee, in its sole discretion, may grant such request.
If the Employee shall die (or become legally incapacitated) before the
severance payments have been completed, the balance remaining of such
severance payments shall be made in a lump sum payment to the legal
representative of the Employee or his estate. Periodic payments will be
sent to the Employee's home address, or other address if requested in
writing by the Employee.
2. Amount of Payments.
The specific number of months of severance pay for which an individual
Employee is eligible under the Plan shall be determined in accordance
with the Schedule of Severance Payments on Appendix B. All payments are
subject to state and federal taxes just as regular wages. The amount of
the monthly severance payment paid under this Plan shall be equal to
one-twelfth (1/12) of the Employee's annualized Base Salary as of the
date of termination or, in the case of any qualifying termination of
employment within the three-year period immediately following a Change
in Control, the higher of Base Salary as of the date of termination or
Base Salary immediately prior to such Change in Control. Base Salary
shall mean direct compensation in the form of salary or wages exclusive
of all bonuses, commissions, overtime premium, incentive compensation
and extraordinary compensation, but including salary reductions under
Code Sections 401(k) and 125 and elective deferrals of base salary to
the Elective Deferral Plan for Senior Management.
3. Duration of Periodic Payments.
Severance payments will cease as of the next regularly scheduled payment
date following the conclusion of the maximum period for which the
Employee is eligible under the Schedule of Severance Payments or upon
reemployment by the Company, whichever occurs first. Employees are
responsible for informing the Company of any change in their employment
status while receiving severance benefits.
B. Outplacement/Retirement Planning Assistance
1. Professional Outplacement.
Professional outplacement services shall be provided to eligible
Employees in accordance with Appendix B. The outside agency retained to
provide the services will be selected by the Company and the specific
services available to Employees may vary depending upon the
circumstances, commensurate with customary and prevailing industry
standards for employees of similar status and salary level.
2. Professional Retirement Planning.
Professional estate planning, financial and tax counseling services
shall be provided to certain eligible Employees in lieu of professional
outplacement described above, in accordance with Appendix B. The Company
reserves the right to designate specific providers of such services to
include reputable Certified Public Accountants, registered financial
advisors and attorneys and to vary the type and level of services
available to individual Employees as appropriate in the circumstances
and commensurate with the salary level and financial status of the
Employee.
3
<PAGE> 4
C. Group Health and Life Insurance Coverage.
Subject to the conditions and limitations stated in Appendix B, the Company
shall continue to provide, under the same terms and conditions, group
health and life insurance family coverages and benefits being received by
the Employee and Employee's family at the date of termination (as described
in Appendix B), provided that such coverage and benefits shall be
eliminated or reduced to the extent comparable coverage and benefits are
actually received by the Employee from other employment sources within the
coverage period provided in Appendix B. The Employee shall promptly notify
the Company of such comparable coverage, or of any other change that would
affect the coverages and benefits provided hereunder. If the Employee fails
to advise the Company of the actual receipt of benefits by Employee from
other employment, the coverage and benefits provided in this Section III(C)
shall automatically cease. Employees may be eligible to continue
participation in the group health and life insurance program and/or convert
to individual coverage depending upon the circumstances involved, in
compliance with federal and state insurance continuation and conversion
laws; however, the date of termination shall be regarded as the date of the
"qualifying event" for purposes of determining COBRA eligibility. Employees
will be notified by the Company of the options available at the time such
benefit extension expires.
D. Retiree Medical Eligibility.
Certain Employees shall be eligible to enroll in the Company's Retiree
Medical Benefits Plan, either immediately or as of the date of commencement
of a deferred vested retirement benefit, as specified in Appendix B,
provided that (1) the Company continues to offer a retiree medical benefits
plan to newly retired Employees as of the date of such eligibility, and (2)
the Employee is not eligible to receive coverage, as a retiree or as a
dependent of another person, under the medical plan of another employer.
Such enrollment shall be under the terms and conditions of the Retiree
Medical Benefits Plan in effect as of the date coverage begins and at
contribution rates then applicable to newly retired Employees. Nothing
herein shall require the Company to continue to offer any medical benefits
plan to its new or existing retirees or to maintain any such plan on the
same terms and conditions as when first offered.
E. Other Benefits Available Upon Termination.
The severance benefits provided hereunder are in addition to, and not in
lieu of, any other benefits provided pursuant to other written policies,
plans or agreements of the Company. The severance benefits provided
hereunder will not be considered in the determination of benefits available
under any Company sponsored retirement plan. Notwithstanding the foregoing,
all severance benefits provided hereunder shall fulfill, to the extent of
the payments made hereunder, any other benefits required by any state or
federal law regarding severance payments, notice, benefit extensions and
related matters.
SECTION IV
Notice of Benefits/Execution of Release and Waiver
Eligible Employees will be informed of the specific severance benefits to which
they are entitled on or before the date of termination. The payment of severance
benefits will be contingent upon the execution and return to the Company of a
Release and Waiver Agreement by the Employee within twenty-one calendar days of
the Employee's receipt of such Release and Waiver Agreement. In the event of
termination within three years of a Change in Control, the form and substance of
the Release and Waiver Agreement will be substantially identical to the form and
substance of the Release and Waiver Agreement used by the Company immediately
prior to a Change in Control.
4
<PAGE> 5
SECTION V
Administration
A. Plan Administrator. The Benefit Plans Committee (hereinafter the
"Committee") shall serve as the Plan Administrator and shall exercise such
authority and responsibility as it deems appropriate in order to comply
with ERISA and governmental regulations issued thereunder relating to:
1. reports and notifications to employees;
2. annual reports to the Department of Labor; and
3. any other actions required by ERISA.
B. Claims Procedure. All claims for benefits shall be submitted in writing to
the Plan Administrator who shall process them and approve or disapprove
them within 90 days of the date that the claim is received by the Plan
Administrator. In addition, all claims arising based on a claimant's belief
that claimant has been discriminated against for exercising any right to
which claimant believes he or she is entitled under the provisions of this
Plan or for the purpose of interfering with the attainment to any right to
which claimant may become entitled to under the Plan shall also be
submitted in writing to the Plan Administrator who shall process them and
approve or disapprove them within 90 days of the date that the claim is
received by the Plan Administrator. If special circumstances arise and the
Plan Administrator cannot process the claim within 90 days, the Plan
Administrator shall notify the claimant that the time for making the
decision is extended for up to 90 additional days. If the Plan
Administrator fails to notify the claimant within the applicable period,
the claim is considered denied. If the Plan Administrator makes a
determination to deny benefits to an employee, the denial shall be stated
in writing by the Plan Administrator and delivered or mailed to the
employee. Such notice shall set forth the specific reasons for the denial,
written in a manner that may be understood by the Employee and shall
describe the steps necessary for appeal. The Employee whose claim for
benefits has been denied shall have a period of 60 days in which to appeal
to the Committee and submit additional information to the Committee. The
Committee shall consider the request at its next scheduled meeting.
If the claim is again denied in writing, the Employee may request a hearing
within 30 days of the second denial and the Committee shall afford a
reasonable opportunity for a hearing to any Employee for a review of its
decision denying the claim, which hearing shall be held within 60 days
following receipt of the request. The claimant shall have an opportunity to
present evidence and appear before the Committee. The Committee shall
review all evidence submitted by the claimant and shall make its decision
regarding the claim within 120 days following the receipt of the request
for a hearing by the claimant and shall provide the claimant with a written
decision. Should the claimant wish to contest the decision of the
Committee, which shall be final and conclusive, claimant must do so within
180 days of that decision and agrees to waive any statute of limitations to
the contrary.
C. Governing Law. The Plan shall be construed under and governed by the laws
of the State in which the employment occurs except to the extent such laws
are preempted by ERISA or subsequent amendments thereto or any other laws
of the United States of America.
SECTION VI
Amendment/Termination of the Plan
The Company hopes and expects to continue this Plan, but must reserve the right
to alter, amend or terminate any or all of its provisions in its sole
discretion, retroactively or at any future time. It also reserves the right to
adjust in its sole discretion the severance benefits provided to specific
Employees based upon individual circumstances. Notwithstanding the foregoing,
during the three-year period immediately following a Change in Control, no
amendment, termination or discretionary adjustment shall be effective if it
would adversely affect the rights, expectancies or benefits of any Employee
provided by the Plan as in effect immediately prior to the Change in Control.
5
<PAGE> 6
APPENDIX A
Participating Subsidiaries
Gerber Life Insurance Company
Hankscraft Motors, Inc.
6
<PAGE> 7
APPENDIX B
Gerber Products Company
Eligibility
To be eligible for severance benefits, an Employee must:
1. be a full-time Employee who has at least one year of service with the
Company (except that during the three-year period following a Change in
Control, the one-year service requirement shall not apply) and who is
actively at work within three months of the Date of Termination (the date
set forth in a written Notice of Termination on which Employee's status as
an employee is terminated and severance benefits commence), or who is on a
temporary layoff; and
2. not be covered under the provisions of any collective bargaining agreement.
Schedule of Severance Payments
I. Non-exempt Employees with annualized Base Salary of less than $25,000
* 1 through 4 years of service - one month of severance
* 5 or more years of service - one week of severance for each year of
service to a maximum of 26 weeks
II. Non-exempt Employees with annualized Base Salary of $25,000 or more; exempt
Employees with annualized Base Salary of less than $75,000
* 1 through 4 years of service - two months of severance
* 5 through 9 years of service - three months of severance
* 10 through 19 years of service - four and one-half months of severance
* 20 through 29 years of service - six months of severance
* 30 or more years of service - nine months of severance
III. Exempt Employees with annualized Base Salary of $75,000 or more
* 1 through 4 years of service - three months of severance
* 5 through 9 years of service - four months of severance
* 10 through 19 years of service - six months of severance
* 20 through 29 years of service - nine months of severance
* 30 or more years of service - twelve months of severance
Subject to the immediately following paragraph, in the event of an involuntary
termination of an Employee (who qualifies for severance benefits and who was
employed by the Company or a Participating Subsidiary on the date of the Change
in Control) without cause which occurs within the three-year period immediately
following a Change in Control, the respective periods of severance provided by
items I, II, and III above (and other benefits based on such periods) shall be
lengthened by fifty percent (50%).
In the event of an involuntary termination of an Employee in Bonus Tiers I-IX,
as determined immediately preceding the Change in Control (and who was employed
by the Company or a Participating Subsidiary on the date of the Change in
Control), without cause which occurs within the three-year period immediately
following a Change in Control, such Employee (regardless of years of service)
shall be entitled to the greater of (i) the following severance payments based
on annualized base salary as of the date of Change in Control or date of
termination, whichever is greater (and corresponding benefits based on such
periods); or (ii) the applicable severance payments in I-III above as adjusted
by the preceding paragraph.
7
<PAGE> 8
I. Employees in Bonus Tiers I-VI
* twenty-four months of severance
II. Employees in Bonus Tiers VII-VIII (Grade 7)
* eighteen months of severance
III. Employees in Bonus Tiers VIII (Grade 6) and IX
* twelve months of severance
Benefits Extension
Employee benefit coverages under the following company sponsored plans will be
continued while periodic severance payments are being made pursuant to the above
Schedule of Severance Payments, subject to the provisions of Section II C of
this Plan, and the continued eligibility of the Employee and dependents under
the terms of the respective plans and the payment of required employee
contributions or premiums, which shall be deducted from the ongoing severance
payments:
Gerber Medical Plan (or alternative HMO coverage if elected)
Gerber Dental Plan
Life and Accidental Death & Dismemberment Insurance
Supplemental Life and Accidental Death & Dismemberment Insurance
Voluntary Personal Accident Insurance
Dependent Life Insurance
In addition, effective January 1, 1990, an Employee who has attained age 50 and
has completed at least 20 years of service shall be eligible to enroll in the
Gerber Retiree Medical Benefits Plan as of the date of commencement of any
deferred vested benefit payable from the Gerber Products Company Retirement
Plan.
Outplacement Assistance
All Employees will be entitled to Professional Outplacement as defined in the
Plan.
Housing Guarantee Benefit
Subject to the conditions and limitations stated in Appendix C, Employees who
are involuntarily terminated without cause within the three-year period
immediately following a Change in Control and who qualify for severance benefits
shall be eligible for the Housing Guarantee Benefit described in Appendix C if
they meet the eligibility requirements set forth in Appendix C.
Special Provision for Employees Aged 55 or Over
In lieu of the severance and benefit extension provisions outlined above,
Employees aged 55 years or over who are entitled to six months or more of
scheduled severance (without regard to any Change in Control), may elect the
following optional form of periodic payments:
Entitled to six months of severance under Schedule - May elect to receive
24 months of severance payments at 37.5% of Base Salary and benefit
extension
Entitled to nine months of severance under Schedule - May elect to receive
24 months of severance payments at 50% of Base Salary and benefit extension
Entitled to twelve months of severance under Schedule - May elect to
receive 24 months of severance payments at 62.5% of Base Salary and benefit
extension.
Employees electing this option shall have the right to enroll in the Gerber
Retiree Medical Plan upon commencement of their benefit under the Gerber
Products Company Retirement Plan.
8
<PAGE> 9
In each of the three foregoing entitlement categories, the "months of severance
under Schedule" shall be measured without regard to any Change in Control;
provided, however, that the percentages of Base Salary and benefit extension
(37.5%, 50% and 62.5%), which determine the size of the optional payments which
are available to the respective Employees upon election, shall each be increased
by 50% thereof in the event of an involuntary termination without cause which
occurs within the three-year period immediately following a Change in Control
and qualifies for severance benefits.
In addition, in lieu of professional outplacement benefits, an Employee electing
the optional two-year form of periodic payments may elect to receive the
professional retirement planning benefit as defined in the Plan, subject to a
dollar limit on the total cost of such benefit equal to the lesser of one
month's base salary or $2,500.00.
9
<PAGE> 10
APPENDIX C
Housing Guarantee Benefit
Eligibility
To be eligible for the Housing Guarantee Benefit, an Employee must:
* be a Salaried Employee as of the date of a Change in Control
* be involuntarily terminated without cause within the three-year period
immediately following a Change in Control
* qualify for severance benefits on the date of termination of employment
* plan to offer his or her principal home for sale within eighteen months of the
date of termination of employment
* be employed at a Fremont, Michigan facility.
Definitions
"Executive Relocation Corporation (ERC)" - The relocation company designated by
the Company to work with Employees in selling their homes (or such other third
party relocation company selected by the Company to provide services comparable
to those described herein). All fees are paid by the Company or its successor.
"Guaranteed Offer" - The offer based on the average of two (or three) appraisals
in accordance with the section below entitled "The Appraisal and Offer Process."
"Market Value Sale (MVS)" - A sale which is negotiated prior to or during the
120-day period that the Guaranteed Offer will remain outstanding. This sale must
be approved and signed by the Account Manager at ERC and it may net Employee an
amount greater than the Guaranteed Offer.
"Loss-On-Sale Protection" - The reimbursement for the loss on sale based on the
depreciation cost of Employee's home.
Eligible Properties
Both sale options (Guaranteed Offer and Market Value Sale) apply to principal
residences only, which may be a one-family or two-family dwelling, condominium
or townhouse. Cooperative apartments will be accepted on a case-by-case basis.
The following types of properties are not eligible for the Housing Guarantee
Benefit:
* home with more than two units
* mobile homes
* homes with more land than is typical for the area
* secondary tracts of land (i.e., adjacent building lots)
* vacation homes
* farms
* investment properties
* properties with unmarketable titles
* homes which would result in a Guaranteed Offer exceeding $500,000
* homes subject to land contracts
* properties where the following are present:
* radon gas above acceptable levels
* urea formaldehyde foam insulation (UFFI)
* asbestos
* other toxic or hazardous materials, e.g. lead paint
* properties in proximity to hazardous or toxic sites
* properties which are partially uncompleted
10
<PAGE> 11
Selling Present Homes
Employees who plan to offer their present homes for sale must contact the Human
Resources Department in Fremont, Michigan which will assign an ERC Account
Manager. Employees have the option to sell their homes without using the
Guaranteed Offer and MVS options and the related services. Employees electing
this course of action are not eligible for reimbursement of selling costs or any
other features of this program.
The Appraisal and Offer Process
The Employee and ERC will each select one appraiser. Employees must provide ERC
with pertinent information about the property to be sold and complete the forms
necessary to assist in the completion of the appraisals. The Guaranteed Offer
will be established by averaging the two appraisals. If the appraisals vary from
the average by more than 5%, a third appraisal will be ordered (appraiser
selected by Employee and ERC). The Guaranteed Offer will then equal the average
of all three appraisals.
Once the Guaranteed Offer is determined, ERC will provide the Employee both an
oral and written verification. The Guaranteed Offer will be valid for 120 days
after Employee receives written verification from ERC.
Marketing
The ERC Account Manager will assist Employees in marketing their homes by:
- - Selecting a broker who can maximize the property's exposure at a sales
commission not to exceed local prevailing rates.
- - Selecting a reasonable listing price consistent with market conditions.
- - Suggesting conditioning recommendations which will eliminate possible buyer
objections.
- - Updating the marketing strategy through regular discussions with Employees and
their brokers.
- - Reviewing all purchase offers received by Employees, whether above or below
the Guaranteed Offer. EMPLOYEES MUST NOT COUNTER ANY OFFERS NOR SIGN ANY SALE
AGREEMENTS UNTIL THEY HAVE CONSULTED WITH THEIR ERC ACCOUNT MANAGER, AS THIS
WILL NULLIFY THE PROGRAM.
Employees must include the following clause in their listing agreements:
"This Listing Agreement is subject to the following provisions:
It is understood and agreed, regardless of whether or not an offer is
presented by a ready, willing, and able buyer that:
1) No commission or compensation shall be earned by or be due and payable
to broker until the sale of the property has been consummated between
seller and buyer, the deed delivered to the buyer, and the purchase
price delivered to the seller; and
2) The sellers reserve the right to sell the property to Gerber Products
Company or its nominee (individually and collectively a "Named
Prospective Purchaser") at any time. Upon execution by a Named
Prospective Purchaser and me (us) of an Agreement of Sale with respect
to the property, this Listing Agreement shall immediately terminate
without obligation on my (our) part or on the part of any Named
Prospective Purchaser to either pay a commission or to continue this
listing."
This clause preserves the right to accept the Guaranteed Offer or utilize the
Market Value Sale Program with no obligation to pay a broker's commission or
fee.
When an Employee receives an acceptable offer, ERC will determine whether it is
a bona fide offer and satisfactory to ERC. The ERC Account Manager will advise
the Employee of the Effective Purchase Price to insert into the Contract of Sale
document, provided by ERC. ERC will then contract with the potential buyer
11
<PAGE> 12
and conclude the sale. (If for any reason the sale with the potential buyer
cannot be completed after the buyer's written offer has been approved, Employee
will still receive the Effective Purchase Price).
Concluding the Sale (After 120 Days)
At the end of 120 days, eligibility for the Market Value Sale and Guaranteed
Offer programs will expire. If an acceptable buyer is not found by the end of
this period, the Employee may accept the Guaranteed Offer within 10 days
following the end of the 120-day period and ERC will purchase Employee's home
for the Guaranteed Offer Price.
Employees who choose to complete their sale without using ERC, will not be
eligible for reimbursement of selling costs or other features of the Home
Guarantee Benefit.
Loss-on-Sale Protection
Loss-on-Sale assistance will be provided to Employees whose Guaranteed Offer, or
Effective Purchase Price under the Market Value Sale program, is less than
Employee's Investment. The Company will pay to Employee, upon consummation of
the sale of his or her home pursuant to a Guaranteed Offer or MVS sale, an
amount equal to the Loss-on-Sale for such home; provided, that the maximum
allowance under this provision will be 20% of the Employee's investment in
his/her primary dwelling, to a maximum of $50,000. Repairs and maintenance
required to present the house in saleable and full operating condition will be
at the Employee's expense and will not be considered as part of the Investment.
Definitions:
1. Loss-on-Sale equals the difference between the Employee's Investment and the
Guaranteed Offer, or the Effective Purchase Price under the Market Value Sale
program, whichever applies.
2. Investment equals the original purchase price including normal closing costs,
such as title, survey, inspection costs (unless reimbursed by employer), loan
origination fees, and loan discount points (not to exceed 3%); plus
documented Property Improvements (less depreciation calculated on those
improvements at the rate of 2.5% per year).
3. Property Improvements are capital improvements which add materially to the
value of the land and/or residence and appreciably prolong its useful life as
defined by the Internal Revenue Service. In order to qualify, documented
costs (i.e. receipts, cancelled checks) must be in the amount of at least
$500 per improvement project. Any items validated as capital improvements
must stay with the property being sold. Repairs and maintenance such as
painting, wallpapering, will not be considered as capital improvements.
12
<PAGE> 13
Formula for Loss-on-Sale Calculation
<TABLE>
<CAPTION>
(EXAMPLE)
---------
<S> <C> <C>
Original purchase price................................................. $ 80,000
Plus improvements
Original cost......................................................... $ 5,000
Less Depreciation - (2 years @ 2.5%).................................. ( 250)
--------
$ 4,750
Less required repairs/maintenance....................................... ( 100)
---------
Subtotal........................................................... $ 84,650(A)
Less Effective Purchase Price
(Guaranteed Offer or Market Value Sale)............................... ( 81,000)
---------
Loss-on-Sale Total................................................. $ 3,650(B)
Calculation for Reimbursement: 20% of A = 16,903
B = 3,650
Reimbursement: (lesser of (A) or (B) or $50,000) $ 3,650
---------
</TABLE>
NOTE: Loss on Sale Reimbursement will be limited to a maximum of 20% of (A), or
$50,000, whichever is less.
ANY LOSS-ON-SALE REIMBURSEMENT WILL BE ADDED TO THE EMPLOYEE'S W-2 AT YEAR END
AS TAXABLE INCOME.
13
<PAGE> 1
[GERBER PRODUCTS COMPANY LETTERHEAD]
April 29, 1994
Sandoz Corporation
608 Fifth Avenue
New York, NY 10020
Attention: Heinz Imhof
Vice Chairman and
Chief Executive Officer
CONFIDENTIALITY AGREEMENT
Gentlemen:
This letter agreement is in regard to our discussions concerning possible
negotiated business arrangements in our mutual interest involving Gerber
Products Company (the "Company"). In connection therewith you may receive
certain written or oral information concerning the Company and its subsidiaries
from officers, directors, employees, agents or advisors of the Company. All
such information furnished to you, your officers, directors, employees, agents
or representatives (collectively, "Representatives") and all analyses,
compilations, computer disks, forecasts, studies or other documents prepared by
you or your Representatives based on any such information are hereinafter
referred to as the "Information." In consideration of our entering into such
discussions, you agree that:
The Information will be used by you and your Representatives solely for
the purpose of exploring possible negotiated business arrangements and not for
any other business or competitive purpose. The Information will be kept
confidential by you and your Representatives. Without the prior written
consent of the Company, neither you nor your Representatives will disclose to
any person the fact that the Information has been made avail-
<PAGE> 2
able or that discussions between the parties concerning possible business
arrangements or involving the Company are taking place or any term, condition
or other fact relating to any such business arrangement (except as required by
law and then only after compliance with the next paragraph hereof).
In the event that you or any of your Representatives are required by law
to disclose any of the Information, you will notify us promptly so that we may
seek a protective order or other appropriate remedy or, in our sole discretion,
waive compliance with certain terms of this letter agreement. In the event
that no such protective order or other remedy is obtained, or that we waive
compliance with certain terms of this letter agreement, you will furnish only
that portion of the Information which you are advised by counsel is legally
required and will exercise your best efforts to obtain reliable assurance that
confidential treatment will be accorded the Information.
If we do not proceed with any business arrangement, or upon the Company's
request (i) all Information furnished to you will be promptly returned to the
Company and (ii) all other written Information will be destroyed with any such
destruction confirmed by you in writing to the Company; provided, that all
Information (including, oral Information) will remain subject to the terms of
this Agreement. This letter agreement does not apply to such portions of the
Information which you demonstrate (i) are or become generally available to the
public (other than as a result of a disclosure by you or your Representatives),
(ii) were available to you on a nonconfidential basis prior to disclosure to
you by the Company or its Representatives or (iii) become available to you on a
nonconfidential basis from a source other than the Company or one of its
Representatives which is entitled to disclose it.
The Company has endeavored to provide you with Information which it
believes to be relevant to your investigation. You understand, however, that
the Company, its agents and its Representatives make no representations or
warranties as to the accuracy or completeness of the Information. You also
agree that the Company, its agents and its Representatives shall have no
liability to
2
<PAGE> 3
you or any of your Representatives resulting from the use of the Information by
you or your Representatives.
For a period of three years after the date hereof, without the prior
written consent of the Company, you will not, and will cause each of your
affiliates (as such term is defined under the Securities Exchange Act of 1934)
not to, singly or as part of a group, in any manner, directly or indirectly:
(i) own or acquire or propose to acquire, by purchase or otherwise, any equity
securities of the Company ("Equity Securities") or any assets of the Company or
any rights to acquire any Equity Securities or assets of the Company, provided
that, notwithstanding the other provisions of this letter agreement, you may
acquire Equity Securities of the Company (not exceeding 1% of the outstanding
Equity Securities of the Company) in the ordinary course of your portfolio
investment activities provided that any investment decision to acquire such
Equity Securities is not made by persons who have had access to any Information
or who are aware (other than from public disclosures not made in violation of
this letter agreement) of the transactions contemplated by this letter
agreement, (ii) participate in any solicitation of proxies or become a
participant in any election contest with respect to the Company, (iii) form,
join or in any way participate in a "group" (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934) with respect to any voting
securities of the Company or (iv) otherwise act, alone or in concert with
others, to seek or offer to control or influence, in any manner, the
management, Board of Directors or policies of the Company. For a period of
three years after the date hereof, unless such shall have been specifically
invited in writing by the Company, you will not, and will cause each of your
affiliates not to, directly or indirectly, seek or offer to negotiate with or
make any statement or proposal to the Company, its Representatives or to any
stockholder of the Company, or otherwise make any public announcement with
respect to (i) any form of business combination or transaction involving the
Company, (ii) any form of restructuring, recapitalization or similar
transaction with respect to the Company, (iii) any request to amend, waive or
terminate the provisions of this letter agreement or (iv) any proposal or other
statement inconsistent with the terms of this letter agreement.
3
<PAGE> 4
Notwithstanding the last sentence of the previous paragraph, if (a) the
Board of Directors of the Company approves a transaction with any person (other
than the Company or any employee benefit plans of the Company), and (b) such
transaction would result in such person beneficially owning more than 50% of
the outstanding Equity Securities or all or substantially all of the assets of
the Company, then you shall be permitted to seek or offer to negotiate with or
make a statement or proposal to the Company or its Representatives to acquire
more than 50% of the outstanding Equity Securities of the Company or all or
substantially all of the assets of the Company, provided that the offer is at a
price and on terms that are financially superior to the price and terms of the
transaction proposed by such person.
You acknowledge and agree that (a) we and our Representatives are free to
conduct the process leading up to a possible business arrangement as we and our
Representatives, in our sole discretion, determine (including, without
limitation, by negotiating with any prospective buyer and entering into a
preliminary or definitive agreement without prior notice to you or any other
person), (b) we reserve the right, in our sole discretion, to change the
procedures relating to our consideration of a business arrangement at any time
without prior notice to you or any other person, to reject any and all
proposals made by you and any of your Representatives with regard to any
business arrangement, and to terminate discussions and negotiations with you at
any time and for any reason and (c) unless and until a written definitive
agreement concerning a business arrangement has been executed, neither we nor
any of our Representatives will have any liability to you with respect to any
business arrangement, whether by virtue of this letter agreement, any other
written or oral expression with respect to any business arrangement or
otherwise.
You acknowledge that, in the event of any breach of this letter agreement
by you, the Company would be irreparably and immediately harmed and could not
be made whole by monetary damages. It is accordingly agreed that the Company,
in addition to any other remedy to which it may be entitled, shall be entitled
to an injunction to prevent breaches of, and to compel specific performance of,
this letter agreement.
4
<PAGE> 5
Any proceeding relating to this letter agreement shall be brought in a
federal or state court of New York. You and the Company hereby consent to
personal jurisdiction in any such action and to service of process by mail, and
waive any objection to venue in any such New York court. This letter agreement
shall be governed by the internal laws of the State of New York and shall inure
to the benefit of and be binding upon the Company and you and our respective
affiliates, successors and assigns, including any successor to the Company or
you or substantially all of the Company's or your assets or business.
5
<PAGE> 6
Please sign and return one copy of this letter which thereupon will
constitute an agreement with respect to the subject matter hereof.
Very truly yours,
By /s/ Fred K. Schomer
-------------------------
Title: Executive Vice
President
Confirmed and agreed to as of
the date first above written:
By /s/ Heinz Imhof
------------------------------
Title: Vice-Chairman and CEO
6
<PAGE> 1
SANDOZ
PRESS RELEASE
CONTACT:
Mr. Tim Croasdaile - Gerber Bjorn Edlund - Sandoz
(616) 928-2718 41-61-324-9001
FOR IMMEDIATE RELEASE: Laurie Smith - Burson-Marsteller
(212) 614-4952
SANDOZ LTD. TO ACQUIRE THE GERBER PRODUCTS COMPANY
SANDOZ TO COMMENCE TENDER OFFER AT $53 PER SHARE IN CASH
Fremont, Michigan and Basel, Switzerland, May 23, 1994 - Gerber
Products Company (NYSE-GEB) and Sandoz Ltd., Basel announced today that they
have entered into a definitive agreement for Sandoz to acquire all of the
issued and outstanding shares of common stock of Gerber at $53 per share in
cash, for an aggregate purchase price of approximately $3.7 billion. According
to the agreement, Sandoz will commence a tender offer for all outstanding
shares of common stock of Gerber at $53 per share in cash on or prior to May
27, 1994.
The $53 cash price represents a premium of approximately 53 percent
over Friday's closing price of Gerber stock on the New York Stock Exchange.
Sandoz' obligation to purchase shares in the offer will be subject to
the satisfaction or waiver of certain conditions, including the expiration or
termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and, as a result of Gerber's ownership of Gerber Life
Insurance Company, the receipt of the approval of the Superintendent of
Insurance of New York. The parties indicated that they expect to receive all
such approvals in due course and expect to close the tender offer in three to
six months.
<PAGE> 2
- 2 -
All shares not purchased in the tender offer will be converted into the
right to receive $53 per share in a second-step merger to be consummated as
soon as practicable after the tender offer.
Mr. Alfred Piergallini, Gerber Chairman, President and CEO said, "This
transaction represents exceptional value for our shareholders and is in the best
interest of our customers and associates. We spent many months assessing the
best course for Gerber. As I wrote to our shareholders in Gerber's Annual
Report, the most important ingredient in our future is further extending the
Gerber franchise in the international arena. To capitalize on the large
international potential for our products would require significant investments
over many years to build the necessary infrastructure. Joining with Sandoz
provides us with opportunities for dynamic growth in a much shorter time
horizon and with the necessary infrastructure already in place in most major
markets".
Dr. Marc Moret, Chariman of Sandoz, Ltd. said, "We are delighted to
welcome the Gerber Products Company into the Sandoz Group. This transaction
furthers our long-term commitment to building a high quality worldwide
nutrition business. Gerber is a unique company of the highest quality which
will fit perfectly as a cornerstone for this business in North America and
complement our strong nutrition business in Europe. We have been searching for
and acquiring high value-added nutritional products with market leadership
positions to add to our portfolio. Gerber's excellent image and exceptional
market strength in North America give us a strong base in child nutrition on
which we will expand internationally."
Dr. Rolf Schweizer, CEO of Sandoz, Ltd. said, "Sandoz has in place the
international structure and presence to capitalize on the Gerber brand and
expertise in child nutrition. Gerber's position in North America strengthens
our existing base of nutrition products there. This geographic balance will
provide a platform for dynamic growth. Gerber provides synergies for Sandoz
with advanced technologies in processing and packaging which we can apply in
Europe and the Far East".
<PAGE> 3
Gerber had sales of $1.2 billion in fiscal 1994 (89% in North America),
operating income of $212 million and net income of $127 million before
restructuring charges.
Gerber has for 65 years been a major developer, producer and
marketer of baby food and baby care products. In the U.S. Gerber is the
leading baby food company with over 70% of the market. The Company has a
strong presence in Mexico, Puerto Rico and Central America. Gerber employs
12,000 worldwide.
Sandoz Ltd. founded in 1886 discovers, develops, manufactures and
markets products and services in pharmaceuticals, nutrition, seeds, chemicals,
agro and the construction & environment business.
Sandoz Nutrition develops, manufactures and markets a wide range of
health-related products such as food drinks, baked goods, sport drinks, health
foods and clinical nutrition. Sandoz Nutrition operations were created by the
merger with the Wander Company in 1967. With Ovaltine as its base, Sandoz
has built a strong group of specialized nutrition products. Wasa and Roland
crispbread have strong market positions. Isostar sports drink is the market
leader in Europe. Health foods have shown good progress with the recent
acquisition of the preforma group and the joint venture with Gazzoni. Clinical
enteral nutrition and healthcare foodservice have grown from their U.S. base in
Minneapolis, Minn. to recent expansions in key European markets.
In 1993, Sandoz had sales of 15 billion Swiss Francs ($10.3 billion) and
net income of 1.7 billion Swiss Francs ($1.2 billion). The Nutrition division
had sales of $1.2 billion (14% in North America). Together with Gerber,
Sandoz Nutrition will now double its revenue world-wide to approximately $2.4
billion. Sandoz Nutrition reported sales growth of 25% in the 1st Quarter
1994.
Sandoz has operated in the U.S. for 75 years and employs approximately
11,000 in its U.S. subsidiaries. Sandoz Ltd. ADRs (American Depository
Receipts) are traded in the OTC market under the symbol, SDOZY.
<PAGE> 1
[GERBER PRODUCTS COMPANY LETTERHEAD]
May 27, 1994
To Our Shareholders:
I am pleased to inform you that, on May 21, 1994, Gerber Products Company
entered into an Agreement and Plan of Merger with Sandoz Ltd. and SL Sub Corp.,
an indirect wholly owned subsidiary of Sandoz, pursuant to which SL Sub has
commenced a cash tender offer to purchase all of the outstanding shares of
Gerber Common Stock for $53.00 per share. Under the Agreement, the Offer will be
followed by a Merger in which any remaining shares of Gerber Common Stock will
be converted into the right to receive $53.00 per share in cash, without
interest.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS, HAS APPROVED THE OFFER AND THE MERGER, AND UNANIMOUSLY RECOMMENDS
THAT GERBER SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER. Having reviewed the best course for our Company, we are enthused
about the prospect of further expanding the Gerber franchise as part of the
Sandoz Group.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinions of Goldman, Sachs & Co. and
Wasserstein Perella & Co., Inc., Gerber's financial advisors, that the
consideration to be received by the holders of Gerber Common Stock in the Offer
and the Merger is fair to such holders.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated May 27, 1994, of SL Sub Corp., together
with related materials, including a Letter of Transmittal, to be used for
tendering your Shares. These documents set forth the terms and conditions of the
Offer and the Merger and provide instructions as to how to tender your Shares. I
urge you to read the enclosed material carefully.
Sincerely,
Alfred A. Piergallini
Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 1
[LETTERHEAD]
EXHIBIT 7.1
PERSONAL AND CONFIDENTIAL
May 21, 1994
Board of Directors
Gerber Products Company
445 State Street
Fremont, MI 49413-0001
Gentlemen and Mesdames:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $2.50 per share (together with the
associated preferred stock purchase rights, the "Shares"), of Gerber Products
Company, a Michigan corporation (the "Company"), of the $53.00 per Share in cash
to be received by such holders pursuant to the Agreement and Plan of Merger,
dated as of May 21, 1994, by and among Sandoz Ltd., a corporation organized
under the laws of Switzerland ("Sandoz"), SL Sub Corp., a Delaware corporation
and an indirect wholly-owned subsidiary of Sandoz ("Newco"), and the Company
(the "Agreement").
The Agreement provides for Newco to make a tender offer to acquire all of the
issued and outstanding Shares for $53.00 per Share in cash (the "Tender Offer").
The Agreement further provides that following completion of the Tender Offer,
Newco will be merged into the Company (the "Merger") and each outstanding Share
(other than Shares already owned by Sandoz or Newco) will be converted into the
right to receive $53.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having provided certain investment banking services to the Company
from time to time, including having acted as its financial advisor in connection
with, and participated in certain of the negotiations lending to, the Agreement.
We have also provided certain investment banking services to Sandoz from time to
time, and we may provide investment banking services to Sandoz in the future.
Goldman, Sachs & Co. is a full service securities firm and in the course of its
normal trading activities may from time to time effect transactions and hold
positions in securities of the Company and Sandoz.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended March 31, 1993; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q; certain other communications
from the Company to its stockholders; and certain internal financial analyses
and forecasts for the Company prepared by its management. We also
<PAGE> 2
Gerber Products Company
May 21, 1994
Page Two
have held discussions with members of the senior management of the Company
regarding its past and current business operations, financial condition and
future prospects. In addition, we have reviewed the reported price and trading
activity for the Shares, compared certain financial and stock market information
for the Company with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of certain
recent business combinations in the food industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries and we have not been furnished with any such evaluation or
appraisal.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the $53.00 per
Share in cash to be received by the holders of Shares in the Tender Offer and
the Merger is fair to such holders.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE> 1
[LETTERHEAD]
EXHIBIT 7.2
May 21, 1994
The Board of Directors
Gerber Products Company
445 State Street
Fremont, MI 49413-0001
Members of the Board:
You have asked us to advise you with respect to the fairness
from a financial point of view to the holders of the Common Stock, par value
$2.50 per share (together with the associated preferred stock purchase rights,
the "Shares"), of Gerber Products Company (the "Company") of the consideration
to be received by such holders pursuant to the terms of the Agreement and Plan
of Merger, dated as of May 21, 1994 (the "Merger Agreement"), among the Company,
Sandoz Ltd. ("Buyer"), and SL Sub Corp., an indirect wholly owned subsidiary of
Buyer ("Newco"). The Merger Agreement provides for, among other things, a cash
tender offer by Newco to acquire all of the outstanding Shares at a price of $53
per Share (the "Tender Offer") and for a subsequent merger of Newco with and
into the Company pursuant to which each outstanding Share (other than Shares
already owned by Buyer or Newco) will be converted into the right to receive $53
in cash (the "Merger"). The terms and conditions of the Tender Offer and the
Merger are set forth in more detail in the Merger Agreement.
In arriving at our opinion, we have:
- - reviewed the Merger Agreement dated May 21, 1994 as executed;
- - reviewed certain publicly available business and financial information
relating to the Company for recent years and interim periods to date;
- - reviewed certain internal financial and operating information, including
financial forecasts, provided to us by the Company, and we have met with
management of the Company to review and discuss such information and the
Company's business, operations, assets, financial condition and future
prospects;
- - reviewed recent reported prices and trading activity for the Company's
common stock;
- - reviewed and considered certain financial and stock market data of the
Company, and compared that data with similar data for certain other
publicly traded companies which we believe may be similar or comparable
to the Company;
- - reviewed and considered the financial terms of certain recent
acquisitions and business combination transactions in the packaged food
and baby food industries specifically, and in other industries generally;
and
<PAGE> 2
Board of Directors
May 21, 1994
Page 2
- - performed other such studies, analyses and investigations as we considered
appropriate.
In our review and analysis and in formulating our opinion, we
have assumed and relied upon the accuracy and completeness of all the financial
and other information provided to us or publicly available, and we have not
attempted independently to verify any of such information. We have assumed, with
your consent, that the financial forecasts provided to us by the Company were
prepared in good faith and on bases reflecting the best currently available
judgements and estimates of the Company's management. In addition, we have not
reviewed any of the books and records of the company or conducted a physical
inspection of the properties or facilities of the Company, nor have we made or
obtained an independent valuation or appraisal of the assets or liabilities of
the Company. Our opinion is necessarily based on economic and market conditions
and other circumstances as they exist and can be evaluated by us on the date
hereof.
We have acted as financial advisor to the Company in connection
with the proposed Tender Offer and the Merger and will receive a fee for our
services. In addition, we have performed various investment banking services for
the Company and the Buyer in the past and have received customary fees for such
services. In the ordinary course of our business, we may actively trade the debt
and equity securities of the Company and the Buyer 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.
It is understood that this letter is solely for the benefit and
use of the Board of Directors of the Company in its consideration of the Tender
Offer and the Merger. This letter does not constitute a recommendation to any
stockholder with respect to whether to tender Shares pursuant to the Tender
Offer or whether to vote in favor of the Merger and should not be relied upon by
any stockholder as such.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion that, as of the
date hereof, the $53 per Share cash consideration to be received by the
stockholders of the Company pursuant to the Tender Offer and the Merger is fair
from a financial point of view to such stockholders.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
