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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 30, 1998
Whitman Corporation
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(Exact name of registrant as specified in its charter)
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Delaware 001-04710 36-6076573
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(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of incorporation)
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3501 Algonquin Road, Rolling Meadows, Illinois 60008
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 818-5000
N/A
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(Former name or former address, if changed since last report.)
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Item 2. Acquisition or Disposition of Assets
On January 30, 1998, Whitman Corporation ("Whitman") distributed (the
"Distribution") to its shareholders of record as of the close of business on
January 16, 1998 (the "Record Date"), all of the outstanding shares of common
stock of Hussmann International, Inc. ("Hussmann") and all of the outstanding
shares of common stock of Midas, Inc. ("Midas"). Prior to the Distribution, both
Hussmann and Midas were wholly-owned subsidiaries of Whitman. (Hussmann and
Midas are individually referred to herein as a "Company" and collectively as the
"Companies.")
Prior to the Distribution, Whitman entered into a separate Distribution and
Indemnity Agreement (each, a "Distribution Agreement") with each Company
providing for, among other things, the principal corporate transactions required
to effect the Distribution and certain other agreements governing the
relationship between Whitman and each Company with respect to or as a result of
the Distribution.
The Distribution Agreements set forth a series of steps required in order
to separate from Whitman, prior to the Distribution, any assets that are related
to the respective businesses of the Companies. Such steps involved, among other
things, the transfer to Hussmann and Midas, respectively, of Hussmann
Corporation and Midas International Corporation and all of the foreign
businesses conducted by Hussmann Corporation and Midas International Corporation
which were held by a Netherlands company owned by Whitman. As a result of the
Distribution, each Company is now an independent publicly-owned company and
Hussmann Corporation and Midas International Corporation are the principal
operating subsidiaries of Hussmann and Midas, respectively. Whitman has retained
the Pepsi-Cola General Bottlers business it conducted prior to the Distribution.
Also pursuant to the Distribution Agreement and prior to the Distribution
Date, each Company made certain payments to Whitman. Midas International
Corporation and a foreign affiliate paid to Whitman approximately $210 million
which was applied to settle all intercompany loans and advances from Whitman and
to pay a cash dividend. Hussmann Corporation paid to Whitman $240 million which
was applied to settle all intercompany loans and advances from Whitman and to
pay a cash dividend.
No consideration was payable by Whitman shareholders for the shares of
Hussmann common stock or for the shares of Midas common stock, nor were they
required to surrender or exchange shares of Whitman common stock or take any
other action in order to receive such shares.
Additional information concerning Hussmann and the Distribution is
contained in Hussmann's Registration Statement on Form 10/A No. 3 (Post-
Effective Amendment No. 1) (Commission File No. 1-13409) which was declared
effective by the Commission on December 29, 1997. Additional information
concerning Midas and the Distribution is contained in Midas' Registration
Statement on Form 10/A No. 3 (Post-Effective Amendment No. 1) (Commission File
No. 1-13407) which was declared effective by the Commission on December 29,
1997.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Pro Forma Financial Information
The financial statements required by this item are contained in, and are
incorporated herein by reference to, Whitman's Current Report on Form 8-K dated
December 17, 1997, which was filed with the Commission on January 6, 1998.
(c) Exhibits
--------
The exhibits accompanying this report are listed in the accompanying
Exhibit Index.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
WHITMAN CORPORATION
Date: February 10, 1998 By: William B. Moore
---------------------------------------------
William B. Moore
Vice President, General Counsel and Secretary
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Exhibit Index
Exhibit
Number Description of Exhibit
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2.1 Distribution and Indemnity Agreement dated as of December 31, 1997 by
and among the Registrant, Hussmann International, Inc. and Hussmann
Corporation
2.2 Tax Sharing Agreement dated as of December 31, 1997 by and among the
Registrant, Hussmann International, Inc. and Hussmann Corporation
2.3 Distribution and Indemnity Agreement dated as of December 31, 1997 by
and among the Registrant, Midas, Inc. and Midas International
Corporation
2.4 Tax Sharing Agreement dated as of December 31, 1997 by and among the
Registrant, Midas, Inc. and Midas International Corporation
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DISTRIBUTION AND INDEMNITY AGREEMENT
DATED AS OF DECEMBER 31, 1997
BY AND AMONG
WHITMAN CORPORATION,
HUSSMANN INTERNATIONAL, INC.
and
HUSSMANN CORPORATION
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DISTRIBUTION AND INDEMNITY AGREEMENT
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TABLE OF CONTENTS
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ARTICLE I. DEFINITIONS............................................................. 1
Section 1.01 General......................................................... 1
ARTICLE II. THE DISTRIBUTION....................................................... 7
Section 2.01 The Distribution................................................ 7
Section 2.02 Cooperation Prior to the Distribution........................... 8
Section 2.03 Conditions to the Distribution.................................. 9
ARTICLE III. TRANSACTIONS RELATING TO THE DISTRIBUTION............................. 9
Section 3.01 Intercorporate Reorganization................................... 9
Section 3.02 Repayment of Intercompany Indebtedness
and Cash Dividend............................................. 10
Section 3.03 Satisfaction and Waiver of Any Claims........................... 10
Section 3.04 Hussmann Tax Sharing Agreement.................................. 10
Section 3.05 Employee Benefit Plans and Other
Compensation Arrangements..................................... 10
Section 3.06 Board of Directors and Resignations............................. 21
Section 3.07 Hussmann Rights Agreement....................................... 21
Section 3.08 Insurance....................................................... 21
ARTICLE IV. INDEMNIFICATION........................................................ 22
Section 4.01 Indemnification by Whitman...................................... 22
Section 4.02 Indemnification by Hussmann and
Hussmann Operating Company.................................... 23
Section 4.03 Limitations on Indemnification
Obligations................................................... 23
Section 4.04 Procedures for Indemnification.................................. 25
Section 4.05 Remedies Cumulative............................................. 27
Section 4.06 Survival of Indemnities......................................... 27
ARTICLE V. ACCESS TO INFORMATION................................................... 28
Section 5.01 Access to Information........................................... 28
Section 5.02 Production of Witnesses......................................... 28
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Section 5.03 Retention of Records............................................ 28
Section 5.04 Confidentiality................................................. 29
ARTICLE VI. ADDITIONAL COVENANTS.................................................. 29
Section 6.01 Corporate Names................................................. 29
Section 6.02 Privileged Matters.............................................. 30
Section 6.03 Limitation on Solicitation of Employees......................... 32
Section 6.04 Expenses........................................................ 33
Section 6.05 Further Assurances.............................................. 33
Section 6.06 Qualification as Tax-Free Distribution.......................... 33
Section 6.07 Insurance Coverage Litigation................................... 34
ARTICLE VII. MISCELLANEOUS........................................................ 34
Section 7.01 Complete Agreement; Conflict with Hussmann
Tax Sharing Agreement......................................... 34
Section 7.02 Survival of Agreements.......................................... 35
Section 7.03 Governing Law................................................... 35
Section 7.04 Notices......................................................... 35
Section 7.05 Amendments...................................................... 35
Section 7.06 Successors and Assigns.......................................... 35
Section 7.07 Termination..................................................... 35
Section 7.08 No Third Party Beneficiaries.................................... 36
Section 7.09 Titles and Headings............................................. 36
Section 7.10 Severability.................................................... 36
Section 7.11 Specific Performance............................................ 36
Section 7.12 Waivers......................................................... 36
Section 7.13 Execution in Counterparts....................................... 37
SCHEDULE A: Hussmann Limits of Liability.......................................... A-1
SCHEDULE B: Whitman Indemnification of Hussmann Indemnitees....................... B-1
SCHEDULE C: Hussmann and Hussmann Operating Company
Indemnification of Whitman Indemnitees.............................. C-1
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DISTRIBUTION AND INDEMNITY AGREEMENT
DISTRIBUTION AND INDEMNITY AGREEMENT (this "Agreement"), dated as of
December 31, 1997, by and among WHITMAN CORPORATION, a Delaware corporation
("Whitman"), HUSSMANN INTERNATIONAL, INC., a Delaware corporation and, as of the
date hereof, a wholly-owned subsidiary of Whitman ("Hussmann"), and HUSSMANN
CORPORATION, a Missouri corporation and, as of the Distribution Date, a wholly-
owned subsidiary of Hussmann ("Hussmann Operating Company").
WHEREAS, the Whitman Board has determined that it is appropriate and
desirable to spin off Hussmann by distributing all of the shares of Hussmann
Common Stock owned by Whitman on the Distribution Date on a pro rata basis to
the holders of record of Whitman Common Stock as of the Record Date; and
WHEREAS, Whitman, Hussmann and Hussmann Operating Company have
determined that it is appropriate and desirable to set forth the principal
corporate transactions required to effect such distribution and certain other
agreements that will govern certain matters relating to such distribution;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 General. In this Agreement, the following terms have
the meanings specified or referred to in this Article I and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement. Unless the context clearly indicates otherwise, the word "including"
means "including but not limited to."
Action: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: when used with respect to a specified Person, another
Person that controls, is controlled by, or is under common control with the
Person specified. As used in this Agreement, "control" means the possession,
directly or indirectly, of the
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power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or other interests,
by contract or otherwise.
Agent: First Chicago Trust Company of New York, as distribution
agent.
Available Whitman Reserves: has the meaning specified in Section
3.05(c)(3).
Code: the Internal Revenue Code of 1986, as amended, and the Treasury
regulations promulgated thereunder, including any successor legislation.
Commission: the Securities and Exchange Commission.
Conveyance and Assumption Instruments: collectively, the various
agreements, instruments and other documents to be entered into to effect the
transfer of assets and the assumption of Liabilities contemplated by this
Agreement.
Distribution: the distribution to holders of record of Whitman Common
Stock as of the Record Date of all of the shares of Hussmann Common Stock owned
by Whitman on the Distribution Date.
Distribution Date: the date determined by the Whitman Board (or a
duly authorized committee thereof) on which the Distribution shall be effected.
Employee Benefit Plan: an employee welfare benefit plan or an
employee pension benefit plan as defined in Sections 3(1) and 3(2) of ERISA or a
plan which is both an employee welfare benefit plan and an employee pension
benefit plan.
Environmental Coverage Litigation: has the meaning specified in
Section 6.07.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
Exchange Act: the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, including any successor
legislation.
Foreign Exchange Rate: with respect to any currency other than United
States dollars as of any date of determination, the average of the opening bid
and asked rates on such date at which such currency may be exchanged for United
States dollars as quoted by The First National Bank of Chicago or, if not quoted
by said Bank, by Citicorp, N.A.
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Hussmann: Hussmann International, Inc., a Delaware corporation and,
as of the date hereof, a wholly-owned subsidiary of Whitman.
Hussmann Common Stock: the Common Stock, $.001 par value, of
Hussmann.
Hussmann Debt Repayment: has the meaning specified in Section
3.02(a).
Hussmann ERP: has the meaning specified in Section 3.05(e)(1).
Hussmann Form 10: the registration statement on Form 10 filed by
Hussmann with the Commission to effect the registration of the Hussmann Common
Stock pursuant to the Exchange Act.
Hussmann Funded Welfare Plan: has the meaning specified in Section
3.05(c)(1).
Hussmann Indemnitees: has the meaning specified in Section
3.05(a)(2)(ii).
Hussmann Management Incentive Compensation Plan: has the meaning
specified in Section 3.05(a)(1).
Hussmann Master Trust: has the meaning specified in Section
3.05(e)(2).
Hussmann Operating Company: Hussmann Corporation, a Missouri
corporation and, as of the Distribution Date, a wholly-owned subsidiary of
Hussmann.
Hussmann Participants: has the meaning specified in Section
3.05(d)(1)(i).
Hussmann Pension Plan Beneficiaries: has the meaning specified in
Section 3.05(e)(1).
Hussmann Pension Plans: has the meaning specified in Section
3.05(e)(1).
Hussmann Rights: Preferred Stock Purchase Rights of Hussmann issued
pursuant to the Hussmann Rights Agreement.
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Hussmann Rights Agreement: the Rights Agreement, to be entered into
on or prior to the Distribution Date, between Hussmann and First Chicago Trust
Company of New York.
Hussmann RSP Plans: has the meaning specified in Section
3.05(d)(1)(i).
Hussmann RSP Trust: has the meaning specified in Section
3.05(d)(1)(i).
Hussmann Separated Employee: any individual (i) who, on or prior to
the Distribution Date, was employed by Whitman or any of its subsidiaries
(including Hussmann or any subsidiary of Hussmann) and who, prior to the
Distribution Date, was last employed by Hussmann or any Hussmann Subsidiary or
(ii) who, on or after the Distribution Date or otherwise in connection with the
Distribution, remains or becomes employed by Hussmann or any Hussmann
Subsidiary, including any beneficiary or dependent of such individual, as
applicable.
Hussmann Split Dollar Plan: has the meaning specified in Section
3.05(f)(1).
Hussmann Stock Incentive Plan: has the meaning specified in Section
3.05(b)(2).
Hussmann Subsidiary: any subsidiary of Hussmann on the Distribution
Date that will remain a subsidiary of Hussmann immediately following the
Distribution Date, including Hussmann Operating Company, and any other
subsidiary of Hussmann which thereafter may be organized or acquired.
Hussmann Tax Sharing Agreement: the Tax Sharing Agreement, dated the
date hereof, between Whitman, Hussmann and Hussmann Operating Company.
Hussmann Welfare Benefit Plans: has the meaning specified in Section
3.05(c)(1).
Hussmann Welfare Trust: has the meaning specified in Section
3.05(c)(1).
Indemnifying Party: has the meaning specified in Section 4.03(a).
Indemnitee: has the meaning specified in Section 4.03(a).
Information: has the meaning specified in Section 5.01.
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Information Statement: the Information Statement sent to the holders
of Whitman Common Stock in connection with the Distribution.
Insurance Proceeds: those monies (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of an insured,
in either case net of any applicable premium adjustments (including reserves),
retrospectively rated premium adjustments, deductibles, retentions, costs paid
by such insured or repayments by such insured to such insurance carrier of any
monies previously received by such insured from such insurance carrier.
IRS: the Internal Revenue Service.
Liabilities: any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and
including, without limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any governmental entity or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.
Loss and Losses: have the meanings specified in Section 3.05(a)(1).
Management Committee: has the meaning specified in Section
3.05(e)(2).
Option: any option granted under the Whitman Stock Incentive Plan.
Pension Effective Date: has the meaning specified in Section
3.05(e)(2).
Person: any natural person, corporation, business trust, joint
venture, limited liability company, association, company, partnership or
government, or any agency or political subdivision thereof.
Pneumo Abex: has the meaning specified in Section 6.07.
Record Date: the close of business, New York time, on the date
determined by the Whitman Board (or a duly authorized committee thereof) as the
record date for the Distribution.
Representatives: has the meaning specified in Section 5.01.
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Restricted Stock: any award of restricted shares of Whitman Common
Stock granted under the Restricted Stock Award provisions of the Whitman Stock
Incentive Plan.
RSP Committee: has the meaning specified in Section 3.05(d)(2).
RSP Effective Date: has the meaning specified in Section
3.05(d)(1)(i).
Split Dollar Effective Date: has the meaning specified in Section
3.05(f)(1).
Spread: has the meaning specified in Section 3.05(b)(1).
Subsidiaries: the term "subsidiaries" as used herein with respect to
any entity shall mean any corporation, partnership or other entity of which such
entity (i) owns, directly or indirectly, ownership interests sufficient to elect
a majority of the board of directors (or individuals performing similar
functions) (irrespective of whether at the time any other class or classes of
ownership interests of such corporation, partnership or other entity shall or
might have such voting power upon the occurrence of any contingency) or (ii) is
a general partner or an entity performing similar functions, and
shall, unless otherwise indicated, be deemed to refer to both direct and
indirect subsidiaries of such entity.
taxing saving: has the meaning specified in Section 4.03(b).
Third Party Claim: has the meaning specified in Section 4.04(b)(1).
Welfare Committee: has the meaning specified in Section 3.05(c)(3).
Welfare Effective Date: has the meaning specified in Section
3.05(c)(1).
Whitman: Whitman Corporation, a Delaware corporation.
Whitman Board: the Board of Directors of Whitman.
Whitman Common Stock: the Common Stock, without par value, of
Whitman.
Whitman Funded Welfare Plan: has the meaning specified in Section
3.05(c)(1).
Whitman Indemnitees: has the meaning specified in Section 3.05(a)(1).
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Whitman Master Trust: has the meaning specified in Section
3.05(e)(1).
Whitman MIC Plan: has the meaning specified in Section 3.05(a)(2).
Whitman RSP Plans: has the meaning specified in Section
3.05(d)(1)(i).
Whitman RSP Trust: has the meaning specified in Section
3.05(d)(1)(i).
Whitman Split Dollar Plan: has the meaning specified in Section
3.05(f)(1).
Whitman Stock Incentive Plan: the Whitman Corporation Stock Incentive
Plan and the Whitman Corporation Revised Stock Incentive Plan.
Whitman Subsidiary: any subsidiary of Whitman other than Hussmann or
any Hussmann Subsidiary.
Whitman Welfare Trust: has the meaning specified in Section
3.05(c)(1).
ARTICLE II
THE DISTRIBUTION
----------------
Section 2.01 The Distribution.
(a) Subject to Section 2.03 and Section 7.07 hereof, prior to the
Distribution Date, Whitman shall deliver to the Agent, for the benefit of the
holders of record of Whitman Common Stock on the Record Date, one or more stock
certificates, endorsed by Whitman in blank, representing all of the then
outstanding shares of Hussmann Common Stock owned by Whitman, and shall instruct
the Agent on the Distribution Date either to distribute in certificated form, or
make book-entry credits for, the appropriate number of such shares of Hussmann
Common Stock to each such holder (and, if applicable, cash in lieu of any
fractional shares obtained in the manner provided in Section 2.01(c)). Each of
Whitman and Hussmann shall provide to the Agent all share certificates and any
information required in order to complete the Distribution on the basis of one
share of Hussmann Common Stock for every two shares of Whitman Common Stock
outstanding on the Record Date.
(b) The Distribution shall be effective as of 12:01 a.m., New York
time, on the Distribution Date.
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(c) No certificates representing fractional shares of Hussmann Common
Stock shall be distributed in the Distribution. Holders that request or receive
delivery of physical certificates representing Hussmann Common Stock in the
Distribution and holders that would receive less than one whole share of
Hussmann Common Stock in the Distribution will receive cash in lieu of any
fractional shares. Whitman shall instruct the Agent to determine the number of
fractional shares of Hussmann Common Stock allocable to each holder of record of
Whitman Common Stock as of the Record Date who will receive cash in lieu of a
fractional share of Hussmann Common Stock, to aggregate all such fractional
shares and sell the whole shares obtained thereby on the New York Stock Exchange
or otherwise, in each case at then prevailing trading prices, and to cause to be
distributed to each such holder, in lieu of any fractional share, such holder's
ratable share of the proceeds of such sale, after deducting an amount equal to
all brokerage charges, commissions and transfer taxes attributed to such sale.
Section 2.02 Cooperation Prior to the Distribution.
(a) Whitman and Hussmann have prepared, and Whitman shall mail, prior
to the Distribution Date, to the holders of Whitman Common Stock as of the
Record Date, the Information Statement, which shall set forth appropriate
disclosure concerning Hussmann, the Distribution and other matters. Whitman and
Hussmann have prepared, and Hussmann has filed with the Commission, the Hussmann
Form 10, which includes or incorporates by reference portions of the Information
Statement. The Hussmann Form 10 has become effective under the Exchange Act.
(b) Whitman and Hussmann shall cooperate in preparing, filing with
the Commission and causing to become effective any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by the
Distribution and this Agreement.
(c) Whitman and Hussmann shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States (and any comparable laws of
any foreign jurisdiction), in connection with the transactions contemplated by
this Agreement.
(d) Whitman and Hussmann have prepared, and Hussmann has filed in
preliminary form and shall seek to make effective, an application to permit
listing of the Hussmann Common Stock (as well as the associated Hussmann Rights)
on the New York Stock Exchange.
Section 2.03 Conditions to the Distribution. This Agreement and the
consummation of each of the transactions provided for herein shall be subject to
approval of the Whitman Board. The Whitman Board (or a duly authorized
committee
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thereof) shall in its discretion establish the Record Date and the Distribution
Date and all appropriate procedures in connection with the Distribution, but in
no event shall the Distribution Date occur prior to such time as each of the
following have occurred or have been waived by the Whitman Board in its sole
discretion: (1) the Whitman Board shall have formally approved the
Distribution; (2) the Hussmann Form 10 shall have been declared effective by the
Commission; (3) a ruling(s) from the IRS shall have been obtained, and continue
in effect, that in substance provides that the Distribution will qualify as a
tax-free "spin-off" under Section 355 of the Code, and such ruling(s) shall be
in form and substance satisfactory to Whitman in its sole discretion; (4) the
Board of Directors of Hussmann, comprised as contemplated by Section 3.06(a),
shall have been duly elected; (5) the Hussmann Common Stock shall have been
accepted for listing on the New York Stock Exchange or for quotation on The
Nasdaq Stock Market; (6) the transactions contemplated by Section 3.01 and
Section 3.02 shall have been consummated in all material respects; and (7) no
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Distribution shall be in effect and no other event shall have occurred or
failed to occur that prevents the consummation of the Distribution; provided,
however, that the satisfaction of such conditions shall not create any
obligation on the part of Whitman to effect the Distribution or in any way limit
Whitman's power of termination set forth in Section 7.07 or alter the
consequences of any such termination from those specified in such Section.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
-----------------------------------------
Section 3.01 Intercorporate Reorganization.
(a) At least one business day prior to the Distribution Date, a
series of steps shall be consummated for the purpose of separating from Whitman
any assets that are related to the business of Hussmann. The steps to be taken,
the specific form and sequence of which shall be in the sole discretion of the
management of Whitman shall, among other things, result in Hussmann directly
owning all of the outstanding capital stock of Hussmann Operating Company and
directly or indirectly owning all of the foreign Subsidiaries and Affiliates of
Whitman that are related to the business of Hussmann. The transfer of capital
stock shall be effected by means of delivery of one or more stock certificates
duly endorsed or accompanied by duly executed stock powers and notation on the
stock records books of the corporation or other legal entities involved and, to
the extent required by applicable law, by notation on appropriate registries.
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(b) In connection with transfers of assets other than capital stock
and the assumptions of any Liabilities, Whitman and Hussmann shall execute or
cause to be executed by the appropriate entities the Conveyance and Assumption
Instruments in such forms as Whitman and Hussmann shall reasonably agree,
including the transfer of any real property by deed.
(c) Prior to the Distribution Date, Whitman and Hussmann shall take
all steps necessary to increase the outstanding shares of Hussmann Common Stock
so that immediately prior to the Distribution, Whitman shall own the number of
shares of Hussmann Common Stock necessary to effect the Distribution.
Section 3.02 Repayment of Intercompany Indebtedness and Cash
Dividend.
(a) Prior to the Distribution, Hussmann shall repay to Whitman all
intercompany indebtedness owing by Hussmann and the Hussmann Subsidiaries to
Whitman and the Whitman Subsidiaries at the time of such repayment (the
"Hussmann Debt Repayment").
(b) Prior to the Distribution, Hussmann shall pay a cash dividend to
Whitman in an amount which, when added to the amount of the Hussmann Debt
Repayment, equals an aggregate of $250 million.
Section 3.03 Satisfaction and Waiver of Any Claims. Hussmann agrees,
on behalf of itself and each Hussmann Subsidiary, except as may otherwise be
provided in the Hussmann Tax Sharing Agreement, that Hussmann and each Hussmann
Subsidiary hereby waives any claim they might otherwise have against Whitman or
any Whitman Subsidiary by reason of dividends or tax benefits paid or made
available to Whitman or any Whitman Subsidiary, by Hussmann or any Hussmann
Subsidiary at any time prior to the Distribution.
Section 3.04 Hussmann Tax Sharing Agreement. On or prior to the date
hereof, Whitman, Hussmann and Hussmann Operating Company will execute and
deliver the Hussmann Tax Sharing Agreement.
Section 3.05 Employee Benefit Plans and Other Compensation
Arrangements.
(a) Management Incentive Compensation Plan.
(1) Hussmann shall establish a Management Incentive Compensation Plan
(the "Hussmann Management Incentive Compensation Plan"). Hussmann and the
Hussmann Subsidiaries shall be solely liable and responsible for all Liabilities
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whatsoever arising under the Hussmann Management Incentive Compensation Plan,
and neither Whitman nor any Whitman Subsidiary shall have any Liabilities in
respect thereof at any time. Hussmann and Hussmann Operating Company shall
indemnify, defend and hold harmless Whitman, each Affiliate of Whitman and each
of Whitman's directors, officers and employees and each of the heirs, executors,
successors and assigns of any of the foregoing (the "Whitman Indemnitees") from
and against any and all losses, Liabilities, claims, damages, payments, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown (including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions (collectively,
"Losses" and, individually, a "Loss")) of the Whitman Indemnitees arising out of
or due to the failure or alleged failure of Hussmann or any of its Affiliates to
pay, perform or otherwise discharge such Liabilities.
(2) With respect to the Whitman Corporation Management Incentive
Compensation Plan (the "Whitman MIC Plan"):
(i) Hussmann and the Hussmann Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Whitman MIC
Plan in connection with any claims made by or on behalf of any Hussmann
Separated Employee, and neither Whitman nor any Whitman Subsidiary shall
have any Liabilities in respect thereof at any time. Hussmann and Hussmann
Operating Company shall indemnify, defend and hold harmless the Whitman
Indemnitees from and against any and all Losses of the Whitman Indemnitees
arising out of or due to the failure or alleged failure of Hussmann or any
of its Affiliates to pay, perform or otherwise discharge such Liabilities.
(ii) Except as set forth in Section 3.05(a)(2)(i), Whitman shall be
solely liable and responsible for all Liabilities whatsoever arising under
the Whitman MIC Plan in connection with any claims made by or on behalf of
any individual, and neither Hussmann nor any Hussmann Subsidiary shall have
any Liabilities in respect thereof at any time. Whitman shall indemnify,
defend and hold harmless Hussmann, each Affiliate of Hussmann and each of
Hussmann's and Hussmann Operating Company's directors, officers and
employees and each of the heirs, executors, successors and assigns of any
of the foregoing (the "Hussmann Indemnitees") from and against any and all
Losses of the Hussmann Indemnitees arising out of or due to the failure or
alleged failure of Whitman or any of its Affiliates to pay, perform or
otherwise discharge such Liabilities.
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(b) Stock Incentive Plan.
(1) With respect to any Options issued to Hussmann Separated
Employees, the Distribution constitutes a termination of employment from Whitman
and its subsidiaries under the terms of Section 7(E) of the Whitman Stock
Incentive Plan. Each Option held by a Hussmann Separated Employee which is
exercisable on, and not exercised on or prior to, the Distribution Date and with
respect to which the holder has elected prior to the Distribution Date not to
surrender for an option to purchase shares of Hussmann Common Stock shall be
considered outstanding and exercisable according to its terms and the terms of
the Whitman Corporation Stock Incentive Plan. The number of shares of Whitman
Common Stock subject to and the exercise price of such Option shall be
determined in accordance with the requirements of Section 424 of the Code and
the regulations promulgated thereunder. The exercise price of any such Option
shall be rounded to the nearest $.01; the number of shares subject to any such
Option shall be rounded down to the nearest whole share; the aggregate Spread of
such Option immediately after the Distribution Date shall be equal to the Spread
of such Option immediately before the Distribution Date. "Spread" means, as of
the same date, the excess of the fair market value of the shares subject to the
option over the aggregate option price.
(2) Whitman and Hussmann shall cooperate and take all action
necessary so that as of the Distribution Date, each Option held by a Hussmann
Separated Employee and which is either (i) exercisable on, and not exercised on
or prior to, the Distribution Date and with respect to which the holder has
elected prior to the Distribution Date to surrender in exchange for an option to
purchase shares of Hussmann Common Stock; or (ii) not exercisable on or prior to
the Distribution Date, shall both, without any action on the part of the holder
thereof, be considered to be surrendered to Whitman in exchange for an option to
be issued from the Stock Incentive Plan to be established by Hussmann (the
"Hussmann Stock Incentive Plan") to purchase shares of Hussmann Common Stock.
The number of shares of Hussmann Common Stock subject to and the exercise price
of such option shall be determined in accordance with the requirements of
Section 424 of the Code and the regulations promulgated thereunder. The
exercise price of any such option shall be rounded to the nearest $.01; the
number of shares subject to any such option shall be rounded down to the nearest
whole share; the aggregate Spread of such option immediately after the
Distribution Date shall be equal to the Spread of each Option surrendered for it
immediately before the Distribution Date; and such options shall be granted
under the Hussmann Stock Incentive Plan with an outstanding exercise period and
vesting schedule which is the same as the exercise period and vesting schedule
of the Option surrendered for it.
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(3) The parties agree that Hussmann Separated Employees holding
shares of Restricted Stock on the Record Date will receive shares of Hussmann
Common Stock (as well as shares of common stock of Midas, Inc. being distributed
simultaneously therewith) as a dividend on the Distribution Date, in common with
all other shareholders of Whitman, free of any restriction but subject to
applicable withholding taxes. Whitman and Hussmann will separately arrange for
the payment of such withholding taxes by the recipient. With respect to any
shares of Restricted Stock outstanding as of the close of business on the
Distribution Date that are then held by a Hussmann Separated Employee, Whitman
and Hussmann shall cooperate and take all action necessary so that as of the
Distribution Date such shares of Restricted Stock and the underlying Restricted
Stock Award Agreement will be canceled and replaced with shares of restricted
Hussmann Common Stock of equivalent value and a Restricted Stock Award Agreement
issued under the Hussmann Stock Incentive Plan having the same vesting schedule
as that contained in the Agreement which it replaced.
(4) Hussmann and the Hussmann Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Whitman Stock
Incentive Plan or Options or Restricted Stock issued thereunder in connection
with any claims made by or on behalf of any Hussmann Separated Employee, and
neither Whitman nor any Whitman Subsidiary shall have any Liabilities in respect
thereof at any time. Hussmann and Hussmann Operating Company shall indemnify,
defend and hold harmless the Whitman Indemnitees from and against any and all
Losses of the Whitman Indemnitees arising out of or due to the failure or
alleged failure of Hussmann or any of its Affiliates to pay, perform or
otherwise discharge such Liabilities or the failure by any Hussmann Separated
Employee to pay the applicable withholding taxes referred to in Section
3.05(b)(3).
(5) Except as set forth in Section 3.05(b)(4), Whitman shall be
solely liable and responsible for all Liabilities whatsoever arising under the
Whitman Stock Incentive Plan in connection with any claims made by or on behalf
of any individual, and neither Hussmann nor any Hussmann Subsidiary shall have
any Liabilities in respect thereof at any time. Whitman shall indemnify, defend
and hold harmless the Hussmann Indemnitees from and against any and all Losses
of the Hussmann Indemnitees arising out of or due to the failure or alleged
failure of Whitman or any of its Affiliates to pay, perform or otherwise
discharge such Liabilities.
(6) Hussmann shall establish the Hussmann Stock Incentive Plan
substantially in the form in which it has been filed as an Exhibit to the
Hussmann Form 10. The Hussmann Stock Incentive Plan shall become effective as
of the Distribution Date for Hussmann Separated Employees. Whitman shall
approve the Hussmann Stock Incentive Plan as the sole shareholder of Hussmann.
Hussmann and the Hussmann Subsidiaries shall be solely liable and responsible
for all Liabilities
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whatsoever arising under the Hussmann Stock Incentive Plan, and neither Whitman
nor any Whitman Subsidiary shall have any Liabilities in respect thereof at any
time. Hussmann and Hussmann Operating Company shall indemnify, defend and hold
harmless the Whitman Indemnitees from and against any and all Losses of the
Whitman Indemnitees arising out of or due to the failure or alleged failure of
Hussmann or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities.
(c) Welfare Benefits.
(1) Hussmann shall, effective on a date which is on or prior to the
Distribution Date ("Welfare Effective Date"), establish the Hussmann Corporation
Group Benefits Plan ("Hussmann Funded Welfare Plan") and the Hussmann
Corporation Welfare Benefit Trust ("Hussmann Welfare Trust"), each substantially
similar to the Whitman Corporation Group Benefits Plan ("Whitman Funded Welfare
Plan") and the Whitman Corporation Welfare Benefit Trust ("Whitman Welfare
Trust"), respectively. The Hussmann Funded Welfare Plan and the Hussmann Welfare
Trust shall, as of the Welfare Effective Date, assume all Liabilities whatsoever
arising (before, on or after the Welfare Effective Date) under the Whitman
Funded Welfare Plan or the Whitman Welfare Trust, respectively, at any time with
respect to each and every Hussmann Separated Employee. Hussmann shall continue
to provide, effective on the Distribution Date, welfare benefit plans (as
described in ERISA Section 3(c)) it or any Hussmann Subsidiary currently
sponsors to each and every Hussmann Separated Employee substantially similar to
the welfare benefits provided to each and every Hussmann Separated Employee on
the date hereof (all such plans herein referred to as "Hussmann Welfare Benefit
Plans").
(2) Hussmann and the Hussmann Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under all Hussmann Welfare
Benefit Plans or the Hussmann Welfare Trust, and neither Whitman nor any Whitman
Subsidiary shall have any Liabilities in respect thereof at any time. Hussmann
and the Hussmann Subsidiaries shall be solely liable and responsible for all
Liabilities whatsoever to each and every Hussmann Separated Employee with
respect to the Hussmann Welfare Benefit Plans or the Hussmann Welfare Trust at
any time. Hussmann and Hussmann Operating Company shall indemnify, defend and
hold harmless the Whitman Funded Welfare Plan, the Whitman Welfare Trust, and
the Whitman Indemnitees from and against any and all Losses of the Whitman
Funded Welfare Plan, the Whitman Welfare Trust, and the Whitman Indemnitees
arising out of or due to the failure or alleged failure of the Hussmann Welfare
Benefit Plans, the Hussmann Welfare Trust, Hussmann or any of its Affiliates to
pay, perform or otherwise discharge such Liabilities.
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(3) Whitman shall provide to Hussmann, as of the Welfare Effective
Date, a determination of the fair market value of the assets held by the Whitman
Welfare Trust as of the Welfare Effective Date (but excluding the sum of
$6,000,000) ("Available Whitman Reserves"). The Whitman Welfare Trust shall
deliver to the Hussmann Welfare Trust an amount, as determined by the Welfare
Benefit Trust Committee for the Whitman Benefit Trust ("Welfare Committee"), of
the Available Whitman Reserves, equal to (1) minus (2) where (1) is an amount
determined by multiplying the Available Whitman Reserves times a fraction, the
numerator of which is Whitman's estimate of claim reserve for the fiscal year
ended December 31, 1997, based on historical and current transactions of the
Whitman Welfare Trust attributable to each and every Hussmann Separated
Employee, and the denominator of which is the aggregate claim reserve for the
fiscal year ended December 31, 1997, based on historical and current
transactions of the Whitman Welfare Trust attributable to all activity under the
Whitman Funded Welfare Plan; and (2) is an amount equal to expenses and
contributions incurred but not paid on and prior to the Welfare Effective Date
attributable to each and every Hussmann Separated Employee.
(4) As of the Welfare Effective Date, Whitman, the Welfare Committee,
the Whitman Funded Welfare Plan, and the Whitman Welfare Trust, each to the
extent applicable, shall cause to be issued to Hussmann, the Hussmann Funded
Welfare Plan or the Hussmann Welfare Trust, respectively, for the benefit only
of a Hussmann Separated Employee, all insurance contracts (including health
maintenance organization contracts), administration contracts, or other service
contracts which are either substantially similar to such contracts held by each
or applicable only with respect to a Hussmann Separated Employee. Each such
contract shall include, if any, reserves or retrospective refunds or premiums
due based on the experience realized thereunder with respect to each and every
Hussmann Separated Employee.
(d) Retirement Savings Plans.
(1)(i) Hussmann shall, as of a date which is on or prior to the
Distribution Date ("RSP Effective Date"), establish two defined
contribution plans and related trust(s) with a trustee designated by
Hussmann (respectively referred to below as the "Hussmann RSP Plans" and
"Hussmann RSP Trust") substantially similar to the Whitman Corporation
Retirement Savings Plan and the Whitman Corporation Master Retirement
Savings Plan (with the exception that on and after the Distribution Date
instead of a Whitman Common Stock fund in both there will be offered a
Hussmann Common Stock fund) and the Whitman Corporation Defined
Contribution Master Trust (respectively referred to below as the "Whitman
RSP Plans" and the "Whitman RSP Trust") covering, among others, each and
every Hussmann Separated Employee or beneficiary thereof who, on or prior
to the RSP Effective Date, is either a participant or a beneficiary,
respectively, in either of the Whitman RSP Plans who has or has
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accrued a right to an account balance in either of the Whitman RSP Plans
(such persons are referred to as "Hussmann Participants"). Each of the
Hussmann RSP Plans and the Hussmann RSP Trust shall, effective as of the
RSP Effective Date, assume all Liabilities whatsoever arising (before, on
or after the RSP Effective Date) under each of the respective Whitman RSP
Plans and the respective portion of the Whitman RSP Trust with respect to
Hussmann Participants.
(ii) Hussmann and the Hussmann Subsidiaries shall be solely liable
and responsible for all Liabilities whatsoever arising under the Hussmann
RSP Plans and Hussmann RSP Trust, and neither Whitman nor any Whitman
Subsidiary shall have any Liabilities in respect thereof at any time.
Hussmann and the Hussmann Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever to Hussmann Participants with
respect to the Hussmann RSP Plans and Hussmann RSP Trust at any time.
Hussmann and Hussmann Operating Company shall indemnify, defend and hold
harmless the Whitman RSP Plans, the Whitman RSP Trust and the Whitman
Indemnitees from and against any and all Losses of the Whitman RSP Plans,
the Whitman RSP Trust and the Whitman Indemnitees arising out of or due to
the failure or alleged failure of the Hussmann RSP Plans, the Hussmann RSP
Trust, Hussmann or any of its Affiliates to pay, perform or otherwise
discharge such Liabilities.
(2) As of a valuation date not later than 30 calendar days after the
RSP Effective Date, as provided in the Whitman RSP Trust, there shall be
transferred to the Hussmann RSP Trust assets the value of which as of such
valuation date is equal to, as determined by the Administrative Committee of the
Whitman RSP Trust ("RSP Committee"), the value of the account balances of, and
liabilities with respect to, all Hussmann Participants, as of such valuation
date not otherwise distributed or to be distributed pursuant to the Whitman RSP
Plans, less expenses or contributions incurred or due but not paid as of such
date of transfer with respect to each and every Hussmann Separated Employee.
Such assets shall consist of cash, contract rights, beneficial interests in
collective funds, and shares of stock to the extent that the accounts of
Hussmann Participants under the Whitman RSP Plans were invested in such
investment alternatives. Hussmann shall cause all assets so transferred to the
Hussmann RSP Trust to be allocated among the Hussmann RSP Plans in a manner such
that the value of the assets of each of the Hussmann RSP Plans so allocated
shall be equal to the value of assets transferred from each of the respective
Whitman RSP Plans.
(3) As of the RSP Effective Date, Whitman, the RSP Committee, the
Whitman RSP Plans, and the Whitman RSP Trust, each to the extent applicable,
shall cause to be issued to Hussmann, the Hussmann RSP Plans or the Hussmann RSP
Trust, respectively, for the benefit only of Hussmann Participants, all
insurance
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contracts, administration contracts, or other service contracts which are either
substantially similar to such contracts held by each or applicable only with
respect to Hussmann Participants.
(e) Defined Benefit Pension Plans.
(1) Hussmann shall continue, on and after the Distribution Date,
qualified defined benefit pension plans ("Hussmann Pension Plans"), which are
presently being funded by the Whitman Corporation Defined Benefit Master Trust
("Whitman Master Trust"), and a nonqualified Hussmann Corporation Executive
Retirement Plan ("Hussmann ERP"), all of which Hussmann or a Hussmann Subsidiary
currently sponsors for current and former employees and beneficiaries of
employees or former employees of Hussmann and Hussmann Subsidiaries (the
"Hussmann Pension Plan Beneficiaries"). Hussmann and the Hussmann Subsidiaries
shall be solely liable and responsible for all Liabilities whatsoever arising
under the Hussmann Pension Plans and Hussmann ERP, and neither Whitman nor any
Whitman Subsidiary shall have any Liabilities in respect thereof at any time,
except to the extent such Liabilities relate to a benefit accrued by the
Hussmann Participant under a qualified defined benefit pension plan maintained
by Whitman or a Whitman Subsidiary which is offset by the Hussmann Pension Plans
against any benefit accrual under the Hussmann Pension Plans based on the same
period of credited service. Hussmann and the Hussmann Subsidiaries shall be
solely liable and responsible to all Hussmann Pension Plan Beneficiaries for all
Liabilities whatsoever with respect to the Hussmann Pension Plans and Hussmann
ERP at any time. Hussmann and Hussmann Operating Company shall indemnify,
defend and hold harmless the Whitman Master Trust and the Whitman Indemnitees
from and against any and all Losses of the Whitman Master Trust and the Whitman
Indemnitees arising out of or due to the failure or alleged failure of the
Hussmann Pension Plans, Hussmann Master Trust (defined below), Hussmann or any
of its Affiliates to pay, perform or otherwise discharge such Liabilities.
(2) Hussmann shall, as of a date on or prior to the Distribution Date
("Pension Effective Date"), adopt a Hussmann Corporation Defined Benefit Master
Trust ("Hussmann Master Trust") substantially similar to the Whitman Master
Trust and designate a trustee for the Hussmann Master Trust for each of the
Hussmann Pension Plans. As provided in the Whitman Master Trust, the Management
Committee of the Whitman Master Trust ("Management Committee") shall cause the
Whitman Master Trust to transfer to the Hussmann Master Trust, a pro rata
portion (net of accrued expenses, contributions and benefits attributable to
each and every Hussmann Separated Employee) of the cash, securities and other
assets in the Whitman Master Trust as determined solely by the Management
Committee on or as soon as practicable after the Pension Effective Date.
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Hussmann shall cause all assets so transferred to the Hussmann Master
Trust to be allocated among the Hussmann Pension Plans in a manner such that the
value of the assets of each of the Hussmann Pension Plans (net of accrued
expenses, contributions, and benefits attributable to each such Hussmann Pension
Plan) so allocated shall be equal to the value of such assets immediately prior
to the transfer from the Whitman Master Trust.
(3) On or as soon as administratively possible after the Distribution
Date, Whitman shall terminate the Canadian Master Trust and the Management
Committee shall cause the Canadian Master Trust to transfer assets to trusts
participating in the Canadian Master Trust in accordance with the terms of the
Canadian Master Trust.
(f) Executive Split Dollar Life Insurance Plan
(1) Hussmann shall, effective on a date which is on or prior to the
Distribution Date ("Split Dollar Effective Date"), establish the Hussmann
Executive Split Dollar Life Insurance Plan ("Hussmann Split Dollar Plan")
substantially similar to the Whitman Corporation Executive Split Dollar Life
Insurance Plan ("Whitman Split Dollar Plan"). The Hussmann Split Dollar Plan
shall, as of the Split Dollar Effective Date, assume all Liabilities whatsoever
arising (before, on or after the Split Dollar Effective Date) under the Whitman
Split Dollar Plan at any time with respect to each and every Hussmann Separated
Employee.
(2) Whitman shall provide to Hussmann on or before the Split Dollar
Effective Date a list of outstanding life insurance policies issued pursuant to
the Whitman Split Dollar Plan to Hussmann Separated Employees and premiums paid
by Whitman for such policies since the inception of the Whitman Split Dollar
Plan. Whitman and Hussmann shall cooperate in obtaining new Split Dollar
Agreements and Collateral Assignments by Hussmann Split Dollar Plan participants
assigning to Hussmann the right to Whitman's Corporate Capital Interest as
provided in the Whitman Split Dollar Plan with respect to past premium
contributions made by Whitman in respect of Hussmann Separated Employees.
Subject to the execution of such Split Dollar Agreements and Collateral
Assignments by Hussmann Split Dollar Plan participants, Hussmann shall reimburse
Whitman for all premium contributions made by Whitman in respect of Hussmann
Separated Employees since the inception of the Whitman Split Dollar Plan
pursuant to Section 3.02(a).
(3) Hussmann and the Hussmann Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Hussmann Split
Dollar Plan, and neither Whitman nor any Whitman Subsidiary shall have any
Liabilities in respect thereof at any time. Hussmann and the Hussmann
Subsidiaries shall be solely liable and responsible for all Liabilities
whatsoever to each and every Hussmann Separated Employee with respect to the
Hussmann Split Dollar Plan at any time. Hussmann and
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Hussmann Operating Company shall indemnify, defend and hold harmless the Whitman
Split Dollar Plan and the Whitman Indemnitees from and against any and all
Losses of the Whitman Split Dollar Plan and the Whitman Indemnitees arising out
of or due to the failure or alleged failure of the Hussmann Split Dollar Plan,
Hussmann or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities.
(g) Severance Pay.
(1) The parties agree that, with respect to any individual who, in
connection with the Distribution, ceases to be an employee of Whitman or a
Whitman Subsidiary and becomes or continues to be a Hussmann Separated Employee,
such cessation shall not be deemed to be a severance or termination of
employment from Whitman or a Whitman Subsidiary for purposes of any policy,
plan, program or agreement of Whitman or a Whitman Subsidiary that provides for
the payment of severance or salary continuation benefits. The parties agree
that, as of the Distribution Date, all severance compensation agreements between
Whitman or a Whitman Subsidiary and Hussmann Separated Employees shall be
terminated, and that Hussmann will adopt and approve agreements between Hussmann
and such Hussmann Separated Employees, in lieu of such terminated agreements,
which agreements shall be substantially in the form of the Change in Control
Agreement filed as an Exhibit to the Hussmann Form 10.
(2) Hussmann and the Hussmann Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising in connection with any claims
made by or on behalf of Hussmann Separated Employees in respect of severance pay
or salary continuation obligations relating to the termination or alleged
termination of any such individual's employment as of the Distribution Date or
in connection with the Distribution, and neither Whitman nor any Whitman
Subsidiary shall have any Liabilities in respect thereof at any time. Hussmann
and Hussmann Operating Company shall indemnify, defend and hold harmless the
Whitman Indemnitees from and against any and all Losses of the Whitman
Indemnitees arising out of or due to the failure or alleged failure of Hussmann
or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities.
(3) Except as set forth in Section 3.05(g)(2), Whitman shall be
solely liable and responsible for all Liabilities whatsoever arising in
connection with any claims made by or on behalf of any individual in respect of
severance pay or salary continuation obligations relating to the termination or
alleged termination of employment of such individual, other than any claim
relating to the termination or alleged termination of employment of a Hussmann
Separated Employee as of the Distribution Date or in connection with the
Distribution, and neither Hussmann nor any Hussmann Subsidiary shall have any
Liabilities in respect thereof at any time. Whitman shall indemnify, defend and
hold harmless the Hussmann Indemnitees from
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and against any and all Losses of the Hussmann Indemnitees arising out of or due
to the failure or alleged failure of Whitman or any of its Affiliates to pay,
perform or otherwise discharge such Liabilities.
(h) Hussmann Liability to Hussmann Separated Employees. As of the
Distribution Date, Hussmann and the Hussmann Subsidiaries shall be solely liable
and responsible for all Liabilities whatsoever arising in connection with any
claims made by or on behalf of Hussmann Separated Employees in respect of any
Employee Benefit Plan or Liabilities not otherwise provided for in this
Agreement, as well as with respect to any employee benefit or payment to a
Hussmann Separated Employee not otherwise provided for in this Agreement, and
neither Whitman nor any Whitman Subsidiary shall have any Liabilities in respect
thereof at any time. Hussmann and Hussmann Operating Company shall indemnify,
defend and hold harmless the Whitman Indemnitees and any relevant Employee
Benefit Plan of the Whitman Indemnitees from and against any and all Losses of
the Whitman Indemnitees and any such Employee Benefit Plan arising out of or due
to the failure or alleged failure of Hussmann or any of its Affiliates to pay,
perform or otherwise discharge such Liabilities. To the extent not otherwise
provided in this Agreement, Whitman and Hussmann shall take such action as is
necessary to effect an adjustment to the books of Whitman and of Hussmann and of
their subsidiaries so that, as of the Distribution Date, the prepaid expense
balances and accrued employee Liabilities, if any, with respect to any employee
Liabilities assumed or retained as of the Distribution Date by Whitman and the
Whitman Subsidiaries, on the one hand, and Hussmann and the Hussmann
Subsidiaries, on the other hand, are appropriately reflected on their respective
balance sheets as of the Distribution Date. To the extent that Whitman pays for
any other expenses or Liabilities in respect of a Hussmann Separated Employee
not otherwise provided for in this Agreement, Hussmann and the Hussmann
Subsidiaries shall reimburse Whitman as of the Distribution Date, to the extent
not previously reimbursed.
(i) Whitman Liability to Whitman Employees. Except as otherwise
specifically provided in this Section 3.05, this Agreement shall not affect any
Employee Benefit Plan or other compensation arrangement of Whitman in respect of
any employees of Whitman or the Whitman Subsidiaries who are not Hussmann
Separated Employees. Except as otherwise specifically provided, (1) this
Agreement shall not affect any Hussmann or Hussmann Subsidiary Employee Benefit
Plans or other compensation arrangements which Hussmann or the Hussmann
Subsidiaries have maintained on or before the Distribution Date and (2) Whitman
shall have no Liabilities with respect to such Employee Benefit Plans or
arrangements at any time.
(j) Cooperation. Whitman and Hussmann shall, in connection with the
transactions and transfers described in Section 3.05(d) and Section 3.05(e),
cooperate in making any and all appropriate filings required under the Code or
ERISA and the regulations thereunder and any applicable securities laws and take
all such action as
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may be necessary to cause such transactions and transfers to take place on or as
soon as practicable after the Distribution Date.
(k) Miscellaneous. Nothing in this Agreement shall be interpreted as
requiring Whitman or Hussmann or any subsidiary of Whitman or Hussmann to
maintain any Employee Benefit Plan or other benefit plan for any period of time
or shall impair the right of any of the foregoing to amend or terminate any such
Employee Benefit Plan or other benefit plan in accordance with its terms or
applicable law. Nothing in this Agreement shall be construed to create a right
in any employee or dependent or beneficiary of any employee under an Employee
Benefit Plan or other benefit plan which such employee, dependent or beneficiary
would not otherwise have under the terms of such Employee Benefit Plan or other
benefit plan.
Section 3.06 Board of Directors and Resignations.
(a) Hussmann and Whitman shall take all actions which may be required
to elect as directors of Hussmann, on or prior to the Distribution Date, the
persons named in the Hussmann Form 10 to constitute the Board of Directors of
Hussmann on the Distribution Date.
(b) Whitman shall cause each of its employees to resign, effective
not later than the Distribution Date, from all positions as a director and/or
officer of Hussmann and any Hussmann Subsidiary; and Hussmann shall cause each
of its employees to resign, effective not later than the Distribution Date, from
all positions as a director and/or officer of Whitman or any Whitman Subsidiary;
provided, however, that no individual shall be required by any party hereto to
resign from any position or office with another party hereto (or a subsidiary of
such other party) if such individual is named or identified in the Information
Statement as the individual who is to hold such position or office after the
Distribution.
Section 3.07 Hussmann Rights Agreement. Hussmann shall enter into
the Hussmann Rights Agreement substantially in the form attached as an Exhibit
to the Hussmann Form 10.
Section 3.08 Insurance.
(a) Since April 1, 1979, Whitman has provided insurance coverage to
Hussmann and the Hussmann Subsidiaries through Whitman's wholly-owned insurance
subsidiary, Whitman Insurance Co., Ltd., for workers' compensation, general
liability, automobile liability and products liability. Hussmann Operating
Company has paid premiums to Whitman Insurance Co., Ltd. to provide such
insurance, without deductibles, and for varying limits of liability, as detailed
on Schedule A. Whitman shall cause Whitman Insurance Co., Ltd. to provide
coverage to Hussmann and the
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Hussmann Subsidiaries for all those coverages named above, without deductibles,
and up to the limits shown on Schedule A, for all insured incidents occurring
from the date such coverage first commenced through and including the
Distribution Date. The provisions of insurance coverage applicable to the above
are stipulated in policies of insurance issued to Whitman by Continental
Insurance Co., National Union Fire Insurance Co. and Old Republic Insurance Co.
(b) Since April 1, 1994, Whitman has provided Employment Practices
Liability insurance coverage to Hussmann and the Hussmann Subsidiaries through
Whitman Insurance Co., Ltd. for $900,000 per occurrence with an aggregate of
$2,000,000 per policy period for Whitman and its Subsidiaries excess of the per
occurrence deductible of $100,000, as shown on Schedule A. The insurance
applicable to this coverage is stipulated in policies of insurance issued to
Whitman by Lexington Insurance Co. and Whitman Insurance Co., Ltd.
(c) Since April 1, 1996 Whitman has provided General Liability and
since July 1, 1996 Whitman has provided All Risk Property insurance coverage to
Hussmann and the Hussmann Subsidiaries located outside of the United States and
Canada through Whitman Insurance Co., Ltd. for varying limits excess of varying
deductibles, as shown on Schedule A. The insurance applicable to this coverage
is stipulated in policies of insurance issued to Whitman by Cigna Insurance
Company, CNA and Winterthur Insurance Company.
(d) The parties agree that Hussmann shall have the right to present
claims to Whitman or Whitman's insurers under all policies of insurance placed
by Whitman on behalf of Hussmann or any Hussmann Subsidiary or which include
Hussmann or any Hussmann Subsidiary within them, whether placed through Whitman
Insurance Co., Ltd. or otherwise, for insured incidents occurring from the date
said coverage first commenced until the Distribution Date. The parties agree
that any such policies written on a "claims made" rather than "occurrence" basis
may not provide coverage to Hussmann for incidents occurring on or prior to the
Distribution Date but which are first reported after the Distribution Date.
ARTICLE IV
INDEMNIFICATION
---------------
Section 4.01 Indemnification by Whitman. Except with respect to
employee benefits or other Liabilities to employees, which shall be governed by
Section 3.05 hereof, Whitman shall indemnify, defend and hold harmless the
Hussmann Indemnitees from and against any and all Losses of the Hussmann
Indemnities arising out of or due to the failure or alleged failure of Whitman
or any of its
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Affiliates to pay, perform or otherwise discharge in due course any item set
forth on Schedule B. Anything in this Section 4.01 to the contrary
notwithstanding, neither Whitman nor any Whitman Subsidiary shall have any
Liabilities whatsoever to Hussmann or any Hussmann Subsidiary in respect of any
Tax (as such term is defined in the Hussmann Tax Sharing Agreement), except as
otherwise provided on Schedule B hereto or in the Hussmann Tax Sharing
Agreement.
Section 4.02 Indemnification by Hussmann and Hussmann Operating
Company. Except with respect to employee benefits or other Liabilities to
employees, which shall be governed by Section 3.05 hereof, Hussmann and Hussmann
Operating Company shall indemnify, defend and hold harmless the Whitman
Indemnitees from and against any and all Losses of the Whitman Indemnitees
arising out of or due to the failure or alleged failure of Hussmann or any of
its Affiliates to pay, perform or otherwise discharge in due course any item set
forth on Schedule C. Anything in this Section 4.02 to the contrary
notwithstanding, neither Hussmann nor any Hussmann Subsidiary shall have any
Liabilities whatsoever to Whitman or any Whitman Subsidiary in respect of any
Tax (as such term is defined in the Hussmann Tax Sharing Agreement), except as
otherwise provided on Schedule C hereto or in the Hussmann Tax Sharing
Agreement.
Section 4.03 Limitations on Indemnification Obligations.
(a) The amount which any party (an "Indemnifying Party") is or may be
required to pay to any other Person (an "Indemnitee") pursuant to the
indemnification provisions contained in Section 3.05, Section 4.01 or Section
4.02 shall be reduced (including, without limitation, retroactively) by any
Insurance Proceeds or other amounts actually recovered by or on behalf of such
Indemnitee, in reduction of the related Loss. If an Indemnitee shall have
received the payment required by Section 3.05, 4.01 or 4.02 of this Agreement
from an Indemnifying Party in respect of any Loss and shall subsequently
actually receive Insurance Proceeds or other amounts in respect of such Loss,
then such Indemnitee shall pay to such Indemnifying Party a sum equal to the
amount of such Insurance Proceeds or other amounts actually received (subject to
the enforcement of the following sentence and up to but not in excess of the
amount of any indemnity payment made hereunder). An insurer who would otherwise
be obligated to pay any claim shall not be relieved of the responsibility with
respect thereto, or, solely by virtue of the indemnification provisions hereof,
have any subrogation rights with respect thereto, it being expressly understood
and agreed that no insurer or any other third party shall be entitled to a
"windfall" (i.e., a benefit they would not be entitled to receive in the absence
of the indemnification provisions) by virtue of the indemnification provisions
hereof.
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(b) If an Indemnitee shall actually realize a tax saving by reason of
having incurred a Loss for which such Indemnitee shall have received a payment
from an Indemnifying Party, then such Indemnitee shall pay to such Indemnifying
Party an amount equal to such tax saving. Whenever there is a substantial
likelihood that an Indemnitee will receive a tax saving by reason of a Loss,
such Indemnitee shall file its tax returns in a manner designed to do so,
provided that such Indemnitee shall have the sole responsibility for the
preparation of its tax returns and reporting thereon such Loss and any payments
received from such Indemnifying Party. An Indemnitee shall be deemed actually
to have realized a tax saving with respect to a Loss if, and to the extent that,
for any taxable period, whether ending before, on or after the Distribution
Date, the aggregate federal, state, local and foreign tax liability actually
payable by such Indemnitee and any of its wholly-owned subsidiaries, computed by
taking into account any deductions, credits or other items attributable to a
Loss (including the receipt of an Indemnity Payment with respect thereto and the
payment of any amounts pursuant to this Section 4.03(b)), is less than such
aggregate tax liability, computed without regard to such deductions, credits or
other items attributable to a Loss (including the receipt of an indemnity
payment with respect thereto and the payment of any amounts pursuant to this
Section 4.03(b)). In the event that, following a payment by an Indemnitee
pursuant to this Section 4.03(b) in respect of a tax saving, there shall be an
adjustment to the amount of such tax saving as a result of an audit or other
proceeding in respect of such Indemnitee's tax returns, the parties shall take
appropriate actions to reflect such adjustment. The term "tax saving" shall
also be deemed to include any interest received from a governmental tax
authority, net of any federal, state, local or foreign taxes payable thereon.
(c) In the event that an indemnity payment shall be denominated in a
currency other than United States dollars, the amount of such payment shall be
translated into United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:
(1) with respect to a Loss arising from payment by a financial
institution under a guarantee, comfort letter, letter of credit, foreign
exchange contract or similar instrument, the Foreign Exchange Rate for such
currency shall be determined as of the date on which such financial
institution shall have been reimbursed;
(2) with respect to a Loss covered by insurance, the Foreign Exchange
Rate for such currency shall be the Foreign Exchange Rate employed by the
insurance company providing such insurance in settling such Loss with the
Indemnifying Party; and
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(3) with respect to a Loss not covered by clause (1) or (2) of this
Section 4.03(c), the Foreign Exchange Rate for such currency shall be
determined as of the date that notice of the claim with respect to such
Loss shall be given to the Indemnitee.
(d) If the amount of any Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
Section 4.04 Procedures for Indemnification.
(a) Any claim under Section 3.05, Section 4.01 or Section 4.02 or any
other Section of this Agreement on account of a Loss which does not result from
a Third Party Claim shall be asserted by written notice given by or on behalf of
an Indemnitee to the relevant Indemnifying Party. Such Indemnifying Party shall
have a period of 30 calendar days after the receipt of such notice within which
to respond thereto. If any such claim is not paid in full by an Indemnifying
Party within 30 calendar days after written notice has been received by the
Indemnifying Party, such Indemnitee and Indemnifying Party shall negotiate in
good faith for a reasonable period of time to settle such amount claimed;
provided, however, that such reasonable period shall not, unless otherwise
agreed by such Indemnitee and Indemnifying Party in writing, exceed 45 calendar
days from the time they began such negotiations; provided, further, that if such
Indemnifying Party does not respond within such 30-day period or rejects such
claim in whole or in part, such Indemnifying Party shall be deemed to have
refused to accept responsibility to make payment. The Indemnitee may, but need
not, at any time thereafter bring an Action against the Indemnifying Party to
recover the unpaid amount of the claim and, if successful in whole or in part,
the Indemnitee also shall be entitled to be paid the expenses of prosecuting
such claim; provided, however, that in the event of any such Action, neither the
Indemnitee nor the Indemnifying Party shall assert the defenses of statute of
limitations and laches arising for the period beginning after the date they
began negotiations hereunder as provided in the preceding sentence.
(b) Procedures for indemnification of Third Party Claims shall be as
follows:
(1) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a Person (including, without limitation, any governmental entity)
who is not a party to this Agreement of any claim or of the commencement by any
such Person of any Action (a "Third Party Claim") with respect to which an
Indemnifying Party may be obligated to provide indemnification pursuant to
Section 3.05, Section 4.01 or Section 4.02 or any other Section of this
Agreement, such Indemnitee or other party shall give such Indemnifying Party
written notice thereof promptly (and in any event within 30
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calendar days) after becoming aware of such Third Party Claim; provided,
however, that the failure of any Indemnitee to give notice as provided in this
Section 4.04(b)(1) shall not relieve such Indemnifying Party of its obligations
under this Article IV, except and only to the extent that such Indemnifying
Party is prejudiced by such failure to give notice. Such notice shall describe
the Third Party Claim in reasonable detail and, if ascertainable, shall indicate
the amount (estimated if necessary) of the Loss that has been or may be
sustained by such Indemnitee.
(2) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim. Within 30 calendar days of the
receipt of notice from an Indemnitee in accordance with Section 4.04(b)(1) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such Indemnitee under this
Article IV for any legal or other expenses (except expenses approved in writing
in advance by the Indemnifying Party) subsequently incurred by such Indemnitee
in connection with the defense thereof; provided, however, that if the
defendants in any such Third Party Claim include both the Indemnifying Party and
one or more Indemnitees and in any Indemnitee's reasonable judgment a conflict
of interest between one or more of such Indemnitees and such Indemnifying Party
exists in respect of such Third Party Claim or if the Indemnifying Party shall
have assumed responsibility for such Third Party Claim with any reservations or
exceptions, such Indemnitees shall have the right to employ separate counsel to
represent such Indemnitees and in that event the reasonable fees and expenses of
such separate counsel (but not more than one separate counsel (other than local
counsel) reasonably satisfactory to the Indemnifying Party) shall be paid by
such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 4.04(b)(2), such
Indemnitee may defend or (subject to the remainder of this Section 4.04(b)(2))
seek to compromise or settle such Third Party Claim. Notwithstanding the
foregoing, neither an Indemnifying Party nor an Indemnitee may settle or
compromise any Third Party Claim over the objection of the other; provided,
however, that consent to settlement or compromise shall not be unreasonably
withheld. Neither an Indemnifying Party nor an Indemnitee shall consent,
without the written approval of the Indemnitee or Indemnifying Party (as the
case may be) to entry of any judgment or enter into any settlement of any Third
Party Claim which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnitee, in the case of a consent or
settlement by an Indemnifying Party, or the Indemnifying Party, in the case of a
consent or settlement by the Indemnitee, of a written release from all
Liabilities in respect to such Third Party Claim.
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(3) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the related Indemnitee shall make
available to such Indemnifying Party any personnel or any books, records or
other documents within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense, settlement or
compromise, and shall otherwise cooperate in the defense, settlement or
compromise of such Third Party Claim.
(4) Notwithstanding anything else in this Section 4.04(b) to the
contrary, if an Indemnifying Party notifies the related Indemnitee in writing of
such Indemnifying Party's desire to settle or compromise a Third Party Claim on
the basis set forth in such notice (provided that such settlement or compromise
includes as an unconditional term thereof the giving by the claimant or
plaintiff of a written release of the Indemnitee from all Liabilities in respect
thereof) and the Indemnitee shall notify the Indemnifying Party in writing that
such Indemnitee declines to accept any such settlement or compromise, such
Indemnitee may continue to contest such Third Party Claim, free of any
participation by such Indemnifying Party, at such Indemnitee's sole expense. In
such event, the obligation of such Indemnifying Party to such Indemnitee with
respect to such Third Party Claim shall be equal to (i) the costs and expenses
of such Indemnitee prior to the date such Indemnifying Party notifies such
Indemnitee of the offer to settle or compromise (to the extent such costs and
expenses are otherwise indemnifiable hereunder) plus (ii) the lesser of (A) the
amount of any offer of settlement or compromise which such Indemnitee declined
to accept and (B) the actual out-of-pocket amount such Indemnitee is obligated
to pay subsequent to such date as a result of such Indemnitee's continuing to
pursue such Third Party Claim.
(5) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third Party Claim against any claimant or plaintiff
asserting such Third Party Claim or against any other person. Such Indemnitee
shall cooperate with such Indemnifying Party in a reasonable manner, and at the
cost and expense of such Indemnifying Party, in prosecuting any subrogated right
or claim.
Section 4.05 Remedies Cumulative. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 4.06 Survival of Indemnities. The obligations of each of
Whitman, Hussmann and Hussmann Operating Company under this Article IV shall
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survive the sale or other transfer by it of any assets or businesses or the
assignment by it of any Liabilities, with respect to any Loss of the other
parties related to such assets, businesses or Liabilities.
ARTICLE V
ACCESS TO INFORMATION
---------------------
Section 5.01 Access to Information. Subject to Section 6.02, from
and after the Distribution Date, each party hereto shall afford to each other
party and its authorized accountants, counsel and other designated
representatives (collectively, "Representatives") reasonable access (including
using reasonable efforts to give access to Persons possessing information) and
duplicating rights during normal business hours to all business records, books,
contracts, instruments, computer data and other data and information
(collectively, "Information") within such party's possession relating to such
other party or any subsidiary of such other party, insofar as such access is
reasonably required by such other party. Information may be requested under
this Article V for, without limitation, audit, accounting, claims, litigation
and tax purposes, as well as for purposes of fulfilling disclosure and reporting
obligations and for performing this Agreement and the transactions contemplated
hereby.
Section 5.02 Production of Witnesses. After the Distribution Date,
each of Whitman and Hussmann and their respective subsidiaries shall use
reasonable efforts to make available to the other parties and their
subsidiaries, upon written request, their present and former directors,
officers, employees and agents as witnesses to the extent that any such
individual may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from time
to time be involved.
Section 5.03 Retention of Records. Except as otherwise required by
law or agreed to in writing, each of Whitman and Hussmann shall retain, and
shall cause its subsidiaries to retain, for a period of at least seven years
following the Distribution Date, all significant Information relating to the
business of the other parties and the other parties' subsidiaries. In addition,
after the expiration of such seven-year period, such Information shall not be
destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (a) the party proposing to destroy or otherwise dispose
of such Information shall provide no less than 30 calendar days' prior written
notice to the party to which such Information relates, specifying in reasonable
detail the Information proposed to be destroyed or disposed of and (b) if a
recipient of such notice shall request in writing prior to the scheduled date
for such destruction or disposal that any of the Information proposed to be
destroyed or disposed of be
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delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested at the expense of the party requesting such Information.
Section 5.04 Confidentiality. Each party shall hold, and shall
cause its subsidiaries and Representatives to hold, in strict confidence, all
Information concerning the other parties in its possession or furnished by the
other parties or the other parties' Representatives pursuant to either this
Agreement or the Hussmann Tax Sharing Agreement (except to the extent that such
Information (a) is on the date hereof or hereafter becomes generally available
to the public other than as a result of a disclosure, directly or indirectly, by
such party or its Representatives or (b) was or becomes available to such party
on a nonconfidential basis prior to its disclosure to such party or its
Representatives, in each case from a source other than the party furnishing such
Information, which source was not itself bound by a confidentiality agreement
with the party furnishing such Information and had not received such
Information, directly or indirectly, from a Person so bound), and each party
shall not release or disclose such Information to any other Person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors, unless compelled to disclose by judicial or administrative process or,
as advised by its counsel, by other requirements of law.
ARTICLE VI
ADDITIONAL COVENANTS
--------------------
Section 6.01 Corporate Names.
(a) As soon as reasonably practicable after the Distribution Date but
in any event within six months thereafter, at Hussmann's expense, Hussmann
shall, and shall cause the Hussmann Subsidiaries to, remove (or, if necessary,
on an interim basis, cover up) any and all exterior signs and other identifiers
located on any of Hussmann's or any Hussmann Subsidiary's property or premises
or on the property or premises used by any of the foregoing which refer or
pertain to Whitman or which include the Whitman name, logo or other trademark or
other Whitman intellectual property.
(b) As soon as is reasonably practicable after the Distribution Date
but in any event within 90 calendar days thereafter, at Hussmann's expense,
Hussmann shall, and shall cause the Hussmann Subsidiaries to, remove from all
letterhead, envelopes, business cards, invoices and other communications media
of any kind, all references to Whitman, including the Whitman name, logo and any
other trademark or other Whitman intellectual property (except that Hussmann
shall not be required to take any
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such action with respect to materials in the possession of customers), and
neither Hussmann nor any Hussmann Subsidiary shall use or display the Whitman
name, logo or other trademarks or Whitman intellectual property without the
prior written consent of Whitman.
(c) Hussmann shall cause Whitman Netherlands B.V. to change its name
within 90 calendar days after the Distribution Date to a name that does not
include "Whitman."
(d) Whitman acknowledges that it has no interest in nor any right to
use or display the Hussmann name or any Hussmann trademark or intellectual
property in any way, and shall cease any such use or display within 90 calendar
days after the Distribution Date.
Section 6.02 Privileged Matters. The parties hereto recognize that
legal and other professional services that have been and will be provided on and
prior to the Distribution Date have been and will be rendered for the benefit of
Whitman and Hussmann and their subsidiaries, and that each of the foregoing
should be deemed to be the client for the purposes of asserting all privileges
which may be asserted under applicable law. To allocate the interests of each
party in the Information as to which any party or any its subsidiaries is
entitled to assert a privilege, the parties agree as follows:
(a) Whitman shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged Information
which relates solely to Whitman or any Whitman Subsidiary or the business of
Whitman or any Whitman Subsidiary, whether or not the privileged Information is
in the possession of or under the control of Whitman or Hussmann or any of their
subsidiaries. Whitman shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged Information
that relates solely to the subject matter of any claims arising out of any item
set forth on Schedule B or any claims which may be asserted in the future in any
lawsuits or other proceedings (not involving Hussmann or any Hussmann
Subsidiary) initiated against or by Whitman or any Whitman Subsidiary, whether
or not the privileged Information is in the possession of or under the control
of Whitman or Hussmann or any of their subsidiaries.
(b) Hussmann shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged Information
which relates solely to Hussmann or any Hussmann Subsidiary or the business of
Hussmann or any Hussmann Subsidiary, whether or not the privileged Information
is in the possession of or under the control of Whitman or Hussmann or any of
their subsidiaries. Hussmann shall also be entitled, in perpetuity, to control
the assertion or waiver of all privileges in connection with privileged
Information which relates solely to the subject matter of any
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claims arising out of any item set forth on Schedule C or any claims which may
be asserted in the future in any lawsuits or other proceedings (not involving
Whitman or any Whitman Subsidiary) initiated against or by Hussmann or any
Hussmann Subsidiary, whether or not the privileged Information is in the
possession of or under the control of Whitman or Hussmann or any of their
subsidiaries.
(c) The parties hereto agree that they shall have a shared privilege,
with equal right to assert or waive, subject to the restrictions in this Section
6.02, with respect to all privileges not allocated pursuant to the terms of
Sections 6.02(a) and (b); provided, however, that no party shall have a shared
privilege in connection with privileged Information that does not relate to such
party, any of its subsidiaries or their respective businesses. All privileges
relating to any claims, proceedings, litigation, disputes, or other matters
which involve Whitman or any Whitman Subsidiary and/or Hussmann or any Hussmann
Subsidiary in respect of which each party retains any responsibility or
liability under this Agreement, shall be subject to a shared privilege among
them.
(d) No party hereto may waive any privilege which could be asserted
under any applicable law, and in which any other party hereto has a shared
privilege, without the consent of the other party, except to the extent
reasonably required in connection with any litigation as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within 20 calendar days after written notice from the
party requesting such consent.
(e) In the event of any litigation or dispute between or among the
parties hereto, any party and a subsidiary of another party hereto, or a
subsidiary of one party hereto and a subsidiary of another party hereto, either
such party may waive a privilege in which the other party has a shared
privilege, without obtaining the consent of the other party; provided, however,
that such waiver of a shared privilege shall be effective only as to the use of
information with respect to the litigation or dispute between the relevant
parties and/or their subsidiaries, and shall not operate as a waiver of the
shared privilege with respect to third parties.
(f) If a dispute arises between or among the parties hereto or their
respective subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto specifically agrees that it will
not withhold consent to waiver for any purpose except to protect its own
legitimate interests.
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(g) Upon receipt by any party hereto or by any subsidiary thereof of
any subpoena, discovery or other request which arguably calls for the production
or disclosure of Information subject to a shared privilege or as to which
another party has the sole right hereunder to assert a privilege, or if any
party obtains knowledge that any of its or any of its subsidiaries' current or
former directors, officers, agents or employees has received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such privileged Information, such party shall promptly notify the
other party or parties of the existence of the request and shall provide the
other party or parties a reasonable opportunity to review the Information and to
assert any rights it or they may have under this Section 6.02 or otherwise to
prevent the production or disclosure of such privileged Information.
(h) The furnishing and delivery of Information pursuant to this
Agreement is made in reliance on the agreement of the parties, as set forth in
Section 5.04, to maintain the confidentiality of confidential or privileged
Information and to assert and maintain all applicable privileges. The access to
Information being granted pursuant to Section 5.01, the agreement to provide
witnesses pursuant to Section 5.02, and the furnishing of notices and documents
and other cooperative efforts contemplated by Article IV, shall not be deemed a
waiver of any privilege that has been or may be asserted under this Agreement or
otherwise.
Section 6.03 Limitation on Solicitation of Employees.
(a) Whitman agrees on behalf of itself, its subsidiaries and
Affiliates which it controls, without any separate bargained for consideration,
but rather as an integral part of the Distribution provided for in this
Agreement, that it shall not directly or indirectly, through a subsidiary or
otherwise, until one year after the Distribution Date, employ or attempt to
employ any Hussmann Separated Employee or induce or attempt to induce any
Hussmann Separated Employee to leave his or her employment.
(b) Hussmann agrees on behalf of itself, its subsidiaries and
Affiliates which it controls, without any separate bargained for consideration,
but rather as an integral part of the Distribution provided for in this
Agreement, that it shall not directly or indirectly, through a subsidiary or
otherwise, until one year after the Distribution Date, employ or attempt to
employ any employee of Whitman or any Whitman Subsidiary or induce or attempt to
induce any employee of Whitman or any Whitman Subsidiary to leave his or her
employment.
(c) The parties agree and acknowledge that the restrictions contained
in this Section 6.03 are reasonable in scope and duration and are necessary to
protect the other party hereto.
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Section 6.04 Expenses. Except as otherwise set forth in this
Agreement, all costs and expenses arising on or prior to the Distribution Date
(whether or not then payable) in connection with the Distribution shall be paid
by Whitman to the extent that appropriate documentation concerning such costs
and expenses shall be provided to Whitman, other than (1) costs incurred in
connection with any financing arrangements entered into by Hussmann or any of
its subsidiaries, (2) listing fees of any national securities exchange or fees
of the National Association of Securities Dealers, Inc. incurred with respect to
listing or quoting the Hussmann Common Stock, (3) fees charged by rating
agencies for rating Hussmann securities, (4) one-third of the legal fees and
expenses of Sidley & Austin and McDermott, Will & Emery, (5) one-half of the
fees and expenses of KPMG Peat Marwick which directly relate to the
Distribution, (6) the fees and expenses of any outside consultant retained by
Hussmann or Hussmann Operating Company, (7) costs incurred in printing and
engraving the stock certificates of Hussmann, and (8) one-third of the cost of
printing and distributing the Hussmann Form 10, the Information Statement and
related documents, all of which shall be paid by Hussmann and Hussmann Operating
Company, whether invoiced by Whitman before or after the Distribution Date.
Section 6.05 Further Assurances. From time to time after the
Distribution Date, each party shall do, execute and deliver, or cause to be
done, executed and delivered, to another party hereto, or its successors and
assigns, all such further acts, deeds, assignments, powers of attorney and other
instruments of conveyance and transfer as such party may reasonably request as
may be necessary to consummate the Distribution and the transactions
contemplated hereby, including filings with, and obtaining the approval of, any
governmental body.
Section 6.06 Qualification as Tax-Free Distribution.
(a) After the Distribution Date, neither Whitman nor Hussmann shall
take, or permit any of its subsidiaries to take, any action which could
reasonably be expected to prevent the Distribution from qualifying as a tax-free
distribution within the meaning of Section 355 of the Code or any other
transaction contemplated by this Agreement which is intended by the parties to
be tax-free from failing so to qualify.
(b) After the Distribution Date, Whitman shall not, nor cause or
permit, any Whitman Subsidiary to take any action or enter into any transaction
which could reasonably be expected to materially adversely impact the expected
tax consequences to Hussmann which are known to Whitman of any transaction
contemplated by this Agreement; provided, however, nothing in this Section
6.06(b) shall prohibit Whitman from taking any action, or entering into any
transaction (or permitting or causing any Whitman Subsidiary so to act or
enter), in the ordinary course of business or in connection with the settlement
of any audit issue or the filing of any tax return. After the Distribution
Date, Hussmann shall not, nor cause or permit, any Hussmann
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Subsidiary to take any action or enter into any transaction which could
reasonably be expected to materially adversely impact the reasonably expected
tax consequences to Whitman which are known to Hussmann of any transaction
contemplated by this Agreement; provided, however, nothing in this Section
6.06(b) shall prohibit Hussmann from taking any action, or entering into any
transaction (or permitting or causing any Hussmann Subsidiary so to act or
enter) in the ordinary course of business or in connection with the settlement
of any audit issue or the filing of any tax return.
Section 6.07 Insurance Coverage Litigation. Hussmann Operating
Company together with Whitman and its former subsidiaries, Pneumo Abex
Corporation ("Pneumo Abex") and Jensen-Kelly Corporation, are co-plaintiffs in
an environmental coverage lawsuit filed in 1992 in the Superior Court of the
State of California, County of Los Angeles, entitled Jensen-Kelly Corporation v.
Allianz Insurance Co., et al., Case No. BC069018 (the "Environmental Coverage
Litigation"). The Environmental Coverage Litigation seeks recovery for
environmental liabilities at numerous sites involving present or former
Subsidiaries or Affiliates of Whitman, including one or more sites attributable
to Hussmann Operating Company or a Subsidiary of Hussmann. Hussmann and Hussmann
Operating Company agree that, from and after the Distribution Date, they will
continue to cooperate at their expense in the prosecution by Whitman and Pneumo
Abex of the Environmental Coverage Litigation to the extent reasonably requested
by Whitman and/or Pneumo Abex, which cooperation will include but not be limited
to the production of documents and the furnishing of testimony. Such cooperation
shall extend to any other insurance coverage action to which Whitman may be a
party and involving any present or former properties or activities of Hussmann
Operating Company or Hussmann Subsidiaries which are not currently part of the
Environmental Coverage Litigation. In exchange for such cooperation, Whitman
agrees to pay to Hussmann Operating Company any insurance proceeds it may
receive in settlement of those claims pertaining to Hussmann properties and
activities, net of attorneys' fees and other reasonable costs and expenses
incurred by Whitman in prosecuting or defending the same.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Complete Agreement; Conflict with Hussmann Tax Sharing
Agreement. This Agreement and the Hussmann Tax Sharing Agreement, including any
schedules and exhibits hereto or thereto, and other agreements and documents
referred to herein, shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that
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there shall be a conflict between the provisions of this Agreement and the
Hussmann Tax Sharing Agreement, the provisions of the Hussmann Tax Sharing
Agreement shall control.
Section 7.02 Survival of Agreements. Except as otherwise
specifically contemplated by this Agreement, all covenants and agreements of the
parties contained in this Agreement shall survive the Distribution Date.
Section 7.03 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
Section 7.04 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be delivered by
hand, mailed by registered or certified mail (postage prepaid and return receipt
requested) or sent by telecopy (confirmed by regular, first-class mail, postage
prepaid) to the parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice) and shall be deemed given on
the date on which such notice is received:
if to Whitman:
Whitman Corporation
3501 Algonquin Road
Rolling Meadows, Illinois 60008
Attention: General Counsel
if to Hussmann or Hussmann Operating Company:
Hussmann International, Inc.
12999 St. Charles Rock Road
Bridgeton, Missouri 63044-2483
Attention: General Counsel
Section 7.05 Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by each of the parties.
Section 7.06 Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. No party may assign its
respective rights or delegate its respective obligations under this Agreement
without the express prior written consent of the other parties hereto.
Section 7.07 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the Whitman Board without the approval of either Hussmann or
of
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<PAGE>
Whitman's shareholders. In the event of such termination, no party shall have
any Liabilities of any kind to any other party on account of such termination
except that expenses incurred in connection with the transactions contemplated
hereby shall be paid as provided in Section 6.04.
Section 7.08 No Third Party Beneficiaries. Except for the provisions
of Section 3.03, Section 3.05 and Article IV relating to Indemnitees, this
Agreement is solely for the benefit of the parties hereto and their respective
Affiliates and should not be deemed to confer upon third parties (including any
employee of Whitman, any Whitman Subsidiary, Hussmann or any Hussmann
Subsidiary) any remedy, claim, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.
Section 7.09 Titles and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
Section 7.10 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
Section 7.11 Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement, the party or parties who are or are to be thereby aggrieved
shall have the right to specific performance and injunctive or other equitable
relief of its rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived. Any requirements for the securing or
posting of any bond with such remedy are waived.
Section 7.12 Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such
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<PAGE>
provision, nor in any way to affect the validity of this Agreement or any part
hereof or the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
Section 7.13 Execution in Counterparts. This Agreement may be
executed in counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same agreement, and
shall become binding when such counterparts have been signed by each of the
parties hereto and delivered to each of the other parties hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
WHITMAN CORPORATION
By: /s/ Kathleen R. Gannon
------------------------
Name: Kathleen R. Gannon
Title: Vice President and Treasurer
HUSSMANN INTERNATIONAL, INC.
By: /s/ Michael D. Newman
-------------------------
Name: Michael D. Newman
Title: Vice President and Chief Financial Officer
HUSSMANN CORPORATION
By: /s/ Michael D. Newman
------------------------
Name: Michael D. Newman
Title: Vice President and Chief Financial Officer
-38-
<PAGE>
SCHEDULE A
HUSSMANN LIMITS OF LIABILITY
<TABLE>
<CAPTION>
POLICY PERIOD LIMITS OF LIABILITY
<S> <C>
4/1/79 - 4/1/80 50% of the first $250,000 each and every
loss, all lines
4/1/80 - 4/1/81 50% of the first $250,000 each and every
loss, all lines*
4/1/81 - 4/1/82 $250,000 each and every loss, all lines*
4/1/82 - 4/1/83 50% of the first $250,000 each and every
loss, all lines*
4/1/83 - 4/1/84 $250,000 each and every loss, all lines*
4/1/84 - 4/1/85 $250,000 each and every loss, all lines*
4/1/85 - 4/1/86 $500,000 each and every loss, General
Liability $250,000 each and every loss,
Workers' Compensation and Automobile
Liability
4/1/86 - 4/1/87 $2,000,000 each and every loss, General
Liability
$500,000 each and every loss, Automobile
Liability
$250,000 each and every loss, Workers'
Compensation
4/1/87 - 4/1/88 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/88 - 4/1/89 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/89 - 4/1/90 $2,000,000 each and every loss, General
Liability
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/90 - 4/1/91 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/91 - 4/1/92 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/92 - 4/1/93 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/93 - 4/1/94 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/94 - 4/1/95 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/95 - 4/1/96 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/96 - 4/1/97 $2,000,000 each and every loss, General
Liability, Workers' Compensation and
Automobile Liability
4/1/97 - Distribution Date $2,000,000 each and every loss, General
Liability, Workers' Compensation and
Automobile Liability
4/1/94 - 4/1/95 $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis,
Employment Practices Liability Coverage.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4/1/95 - 4/1/96 $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis,
Employment Practices Liability Coverage.
4/1/96 - 4/1/97 $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis,
Employment Practices Liability Coverage.
4/1/97 - Distribution Date $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis,
Employment Practices Liability Coverage.
4/1/96 - 4/1/97 $25,000 per occurrence less underlying
deductible for non - U.S. and Canadian
exposures of General Liability.
Underlying Deductibles:
U.K. $10,000
Mexico $10,000
Elsewhere $ 4,500
4/1/97 - Distribution Date $25,000 per occurrence less underlying
deductible for non - U.S. and Canadian
exposures of General Liability.
Underlying Deductibles:
U.K. $10,000
Mexico $10,000
Elsewhere $ 4,500
7/1/96 - 7/1/97 $100,000 per occurrence less underlying
deductible for non - U.S. and Canadian
exposures of $25,000 for All Risk Property
Insurance
</TABLE>
*General Liability (including Products Liability), Automobile Liability and
Workers' Compensation.
A-3
<PAGE>
SCHEDULE B
WHITMAN INDEMNIFICATION OF HUSSMANN INDEMNITEES
Items with respect to which Whitman will indemnify the Hussmann
Indemnitees in accordance with Section 4.01 of this Agreement:
(1) All Losses arising out of the businesses conducted (formerly or
currently) or to be conducted by Whitman (whether directly or through a
subsidiary or Affiliate of Whitman), the Whitman Subsidiaries, and any
previously-owned division, subsidiary or Affiliate of Whitman, whether such
Losses relate to events occurring, or whether such Losses are asserted, before,
on or after the Distribution Date; provided, however, that Whitman shall not be
liable for Losses arising out of (i) the businesses conducted (formerly or
currently) or to be conducted by Hussmann or Hussmann Operating Company (whether
directly or through a subsidiary or Affiliate of Hussmann or Hussmann Operating
Company), the Hussmann Subsidiaries or any previously-owned division, subsidiary
or Affiliate of Hussmann or Hussmann Operating Company; and provided, further,
that, except as set forth in subsection (3) below, Whitman shall be liable for
Losses arising out of the businesses of Whitman that are otherwise not related
to the business of Hussmann.
(2) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, with
respect to all information set forth in the Information Statement or any
supplement thereto (i) on the cover page of the Information Statement and in the
body of the Information Statement under the headings (a) "Summary - The
Distribution," (b) "Summary - Midas," (c) "Introduction," (d) "The Distribution"
and (e) any information derived from such information and (ii) in Annex A and
Annex C of the Information Statement.
(3) All Losses arising out of any Action brought by shareholders of
Whitman or Hussmann because the Distribution is or becomes taxable to such
shareholders for any reason other than as a result of the occurrence of a
transaction on or after the Distribution Date involving either the stock or
assets (or any combination thereof) of Hussmann or any Hussmann Subsidiary or a
breach by Hussmann or Hussmann Operating Company of the Hussmann Tax Sharing
Agreement.
(4) All Losses arising out of any breach by Whitman or any Whitman
Subsidiary of this Agreement or the Hussmann Tax Sharing Agreement.
B-1
<PAGE>
SCHEDULE C
HUSSMANN AND HUSSMANN OPERATING COMPANY INDEMNIFICATION OF
WHITMAN INDEMNITEES
Items with respect to which Hussmann and Hussmann Operating Company
will indemnify the Whitman Indemnitees in accordance with Section 4.02 of this
Agreement:
(1) All Losses arising out of the businesses conducted (formerly or
currently) or to be conducted by Hussmann or Hussmann Operating Company (whether
directly or through a subsidiary or Affiliate of Hussmann or Hussmann Operating
Company), the Hussmann Subsidiaries and any previously-owned division,
subsidiary or Affiliate of Hussmann or Hussmann Operating Company, whether such
Losses relate to events occurring, or whether such Losses are asserted, before,
on or after the Distribution Date.
(2) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, with
respect to all information set forth in the Information Statement or any
supplement thereto, except for information with respect to which Whitman will
indemnify the Hussmann Indemnitees as set forth in Paragraph (2) of Schedule B
of this Agreement.
(3) All Losses arising out of any Action brought by shareholders of
Whitman or Hussmann because the Distribution is or becomes taxable to such
shareholders as a result of the occurrence of a transaction on or after the
Distribution Date involving either the stock or assets (or any combination
thereof) of Hussmann or any Hussmann Subsidiary or a breach by Hussmann or
Hussmann Operating Company of the Hussmann Tax Sharing Agreement.
(4) All Losses arising out of any breach by Hussmann or Hussmann
Operating Company of this Agreement or the Hussmann Tax Sharing Agreement.
C-1
<PAGE>
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") dated as of December 31, 1997,
by and among Whitman Corporation, a Delaware corporation ("Whitman"), Hussmann
International, Inc., a Delaware corporation ("International") and Hussmann
Corporation, a Missouri corporation ("Hussmann").
WHEREAS, the parties have entered into a Distribution and Indemnity
Agreement of even date herewith (the "Distribution Agreement");
WHEREAS, pursuant to the Distribution Agreement all of the issued and
outstanding common stock of International and of Midas, Inc., a Delaware
corporation ("Midas"), will be distributed by Whitman (pro rata) to the holders
of its common stock (the "Distribution");
WHEREAS, International was incorporated on August 29,1997, and, at the time
of the Distribution, International will own all of the issued and outstanding
shares of common stock of Hussmann;
WHEREAS, Whitman and Hussmann are parties to certain tax allocation
agreements (collectively referred to as the "Tax Allocation Agreements") which
deal with the payment of U.S. federal, state and foreign income taxes and other
taxes; and
WHEREAS, the Tax Allocation Agreements did not contemplate the
Distribution;
NOW, THEREFORE, Whitman, on behalf of itself and its former, present and
future direct or indirect subsidiaries other than the members of the Hussmann
Group, as hereinafter defined (hereinafter referred to as the "Whitman Group"),
and International and Hussmann, on behalf of themselves and their former,
present and future direct or indirect subsidiaries, other than those
subsidiaries which, immediately after the Distribution, will be direct or
indirect subsidiaries of Whitman or Midas (hereinafter referred to as the
"Hussmann Group"), enter into this Agreement for the purposes of replacing and
superseding the Tax Allocation Agreements and to define the rights of the
parties hereto with respect to certain potential tax controversies, all as
hereinafter provided.
<PAGE>
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and the
plural forms of the terms defined):
"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Distribution Date" means the date of the Distribution. For all purposes of
this Agreement, the Distribution shall be deemed effective as of the close of
business on the Distribution Date.
"Foreign" means outside the United States of America.
"Hussmann Businesses" means the former, present and future subsidiaries,
divisions and businesses of any member of the Hussmann Group.
"Regulations" means any U.S. Treasury regulations under the Code and any
other state, foreign, or local regulations with respect to taxes.
"Restructuring Taxes" means any Taxes, including, without limitation, any
Taxes imposed pursuant to or as a result of Code Section 311 (together with
related interest, penalties and additions to Tax), resulting from the transfer
or other disposition of stock, assets, or debt including the Distribution and
from those transactions undertaken to separate the Hussmann Businesses from the
Whitman Businesses as contemplated by the Distribution Agreement.
"Tax" or "Taxes" means all forms of taxation, whenever created or imposed,
and whether of the United States of America or otherwise, and whether imposed by
a local, municipal, governmental, state, federation or other body, and without
limiting the generality of the foregoing, shall include income, sales, use, ad
valorem, gross receipts, value added, franchise, transfer, recording,
withholding, payroll, employment, excise, occupation, premium or property taxes,
together with any related interest, penalties and additions to tax, or
additional amounts imposed by any taxing authority (domestic or foreign) upon
the
2
<PAGE>
Hussmann Group, the Whitman Group or any of their respective members or
divisions or branches.
"Tax Benefit" means the amount by which any item, including, but not
limited to, any item of income or deduction, gain or loss or tax credit,
decreases the liability for Taxes on or with respect to a Tax Return.
"Tax Detriment" means the amount by which any item, including, but not
limited to, any item of income or deduction, gain or loss, or tax credit,
increases the liability for Taxes on or with respect to a Tax Return.
"Tax Return" means any return, filing, questionnaire, or other document
required to be filed, including amended returns that may be filed, for any
period with any taxing authority (whether U.S. domestic or foreign) in
connection with any Tax or Taxes (whether or not a payment is required to be
made with respect to such filing).
"Whitman Businesses" means the former, present and future subsidiaries,
divisions and businesses of any member of the Whitman Group which are not, or
are not contemplated by the Distribution Agreement to be, part of the Hussmann
Group immediately after the Distribution.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
Section 2.01. Manner of Preparation. All Tax Returns filed after the
Distribution Date shall be prepared on a basis which is consistent with the
income tax rulings obtained from the U.S. Internal Revenue Service ("IRS") or
any other governmental authority in connection with the restructuring of Whitman
contemplated by the Distribution Agreement (in the absence of a controlling
change in law or circumstances) and shall be filed on a timely basis by the
party responsible for such filing under this Agreement. To the extent that an
inconsistent position taken by one party hereto or a member of its group would
result in a Tax Detriment to the other party hereto or a member of its group,
and in the absence of a controlling change in law or circumstances, all Tax
Returns filed after the date of this Agreement shall be prepared on a basis
consistent with the elections, accounting methods, conventions, and principles
of taxation used for the most
3
<PAGE>
recent taxable periods for which Tax Returns involving similar items have been
filed. Subject to the provisions of this Agreement, all decisions relating to
the preparation and filing of Tax Returns and any audit or other review of such
Tax Returns shall be made in the sole discretion of the party responsible under
this Agreement for such filing.
Section 2.02. Preparation and Filing of and Elections with respect to Pre-
Distribution Tax Returns and Tax Returns for Periods through, to and including
the Distribution Date.
(a) Consolidated U.S. Federal Income and Other U.S. Federal Tax Returns.
All consolidated U.S. federal income and other U.S. federal (including
excise, withholding, fuel and payroll) Tax Returns which include a member of the
Whitman Group and the Hussmann Group that are required to be filed for periods
beginning on or before the Distribution Date shall be prepared and filed by
Whitman. International shall, for each of its taxable periods for which it
and/or Hussmann is included in the consolidated federal income tax return of the
Whitman Group, provide Whitman with (i) a true and correct consolidated federal
income tax return for the Hussmann Group, (ii) separate federal income tax
returns for each member of the Hussmann Group and (iii) a reconciliation of book
income to federal taxable income for each member of the Hussmann Group.
International hereby agrees to and shall utilize the Fast-Tax system for U.S.
federal income tax return preparation in preparing the aforesaid returns and
computations and shall use its best efforts to provide Whitman with such returns
and computations on or before the first day of the sixth month following the end
of the period to which such returns and computations relate but in any event
International shall provide such returns and computations no later than the
fifteenth day of the sixth month following the end of the period to which such
returns and computations relate. Simultaneously with providing the aforesaid
returns and computations, International shall pay to Whitman the amount of total
U.S. federal income tax liability shown on the above-referenced consolidated
federal income tax return for the Hussmann Group, reduced by all estimated
payments theretofore made by International or Hussmann to Whitman on account of
such liability, or if such estimated payments in the aggregate exceed the
federal income tax liability of the Hussmann Group, Whitman shall pay such
excess to International within five (5) days of the filing by Whitman of its
consolidated federal income tax return. Anything herein to the contrary
notwithstanding, International for itself and the members of the Hussmann Group
shall calculate in accordance with past practice and shall remit to Whitman at
least five (5) days prior to the due date of
4
<PAGE>
each Whitman estimated quarterly federal income tax payment the quarterly
estimated federal income tax payment that Whitman is required to remit on behalf
of the Hussmann Group. In no event will any member of the Hussmann Group receive
any tax benefit for purposes of this Section unless Whitman recognizes and
obtains said benefit on its consolidated federal income tax return.
(b) State of Illinois Corporate Income Tax Returns.
All State of Illinois corporate income tax returns that may be or are
required to be filed by Whitman for periods beginning on or before the
Distribution Date shall be prepared and filed by Whitman on a unitary group
basis and shall include members of the Hussmann Group. To permit Whitman to
prepare and file such returns, International or Hussmann shall, for each taxable
period for which it is included in the Illinois state income tax return of
Whitman's unitary group, provide Whitman with (i) a computation of the Illinois
corporate income tax liability of each member of the Hussmann Group, prepared an
both a separate company basis as well as on a unitary basis which includes all
members of the Hussmann Group; (ii) a reconciliation of its separate company
Illinois corporate taxable income to its separate taxable income for U.S.
federal income tax purposes (as determined pursuant to Section 2.02(a) above);
and (iii) the apportionment factors prescribed by Illinois law and all other
information necessary or appropriate for the proper apportionment of the unitary
group income. Each member of the Hussmann Group shall use its best efforts to
provide Whitman with the above material on or before the first day of the sixth
month following the end of each such period, but in any event such material
shall be provided no later than the fifteenth day of such sixth month.
Simultaneously with providing the aforesaid material, International shall pay to
Whitman the lesser of (x) the aggregate amount of the separate company Illinois
tax liability of each member of the Hussmann Group for each such period, or (y)
the Illinois corporate income tax liability as computed above for the Hussmann
Group on a unitary basis, in either case reduced by all estimated payments
theretofore made to Whitman on account of such liability, or if such estimated
payments in the aggregate exceed the aggregate Illinois tax liability for the
Hussmann Group, Whitman shall pay such excess to International within five (5)
days of filing by Whitman of its Illinois corporate income tax return for such
period. Anything herein to the contrary notwithstanding, International or
Hussmann on behalf of all of the members of the Hussmann Group shall make
estimated Illinois corporate income tax payments to Whitman at such time and in
such amount as shall permit Whitman to remit the same to the appropriate
authority on a timely
5
<PAGE>
basis, but in any event each such payment shall be made within five (5) days of
Whitman's written demand for the same.
(c) Netherlands Corporate Income Tax, Capital Duty Tax and Withholding Tax
Returns.
Any tax returns required to be filed that include Whitman Netherlands B.V.,
Finanza I B.V., Midas Automotive International B.V., any other members of the
Whitman Group and any members of the Hussmann Group in the Netherlands for
corporate income tax, capital duty tax or withholding tax purposes for periods
beginning on or before the Distribution Date shall be prepared, reviewed and
filed under the direction of Whitman consistent with the positions taken by
Whitman in any tax rulings obtained from the U.S. Internal Revenue Service and
the Netherlands taxing authorities in a timely manner in accordance with the law
of the Netherlands. International or Hussmann shall, for each taxable period for
which a member of the Hussmann Group is included in the consolidated income tax
return (also referred to as a "fiscal unity" return in the Netherlands) with
members of the Whitman Group, provide Whitman with (i) a true and correct
Netherlands income tax return for such Hussmann Group members which are required
to file in the Netherlands, (ii) separate Netherlands income tax returns for
such Hussmann Group members and (iii) a reconciliation of book income to
Netherlands taxable income for such Hussmann Group members. International agrees
to utilize Moret Ernst & Young to prepare the income tax returns in the
Netherlands for this purpose and shall use its best efforts to provide Whitman
with such returns and computations on or before sixty (60) days before the tax
returns must be filed (including extensions to file granted by the Netherlands).
Simultaneously with providing the aforesaid returns and computations,
International shall pay Whitman the amount of total Netherlands income taxes
(and any other applicable taxes) shown on the above-referenced consolidated
Netherlands income tax return due and payable relating to the members of the
Hussmann Group, reduced by all estimated tax payments theretofore made by
Hussmann Group members to Whitman on account of such Netherlands tax
liabilities. If such estimated payments in the aggregate exceed the Netherlands
tax liability of the Hussmann Group members, Whitman shall pay such excess to
International within ten (10) days of the filing by Whitman of the consolidated
Netherlands income tax return which included members of the Whitman Group.
Anything herein to the contrary notwithstanding, International for itself and
for members of the Hussmann Group shall remit to Whitman at least ten (10) days
prior to the due date of each Whitman estimated Netherlands income tax payment
(also known as "preliminary
6
<PAGE>
assessments" in the Netherlands) the estimated Netherlands tax payment that
Whitman (or a Whitman Group member) is required to remit on behalf of Hussmann
Group members. In no event will any member of the Hussmann Group receive any
tax benefit for purposes of this Section unless a member of the Whitman Group
recognizes and obtains said benefit on its consolidated Netherlands income tax
return.
(d) Other Tax Returns
All Tax Returns of any member of the Whitman Group or the Hussmann Group,
other than (1) the consolidated U.S. federal income tax returns, (2) the State
of Illinois corporate income tax returns and (3) the corporate income tax, the
capital duty tax and the withholding tax returns filed in the Netherlands, which
are required to be filed for periods beginning on or before the Distribution
Date shall be filed by the member of the Whitman Group or the Hussmann Group, as
the case may be, which filed the corresponding Tax Return for the most recent
period for which such a Tax Return has been filed, or, if no such corresponding
Tax Return has been filed, by the appropriate member in accordance with local
law or custom.
Section 2.03. Filing of Post-Distribution Tax Returns. All Tax Returns for
periods beginning after the Distribution Date shall be the responsibility of the
Whitman Group if such Tax Returns relate to Whitman Businesses, and shall be the
responsibility of the Hussmann Group if such Tax Returns relate to Hussmann
Businesses.
Section 2.04. Certification. Each tax return and computation of tax
liability required to be provided to Whitman by any member of the Hussmann Group
pursuant to either Section 2.02(a), Section 2.02(b) or Section 2.02(c) hereof
shall be accompanied by a statement signed by the Chief Financial Officer of
International to the effect that such officer has reviewed for completeness and
accuracy the tax return and computation of the tax liability and the
documentation in support thereof and has determined that such return and
computation properly reflect the taxable income (or loss), tax liability and tax
credits of the entity or entities, as the case may be, to which such tax return
and computation relate for the period covered thereby.
7
<PAGE>
ARTICLE III
DEFICIENCIES AND REFUNDS OF TAXES
---------------------------------
Section 3.01. Payment of Deficiencies by Hussmann Group Members.
If any adjustments are made with respect to any Tax Returns of Whitman (or
any member of the Whitman Group) in which any member of the Hussmann Group is
included for taxable periods beginning on or before the Distribution Date, and
such adjustments are either consented to by Whitman or are upheld on
administrative appeal or litigation, to the extent that such adjustments
increase the tax liability with respect to any taxing jurisdiction or taxing
authority attributable to any member of the Hussmann Group, then each member of
the Hussmann Group shall be jointly and severally liable to Whitman for such
increases, including interest and penalties thereon. If any member of the
Hussmann Group shall have any liability as a result of this Section 3.01 , the
amount thereof shall be paid by International to Whitman within ten (10) days of
the receipt by International of written notice of such liability, together with
a computation of the amount due and supporting documentation in such detail as
International may reasonably request to verify the computation of the amount
due.
Section 3.02. Payment of Refunds to Hussmann Group Members.
If any adjustments are made with respect to any Tax Returns of Whitman (or
any member of the Whitman Group) in which any member of the Hussmann Group is
included for any taxable period beginning on or before the Distribution Date,
and such adjustments are either consented to by Whitman or are upheld on
administrative appeal or litigation, to the extent that such adjustments
decrease the tax liability attributable to any member of the Hussmann Group as
determined and calculated under this Agreement and result in a Tax Benefit for
Whitman or for other members of the Whitman Group, then Whitman shall remit to
International any refunds of Taxes, together with any interest thereon, received
by it as a result of the adjustments attributable to a member of the Hussmann
Group. Whitman shall pay any amounts due from it to International as a result of
this Section 3.02 within ten (10) days of receipt of the relevant refund from
the respective taxing authority. Such payments shall be accompanied by a
computation of the amount due and supporting documentation in such detail as
International may reasonably request to verify the computation of the amount
due.
8
<PAGE>
Section 3.03. Restructuring Taxes.
(a) With Respect to Transactions Occurring On or Before the Distribution Date.
If as a result of any transaction occurring on or before the Distribution
Date and involving either the stock, assets or debt (or any combination thereof)
of any member of the Hussmann Group, any Restructuring Taxes are imposed upon
any member of the Hussmann Group, then Whitman shall pay and shall indemnify and
hold harmless International and each member of the Hussmann Group from and
against all Restructuring Taxes, including, without limitation, any
Restructuring Taxes at any time paid by International or any member of the
Hussmann Group. Such payment and indemnification shall be made by Whitman no
later than fifteen (15) days after the later to occur of: (a) written notice
from International, which notice shall be accompanied by a computation of the
amounts due; or (b) a final determination of said Restructuring Taxes is made
after exhausting any informal, administrative, arbitration or judicial remedies.
(b) Transactions Occurring After the Distribution Date.
If as a result of any transaction occurring after the Distribution Date and
involving either the stock, assets or debt (or any combination thereof) of
International or of any member of the Hussmann Group (including any transactions
of the type described in Section 4.05 below), any Restructuring Taxes are
imposed upon Whitman or any other member of the Whitman Group, then
International shall pay and shall indemnify and hold harmless Whitman and each
member of the Whitman Group from and against all such Restructuring Taxes at any
time paid by Whitman or any member of the Whitman Group. Such payment and
indemnification shall be made by International no later than fifteen (15) days
after the later to occur of: (a) written notice from Whitman, which notice shall
be accompanied by a computation of the amounts due; or (b) a final determination
of said Restructuring Taxes is made after exhausting any informal,
administrative, arbitration or judicial remedies.
(c) Tax Benefits Regarding Basis Determinations Relating to Restructuring Taxes.
To the extent that Whitman shall pay or indemnify International and/or
any member of the Hussmann Group with respect to Restructuring Taxes pursuant to
Section 3.03(a) above, the basis of the stock, assets or debt which are the
subject of the Restructuring Taxes payable increases, and such stock, assets or
debt are transferred by International or any member of the Hussmann Group in a
taxable transaction to which the basis increase is reflected in the computation
of
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<PAGE>
the gain or loss on such taxable transaction during any taxable year which
includes the Distribution Date and the five (5) taxable years immediately
following the taxable year in which the Distribution Date falls, then
International shall promptly notify Whitman in writing of such taxable
transaction and of the amount of the Tax Benefit resulting from such basis
increase. Such notice shall include supporting documentation in such detail as
Whitman may need to verify the computation of the amount. The amount of such Tax
Benefit shall be payable by International to Whitman within ten (10) days of
sending to Whitman written notice of such amount due. In order to verify the
amount of such Tax Benefit, Whitman shall have access to inspect the Tax Returns
for the taxable years of International and any members of the Hussmann Group
covered by this section upon written request directed to the Chief Financial
Officer of International. International shall comply with such request to make a
copy of the Tax Returns in question available at a reasonable place during
normal business hours within thirty (30) days of receiving said request and
Whitman may make copies of portions of the Tax Returns which it deems relevant
to this inquiry.
ARTICLE IV
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
------------------------------------------
Section 4.01. Tax Audits and Controversies.
Except as otherwise provided in this Section 4.01, Whitman, at its own
expense, shall have the exclusive authority to represent each member of the
Hussmann Group before the IRS or any other governmental agency or authority or
before any court with respect to any matter affecting the U.S. federal income or
other U.S. federal tax liability or any other tax liability (whether state,
local or foreign) of any member of the Whitman Group or the Hussmann Group for
any tax period beginning on or before the Distribution Date. Such
representation shall include, but shall not be limited to exclusive control over
(i) any response to any examination by the IRS or any other taxing authorities
of U.S. federal income tax returns, other U.S. federal tax returns or the tax
returns of other taxing jurisdictions and (ii) any contest through a final
determination of any issue included in any Tax Return that includes a member of
the Whitman Group, including, but not limited to (A) whether and in what forum
to conduct such contest, and (B) whether and on what basis to settle such
contest. Whitman shall give timely notice to International of any inquiry, the
assertion of any claim or the commencement of any suit, action or proceeding in
respect of which indemnity for U.S. federal taxes or any other taxes may be
sought under
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this Agreement against International or any member of the Hussmann Group and
will give International such information with respect thereto as International
may reasonably request. Upon notice to Whitman, International may at its own
expense participate in any such inquiry, audit or other administrative
proceeding and assume the defense or prosecution, as the case may be, of any
suit, action or proceeding; provided, that each International representative is
satisfactory to Whitman, and International shall thereafter consult with Whitman
upon Whitman's request for such consultation from time to time with respect to
such inquiry, suit, action or proceeding. Whitman is authorized and empowered to
settle any claim, suit, action or proceeding in respect of which indemnity for
U.S. federal taxes or any other taxes may be sought against International or any
member of the Hussmann Group. Anything in this Section 4.01 to the contrary
notwithstanding, if Whitman determines to terminate International's
participation in any such inquiry or in the defense of any such suit, action or
proceeding, then upon receipt of notice from Whitman to such effect,
International shall have no further right to commence or continue such
discussions or submissions with respect to the matter, and Whitman shall have
the right to close and to cause International to close such audit or contest.
Anything in this Section 4.01 or elsewhere in this Agreement to the
contrary notwithstanding, if Whitman permits International to litigate any U.S.
federal tax issue or other tax issue in any forum, International shall pay and
shall indemnify and hold harmless each member of the Whitman Group from any and
all costs, expenses and/or liabilities of any type or nature, including, without
limitation, any tax liability (including interest and penalties thereon), that
are incurred by or imposed upon Whitman or any member of the Whitman Group which
Whitman or such Whitman Group member would not otherwise have incurred.
Section 4.02. Code Section 355 Distribution Related Professional and
Consulting Fees.
The Tax Benefits arising out of any professional fees or consulting
fees in connection with the Code section 355 Distribution of International or
other members of the Hussmann Group that are paid for by Whitman or by members
of the Whitman Group which are allowed as a deduction to International or to any
other member of the Hussmann Group, rather than as a deduction to Whitman or to
a member of the Whitman Group which paid for such professional or consulting
fees in question, shall be reimbursed to Whitman or to the member of the Whitman
Group that actually made the payment of such professional or consulting fees.
The amount thereof shall be payable by International to Whitman within ten (10)
days of the receipt by International of written
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notice of such item, together with a computation of the amount due and
supporting documentation in such detail as International may reasonably request
to verify the computation of the amount due.
Section 4.03. Retention of Books and Records.
International and Whitman each agrees that they will take provisions to
insure that both they and the members of the Hussmann Group and the members of
the Whitman Group, respectively, will retain all Tax Returns, related schedules
and workpapers, and all material records and other documents relating thereto
existing on the date hereof or created through or with respect to taxable
periods beginning on or before the Distribution Date, until the later of (a) the
expiration of the statute of limitations (including extensions) of the taxable
years to which such Tax Returns and other documents relate, or (b) September 16,
2008.
Section 4.04. Cooperation With Respect to Tax Return Filings, Examinations
and Tax Related Controversies.
(a) International's Obligations.
In addition to any obligations imposed pursuant to the Distribution
Agreement, International and each other member of the Hussmann Group shall fully
cooperate with Whitman and its representatives, in a prompt and timely manner,
in connection with (i) the preparation and filing of and (ii) any inquiry,
audit, examination, investigation, dispute, or litigation involving, any Tax
Return filed or required to be filed by or for any member of the Whitman Group
for any taxable period beginning on or before the Distribution Date. Such
cooperation shall include, but not be limited to, (x) the execution and delivery
to Whitman by the appropriate Hussmann Group member of any power of attorney
required to allow Whitman and its counsel to represent International or such
other Hussmann Group member in any controversy which Whitman shall have the
right to control pursuant to the terms of Section 4.01 of this Agreement, and
(y) making available to Whitman, during normal business hours, and within sixty
(60) days of any request therefor, all books, records and information, and the
assistance of all officers and employees, necessary or useful in connection with
any tax inquiry, audit, examination, investigation, dispute, litigation or any
other matter.
(b) Whitman's Obligation.
Except as otherwise provided in this Article IV, Whitman shall fully
cooperate with International and its representatives, in a prompt and timely
manner, in connection with (i) the preparation and filing of and (ii) any
inquiry, audit, examination, investigation, dispute, or
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<PAGE>
litigation involving, any Tax Return filed or required to be filed by or for any
member of the Hussmann Group which includes Whitman or any other member of the
Whitman Group. Such cooperation shall include, but not be limited to, (x) the
execution and delivery to International by Whitman of any power of attorney
required to allow International and its counsel to participate on behalf of
International or other Hussmann Group members in any inquiry, audit or other
administrative proceeding and to assume the defense or prosecution, as the case
may be, of any suit, action or proceeding pursuant to the terms of and subject
to the conditions set forth in Section 4.01 of this Agreement, (y) making
available to International, during normal business hours, and within sixty (60)
days of any request therefor, all books, records and information, and the
assistance of all officers and employees, necessary or useful in connection with
any tax inquiry, audit, examination, investigation, dispute, litigation or any
other matter.
(c) Remedy for Failure to Comply.
If Whitman reasonably determines that International is not for any reason
fulfilling its obligations under Section 4.04(a), or if International reasonably
determines that Whitman is not for any reason fulfilling its obligations under
Section 4.04(b), then Whitman or International, as the case may be, shall have
the right to appoint, at the expense of the other, an independent entity such as
a nationally-recognized public accounting firm to assist the other in meeting
its obligations under this Section 4.04. Such entity shall have complete access,
during normal business hours, to all books, records and information, and the
complete cooperation of all officers and employees, of International or Whitman,
as the case may be. The remedy provided in this Section 4.04(c) shall not be
deemed exclusive.
Section 4.05. Certain Post-Distribution Date Transactions.
(a) With Respect to U.S. Federal Income Taxes.
International shall, and shall cause each Hussmann Group member to, comply
with each representation and statement made, or to be made, to the IRS or other
governmental authority in connection with any rulings obtained, or to be
obtained, by Whitman with respect to the Distribution, and any other transaction
contemplated by this Agreement. International further agrees that during the
three-year period following the Distribution Date, it (i) shall continue and
shall cause Whitman Netherlands B.V. to continue to be engaged in an active
trade or business within the meaning of Section 355(b)(2) of the Code, (ii)
shall not issue any shares of, or options with respect to, its stock, except
that it may issue shares of, or options with respect to, its stock if such
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<PAGE>
issuances would not exceed (when aggregated with prior issuances) twenty percent
(20%) of the issued and outstanding stock of International immediately following
the Distribution, (iii) shall not purchase any shares of its stock other than
through stock purchases permitted by the ruling issued to Whitman by the IRS
regarding the Distribution, (iv) shall not liquidate or merge with any other
corporation or transfer substantially all of its assets to any other
corporation, and (v) shall not recommend to its shareholders that they agree to
an acquisition of their stock in International by another entity. Anything in
this Section 4.05 to the contrary notwithstanding, an act or omission otherwise
inconsistent with the representations herein shall be permitted if, in the
opinion of nationally recognized counsel to International, which counsel shall
be satisfactory to Whitman, or pursuant to a supplemental ruling letter obtained
from the IRS and satisfactory to Whitman, such act or omission would not
adversely affect the rulings issued by the IRS or by any other governmental
authority with respect to the Distribution. Nothing in this Section 4.05 should
be interpreted as altering the obligations of International or of any other
member of the Hussmann Group under Section 3.03(b) of this Agreement.
ARTICLE V
TAX ALLOCATION AGREEMENTS TERMINATED
Section 5.01 Complete Agreement and Termination of Tax Allocation
Agreements.
This Agreement shall constitute the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all previous
negotiations and commitments and the prior Tax Allocation Agreements, which
shall be replaced and superseded in their entirety by this Agreement and shall
be of no further force and effect.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
Section 6.02. Modification of Agreement. No modification, amendment or
waiver of any provision of this Agreement shall be
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<PAGE>
effective unless the same shall be in writing and signed by each of the parties
hereto and then such modification, amendment or waiver shall be effective only
in the specific instance and for the purpose for which given.
Section 6.03. Conflict with the Distribution Agreement. In the event and to
the extent that there shall be a conflict between the provisions of this
Agreement and the Distribution Agreement, the provisions of this Agreement shall
control.
Section 6.04. Notices. All notices or other communications required or
permitted under this Agreement shall be delivered by hand, mailed by certified
or registered mail, postage prepaid with return receipt requested, or sent by
cable, telegram, telex or telecopy (confirmed by regular, first-class mail), to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
(a) In the case of Whitman, to
Whitman Corporation
3501 Algonquin Road
Rolling Meadows, Illinois 60008
Attention: Chief Financial Officer
(b) In the case of International and Hussmann:
Hussmann International Inc.
12999 St. Charles Rock Road
Bridgeton, Missouri 63044
Attention: Chief Financial Officer
Section 6.05. Application to Present and Future Subsidiaries. This
Agreement is being entered into by Whitman, International and Hussmann on behalf
of themselves and each member of the Whitman Group and the Hussmann Group,
respectively. This Agreement shall constitute a direct obligation of each such
member and shall be deemed to have been readopted and affirmed on behalf of any
corporation which becomes a member of the Whitman Group or of the Hussmann Group
in the future. Whitman, International and Hussmann hereby guarantee the
performance of all actions, agreements and obligations provided for under this
Agreement of each member of the Whitman Group and the Hussmann Group,
respectively. Whitman, International and Hussmann shall, upon the written
request of the other, cause any of their respective group members formally to
execute this Agreement. This
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<PAGE>
Agreement shall be binding upon, and shall inure to the benefit of, the
successors, assigns and persons controlling any of the corporations bound
hereby.
Section 6.06. Term. This Agreement shall commence on the date of execution
indicated above and shall continue in effect until otherwise agreed to in
writing by the parties hereto, or their respective successors or assigns.
Section 6.07. Titles and Headings. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.
Section 6.08. Singular and Plural. As used herein, the singular shall
include the plural and vice versa.
Section 6.09. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware.
Section 6.10. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
Section 6.11. Form of Payments and Late Payments. Any payment owed by one
party to another under this Agreement shall be made in the currency in which the
tax to which such payment relates, and shall be paid in immediately available
funds and in such other manner as the party to whom such payment is owed may
reasonably request. Any payments required by this Agreement that are not made
when due shall bear interest at the prime rate plus six percent (6%) from the
due date of the payment to the date paid.
Section. 6.12. Treatment of Payments. The parties agree that, in the
absence of any change in law or fact, any indemnification payments made under
this Agreement shall be treated, for tax purposes, as occurring before the
Distribution Date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
WHITMAN CORPORATION
By: /s/ Louis J. Corna
----------------------------------
Vice President-Taxes
HUSSMANN INTERNATIONAL, INC.
By: /s/ Michael D. Newman
----------------------------------
Chief Financial Officer
HUSSMANN CORPORATION
By: /s/ Michael D. Newman
----------------------------------
Chief Financial Officer
17
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DISTRIBUTION AND INDEMNITY AGREEMENT
DATED AS OF DECEMBER 31, 1997
BY AND AMONG
WHITMAN CORPORATION,
MIDAS, INC.
and
MIDAS INTERNATIONAL CORPORATION
<PAGE>
DISTRIBUTION AND INDEMNITY AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I. DEFINITIONS.................................................................... 1
Section 1.01 General........................................................................ 1
ARTICLE II. THE DISTRIBUTION............................................................... 7
Section 2.01 The Distribution............................................................... 7
Section 2.02 Cooperation Prior to the Distribution.......................................... 8
Section 2.03 Conditions to the Distribution................................................. 8
ARTICLE III. TRANSACTIONS RELATING TO THE DISTRIBUTION...................................... 9
Section 3.01 Intercorporate Reorganization.................................................. 9
Section 3.02 Repayment of Intercompany Indebtedness
and Cash Dividend....................................................... 10
Section 3.03 Satisfaction and Waiver of Any Claims......................................... 10
Section 3.04 Midas Tax Sharing Agreement................................................... 10
Section 3.05 Employee Benefit Plans and Other
Compensation Arrangements..................................................... 10
Section 3.06 Board of Directors and Resignations........................................... 20
Section 3.07 Midas Rights Agreement........................................................ 21
Section 3.08 Insurance..................................................................... 21
ARTICLE IV. INDEMNIFICATION............................................................... 22
Section 4.01 Indemnification by Whitman.................................................... 22
Section 4.02 Indemnification by Midas and
Midas Operating Company....................................................... 22
Section 4.03 Limitations on Indemnification
Obligations................................................................... 22
Section 4.04 Procedures for Indemnification................................................ 24
Section 4.05 Remedies Cumulative........................................................... 27
Section 4.06 Survival of Indemnities....................................................... 27
ARTICLE V. ACCESS TO INFORMATION......................................................... 27
Section 5.01 Access to Information......................................................... 27
Section 5.02 Production of Witnesses....................................................... 27
</TABLE>
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<TABLE>
<S> <C> <C>
Section 5.03 Retention of Records.......................................................... 27
Section 5.04 Confidentiality............................................................... 28
ARTICLE VI. ADDITIONAL COVENANTS.................................................................. 28
Section 6.01 Corporate Names.................................................................. 28
Section 6.02 Privileged Matters............................................................... 29
Section 6.03 Limitation on Solicitation of Employees.......................................... 31
Section 6.04 Expenses......................................................................... 32
Section 6.05 Further Assurances............................................................... 32
Section 6.06 Qualification as Tax-Free Distribution........................................... 32
ARTICLE VII. MISCELLANEOUS........................................................................ 33
Section 7.01 Complete Agreement; Conflict with Midas
Tax Sharing Agreement........................................................ 33
Section 7.02 Survival of Agreements........................................................ 33
Section 7.03 Governing Law................................................................. 33
Section 7.04 Notices....................................................................... 33
Section 7.05 Amendments.................................................................... 34
Section 7.06 Successors and Assigns........................................................ 34
Section 7.07 Termination................................................................... 34
Section 7.08 No Third Party Beneficiaries.................................................. 34
Section 7.09 Titles and Headings........................................................... 34
Section 7.10 Severability.................................................................. 35
Section 7.11 Specific Performance.......................................................... 35
Section 7.12 Waivers....................................................................... 35
Section 7.13 Execution in Counterparts..................................................... 35
SCHEDULE A: Midas Limits of Liability............................................................ A-1
SCHEDULE B: Whitman Indemnification of Midas Indemnitees......................................... B-1
SCHEDULE C: Midas and Midas Operating Company
Indemnification of Whitman Indemnitees...................................................... C-1
</TABLE>
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<PAGE>
DISTRIBUTION AND INDEMNITY AGREEMENT
DISTRIBUTION AND INDEMNITY AGREEMENT (this "Agreement"), dated as of
December 31, 1997, by and among WHITMAN CORPORATION, a Delaware corporation
("Whitman"), Midas, Inc., a Delaware corporation and, as of the date hereof, a
wholly-owned subsidiary of Whitman ("Midas"), and MIDAS INTERNATIONAL
CORPORATION, a Delaware corporation and, as of the Distribution Date, a wholly-
owned subsidiary of Midas ("Midas Operating Company").
WHEREAS, the Whitman Board has determined that it is appropriate and
desirable to spin off Midas by distributing all of the shares of Midas Common
Stock owned by Whitman on the Distribution Date on a pro rata basis to the
holders of record of Whitman Common Stock as of the Record Date; and
WHEREAS, Whitman, Midas and Midas Operating Company have determined
that it is appropriate and desirable to set forth the principal corporate
transactions required to effect such distribution and certain other agreements
that will govern certain matters relating to such distribution;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
Section 1.01 General. In this Agreement, the following terms have
the meanings specified or referred to in this Article I and shall be equally
applicable to both the singular and plural forms. Any agreement referred to
below shall mean such agreement as amended, supplemented and modified from time
to time to the extent permitted by the applicable provisions thereof and by this
Agreement. Unless the context clearly indicates otherwise, the word "including"
means "including but not limited to."
Action: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
Affiliate: when used with respect to a specified Person, another
Person that controls, is controlled by, or is under common control with the
Person specified. As used in this Agreement, "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person,
<PAGE>
whether through the ownership of voting securities or other interests, by
contract or otherwise.
Agent: First Chicago Trust Company of New York, as distribution
agent.
Available Whitman Reserves: has the meaning specified in Section
3.05(c)(3).
Code: the Internal Revenue Code of 1986, as amended, and the Treasury
regulations promulgated thereunder, including any successor legislation.
Commission: the Securities and Exchange Commission.
Conveyance and Assumption Instruments: collectively, the various
agreements, instruments and other documents to be entered into to effect the
transfer of assets and the assumption of Liabilities contemplated by this
Agreement.
Distribution: the distribution to holders of record of Whitman Common
Stock as of the Record Date of all of the shares of Midas Common Stock owned by
Whitman on the Distribution Date.
Distribution Date: the date determined by the Whitman Board (or a
duly authorized committee thereof) on which the Distribution shall be effected.
Employee Benefit Plan: an employee welfare benefit plan or an
employee pension benefit plan as defined in Sections 3(1) and 3(2) of ERISA or a
plan which is both an employee welfare benefit plan and an employee pension
benefit plan.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended, or any successor legislation.
Exchange Act: the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, including any successor
legislation.
Foreign Exchange Rate: with respect to any currency other than United
States dollars as of any date of determination, the average of the opening bid
and asked rates on such date at which such currency may be exchanged for United
States dollars as quoted by The First National Bank of Chicago or, if not quoted
by said Bank, by Citicorp, N.A.
Indemnifying Party: has the meaning specified in Section 4.03(a).
Indemnitee: has the meaning specified in Section 4.03(a)
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<PAGE>
Information: has the meaning specified in Section 5.01.
Information Statement: the Information Statement sent to the holders
of Whitman Common Stock in connection with the Distribution.
Insurance Proceeds: those monies (i) received by an insured from an
insurance carrier or (ii) paid by an insurance carrier on behalf of an insured,
in either case net of any applicable premium adjustments (including reserves),
retrospectively rated premium adjustments, deductibles, retentions, costs paid
by such insured or repayments by such insured to such insurance carrier of any
monies previously received by such insured from such insurance carrier.
IRS: the Internal Revenue Service.
Liabilities: any and all debts, liabilities and obligations, absolute
or contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising (unless otherwise specified in
this Agreement), including all costs and expenses relating thereto, and
including, without limitation, those debts, liabilities and obligations arising
under any law, rule, regulation, Action, threatened Action, order or consent
decree of any governmental entity or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.
Loss and Losses: have the meanings specified in Section 3.05(a)(1).
Management Committee: has the meaning specified in Section
3.05(e)(2).
Midas: Midas, Inc., a Delaware corporation and, as of the date
hereof, a wholly-owned subsidiary of Whitman.
Midas Common Stock: the Common Stock, $.001 par value, of Midas.
Midas Debt Repayment: has the meaning specified in Section 3.02(a).
Midas ERP: has the meaning specified in Section 3.05(e)(1).
Midas Form 10: the registration statement on Form 10 filed by Midas
with the Commission to effect the registration of the Midas Common Stock
pursuant to the Exchange Act.
Midas Funded Welfare Plan: has the meaning specified in Section
3.05(c)(1).
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<PAGE>
Midas Indemnitees: has the meaning specified in Section
3.05(a)(2)(ii).
Midas Management Incentive Compensation Plan: has the meaning
specified in Section 3.05(a)(1).
Midas Master Trust: has the meaning specified in Section 3.05(e)(2).
Midas Operating Company: Midas International Corporation, a Delaware
corporation and, as of the Distribution Date, a wholly-owned subsidiary of
Midas.
Midas Participants: has the meaning specified in Section
3.05(d)(1)(i).
Midas Pension Plan Beneficiaries: has the meaning specified in
Section 3.05(e)(1).
Midas Pension Plans: has the meaning specified in Section 3.05(e)(1).
Midas Rights: Preferred Stock Purchase Rights of Midas issued
pursuant to the Midas Rights Agreement.
Midas Rights Agreement: the Rights Agreement, to be entered into on
or prior to the Distribution Date, between Midas and First Chicago Trust Company
of New York.
Midas RSP Plans: has the meaning specified in Section 3.05(d)(1)(i).
Midas RSP Trust: has the meaning specified in Section 3.05(d)(1)(i).
Midas Separated Employee: any individual (i) who, on or prior to the
Distribution Date, was employed by Whitman or any of its subsidiaries (including
Midas or any subsidiary of Midas) and who, prior to the Distribution Date, was
last employed by Midas or any Midas Subsidiary or (ii) who, on or after the
Distribution Date or otherwise in connection with the Distribution, remains or
becomes employed by Midas or any Midas Subsidiary, including any beneficiary or
dependent of such individual, as applicable.
Midas Split Dollar Plan: has the meaning specified in Section
3.05(f)(1).
Midas Stock Incentive Plan: has the meaning specified in Section
3.05(b)(2).
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Midas Subsidiary: any subsidiary of Midas on the Distribution Date
that will remain a subsidiary of Midas immediately following the Distribution
Date, including Midas Operating Company, and any other subsidiary of Midas which
thereafter may be organized or acquired.
Midas Tax Sharing Agreement: the Tax Sharing Agreement, dated the
date hereof, between Whitman, Midas and Midas Operating Company.
Midas Welfare Benefit Plans: has the meaning specified in Section
3.05(c)(1).
Midas Welfare Trust: has the meaning specified in Section 3.05(c)(1).
Option: any option granted under the Whitman Stock Incentive Plan.
Pension Effective Date: has the meaning specified in Section
3.05(e)(2).
Person: any natural person, corporation, business trust, joint
venture, limited liability company, association, company, partnership or
government, or any agency or political subdivision thereof.
Record Date: the close of business, New York time, on the date
determined by the Whitman Board (or a duly authorized committee thereof) as the
record date for the Distribution.
Representatives: has the meaning specified in Section 5.01.
Restricted Stock: any award of restricted shares of Whitman Common
Stock granted under the Restricted Stock Award provisions of the Whitman Stock
Incentive Plan.
RSP Committee: has the meaning specified in Section 3.05(d)(2).
RSP Effective Date: has the meaning specified in Section
3.05(d)(1)(i).
Split Dollar Effective Date: has the meaning specified in Section
3.05(f)(1).
Spread: has the meaning specified in Section 3.05(b)(1).
Subsidiaries: the term "subsidiaries" as used herein with respect to
any entity shall mean any corporation, partnership or other entity of which such
entity (i) owns, directly or indirectly, ownership interests sufficient to elect
a majority of the board
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of directors (or individuals performing similar functions) (irrespective of
whether at the time any other class or classes of ownership interests of such
corporation, partnership or other entity shall or might have such voting power
upon the occurrence of any contingency) or (ii) is a general partner or an
entity performing similar functions, and shall, unless otherwise indicated, be
deemed to refer to both direct and indirect subsidiaries of such entity.
taxing saving: has the meaning specified in Section 4.03(b).
Third Party Claim: has the meaning specified in Section 4.04(b)(1).
Welfare Committee: has the meaning specified in Section 3.05(c)(3).
Welfare Effective Date: has the meaning specified in Section
3.05(c)(1).
Whitman: Whitman Corporation, a Delaware corporation.
Whitman Board: the Board of Directors of Whitman.
Whitman Common Stock: the Common Stock, without par value, of
Whitman.
Whitman Funded Welfare Plan: has the meaning specified in Section
3.05(c)(1).
Whitman Indemnitees: has the meaning specified in Section 3.05(a)(1).
Whitman Master Trust: has the meaning specified in Section
3.05(e)(1).
Whitman MIC Plan: has the meaning specified in Section 3.05(a)(2).
Whitman RSP Plans: has the meaning specified in Section
3.05(d)(1)(i).
Whitman RSP Trust: has the meaning specified in Section
3.05(d)(1)(i).
Whitman Split Dollar Plan: has the meaning specified in Section
3.05(f)(1).
Whitman Stock Incentive Plan: the Whitman Corporation Stock Incentive
Plan and the Whitman Corporation Revised Stock Incentive Plan.
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Whitman Subsidiary: any subsidiary of Whitman other than Midas or any
Midas Subsidiary.
Whitman Welfare Trust: has the meaning specified in Section
3.05(c)(1).
ARTICLE II
THE DISTRIBUTION
----------------
Section 2.01 The Distribution.
(a) Subject to Section 2.03 and Section 7.07 hereof, prior to the
Distribution Date, Whitman shall deliver to the Agent, for the benefit of the
holders of record of Whitman Common Stock on the Record Date, one or more stock
certificates, endorsed by Whitman in blank, representing all of the then
outstanding shares of Midas Common Stock owned by Whitman, and shall instruct
the Agent on the Distribution Date either to distribute in certificated form, or
make book-entry credits for, the appropriate number of such shares of Midas
Common Stock to each such holder (and, if applicable, cash in lieu of any
fractional shares obtained in the manner provided in Section 2.01(c)). Each of
Whitman and Midas shall provide to the Agent all share certificates and any
information required in order to complete the Distribution on the basis of one
share of Midas Common Stock for every six shares of Whitman Common Stock
outstanding on the Record Date.
(b) The Distribution shall be effective as of 12:01 a.m., New York
time, on the Distribution Date.
(c) No certificates representing fractional shares of Midas Common
Stock shall be distributed in the Distribution. Holders that request or receive
delivery of physical certificates representing Midas Common Stock in the
Distribution and holders that would receive less than one whole share of Midas
Common Stock in the Distribution will receive cash in lieu of any fractional
shares. Whitman shall instruct the Agent to determine the number of fractional
shares of Midas Common Stock allocable to each holder of record of Whitman
Common Stock as of the Record Date who will receive cash in lieu of a fractional
share of Midas Common Stock, to aggregate all such fractional shares and sell
the whole shares obtained thereby on the New York Stock Exchange or otherwise,
in each case at then prevailing trading prices, and to cause to be distributed
to each such holder, in lieu of any fractional share, such holder's ratable
share of the proceeds of such sale, after deducting an amount equal to all
brokerage charges, commissions and transfer taxes attributed to such sale.
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Section 2.02 Cooperation Prior to the Distribution.
-------------------------------------
(a) Whitman and Midas have prepared, and Whitman shall mail, prior to
the Distribution Date, to the holders of Whitman Common Stock as of the Record
Date, the Information Statement, which shall set forth appropriate disclosure
concerning Midas, the Distribution and other matters. Whitman and Midas have
prepared, and Midas has filed with the Commission, the Midas Form 10, which
includes or incorporates by reference portions of the Information Statement. The
Midas Form 10 has become effective under the Exchange Act.
(b) Whitman and Midas shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans contemplated by the
Distribution and this Agreement.
(c) Whitman and Midas shall take all such action as may be necessary
or appropriate under the securities or blue sky laws of states or other
political subdivisions of the United States (and any comparable laws of any
foreign jurisdiction), in connection with the transactions contemplated by this
Agreement.
(d) Whitman and Midas have prepared, and Midas has filed in
preliminary form and shall seek to make effective, an application to permit
listing of the Midas Common Stock (as well as the associated Midas Rights) on
the New York Stock Exchange.
Section 2.03 Conditions to the Distribution. This Agreement and the
consummation of each of the transactions provided for herein shall be subject to
approval of the Whitman Board. The Whitman Board (or a duly authorized committee
thereof) shall in its discretion establish the Record Date and the Distribution
Date and all appropriate procedures in connection with the Distribution, but in
no event shall the Distribution Date occur prior to such time as each of the
following have occurred or have been waived by the Whitman Board in its sole
discretion: (1) the Whitman Board shall have formally approved the Distribution;
(2) the Midas Form 10 shall have been declared effective by the Commission; (3)
a ruling(s) from the IRS shall have been obtained, and continue in effect, that
in substance provides that the Distribution will qualify as a tax-free "spin-
off" under Section 355 of the Code, and such ruling(s) shall be in form and
substance satisfactory to Whitman in its sole discretion; (4) the Board of
Directors of Midas, comprised as contemplated by Section 3.06(a), shall have
been duly elected; (5) the Midas Common Stock shall have been accepted for
listing on the New York Stock Exchange or for quotation on The Nasdaq Stock
Market; (6) the transactions contemplated by Section 3.01 and Section 3.02 shall
have been consummated in all material respects; and (7) no order, injunction or
decree issued by
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any court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Distribution shall be in effect
and no other event shall have occurred or failed to occur that prevents the
consummation of the Distribution; provided, however, that the satisfaction of
such conditions shall not create any obligation on the part of Whitman to effect
the Distribution or in any way limit Whitman's power of termination set forth in
Section 7.07 or alter the consequences of any such termination from those
specified in such Section.
ARTICLE III
TRANSACTIONS RELATING TO THE DISTRIBUTION
-----------------------------------------
Section 3.01 Intercorporate Reorganization.
-----------------------------
(a) At least one business day prior to the Distribution Date, a series
of steps shall be consummated for the purpose of separating from Whitman any
assets that are related to the business of Midas. The steps to be taken, the
specific form and sequence of which shall be in the sole discretion of the
management of Whitman shall, among other things, result in Midas directly owning
all of the outstanding capital stock of Midas Operating Company and directly or
indirectly owning all of the foreign Subsidiaries and Affiliates of Whitman that
are related to the business of Midas. The transfer of capital stock shall be
effected by means of delivery of one or more stock certificates duly endorsed or
accompanied by duly executed stock powers and notation on the stock records
books of the corporation or other legal entities involved and, to the extent
required by applicable law, by notation on appropriate registries.
(b) In connection with transfers of assets other than capital stock
and the assumptions of any Liabilities, Whitman and Midas shall execute or cause
to be executed by the appropriate entities the Conveyance and Assumption
Instruments in such forms as Whitman and Midas shall reasonably agree, including
the transfer of any real property by deed.
(c) Prior to the Distribution Date, Whitman and Midas shall take all
steps necessary to increase the outstanding shares of Midas Common Stock so that
immediately prior to the Distribution, Whitman shall own the number of shares of
Midas Common Stock necessary to effect the Distribution.
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Section 3.02 Repayment of Intercompany Indebtedness and Cash
Dividend.
(a) Prior to the Distribution, Midas shall repay to Whitman all
intercompany indebtedness owing by Midas and the Midas Subsidiaries to Whitman
and the Whitman Subsidiaries at the time of such repayment (the "Midas Debt
Repayment").
(b) Prior to the Distribution, Midas shall pay a cash dividend to
Whitman in an amount which, when added to the amount of the Midas Debt
Repayment, equals an aggregate of $225 million.
Section 3.03 Satisfaction and Waiver of Any Claims. Midas agrees, on
behalf of itself and each Midas Subsidiary, except as may otherwise be provided
in the Midas Tax Sharing Agreement, that Midas and each Midas Subsidiary hereby
waives any claim they might otherwise have against Whitman or any Whitman
Subsidiary by reason of dividends or tax benefits paid or made available to
Whitman or any Whitman Subsidiary, by Midas or any Midas Subsidiary at any time
prior to the Distribution.
Section 3.04 Midas Tax Sharing Agreement. On or prior to the date
hereof, Whitman, Midas and Midas Operating Company will execute and deliver the
Midas Tax Sharing Agreement.
Section 3.05 Employee Benefit Plans and Other Compensation
Arrangements.
(a) Management Incentive Compensation Plan.
(1) Midas shall establish a Management Incentive Compensation Plan
(the "Midas Management Incentive Compensation Plan"). Midas and the Midas
Subsidiaries shall be solely liable and responsible for all Liabilities
whatsoever arising under the Midas Management Incentive Compensation Plan, and
neither Whitman nor any Whitman Subsidiary shall have any Liabilities in respect
thereof at any time. Midas and Midas Operating Company shall indemnify, defend
and hold harmless Whitman, each Affiliate of Whitman and each of Whitman's
directors, officers and employees and each of the heirs, executors, successors
and assigns of any of the foregoing (the "Whitman Indemnitees") from and against
any and all losses, Liabilities, claims, damages, payments, absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown (including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions (collectively,
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"Losses" and, individually, a "Loss")) of the Whitman Indemnitees arising out of
or due to the failure or alleged failure of Midas or any of its Affiliates to
pay, perform or otherwise discharge such Liabilities.
(2) With respect to the Whitman Corporation Management Incentive
Compensation Plan (the "Whitman MIC Plan"):
(i) Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Whitman MIC
Plan in connection with any claims made by or on behalf of any Midas
Separated Employee, and neither Whitman nor any Whitman Subsidiary shall
have any Liabilities in respect thereof at any time. Midas and Midas
Operating Company shall indemnify, defend and hold harmless the Whitman
Indemnitees from and against any and all Losses of the Whitman Indemnitees
arising out of or due to the failure or alleged failure of Midas or any of
its Affiliates to pay, perform or otherwise discharge such Liabilities.
(ii) Except as set forth in Section 3.05(a)(2)(i), Whitman shall be
solely liable and responsible for all Liabilities whatsoever arising under
the Whitman MIC Plan in connection with any claims made by or on behalf of
any individual, and neither Midas nor any Midas Subsidiary shall have any
Liabilities in respect thereof at any time. Whitman shall indemnify, defend
and hold harmless Midas, each Affiliate of Midas and each of Midas' and
Midas Operating Company's directors, officers and employees and each of the
heirs, executors, successors and assigns of any of the foregoing (the
"Midas Indemnitees") from and against any and all Losses of the Midas
Indemnitees arising out of or due to the failure or alleged failure of
Whitman or any of its Affiliates to pay, perform or otherwise discharge
such Liabilities.
(b) Stock Incentive Plan.
(1) With respect to any Options issued to Midas Separated Employees,
the Distribution constitutes a termination of employment from Whitman and its
subsidiaries under the terms of Section 7(E) of the Whitman Stock Incentive
Plan. Each Option held by a Midas Separated Employee which is exercisable on,
and not exercised on or prior to, the Distribution Date and with respect to
which the holder has elected prior to the Distribution Date not to surrender for
an option to purchase shares of Midas Common Stock shall be considered
outstanding and exercisable according to its terms and the terms of the Whitman
Corporation Stock Incentive Plan. The number of shares of Whitman Common Stock
subject to and the exercise price of such Option shall be determined in
accordance with the requirements of Section 424 of the Code and the regulations
promulgated thereunder. The exercise price of any such Option
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shall be rounded to the nearest $.01; the number of shares subject to any such
Option shall be rounded down to the nearest whole share; the aggregate Spread of
such Option immediately after the Distribution Date shall be equal to the Spread
of such Option immediately before the Distribution Date. "Spread" means, as of
the same date, the excess of the fair market value of the shares subject to the
option over the aggregate option price.
(2) Whitman and Midas shall cooperate and take all action necessary so
that as of the Distribution Date, each Option held by a Midas Separated Employee
and which is either (i) exercisable on, and not exercised on or prior to, the
Distribution Date and with respect to which the holder has elected prior to the
Distribution Date to surrender in exchange for an option to purchase shares of
Midas Common Stock; or (ii) not exercisable on or prior to the Distribution
Date, shall both, without any action on the part of the holder thereof, be
considered to be surrendered to Whitman in exchange for an option to be issued
from the Stock Incentive Plan to be established by Midas (the "Midas Stock
Incentive Plan") to purchase shares of Midas Common Stock. The number of shares
of Midas Common Stock subject to and the exercise price of such option shall be
determined in accordance with the requirements of Section 424 of the Code and
the regulations promulgated thereunder. The exercise price of any such option
shall be rounded to the nearest $.01; the number of shares subject to any such
option shall be rounded down to the nearest whole share; the aggregate Spread of
such option immediately after the Distribution Date shall be equal to the Spread
of each Option surrendered for it immediately before the Distribution Date; and
such options shall be granted under the Midas Stock Incentive Plan with an
outstanding exercise period and vesting schedule which is the same as the
exercise period and vesting schedule of the Option surrendered for it.
(3) The parties agree that Midas Separated Employees holding shares of
Restricted Stock on the Record Date will receive shares of Midas Common Stock
(as well as shares of common stock of Hussmann International, Inc. being
distributed simultaneously therewith) as a dividend on the Distribution Date, in
common with all other shareholders of Whitman, free of any restriction but
subject to applicable withholding taxes. Whitman and Midas will separately
arrange for the payment of such withholding taxes by the recipient. With respect
to any shares of Restricted Stock outstanding as of the Distribution Date that
are then held by a Midas Separated Employee, Whitman and Midas shall cooperate
and take all action necessary so that as of the Distribution Date such shares of
Restricted Stock and the underlying Restricted Stock Award Agreement will be
canceled and replaced with shares of restricted Midas Common Stock of equivalent
value and a Restricted Stock Award Agreement issued under the Midas Stock
Incentive Plan having the same vesting schedule as that contained in the
Agreement which it replaced.
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(4) Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Whitman Stock
Incentive Plan or Options or Restricted Stock issued thereunder in connection
with any claims made by or on behalf of any Midas Separated Employee, and
neither Whitman nor any Whitman Subsidiary shall have any Liabilities in respect
thereof at any time. Midas and Midas Operating Company shall indemnify, defend
and hold harmless the Whitman Indemnitees from and against any and all Losses of
the Whitman Indemnitees arising out of or due to the failure or alleged failure
of Midas or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities or the failure by any Midas Separated Employee to pay the applicable
withholding taxes referred to in Section 3.05(b)(3).
(5) Except as set forth in Section 3.05(b)(4), Whitman shall be solely
liable and responsible for all Liabilities whatsoever arising under the Whitman
Stock Incentive Plan in connection with any claims made by or on behalf of any
individual, and neither Midas nor any Midas Subsidiary shall have any
Liabilities in respect thereof at any time. Whitman shall indemnify, defend and
hold harmless the Midas Indemnitees from and against any and all Losses of the
Midas Indemnitees arising out of or due to the failure or alleged failure of
Whitman or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities.
(6) Midas shall establish the Midas Stock Incentive Plan substantially
in the form in which it has been filed as an Exhibit to the Midas Form 10. The
Midas Stock Incentive Plan shall become effective as of the Distribution Date
for Midas Separated Employees. Whitman shall approve the Midas Stock Incentive
Plan as the sole shareholder of Midas. Midas and the Midas Subsidiaries shall be
solely liable and responsible for all Liabilities whatsoever arising under the
Midas Stock Incentive Plan, and neither Whitman nor any Whitman Subsidiary shall
have any Liabilities in respect thereof at any time. Midas and Midas Operating
Company shall indemnify, defend and hold harmless the Whitman Indemnitees from
and against any and all Losses of the Whitman Indemnitees arising out of or due
to the failure or alleged failure of Midas or any of its Affiliates to pay,
perform or otherwise discharge such Liabilities.
(c) Welfare Benefits.
(1) Midas shall, effective on a date which is on or prior to the
Distribution Date ("Welfare Effective Date"), establish the Midas International
Corporation Group Benefits Plan ("Midas Funded Welfare Plan") and the Midas
International Corporation Welfare Benefit Trust ("Midas Welfare Trust"), each
substantially similar to the Whitman Corporation Group Benefits Plan ("Whitman
Funded Welfare Plan") and the Whitman Corporation Welfare Benefit Trust
("Whitman Welfare Trust"), respectively. The Midas Funded Welfare Plan and the
Midas Welfare Trust shall, as of the Welfare Effective Date, assume all
Liabilities whatsoever arising (before, on or after the Welfare Effective Date)
under the Whitman Funded Welfare Plan or the Whitman Welfare
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Trust, respectively, at any time with respect to each and every Midas Separated
Employee. Midas shall continue to provide, effective on the Distribution Date,
welfare benefit plans (as described in ERISA Section 3(c)) it or any Midas
Subsidiary currently sponsors to each and every Midas Separated Employee
substantially similar to the welfare benefits provided to each and every Midas
Separated Employee on the date hereof (all such plans herein referred to as
"Midas Welfare Benefit Plans").
(2) Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under all Midas Welfare
Benefit Plans or the Midas Welfare Trust, and neither Whitman nor any Whitman
Subsidiary shall have any Liabilities in respect thereof at any time. Midas and
the Midas Subsidiaries shall be solely liable and responsible for all
Liabilities whatsoever to each and every Midas Separated Employee with respect
to the Midas Welfare Benefit Plans or the Midas Welfare Trust at any time. Midas
and Midas Operating Company shall indemnify, defend and hold harmless the
Whitman Funded Welfare Plan, the Whitman Welfare Trust, and the Whitman
Indemnitees from and against any and all Losses of the Whitman Funded Welfare
Plan, the Whitman Welfare Trust, and the Whitman Indemnitees arising out of or
due to the failure or alleged failure of the Midas Welfare Benefit Plans, the
Midas Welfare Trust, Midas or any of its Affiliates to pay, perform or otherwise
discharge such Liabilities.
(3) Whitman shall provide to Midas, as of the Welfare Effective Date,
a determination of the fair market value of the assets held by the Whitman
Welfare Trust as of the Welfare Effective Date (but excluding the sum of
$6,000,000) ("Available Whitman Reserves"). The Whitman Welfare Trust shall
deliver to the Midas Welfare Trust an amount, as determined by the Welfare
Benefit Trust Committee for the Whitman Benefit Trust ("Welfare Committee"), of
the Available Whitman Reserves, equal to (1) minus (2) where (1) is an amount
determined by multiplying the Available Whitman Reserves times a fraction, the
numerator of which is Whitman's estimate of claim reserve for the fiscal year
ended December 31, 1997, based on historical and current transactions of the
Whitman Welfare Trust attributable to each and every Midas Separated Employee,
and the denominator of which is the aggregate claim reserve for the fiscal year
ended December 31, 1997, based on historical and current transactions of the
Whitman Welfare Trust attributable to all activity under the Whitman Funded
Welfare Plan; and (2) is an amount equal to expenses and contributions incurred
but not paid on and prior to the Welfare Effective Date attributable to each and
every Midas Separated Employee.
(4) As of the Welfare Effective Date, Whitman, the Welfare Committee,
the Whitman Funded Welfare Plan, and the Whitman Welfare Trust, each to the
extent applicable, shall cause to be issued to Midas, the Midas Funded Welfare
Plan or the Midas Welfare Trust, respectively, for the benefit only of a Midas
Separated Employee, all insurance contracts (including health maintenance
organization contracts),
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administration contracts, or other service contracts which are either
substantially similar to such contracts held by each or applicable only with
respect to a Midas Separated Employee. Each such contract shall include, if any,
reserves or retrospective refunds or premiums due based on the experience
realized thereunder with respect to each and every Midas Separated Employee.
(d) Retirement Savings Plans.
(1)(i) Midas shall, as of a date which is on or prior to the
Distribution Date ("RSP Effective Date"), establish two defined
contribution plans and related trust(s) with a trustee designated by Midas
(respectively referred to below as the "Midas RSP Plans" and "Midas RSP
Trust") substantially similar to the Whitman Corporation Retirement Savings
Plan and the Whitman Corporation Master Retirement Savings Plan (with the
exception that on and after the Distribution Date instead of a Whitman
Common Stock fund in both there will be offered a Midas Common Stock fund)
and the Whitman Corporation Defined Contribution Master Trust (respectively
referred to below as the "Whitman RSP Plans" and the "Whitman RSP Trust")
covering, among others, each and every Midas Separated Employee or
beneficiary thereof who, on or prior to the RSP Effective Date, is either a
participant or a beneficiary, respectively, in either of the Whitman RSP
Plans who has or has accrued a right to an account balance in either of the
Whitman RSP Plans (such persons are referred to as "Midas Participants").
Each of the Midas RSP Plans and the Midas RSP Trust shall, effective as of
the RSP Effective Date, assume all Liabilities whatsoever arising (before,
on or after the RSP Effective Date) under each of the respective Whitman
RSP Plans and the respective portion of the Whitman RSP Trust with respect
to Midas Participants.
(ii) Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Midas RSP
Plans and Midas RSP Trust, and neither Whitman nor any Whitman Subsidiary
shall have any Liabilities in respect thereof at any time. Midas and the
Midas Subsidiaries shall be solely liable and responsible for all
Liabilities whatsoever to Midas Participants with respect to the Midas RSP
Plans and Midas RSP Trust at any time. Midas and Midas Operating Company
shall indemnify, defend and hold harmless the Whitman RSP Plans, the
Whitman RSP Trust and the Whitman Indemnitees from and against any and all
Losses of the Whitman RSP Plans, the Whitman RSP Trust and the Whitman
Indemnitees arising out of or due to the failure or alleged failure of the
Midas RSP Plans, the Midas RSP Trust, Midas or any of its Affiliates to
pay, perform or otherwise discharge such Liabilities.
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(2) As of a valuation date not later than 30 calendar days after the
RSP Effective Date, as provided in the Whitman RSP Trust, there shall be
transferred to the Midas RSP Trust assets the value of which as of such
valuation date is equal to, as determined by the Administrative Committee of the
Whitman RSP Trust ("RSP Committee"), the value of the account balances of, and
liabilities with respect to, all Midas Participants, as of such valuation date
not otherwise distributed or to be distributed pursuant to the Whitman RSP
Plans, less expenses or contributions incurred or due but not paid as of such
date of transfer with respect to each and every Midas Separated Employee. Such
assets shall consist of cash, contract rights, beneficial interests in
collective funds, and shares of stock to the extent that the accounts of Midas
Participants under the Whitman RSP Plans were invested in such investment
alternatives. Midas shall cause all assets so transferred to the Midas RSP Trust
to be allocated among the Midas RSP Plans in a manner such that the value of the
assets of each of the Midas RSP Plans so allocated shall be equal to the value
of assets transferred from each of the respective Whitman RSP Plans.
(3) As of the RSP Effective Date, Whitman, the RSP Committee, the
Whitman RSP Plans, and the Whitman RSP Trust, each to the extent applicable,
shall cause to be issued to Midas, the Midas RSP Plans or the Midas RSP Trust,
respectively, for the benefit only of Midas Participants, all insurance
contracts, administration contracts, or other service contracts which are either
substantially similar to such contracts held by each or applicable only with
respect to Midas Participants.
(e) Defined Benefit Pension Plans.
(1) Midas shall continue, on and after the Distribution Date,
qualified defined benefit pension plans ("Midas Pension Plans"), which are
presently being funded by the Whitman Corporation Defined Benefit Master Trust
("Whitman Master Trust"), and a nonqualified Midas International Corporation
Executive Retirement Plan ("Midas ERP"), all of which Midas or a Midas
Subsidiary currently sponsors for current and former employees and beneficiaries
of employees or former employees of Midas and Midas Subsidiaries (the "Midas
Pension Plan Beneficiaries"). Midas and the Midas Subsidiaries shall be solely
liable and responsible for all Liabilities whatsoever arising under the Midas
Pension Plans and Midas ERP, and neither Whitman nor any Whitman Subsidiary
shall have any Liabilities in respect thereof at any time, except to the extent
such Liabilities relate to a benefit accrued by the Midas Participant under a
qualified defined benefit pension plan maintained by Whitman or a Whitman
Subsidiary which is offset by the Midas Pension Plans against any benefit
accrual under the Midas Pension Plans based on the same period of credited
service. Midas and the Midas Subsidiaries shall be solely liable and responsible
to all Midas Pension Plan Beneficiaries for all Liabilities whatsoever with
respect to the Midas Pension Plans and Midas ERP at any time. Midas and Midas
Operating Company shall indemnify, defend and hold harmless
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the Whitman Master Trust and the Whitman Indemnitees from and against any and
all Losses of the Whitman Master Trust and the Whitman Indemnitees arising out
of or due to the failure or alleged failure of the Midas Pension Plans, Midas
Master Trust (defined below), Midas or any of its Affiliates to pay, perform or
otherwise discharge such Liabilities.
(2) Midas shall, as of a date on or prior to the Distribution Date
("Pension Effective Date"), adopt a Midas International Corporation Defined
Benefit Master Trust ("Midas Master Trust") substantially similar to the Whitman
Master Trust and designate a trustee for the Midas Master Trust for each of the
Midas Pension Plans. As provided in the Whitman Master Trust, the Management
Committee of the Whitman Master Trust ("Management Committee") shall cause the
Whitman Master Trust to transfer to the Midas Master Trust, a pro rata portion
(net of accrued expenses, contributions and benefits attributable to each and
every Midas Separated Employee) of the cash, securities and other assets in the
Whitman Master Trust as determined solely by the Management Committee on or as
soon as practicable after the Pension Effective Date.
Midas shall cause all assets so transferred to the Midas Master Trust
to be allocated among the Midas Pension Plans in a manner such that the value of
the assets of each of the Midas Pension Plans (net of accrued expenses,
contributions, and benefits attributable to each such Midas Pension Plan) so
allocated shall be equal to the value of such assets immediately prior to the
transfer from the Whitman Master Trust.
(3) On or as soon as administratively possible after the Distribution
Date, Whitman shall terminate the Canadian Master Trust and the Management
Committee shall cause the Canadian Master Trust to transfer assets to trusts
participating in the Canadian Master Trust in accordance with the terms of the
Canadian Master Trust.
(f) Executive Split Dollar Life Insurance Plan
(1) Midas shall, effective on a date which is on or prior to the
Distribution Date ("Split Dollar Effective Date"), establish the Midas Executive
Split Dollar Life Insurance Plan ("Midas Split Dollar Plan") substantially
similar to the Whitman Corporation Executive Split Dollar Life Insurance Plan
("Whitman Split Dollar Plan"). The Midas Split Dollar Plan shall, as of the
Split Dollar Effective Date, assume all Liabilities whatsoever arising (before,
on or after the Split Dollar Effective Date) under the Whitman Split Dollar Plan
at any time with respect to each and every Midas Separated Employee.
(2) Whitman shall provide to Midas on or before the Split Dollar
Effective Date a list of outstanding life insurance policies issued pursuant to
the Whitman Split Dollar Plan to Midas Separated Employees and premiums paid by
Whitman for such
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policies since the inception of the Whitman Split Dollar Plan. Whitman and Midas
shall cooperate in obtaining new Split Dollar Agreements and Collateral
Assignments by Midas Split Dollar Plan participants assigning to Midas the right
to Whitman's Corporate Capital Interest as provided in the Whitman Split Dollar
Plan with respect to past premium contributions made by Whitman in respect of
Midas Separated Employees. Subject to the execution of such Split Dollar
Agreements and Collateral Assignments by Midas Split Dollar Plan participants,
Midas shall reimburse Whitman for all premium contributions made by Whitman in
respect of Midas Separated Employees since the inception of the Whitman Split
Dollar Plan pursuant to Section 3.02(a).
(3) Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising under the Midas Split Dollar
Plan, and neither Whitman nor any Whitman Subsidiary shall have any Liabilities
in respect thereof at any time. Midas and the Midas Subsidiaries shall be solely
liable and responsible for all Liabilities whatsoever to each and every Midas
Separated Employee with respect to the Midas Split Dollar Plan at any time.
Midas and Midas Operating Company shall indemnify, defend and hold harmless the
Whitman Split Dollar Plan and the Whitman Indemnitees from and against any and
all Losses of the Whitman Split Dollar Plan and the Whitman Indemnitees arising
out of or due to the failure or alleged failure of the Midas Split Dollar Plan,
Midas or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities.
(g) Severance Pay.
(1) The parties agree that, with respect to any individual who, in
connection with the Distribution, ceases to be an employee of Whitman or a
Whitman Subsidiary and becomes or continues to be a Midas Separated Employee,
such cessation shall not be deemed to be a severance or termination of
employment from Whitman or a Whitman Subsidiary for purposes of any policy,
plan, program or agreement of Whitman or a Whitman Subsidiary that provides for
the payment of severance or salary continuation benefits. The parties agree
that, as of the Distribution Date, all severance compensation agreements between
Whitman or a Whitman Subsidiary and Midas Separated Employees shall be
terminated, and that Midas will adopt and approve agreements between Midas and
such Midas Separated Employees, in lieu of such terminated agreements, which
agreements shall be substantially in the form of the Change in Control Agreement
filed as an Exhibit to the Midas Form 10.
(2) Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising in connection with any claims
made by or on behalf of Midas Separated Employees in respect of severance pay or
salary continuation obligations relating to the termination or alleged
termination of any such individual's employment as of the Distribution Date or
in connection with the
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Distribution, and neither Whitman nor any Whitman Subsidiary shall have any
Liabilities in respect thereof at any time. Midas and Midas Operating Company
shall indemnify, defend and hold harmless the Whitman Indemnitees from and
against any and all Losses of the Whitman Indemnitees arising out of or due to
the failure or alleged failure of Midas or any of its Affiliates to pay, perform
or otherwise discharge such Liabilities.
(3) Except as set forth in Section 3.05(g)(2), Whitman shall be
solely liable and responsible for all Liabilities whatsoever arising in
connection with any claims made by or on behalf of any individual in respect of
severance pay or salary continuation obligations relating to the termination or
alleged termination of employment of such individual, other than any claim
relating to the termination or alleged termination of employment of a Midas
Separated Employee as of the Distribution Date or in connection with the
Distribution, and neither Midas nor any Midas Subsidiary shall have any
Liabilities in respect thereof at any time. Whitman shall indemnify, defend and
hold harmless the Midas Indemnitees from and against any and all Losses of the
Midas Indemnitees arising out of or due to the failure or alleged failure of
Whitman or any of its Affiliates to pay, perform or otherwise discharge such
Liabilities.
(h) Midas Liability to Midas Separated Employees. As of the
Distribution Date, Midas and the Midas Subsidiaries shall be solely liable and
responsible for all Liabilities whatsoever arising in connection with any claims
made by or on behalf of Midas Separated Employees in respect of any Employee
Benefit Plan or Liabilities not otherwise provided for in this Agreement, as
well as with respect to any employee benefit or payment to a Midas Separated
Employee not otherwise provided for in this Agreement, and neither Whitman nor
any Whitman Subsidiary shall have any Liabilities in respect thereof at any
time. Midas and Midas Operating Company shall indemnify, defend and hold
harmless the Whitman Indemnitees and any relevant Employee Benefit Plan of the
Whitman Indemnitees from and against any and all Losses of the Whitman
Indemnitees and any such Employee Benefit Plan arising out of or due to the
failure or alleged failure of Midas or any of its Affiliates to pay, perform or
otherwise discharge such Liabilities. To the extent not otherwise provided in
this Agreement, Whitman and Midas shall take such action as is necessary to
effect an adjustment to the books of Whitman and of Midas and of their
subsidiaries so that, as of the Distribution Date, the prepaid expense balances
and accrued employee Liabilities, if any, with respect to any employee
Liabilities assumed or retained as of the Distribution Date by Whitman and the
Whitman Subsidiaries, on the one hand, and Midas and the Midas Subsidiaries, on
the other hand, are appropriately reflected on their respective balance sheets
as of the Distribution Date. To the extent that Whitman pays for any other
expenses or Liabilities in respect of a Midas Separated Employee not otherwise
provided for in this Agreement, Midas and the Midas Subsidiaries shall reimburse
Whitman as of the Distribution Date, to the extent not previously reimbursed.
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(i) Whitman Liability to Whitman Employees. Except as otherwise
specifically provided in this Section 3.05, this Agreement shall not affect any
Employee Benefit Plan or other compensation arrangement of Whitman in respect of
any employees of Whitman or the Whitman Subsidiaries who are not Midas Separated
Employees. Except as otherwise specifically provided, (1) this Agreement shall
not affect any Midas or Midas Subsidiary Employee Benefit Plans or other
compensation arrangements which Midas or the Midas Subsidiaries have maintained
on or before the Distribution Date and (2) Whitman shall have no Liabilities
with respect to such Employee Benefit Plans or arrangements at any time.
(j) Cooperation. Whitman and Midas shall, in connection with the
transactions and transfers described in Section 3.05(d) and Section 3.05 (e),
cooperate in making any and all appropriate filings required under the Code or
ERISA and the regulations thereunder and any applicable securities laws and take
all such action as may be necessary to cause such transactions and transfers to
take place on or as soon as practicable after the Distribution Date.
(k) Miscellaneous. Nothing in this Agreement shall be interpreted as
requiring Whitman or Midas or any subsidiary of Whitman or Midas to maintain any
Employee Benefit Plan or other benefit plan for any period of time or shall
impair the right of any of the foregoing to amend or terminate any such Employee
Benefit Plan or other benefit plan in accordance with its terms or applicable
law. Nothing in this Agreement shall be construed to create a right in any
employee or dependent or beneficiary of any employee under an Employee Benefit
Plan or other benefit plan which such employee, dependent or beneficiary would
not otherwise have under the terms of such Employee Benefit Plan or other
benefit plan.
Section 3.06 Board of Directors and Resignations.
-----------------------------------
(a) Midas and Whitman shall take all actions which may be required to
elect as directors of Midas, on or prior to the Distribution Date, the persons
named in the Midas Form 10 to constitute the Board of Directors of Midas on the
Distribution Date.
(b) Whitman shall cause each of its employees to resign, effective
not later than the Distribution Date, from all positions as a director and/or
officer of Midas and any Midas Subsidiary; and Midas shall cause each of its
employees to resign, effective not later than the Distribution Date, from all
positions as a director and/or officer of Whitman or any Whitman Subsidiary;
provided, however, that no individual shall be required by any party hereto to
resign from any position or office with another party hereto (or a subsidiary of
such other party) if such individual is named or identified in the Information
Statement as the individual who is to hold such position or office after the
Distribution.
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Section 3.07 Midas Rights Agreement. Midas shall enter into the Midas
Rights Agreement substantially in the form attached as an Exhibit to the Midas
Form 10.
Section 3.08 Insurance.
(a) Since April 1, 1978, Whitman has provided insurance coverage to
Midas and the Midas Subsidiaries through Whitman's wholly-owned insurance
subsidiary, Whitman Insurance Co., Ltd., for workers' compensation, general
liability, automobile liability and products liability. Midas Operating Company
has paid premiums to Whitman Insurance Co., Ltd. to provide such insurance,
without deductibles, and for varying limits of liability, as detailed on
Schedule A. Whitman shall cause Whitman Insurance Co., Ltd. to provide coverage
to Midas and the Midas Subsidiaries for all those coverages named above, without
deductibles, and up to the limits shown on Schedule A, for all insured incidents
occurring from the date such coverage first commenced through and including the
Distribution Date. The provisions of insurance coverage applicable to the above
are stipulated in policies of insurance issued to Whitman by Northwestern
National Insurance Co., Continental Insurance Co., National Union Fire Insurance
Co. and Old Republic Insurance Co.
(b) Since April 1, 1994, Whitman has provided Employment Practices
Liability insurance coverage to Midas and the Midas Subsidiaries through Whitman
Insurance Co., Ltd. for $900,000 per occurrence with an aggregate of $2,000,000
per policy period for Whitman and its Subsidiaries excess of the per occurrence
deductible of $100,000, as shown on Schedule A. The insurance applicable to this
coverage is stipulated in policies of insurance issued to Whitman by Lexington
Insurance Co. and Whitman Insurance Co., Ltd.
(c) Since April 1, 1996 Whitman has provided General Liability and
since July 1, 1996 Whitman has provided All Risk Property insurance coverage to
Midas and the Midas Subsidiaries located outside of the United States and Canada
through Whitman Insurance Co., Ltd. for varying limits excess of varying
deductibles, as shown on Schedule A. The insurance applicable to this coverage
is stipulated in policies of insurance issued to Whitman by Cigna Insurance
Company, CNA and Winterthur Insurance Company.
(d) The parties agree that Midas shall have the right to present
claims to Whitman or Whitman's insurers under all policies of insurance placed
by Whitman on behalf of Midas or any Midas Subsidiary or which include Midas or
any Midas Subsidiary within them, whether placed through Whitman Insurance Co.,
Ltd. or otherwise, for insured incidents occurring from the date said coverage
first commenced until the Distribution Date. The parties agree that any such
policies written on a "claims
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made" rather than "occurrence" basis may not provide coverage to Midas for
incidents occurring on or prior to the Distribution Date but which are first
reported after the Distribution Date.
ARTICLE IV
INDEMNIFICATION
---------------
Section 4.01 Indemnification by Whitman. Except with respect to
employee benefits or other Liabilities to employees, which shall be governed by
Section 3.05 hereof, Whitman shall indemnify, defend and hold harmless the Midas
Indemnitees from and against any and all Losses of the Midas Indemnities arising
out of or due to the failure or alleged failure of Whitman or any of its
Affiliates to pay, perform or otherwise discharge in due course any item set
forth on Schedule B. Anything in this Section 4.01 to the contrary
notwithstanding, neither Whitman nor any Whitman Subsidiary shall have any
Liabilities whatsoever to Midas or any Midas Subsidiary in respect of any Tax
(as such term is defined in the Midas Tax Sharing Agreement), except as
otherwise provided on Schedule B hereto or in the Midas Tax Sharing Agreement.
Section 4.02 Indemnification by Midas and Midas Operating Company.
Except with respect to employee benefits or other Liabilities to employees,
which shall be governed by Section 3.05 hereof, Midas and Midas Operating
Company shall indemnify, defend and hold harmless the Whitman Indemnitees from
and against any and all Losses of the Whitman Indemnitees arising out of or due
to the failure or alleged failure of Midas or any of its Affiliates to pay,
perform or otherwise discharge in due course any item set forth on Schedule C.
Anything in this Section 4.02 to the contrary notwithstanding, neither Midas nor
any Midas Subsidiary shall have any Liabilities whatsoever to Whitman or any
Whitman Subsidiary in respect of any Tax (as such term is defined in the Midas
Tax Sharing Agreement), except as otherwise provided on Schedule C hereto or in
the Midas Tax Sharing Agreement.
Section 4.03 Limitations on Indemnification Obligations.
------------------------------------------
(a) The amount which any party (an "Indemnifying Party") is or may be
required to pay to any other Person (an "Indemnitee") pursuant to the
indemnification provisions contained in Section 3.05, Section 4.01 or Section
4.02 shall be reduced (including, without limitation, retroactively) by any
Insurance Proceeds or other amounts actually recovered by or on behalf of such
Indemnitee, in reduction of the related Loss. If an Indemnitee shall have
received the payment required by Section 3.05, 4.01 or 4.02 of this Agreement
from an Indemnifying Party in respect of any Loss and shall subsequently
actually receive Insurance Proceeds or other amounts in
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respect of such Loss, then such Indemnitee shall pay to such Indemnifying Party
a sum equal to the amount of such Insurance Proceeds or other amounts actually
received (subject to the enforcement of the following sentence and up to but not
in excess of the amount of any indemnity payment made hereunder). An insurer who
would otherwise be obligated to pay any claim shall not be relieved of the
responsibility with respect thereto, or, solely by virtue of the indemnification
provisions hereof, have any subrogation rights with respect thereto, it being
expressly understood and agreed that no insurer or any other third party shall
be entitled to a "windfall" (i.e., a benefit they would not be entitled to
receive in the absence of the indemnification provisions) by virtue of the
indemnification provisions hereof.
(b) If an Indemnitee shall actually realize a tax saving by reason of
having incurred a Loss for which such Indemnitee shall have received a payment
from an Indemnifying Party, then such Indemnitee shall pay to such Indemnifying
Party an amount equal to such tax saving. Whenever there is a substantial
likelihood that an Indemnitee will receive a tax saving by reason of a Loss,
such Indemnitee shall file its tax returns in a manner designed to do so,
provided that such Indemnitee shall have the sole responsibility for the
preparation of its tax returns and reporting thereon such Loss and any payments
received from such Indemnifying Party. An Indemnitee shall be deemed actually to
have realized a tax saving with respect to a Loss if, and to the extent that,
for any taxable period, whether ending before, on or after the Distribution
Date, the aggregate federal, state, local and foreign tax liability actually
payable by such Indemnitee and any of its wholly-owned subsidiaries, computed by
taking into account any deductions, credits or other items attributable to a
Loss (including the receipt of an Indemnity Payment with respect thereto and the
payment of any amounts pursuant to this Section 4.03(b)), is less than such
aggregate tax liability, computed without regard to such deductions, credits or
other items attributable to a Loss (including the receipt of an indemnity
payment with respect thereto and the payment of any amounts pursuant to this
Section 4.03(b)). In the event that, following a payment by an Indemnitee
pursuant to this Section 4.03(b) in respect of a tax saving, there shall be an
adjustment to the amount of such tax saving as a result of an audit or other
proceeding in respect of such Indemnitee's tax returns, the parties shall take
appropriate actions to reflect such adjustment. The term "tax saving" shall also
be deemed to include any interest received from a governmental tax authority,
net of any federal, state, local or foreign taxes payable thereon.
(c) In the event that an indemnity payment shall be denominated in a
currency other than United States dollars, the amount of such payment shall be
translated into United States dollars using the Foreign Exchange Rate for such
currency determined in accordance with the following rules:
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(1) with respect to a Loss arising from payment by a financial
institution under a guarantee, comfort letter, letter of credit, foreign
exchange contract or similar instrument, the Foreign Exchange Rate for such
currency shall be determined as of the date on which such financial
institution shall have been reimbursed;
(2) with respect to a Loss covered by insurance, the Foreign Exchange
Rate for such currency shall be the Foreign Exchange Rate employed by the
insurance company providing such insurance in settling such Loss with the
Indemnifying Party; and
(3) with respect to a Loss not covered by clause (1) or (2) of this
Section 4.03(c), the Foreign Exchange Rate for such currency shall be
determined as of the date that notice of the claim with respect to such
Loss shall be given to the Indemnitee.
(d) If the amount of any Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
Section 4.04 Procedures for Indemnification.
------------------------------
(a) Any claim under Section 3.05, Section 4.01 or Section 4.02 or any
other Section of this Agreement on account of a Loss which does not result from
a Third Party Claim shall be asserted by written notice given by or on behalf of
an Indemnitee to the relevant Indemnifying Party. Such Indemnifying Party shall
have a period of 30 calendar days after the receipt of such notice within which
to respond thereto. If any such claim is not paid in full by an Indemnifying
Party within 30 calendar days after written notice has been received by the
Indemnifying Party, such Indemnitee and Indemnifying Party shall negotiate in
good faith for a reasonable period of time to settle such amount claimed;
provided, however, that such reasonable period shall not, unless otherwise
agreed by such Indemnitee and Indemnifying Party in writing, exceed 45 calendar
days from the time they began such negotiations; provided, further, that if such
Indemnifying Party does not respond within such 30-day period or rejects such
claim in whole or in part, such Indemnifying Party shall be deemed to have
refused to accept responsibility to make payment. The Indemnitee may, but need
not, at any time thereafter bring an Action against the Indemnifying Party to
recover the unpaid amount of the claim and, if successful in whole or in part,
the Indemnitee also shall be entitled to be paid the expenses of prosecuting
such claim; provided, however, that in the event of any such Action, neither the
Indemnitee nor the Indemnifying Party shall assert the defenses of statute of
limitations and laches arising for the period beginning after the date they
began negotiations hereunder as provided in the preceding sentence.
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(b) Procedures for indemnification of Third Party Claims shall be as
follows:
(1) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a Person (including, without limitation, any governmental entity)
who is not a party to this Agreement of any claim or of the commencement by any
such Person of any Action (a "Third Party Claim") with respect to which an
Indemnifying Party may be obligated to provide indemnification pursuant to
Section 3.05, Section 4.01 or Section 4.02 or any other Section of this
Agreement, such Indemnitee or other party shall give such Indemnifying Party
written notice thereof promptly (and in any event within 30 calendar days) after
becoming aware of such Third Party Claim; provided, however, that the failure of
any Indemnitee to give notice as provided in this Section 4.04(b)(1) shall not
relieve such Indemnifying Party of its obligations under this Article IV, except
and only to the extent that such Indemnifying Party is prejudiced by such
failure to give notice. Such notice shall describe the Third Party Claim in
reasonable detail and, if ascertainable, shall indicate the amount (estimated if
necessary) of the Loss that has been or may be sustained by such Indemnitee.
(2) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third Party Claim. Within 30 calendar days of the
receipt of notice from an Indemnitee in accordance with Section 4.04(b)(1) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such Indemnitee under this
Article IV for any legal or other expenses (except expenses approved in writing
in advance by the Indemnifying Party) subsequently incurred by such Indemnitee
in connection with the defense thereof; provided, however, that if the
defendants in any such Third Party Claim include both the Indemnifying Party and
one or more Indemnitees and in any Indemnitee's reasonable judgment a conflict
of interest between one or more of such Indemnitees and such Indemnifying Party
exists in respect of such Third Party Claim or if the Indemnifying Party shall
have assumed responsibility for such Third Party Claim with any reservations or
exceptions, such Indemnitees shall have the right to employ separate counsel to
represent such Indemnitees and in that event the reasonable fees and expenses of
such separate counsel (but not more than one separate counsel (other than local
counsel) reasonably satisfactory to the Indemnifying Party) shall be paid by
such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in this Section 4.04(b)(2), such
Indemnitee may defend or (subject to the remainder of this Section 4.04(b)(2))
seek to compromise or settle such Third Party Claim. Notwithstanding the
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foregoing, neither an Indemnifying Party nor an Indemnitee may settle or
compromise any Third Party Claim over the objection of the other; provided,
however, that consent to settlement or compromise shall not be unreasonably
withheld. Neither an Indemnifying Party nor an Indemnitee shall consent, without
the written approval of the Indemnitee or Indemnifying Party (as the case may
be) to entry of any judgment or enter into any settlement of any Third Party
Claim which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnitee, in the case of a consent or settlement
by an Indemnifying Party, or the Indemnifying Party, in the case of a consent or
settlement by the Indemnitee, of a written release from all Liabilities in
respect to such Third Party Claim.
(3) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third Party Claim, the related Indemnitee shall make
available to such Indemnifying Party any personnel or any books, records or
other documents within its control or which it otherwise has the ability to make
available that are necessary or appropriate for such defense, settlement or
compromise, and shall otherwise cooperate in the defense, settlement or
compromise of such Third Party Claim.
(4) Notwithstanding anything else in this Section 4.04(b) to the
contrary, if an Indemnifying Party notifies the related Indemnitee in writing of
such Indemnifying Party's desire to settle or compromise a Third Party Claim on
the basis set forth in such notice (provided that such settlement or compromise
includes as an unconditional term thereof the giving by the claimant or
plaintiff of a written release of the Indemnitee from all Liabilities in respect
thereof) and the Indemnitee shall notify the Indemnifying Party in writing that
such Indemnitee declines to accept any such settlement or compromise, such
Indemnitee may continue to contest such Third Party Claim, free of any
participation by such Indemnifying Party, at such Indemnitee's sole expense. In
such event, the obligation of such Indemnifying Party to such Indemnitee with
respect to such Third Party Claim shall be equal to (i) the costs and expenses
of such Indemnitee prior to the date such Indemnifying Party notifies such
Indemnitee of the offer to settle or compromise (to the extent such costs and
expenses are otherwise indemnifiable hereunder) plus (ii) the lesser of (A) the
amount of any offer of settlement or compromise which such Indemnitee declined
to accept and (B) the actual out-of-pocket amount such Indemnitee is obligated
to pay subsequent to such date as a result of such Indemnitee's continuing to
pursue such Third Party Claim.
(5) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to any
events or circumstances in respect of which such Indemnitee may have any right
or claim relating to such Third Party Claim against any claimant or plaintiff
asserting such Third Party Claim or against any other person. Such Indemnitee
shall cooperate with such Indemnifying Party in a
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reasonable manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
Section 4.05 Remedies Cumulative. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 4.06 Survival of Indemnities. The obligations of each of
Whitman, Midas and Midas Operating Company under this Article IV shall survive
the sale or other transfer by it of any assets or businesses or the assignment
by it of any Liabilities, with respect to any Loss of the other parties related
to such assets, businesses or Liabilities.
ARTICLE V
ACCESS TO INFORMATION
---------------------
Section 5.01 Access to Information. Subject to Section 6.02, from and
after the Distribution Date, each party hereto shall afford to each other party
and its authorized accountants, counsel and other designated representatives
(collectively, "Representatives") reasonable access (including using reasonable
efforts to give access to Persons possessing information) and duplicating rights
during normal business hours to all business records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within such party's possession relating to such other party or
any subsidiary of such other party, insofar as such access is reasonably
required by such other party. Information may be requested under this Article V
for, without limitation, audit, accounting, claims, litigation and tax purposes,
as well as for purposes of fulfilling disclosure and reporting obligations and
for performing this Agreement and the transactions contemplated hereby.
Section 5.02 Production of Witnesses. After the Distribution Date,
each of Whitman and Midas and their respective subsidiaries shall use reasonable
efforts to make available to the other parties and their subsidiaries, upon
written request, their present and former directors, officers, employees and
agents as witnesses to the extent that any such individual may reasonably be
required in connection with any legal, administrative or other proceedings in
which the requesting party may from time to time be involved.
Section 5.03 Retention of Records. Except as otherwise required by law
or agreed to in writing, each of Whitman and Midas shall retain, and shall cause
its subsidiaries to retain, for a period of at least seven years following the
Distribution
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Date, all significant Information relating to the business of the other parties
and the other parties' subsidiaries. In addition, after the expiration of such
seven-year period, such Information shall not be destroyed or otherwise disposed
of at any time, unless, prior to such destruction or disposal, (a) the party
proposing to destroy or otherwise dispose of such Information shall provide no
less than 30 calendar days' prior written notice to the party to which such
Information relates, specifying in reasonable detail the Information proposed to
be destroyed or disposed of and (b) if a recipient of such notice shall request
in writing prior to the scheduled date for such destruction or disposal that any
of the Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of the party requesting such Information.
Section 5.04 Confidentiality. Each party shall hold, and shall
cause its subsidiaries and Representatives to hold, in strict confidence, all
Information concerning the other parties in its possession or furnished by the
other parties or the other parties' Representatives pursuant to either this
Agreement or the Midas Tax Sharing Agreement (except to the extent that such
Information (a) is on the date hereof or hereafter becomes generally available
to the public other than as a result of a disclosure, directly or indirectly, by
such party or its Representatives or (b) was or becomes available to such party
on a nonconfidential basis prior to its disclosure to such party or its
Representatives, in each case from a source other than the party furnishing such
Information, which source was not itself bound by a confidentiality agreement
with the party furnishing such Information and had not received such
Information, directly or indirectly, from a Person so bound), and each party
shall not release or disclose such Information to any other Person, except its
auditors, attorneys, financial advisors, bankers and other consultants and
advisors, unless compelled to disclose by judicial or administrative process or,
as advised by its counsel, by other requirements of law.
ARTICLE VI
ADDITIONAL COVENANTS
--------------------
Section 6.01 Corporate Names.
(a) As soon as reasonably practicable after the Distribution Date but
in any event within six months thereafter, at Midas' expense, Midas shall, and
shall cause the Midas Subsidiaries to, remove (or, if necessary, on an interim
basis, cover up) any and all exterior signs and other identifiers located on any
of Midas' or any Midas Subsidiary's property or premises or on the property or
premises used by any of the
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foregoing which refer or pertain to Whitman or which include the Whitman name,
logo or other trademark or other Whitman intellectual property.
(b) As soon as is reasonably practicable after the Distribution Date
but in any event within 90 calendar days thereafter, at Midas' expense, Midas
shall, and shall cause the Midas Subsidiaries to, remove from all letterhead,
envelopes, business cards, invoices and other communications media of any kind,
all references to Whitman, including the Whitman name, logo and any other
trademark or other Whitman intellectual property (except that Midas shall not be
required to take any such action with respect to materials in the possession of
franchisees or customers), and neither Midas nor any Midas Subsidiary shall use
or display the Whitman name, logo or other trademarks or Whitman intellectual
property without the prior written consent of Whitman.
(c) Whitman acknowledges that it has no interest in nor any right to
use or display the Midas name or any Midas trademark or intellectual property in
any way, and shall cease any such use or display within 90 calendar days after
the Distribution Date.
Section 6.02 Privileged Matters. The parties hereto recognize that
legal and other professional services that have been and will be provided on and
prior to the Distribution Date have been and will be rendered for the benefit of
Whitman and Midas and their subsidiaries, and that each of the foregoing should
be deemed to be the client for the purposes of asserting all privileges which
may be asserted under applicable law. To allocate the interests of each party in
the Information as to which any party or any its subsidiaries is entitled to
assert a privilege, the parties agree as follows:
(a) Whitman shall be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged Information
which relates solely to Whitman or any Whitman Subsidiary or the business of
Whitman or any Whitman Subsidiary, whether or not the privileged Information is
in the possession of or under the control of Whitman or Midas or any of their
subsidiaries. Whitman shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged Information
that relates solely to the subject matter of any claims arising out of any item
set forth on Schedule B or any claims which may be asserted in the future in any
lawsuits or other proceedings (not involving Midas or any Midas Subsidiary)
initiated against or by Whitman or any Whitman Subsidiary, whether or not the
privileged Information is in the possession of or under the control of Whitman
or Midas or any of their subsidiaries.
(b) Midas shall be entitled, in perpetuity, to control the assertion
or waiver of all privileges in connection with privileged Information which
relates solely to Midas or any Midas Subsidiary or the business of Midas or any
Midas Subsidiary,
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whether or not the privileged Information is in the possession of or under the
control of Whitman or Midas or any of their subsidiaries. Midas shall also be
entitled, in perpetuity, to control the assertion or waiver of all privileges in
connection with privileged Information which relates solely to the subject
matter of any claims arising out of any item set forth on Schedule C or any
claims which may be asserted in the future in any lawsuits or other proceedings
(not involving Whitman or any Whitman Subsidiary) initiated against or by Midas
or any Midas Subsidiary, whether or not the privileged Information is in the
possession of or under the control of Whitman or Midas or any of their
subsidiaries.
(c) The parties hereto agree that they shall have a shared privilege,
with equal right to assert or waive, subject to the restrictions in this Section
6.02, with respect to all privileges not allocated pursuant to the terms of
Sections 6.02(a) and (b); provided, however, that no party shall have a shared
privilege in connection with privileged Information that does not relate to such
party, any of its subsidiaries or their respective businesses. All privileges
relating to any claims, proceedings, litigation, disputes, or other matters
which involve Whitman or any Whitman Subsidiary and/or Midas or any Midas
Subsidiary in respect of which each party retains any responsibility or
liability under this Agreement, shall be subject to a shared privilege among
them.
(d) No party hereto may waive any privilege which could be asserted
under any applicable law, and in which any other party hereto has a shared
privilege, without the consent of the other party, except to the extent
reasonably required in connection with any litigation as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within 20 calendar days after written notice from the
party requesting such consent.
(e) In the event of any litigation or dispute between or among the
parties hereto, any party and a subsidiary of another party hereto, or a
subsidiary of one party hereto and a subsidiary of another party hereto, either
such party may waive a privilege in which the other party has a shared
privilege, without obtaining the consent of the other party; provided, however,
that such waiver of a shared privilege shall be effective only as to the use of
information with respect to the litigation or dispute between the relevant
parties and/or their subsidiaries, and shall not operate as a waiver of the
shared privilege with respect to third parties.
(f) If a dispute arises between or among the parties hereto or their
respective subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto specifically agrees that it will
not withhold consent to waiver for any purpose except to protect its own
legitimate interests.
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(g) Upon receipt by any party hereto or by any subsidiary thereof of
any subpoena, discovery or other request which arguably calls for the production
or disclosure of Information subject to a shared privilege or as to which
another party has the sole right hereunder to assert a privilege, or if any
party obtains knowledge that any of its or any of its subsidiaries' current or
former directors, officers, agents or employees has received any subpoena,
discovery or other requests which arguably calls for the production or
disclosure of such privileged Information, such party shall promptly notify the
other party or parties of the existence of the request and shall provide the
other party or parties a reasonable opportunity to review the Information and to
assert any rights it or they may have under this Section 6.02 or otherwise to
prevent the production or disclosure of such privileged Information.
(h) The furnishing and delivery of Information pursuant to this
Agreement is made in reliance on the agreement of the parties, as set forth in
Section 5.04, to maintain the confidentiality of confidential or privileged
Information and to assert and maintain all applicable privileges. The access to
Information being granted pursuant to Section 5.01, the agreement to provide
witnesses pursuant to Section 5.02, and the furnishing of notices and documents
and other cooperative efforts contemplated by Article IV, shall not be deemed a
waiver of any privilege that has been or may be asserted under this Agreement or
otherwise.
Section 6.03 Limitation on Solicitation of Employees.
(a) Whitman agrees on behalf of itself, its subsidiaries and
Affiliates which it controls, without any separate bargained for consideration,
but rather as an integral part of the Distribution provided for in this
Agreement, that it shall not directly or indirectly, through a subsidiary or
otherwise, until one year after the Distribution Date, employ or attempt to
employ any Midas Separated Employee or induce or attempt to induce any Midas
Separated Employee to leave his or her employment.
(b) Midas agrees on behalf of itself, its subsidiaries and Affiliates
which it controls, without any separate bargained for consideration, but rather
as an integral part of the Distribution provided for in this Agreement, that it
shall not directly or indirectly, through a subsidiary or otherwise, until one
year after the Distribution Date, employ or attempt to employ any employee of
Whitman or any Whitman Subsidiary or induce or attempt to induce any employee of
Whitman or any Whitman Subsidiary to leave his or her employment.
(c) The parties agree and acknowledge that the restrictions contained
in this Section 6.03 are reasonable in scope and duration and are necessary to
protect the other party hereto.
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<PAGE>
Section 6.04 Expenses. Except as otherwise set forth in this
Agreement, all costs and expenses arising on or prior to the Distribution Date
(whether or not then payable) in connection with the Distribution shall be paid
by Whitman to the extent that appropriate documentation concerning such costs
and expenses shall be provided to Whitman, other than (1) costs incurred in
connection with any financing arrangements entered into by Midas or any of its
subsidiaries, (2) listing fees of any national securities exchange or fees of
the National Association of Securities Dealers, Inc. incurred with respect to
listing or quoting the Midas Common Stock, (3) fees charged by rating agencies
for rating Midas securities, (4) one-third of the legal fees and expenses of
Sidley & Austin and McDermott, Will & Emery, (5) one-half of the fees and
expenses of KPMG Peat Marwick which directly relate to the Distribution, (6) the
fees and expenses of any outside consultant retained by Midas or Midas Operating
Company, (7) costs incurred in printing and engraving the stock certificates of
Midas, and (8) one-third of the cost of printing and distributing the Midas Form
10, the Information Statement and related documents, all of which shall be paid
by Midas and Midas Operating Company, whether invoiced by Whitman before or
after the Distribution Date.
Section 6.05 Further Assurances. From time to time after the
Distribution Date, each party shall do, execute and deliver, or cause to be
done, executed and delivered, to another party hereto, or its successors and
assigns, all such further acts, deeds, assignments, powers of attorney and other
instruments of conveyance and transfer as such party may reasonably request as
may be necessary to consummate the Distribution and the transactions
contemplated hereby, including filings with, and obtaining the approval of, any
governmental body.
Section 6.06 Qualification as Tax-Free Distribution.
--------------------------------------
(a) After the Distribution Date, neither Whitman nor Midas shall
take, or permit any of its subsidiaries to take, any action which could
reasonably be expected to prevent the Distribution from qualifying as a tax-free
distribution within the meaning of Section 355 of the Code or any other
transaction contemplated by this Agreement which is intended by the parties to
be tax-free from failing so to qualify.
(b) After the Distribution Date, Whitman shall not, nor cause or
permit, any Whitman Subsidiary to take any action or enter into any transaction
which could reasonably be expected to materially adversely impact the expected
tax consequences to Midas which are known to Whitman of any transaction
contemplated by this Agreement; provided, however, nothing in this Section
6.06(b) shall prohibit Whitman from taking any action, or entering into any
transaction (or permitting or causing any Whitman Subsidiary so to act or
enter), in the ordinary course of business or in connection with the settlement
of any audit issue or the filing of any tax return. After the Distribution Date,
Midas shall not, nor cause or permit, any Midas Subsidiary to
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take any action or enter into any transaction which could reasonably be expected
to materially adversely impact the reasonably expected tax consequences to
Whitman which are known to Midas of any transaction contemplated by this
Agreement; provided, however, nothing in this Section 6.06(b) shall prohibit
Midas from taking any action, or entering into any transaction (or permitting or
causing any Midas Subsidiary so to act or enter) in the ordinary course of
business or in connection with the settlement of any audit issue or the filing
of any tax return.
ARTICLE VII
MISCELLANEOUS
-------------
Section 7.01 Complete Agreement; Conflict with Midas Tax Sharing
Agreement. This Agreement and the Midas Tax Sharing Agreement, including any
schedules and exhibits hereto or thereto, and other agreements and documents
referred to herein, shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Notwithstanding any other provisions in this Agreement to the contrary, in the
event and to the extent that there shall be a conflict between the provisions of
this Agreement and the Midas Tax Sharing Agreement, the provisions of the Midas
Tax Sharing Agreement shall control.
Section 7.02 Survival of Agreements. Except as otherwise specifically
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
Section 7.03 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of laws thereof.
Section 7.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered by hand,
mailed by registered or certified mail (postage prepaid and return receipt
requested) or sent by telecopy (confirmed by regular, first-class mail, postage
prepaid) to the parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice) and shall be deemed given on
the date on which such notice is received:
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if to Whitman:
Whitman Corporation
3501 Algonquin Road
Rolling Meadows, Illinois 60008
Attention: General Counsel
if to Midas or Midas Operating Company:
Midas, Inc.
225 North Michigan Avenue
Chicago, Illinois 60601
Attention: General Counsel
Section 7.05 Amendments. This Agreement may not be modified or amended
except by an agreement in writing signed by each of the parties.
Section 7.06 Successors and Assigns. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns. No party may assign its
respective rights or delegate its respective obligations under this Agreement
without the express prior written consent of the other parties hereto.
Section 7.07 Termination. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the Whitman Board without the approval of either Midas or of
Whitman's shareholders. In the event of such termination, no party shall have
any Liabilities of any kind to any other party on account of such termination
except that expenses incurred in connection with the transactions contemplated
hereby shall be paid as provided in Section 6.04.
Section 7.08 No Third Party Beneficiaries. Except for the provisions
of Section 3.03, Section 3.05 and Article IV relating to Indemnitees, this
Agreement is solely for the benefit of the parties hereto and their respective
Affiliates and should not be deemed to confer upon third parties (including any
employee of Whitman, any Whitman Subsidiary, Midas or any Midas Subsidiary) any
remedy, claim, reimbursement, claim of action or other right in excess of those
existing without reference to this Agreement.
Section 7.09 Titles and Headings. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
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<PAGE>
Section 7.10 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby, so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination, the parties shall
negotiate in good faith in an effort to agree upon such a suitable and equitable
provision to effect the original intent of the parties.
Section 7.11 Specific Performance. In the event of any actual or
threatened default in, or breach of, any of the terms, conditions and provisions
of this Agreement, the party or parties who are or are to be thereby aggrieved
shall have the right to specific performance and injunctive or other equitable
relief of its rights under this Agreement, in addition to any and all other
rights and remedies at law or in equity, and all such rights and remedies shall
be cumulative. The parties agree that the remedies at law for any breach or
threatened breach, including monetary damages, are inadequate compensation for
any loss and that any defense in any action for specific performance that a
remedy at law would be adequate is waived. Any requirements for the securing or
posting of any bond with such remedy are waived.
Section 7.12 Waivers. Any term or provision of this Agreement may be
waived, or the time for its performance may be extended, by the party or parties
entitled to the benefit thereof. Any such waiver shall be validly and
sufficiently authorized for the purposes of this Agreement if, as to any party,
it is authorized in writing by an authorized representative of such party. The
failure of any party hereto to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
any party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 7.13 Execution in Counterparts. This Agreement may be executed
in counterparts, each of which shall be considered an original instrument, but
all of which shall be considered one and the same agreement, and shall become
binding when such counterparts have been signed by each of the parties hereto
and delivered to each of the other parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first above written.
WHITMAN CORPORATION
By: /s/ Kathleen R. Gannon
----------------------------------
Name: Kathleen R. Gannon
Title: Vice President and Treasurer
MIDAS, INC.
By: /s/ R. Lee Barclay
----------------------------------
Name: R. Lee Barclay
Title: Executive Vice President and
Chief Financial Officer
MIDAS INTERNATIONAL CORPORATION
By: /s/ R. Lee Barclay
-----------------------------------
Name: R. Lee Barclay
Title: Executive Vice President and
Chief Financial Officer
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SCHEDULE A
MIDAS LIMITS OF LIABILITY
POLICY PERIOD LIMITS OF LIABILITY
4/1/78 - 4/1/79 50% of the first $250,000 each and every
loss, all lines
4/1/79 - 4/1/80 50% of the first $250,000 each and every
loss, all lines
4/1/80 - 4/1/81 50% of the first $250,000 each and every
loss, all lines*
4/1/81 - 4/1/82 $250,000 each and every loss, all lines*
4/1/82 - 4/1/83 50% of the first $250,000 each and every
loss, all lines*
4/1/83 - 4/1/84 $250,000 each and every loss, all lines*
4/1/84 - 4/1/85 $250,000 each and every loss, all lines*
4/1/85 - 4/1/86 $500,000 each and every loss, General
Liability
$250,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/86 - 4/1/87 $2,000,000 each and every loss, General
Liability
$500,000 each and every loss, Automobile
Liability
$250,000 each and every loss, Workers'
Compensation
4/1/87 - 4/1/88 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/88 - 4/1/89 $2,000,000 each and every loss, General
Liability
<PAGE>
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/89 - 4/1/90 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/90 - 4/1/91 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/91 - 4/1/92 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/92 - 4/1/93 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/93 - 4/1/94 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/94 - 4/1/95 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/95 - 4/1/96 $2,000,000 each and every loss, General
Liability
$1,000,000 each and every loss, Workers'
Compensation and Automobile Liability
4/1/96 - 4/1/97 $2,000,000 each and every loss, General
Liability, Workers' Compensation and
Automobile Liability
A-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
4/1/97 - Distribution Date $2,000,000 each and every loss, General
Liability, Workers' Compensation and Automobile
Liability
4/1/94 - 4/1/95 $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis, Employment
Practices Liability Coverage.
4/1/95 - 4/1/96 $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis, Employment
Practices Liability Coverage.
4/1/96 - 4/1/97 $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis, Employment
Practices Liability Coverage.
4/1/97 - Distribution Date $900,000 excess of a $100,000 deductible per
occurrence with an overall aggregate of
$2,000,000 on a Claims made basis, Employment
Practices Liability Coverage.
4/1/96 - 4/1/97 $25,000 per occurrence less underlying
deductible for non - U.S. and Canadian exposures
of General Liability. Underlying Deductibles:
U.K. $10,000
Mexico $10,000
Elsewhere $ 4,500
4/1/97 - Distribution Date $25,000 per occurrence less underlying deductible
for non - U.S. and Canadian exposures of General
Liability. Underlying Deductibles:
U.K. $10,000
Mexico $10,000
Elsewhere $ 4,500
7/1/96 - 7/1/97 $100,000 per occurrence less underlying
deductible for non - U.S. and Canadian
</TABLE>
A-3
<PAGE>
exposures of $25,000 for All Risk Property Insurance
*General Liability (including Products Liability), Automobile Liability and
Workers' Compensation.
A-4
<PAGE>
SCHEDULE B
WHITMAN INDEMNIFICATION OF MIDAS INDEMNITEES
Items with respect to which Whitman will indemnify the Midas
Indemnitees in accordance with Section 4.01 of this Agreement:
(1) All Losses arising out of the businesses conducted (formerly or
currently) or to be conducted by Whitman (whether directly or through a
subsidiary or Affiliate of Whitman), the Whitman Subsidiaries, and any
previously-owned division, subsidiary or Affiliate of Whitman, whether such
Losses relate to events occurring, or whether such Losses are asserted, before,
on or after the Distribution Date; provided, however, that Whitman shall not be
liable for Losses arising out of (i) the businesses conducted (formerly or
currently) or to be conducted by Midas or Midas Operating Company (whether
directly or through a subsidiary or Affiliate of Midas or Midas Operating
Company), the Midas Subsidiaries or any previously-owned division, subsidiary or
Affiliate of Midas or Midas Operating Company (including, without limitation,
the former Sea Nymph division); and provided, further, that, except as set forth
in subsection (3) below, Whitman shall be liable for Losses arising out of the
businesses of Whitman that are otherwise not related to the business of Midas.
(2) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, with
respect to all information set forth in the Information Statement or any
supplement thereto (i) on the cover page of the Information Statement and in the
body of the Information Statement under the headings (a) "Summary - The
Distribution," (b) "Summary - Hussmann," (c) "Introduction," (d) "The
Distribution" and (e) any information derived from such information and (ii) in
Annex A and Annex B of the Information Statement.
(3) All Losses arising out of any Action brought by shareholders of
Whitman or Midas because the Distribution is or becomes taxable to such
shareholders for any reason other than as a result of the occurrence of a
transaction on or after the Distribution Date involving either the stock or
assets (or any combination thereof) of Midas or any Midas Subsidiary or a breach
by Midas or Midas Operating Company of the Midas Tax Sharing Agreement.
(4) All Losses arising out of any breach by Whitman or any Whitman
Subsidiary of this Agreement or the Midas Tax Sharing Agreement.
B-1
<PAGE>
SCHEDULE C
MIDAS AND MIDAS OPERATING COMPANY INDEMNIFICATION OF WHITMAN INDEMNITEES
Items with respect to which Midas and Midas Operating Company will
indemnify the Whitman Indemnitees in accordance with Section 4.02 of this
Agreement:
(1) All Losses arising out of the businesses conducted (formerly or
currently) or to be conducted by Midas or Midas Operating Company (whether
directly or through a subsidiary or Affiliate of Midas or Midas Operating
Company), the Midas Subsidiaries and any previously-owned division, subsidiary
or Affiliate of Midas or Midas Operating Company, whether such Losses relate to
events occurring, or whether such Losses are asserted, before, on or after the
Distribution Date.
(2) All Losses arising out of or based upon any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, with
respect to all information set forth in the Information Statement or any
supplement thereto, except for information with respect to which Whitman will
indemnify the Midas Indemnitees as set forth in Paragraph (2) of Schedule B of
this Agreement.
(3) All Losses arising out of any Action brought by shareholders of
Whitman or Midas because the Distribution is or becomes taxable to such
shareholders as a result of the occurrence of a transaction on or after the
Distribution Date involving either the stock or assets (or any combination
thereof) of Midas or any Midas Subsidiary or a breach by Midas or Midas
Operating Company of the Midas Tax Sharing Agreement.
(4) All Losses arising out of any breach by Midas or Midas Operating
Company of this Agreement or the Midas Tax Sharing Agreement.
C-1
<PAGE>
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") dated as of December 31, 1997,
by and among Whitman Corporation, a Delaware corporation ("Whitman"), Midas,
Inc., a Delaware corporation ("Midas") and Midas International Corporation, a
Delaware corporation ("International").
WHEREAS, the parties have entered into a Distribution and Indemnity
Agreement of even date herewith (the "Distribution Agreement");
WHEREAS, pursuant to the Distribution Agreement all of the issued and
outstanding common stock of Midas and of Hussmann International, Inc., a
Delaware corporation ("Hussmann"), will be distributed by Whitman (pro rata) to
the holders of its common stock (the "Distribution");
WHEREAS, Midas was incorporated on August 29, 1997, and, at the time of the
Distribution, Midas will own all of the issued and outstanding shares of common
stock of International;
WHEREAS, Whitman and International are parties to certain tax allocation
agreements (collectively referred to as the "Tax Allocation Agreements") which
deal with the payment of U.S. federal, state and foreign income taxes and other
taxes; and
WHEREAS, the Tax Allocation Agreements did not contemplate the
Distribution;
NOW, THEREFORE, Whitman, on behalf of itself and its former, present and
future direct or indirect subsidiaries, other than the members of the Midas
Group, as hereinafter defined (hereinafter referred to as the "Whitman Group"),
and Midas and International, on behalf of themselves and their former, present
and future direct or indirect subsidiaries, other than those subsidiaries which,
immediately after the Distribution, will be direct or indirect subsidiaries of
Whitman or Hussmann (hereinafter referred to as the "Midas Group"), enter into
this Agreement for the purposes of replacing and superseding the Tax Allocation
Agreements and to define the rights of the parties hereto with respect to
certain potential tax controversies, all as hereinafter provided.
ARTICLE I
DEFINITIONS
-----------
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and the
<PAGE>
plural forms of the terms defined):
"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor thereto.
"Distribution Date" means the date of the Distribution. For all purposes of
this Agreement, the Distribution shall be deemed effective as of the close of
business on the Distribution Date.
"Foreign" means outside the United States of America.
"Midas Businesses" means the former, present and future subsidiaries,
divisions and businesses of any member of the Midas Group.
"Regulations" means any U.S. Treasury regulations under the Code and any
other state, foreign, or local regulations with respect to taxes.
"Restructuring Taxes" means any Taxes, including, without limitation, any
Taxes imposed pursuant to or as a result of Code Section 311 (together with
related interest, penalties and additions to Tax), resulting from the transfer
or other disposition of stock, assets, or debt including the Distribution and
from those transactions undertaken to separate the Midas Businesses from the
Whitman Businesses as contemplated by the Distribution Agreement.
"Tax" or "Taxes" means all forms of taxation, whenever created or imposed,
and whether of the United States of America or otherwise, and whether imposed by
a local, municipal, governmental, state, federation or other body, and without
limiting the generality of the foregoing, shall include income, sales, use, ad
valorem, gross receipts, value added, franchise, transfer, recording,
withholding, payroll, employment, excise, occupation, premium or property taxes,
together with any related interest, penalties and additions to tax, or
additional amounts imposed by any taxing authority (domestic or foreign) upon
the Midas Group, the Whitman Group or any of their respective members or
divisions or branches.
"Tax Benefit" means the amount by which any item, including, but not
limited to, any item of income or deduction, gain or loss or tax credit,
decreases the liability for Taxes on or with respect to a Tax Return.
"Tax Detriment" means the amount by which any item, including, but not
limited to, any item of income or deduction, gain or loss, or tax credit,
increases the liability for Taxes an or with respect to a Tax Return.
"Tax Return" means any return, filing, questionnaire, or other document
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required to be filed, including amended returns that may be filed, for any
period with any taxing authority (whether U.S. domestic or foreign) in
connection with any Tax or Taxes (whether or not a payment is required to be
made with respect to such filing).
"Whitman Businesses" means the former, present and future subsidiaries,
divisions and businesses of any member of the Whitman Group which are not, or
are not contemplated by the Distribution Agreement to be, part of the Midas
Group immediately after the Distribution.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
-------------------------------------
Section 2.01. Manner of Preparation. All Tax Returns filed after the
Distribution Date shall be prepared on a basis which is consistent with the
income tax rulings obtained from the U.S. Internal Revenue Service ("IRS") or
any other governmental authority in connection with the restructuring of Whitman
contemplated by the Distribution Agreement (in the absence of a controlling
change in law or circumstances) and shall be filed on a timely basis by the
party responsible for such filing under this Agreement. To the extent that and
inconsistent position taken by one party hereto or a member of its group would
result in a Tax Detriment to the other party hereto or a member of its group,
and in the absence of a controlling change in law or circumstances, all Tax
Returns filed after the date of this Agreement shall be prepared on a basis
consistent with the elections, accounting methods, conventions, and principles
of taxation used for the most recent taxable periods for which Tax Returns
involving similar items have been filed. Subject to the provisions of this
Agreement, all decisions relating to the preparation and filing of Tax Returns
and any audit or other review of such Tax Returns shall be made in the sole
discretion of the party responsible under this Agreement for such filing.
Section 2.02. Preparation and Filing of and Elections with respect to Pre-
Distribution Tax Returns and Tax Returns for Periods through, to and including
the Distribution Date.
(a) Consolidated U.S. Federal Income and Other U.S. Federal Tax Returns.
--------------------------------------------------------------------
All consolidated U.S. federal income and other U.S. Federal (including
excise, withholding, fuel and payroll) Tax Returns which include a member of the
Whitman Group and the Midas Group that are required to be filed for periods
beginning on or before the Distribution Date shall be prepared and filed by
Whitman. Midas shall, for each of its taxable periods for which it and/or
International is included in the consolidated federal income tax return of the
Whitman Group, provide Whitman with (i) a true and correct consolidated federal
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income tax return for the Midas Group, (ii) separate federal income tax returns
for each member of the Midas Group and (iii) a reconciliation of book income to
federal taxable income for each member of the Midas Group. Midas hereby agrees
to and shall utilize the Fast-Tax system for U.S. federal income tax return
preparation in preparing the aforesaid returns and computations and shall use
its best efforts to provide Whitman with such returns and computations on or
before the first day of the sixth month following the end of the period to which
such returns and computations relate but in any event Midas shall provide such
returns and computations no later than the fifteenth day of the sixth month
following the end of the period to which such returns and computations relate.
Simultaneously with providing the aforesaid returns and computations, Midas
shall pay to Whitman the amount of total U.S. federal income tax liability shown
on the above referenced consolidated federal income tax return for the Midas
Group, reduced by all estimated payments theretofore made by Midas or
International to Whitman on account of such liability, or if such estimated
payments in the aggregate exceed the federal income tax liability of the Midas
Group, Whitman shall pay such excess to Midas within five (5) days of the filing
by Whitman of its consolidated federal income tax return. Anything herein to the
contrary notwithstanding, Midas for itself and the members of the Midas Group
shall calculate in accordance with past practice and shall remit to Whitman at
least five (5) days prior to the due date of each Whitman estimated quarterly
federal income tax payment the quarterly estimated federal income tax payment
that Whitman is required to remit on behalf of the Midas Group. In no event will
any member of the Midas Group receive any tax benefit for purposes of this
Section unless Whitman recognizes and obtains said benefit on its consolidated
federal income tax return.
(b) State of Illinois Corporate Income Tax Returns.
----------------------------------------------
All State of Illinois corporate income tax returns that may be or are
required to be filed by Whitman for periods beginning on or before the
Distribution Date shall be prepared and filed by Whitman on a unitary group
basis and shall include members of the Midas Group. To permit Whitman to prepare
and file such returns, Midas or International shall, for each taxable period for
which it is included in the Illinois state income tax return of Whitman's
unitary group, provide Whitman with (i) a computation of the Illinois corporate
income tax liability of each member of the Midas Group, prepared on both a
separate company basis as well as on a unitary basis which includes all members
of the Midas Group; (ii) a reconciliation of its separate company Illinois
corporate taxable income to its separate taxable income for U.S. federal income
tax purposes (as determined pursuant to Section 2.02(a) above); and (iii) the
apportionment factors prescribed by Illinois law and all other information
necessary or appropriate for the proper apportionment of the unitary group
income. Each member of the Midas Group shall use its best efforts to provide
Whitman with the above material on or before the first day of the sixth month
following the end of each such period, but in any event such material shall
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be provided no later than the fifteenth day of such sixth month. Simultaneously
with providing the aforesaid material, Midas shall pay to Whitman the lesser of
(x) the aggregate amount of the separate company Illinois tax liability of each
member of the Midas Group for each such period, or (y) the Illinois corporate
income tax liability as computed above for the Midas Group on a unitary basis,
in either case reduced by all estimated payments theretofore made to Whitman on
account of such liability, or if such estimated payments in the aggregate exceed
the aggregate Illinois tax liability for the Midas Group, Whitman shall pay such
excess to International within five (5) days of filing by Whitman of its
Illinois corporate income tax return for such period. Anything herein to the
contrary notwithstanding, Midas or International on behalf of all of the members
of the Midas Group shall make estimated Illinois corporate income tax payments
to Whitman at such time and in such amount as shall permit Whitman to remit the
same to the appropriate authority on a timely basis, but in any event each such
payment shall be made within five (5) days of Whitman's written demand for the
same.
(c) Netherlands Corporate Income Tax, Capital Duty Tax and Withholding Tax
----------------------------------------------------------------------
Returns.
-------
Any tax returns required to be filed that include Whitman Netherlands B.V.,
Finanza I B.V., Midas Automotive International B.V., any members of the Whitman
Group and any members of the Midas Group in the Netherlands for corporate income
tax, capital duty tax or withholding tax purposes for periods beginning on or
before the Distribution Date shall be prepared, reviewed and filed under the
direction of Whitman consistent with the positions taken by Whitman in any tax
rulings obtained from the U.S. Internal Revenue Service and the Netherlands
taxing authorities in a timely manner in accordance with the law of the
Netherlands. Midas or International shall, for each taxable period for which a
member of the Midas Group is included in the consolidated income tax return
(also referred to as a "fiscal unity" return in the Netherlands) with members of
the Whitman Group, provide Whitman with (i) a true and correct Netherlands
income tax return for such Midas Group members which are required to file in the
Netherlands, (ii) separate Netherlands income tax returns for such Midas Group
members and (iii) a reconciliation of book income to Netherlands taxable income
for such Midas Group members. Midas agrees to utilize Moret Ernst & Young to
prepare the income tax returns in the Netherlands for this purpose and shall use
its best efforts to provide Whitman with such returns and computations on or
before sixty (60) days before the tax returns must be filed (including
extensions to file granted by the Netherlands). Simultaneously with providing
the aforesaid returns and computations, Midas shall pay Whitman the amount of
total Netherlands income taxes (and any other applicable taxes) shown on the
above-referenced consolidated Netherlands income tax return due and payable
relating to the members of the Midas Group, reduced by all estimated tax
payments theretofore
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made by Midas Group members to Whitman on account of such Netherlands tax
liabilities. If such estimated payments in the aggregate exceed the Netherlands
tax liability of the Midas Group members, Whitman shall pay such excess to Midas
within ten (10) days of the filing by Whitman of the consolidated Netherlands
income tax return which included members of the Whitman Group. Anything herein
to the contrary notwithstanding, Midas for itself and for members of the Midas
Group shall remit to Whitman at least ten (10) days prior to the due date of
each Whitman estimated Netherlands income tax payment (also known as
"preliminary assessments" in the Netherlands) the estimated Netherlands tax
payment that Whitman (or a Whitman Group member) is required to remit on behalf
of Midas Group members. In no event will any member of the Midas Group receive
any tax benefit for purposes of this Section unless a member of the Whitman
Group recognizes and obtains said benefit on its consolidated Netherlands income
tax return.
(d) Certain Distributions.
---------------------
Notwithstanding any provision of this Agreement to the contrary,
International shall be responsible and pay for any tax liabilities imposed as a
result of any distributions of cash by Midas France S.A., Midas Canada, Inc.,
Midas Canada Holdings, Ltd., or Midas Automotive International B.V. in
anticipation of the Distribution, and Midas shall be entitled to any subsequent
refunds of any such taxes.
(e) Other Tax Returns.
-----------------
All Tax Returns of any member of the Whitman Group or the Midas Group,
other than (1) the consolidated U.S. federal income tax returns, (2) the State
of Illinois corporate income tax returns and (3) the corporate income tax, the
capital duty tax and the withholding tax returns filed in the Netherlands,
required to be filed for periods beginning on or before the Distribution Date
shall be filed by the member of the Whitman Group or the Midas Group, as the
case may be, which filed the corresponding Tax Return for the most recent period
for which such a Tax Return has been filed, or, if no such corresponding Tax
Return has been filed, by the appropriate member in accordance with local law or
custom.
Section 2.03. Filing of Post-Distribution Tax Returns. All Tax Returns for
periods beginning after the Distribution Date shall be the responsibility of the
Whitman Group if such Tax Returns relate to Whitman Businesses, and shall be the
responsibility of the Midas Group if such Tax Returns relate to Midas
Businesses.
Section 2.04. Certification. Each tax return and computation of tax
liability required to be provided to Whitman by any member of the Midas Group
pursuant to either Section 2.02(a), Section 2.02(b) or Section 2.02(c) hereof
shall be
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accompanied by a statement signed by the Chief Financial Officer of Midas to the
effect that such officer has reviewed for completeness and accuracy the tax
return and computation of the tax liability and the documentation in support
thereof and has determined that such return and computation properly reflect the
taxable income (or loss), tax liability and tax credits of the entity or
entities, as the case may be, to which such tax return and computation relate
for the period covered thereby.
ARTICLE III
DEFICIENCIES AND REFUNDS OF TAXES
---------------------------------
Section 3.01. Payment of Deficiencies by Midas Group Members.
----------------------------------------------
If any adjustments are made with respect to any Tax Returns of Whitman (or
any member of the Whitman Group) in which any member of the Midas Group is
included for taxable periods beginning on or before the Distribution Date, and
such adjustments are either consented to by Whitman or are upheld on
administrative appeal or litigation, to the extent that such adjustments
increase the tax liability with respect to any taxing jurisdiction or taxing
authority attributable to any member of the Midas Group, then each member of the
Midas Group shall be jointly and severally liable to Whitman for such increases,
including interest and penalties thereon. If any member of the Midas Group shall
have any liability as a result of this Section 3.01, the amount thereof shall be
paid by Midas to Whitman within ten (10) days of the receipt by Midas of written
notice of such liability, together with a computation of the amount due and
supporting documentation in such detail as Midas may reasonably request to
verify the computation of the amount due.
Section 3.02. Payment of Refunds to Midas Group Members.
If any adjustments are made with respect to any Tax Returns of Whitman (or
any member of the Whitman Group) in which any member of the Midas Group is
included for any taxable period beginning on or before the Distribution
Date, and such adjustments are either consented to by Whitman or are upheld
on administrative appeal or litigation, to the extent that such adjustments
decrease the tax liability attributable to any member of the Midas Group as
determined and calculated under this Agreement and result in a Tax Benefit
for Whitman or for other members of the Whitman Group, then Whitman shall
remit to Midas any refunds of Taxes, together with any interest thereon,
received by it as a result of the adjustments attributable to a member of
the Midas Group. Whitman shall pay any amounts due from it to Midas as a
result of this Section 3.02 within ten (10) days of receipt of the relevant
refund from the respective taxing authority. Such payments shall be
accompanied by a computation of the amount due and supporting documentation
in such detail as Midas may reasonably request to verify the computation of
the amount due.
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Section 3.03. Restructuring Taxes.
(a) With Respect to Transactions Occurring On or Before the Distribution Date.
-------------------------------------------------------------------------
If as a result of any transaction occurring on or before the Distribution
Date and involving either the stock, assets or debt (or any combination thereof)
of any member of the Midas Group, any Restructuring Taxes are imposed upon any
member of the Midas Group, then Whitman shall pay and shall indemnify and hold
harmless Midas and each member of the Midas Group from and against all
Restructuring Taxes, including, without limitation, any Restructuring Taxes at
any time paid by Midas or any member of the Midas Group. Such payment and
indemnification shall be made by Whitman no later than fifteen (15) days after
the later to occur of: (a) written notice from Midas, which notice shall be
accompanied by a computation of the amounts due; or (b) a final determination of
said Restructuring Taxes is made after exhausting any informal, administrative,
arbitration or judicial remedies.
(b) Transactions Occurring After the Distribution Date.
--------------------------------------------------
If as a result of any transaction occurring after the Distribution Date and
involving either the stock, assets or debt (or any combination thereof) of Midas
or of any member of the Midas Group (including any transactions of the type
described in Section 4.05 below), any Restructuring Taxes are imposed upon
Whitman or any other member of the Whitman Group, then Midas shall pay and shall
indemnify and hold harmless Whitman and each member of the Whitman Group from
and against all such Restructuring Taxes at any time paid by Whitman or any
member of the Whitman Group. Such payment and indemnification shall be made by
Midas no later than fifteen (15) days after the later to occur of: (a) written
notice from Whitman, which notice shall be accompanied by a computation of the
amounts due; or (b) a final determination of said Restructuring Taxes is made
after exhausting any informal, administrative, arbitration or judicial remedies.
(c) Tax Benefits Regarding Basis Determinations Relating to Restructuring
Taxes.
---------------------------------------------------------------------
To the extent that Whitman shall pay or indemnify Midas and/or any member
of the Midas Group with respect to Restructuring Taxes pursuant to Section
3.03(a) above, the basis of the stock, assets or debt which are the subject of
the Restructuring Taxes payable increases, and such stock, assets or debt are
transferred by Midas or any member of the Midas Group in a taxable transaction
to which the basis increase is reflected in the computation of the gain or loss
on such taxable transaction during any taxable year which includes the
Distribution Date and the five (5) taxable years immediately following the
taxable year in which the Distribution Date falls, then Midas shall promptly
notify Whitman in writing of such taxable transaction and of the amount of the
Tax Benefit resulting from such basis increase. Such notice shall include
supporting documentation in such detail as Whitman may need to verify the
computation of the amount. The amount of such Tax Benefit shall be payable by
Midas to Whitman within ten (10) days of sending
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to Whitman written notice of such amount due. In order to verify the amount of
such Tax Benefit, Whitman shall have access to inspect the Tax Returns for the
taxable years of Midas and any members of the Midas Group covered by this
section upon written request directed to the Chief Financial Officer of Midas.
Midas shall comply with such request to make a copy of the Tax Returns in
question available at a reasonable place during normal business hours within
thirty (30) days of receiving said request and Whitman may make copies of
portions of the Tax Returns which it deems relevant to this inquiry.
ARTICLE IV
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
------------------------------------------
Section 4.01. Tax Audits and Controversies.
Except as otherwise provided in this Section 4.01, Whitman, at its own
expense, shall have the exclusive authority to represent each member of the
Midas Group before the IRS or any other governmental agency or authority or
before any court with respect to any matter affecting the U.S. federal income or
other U.S. federal tax liability or any other tax liability (whether state,
local or foreign) of any member of the Whitman Group or the Midas Group for any
tax period beginning on or before the Distribution Date. Such representation
shall include, but shall not be limited to exclusive control over (i) any
response to any examination by the IRS or any other taxing authorities of U.S.
federal income tax returns, other U.S. federal tax returns or the tax returns of
other taxing jurisdictions and (ii) any contest through a final determination of
any issue included in any Tax Return that includes a member of the Whitman
Group, including, but not limited to (A) whether and in what forum to conduct
such contest, and (B) whether and on what basis to settle such contest. Whitman
shall give timely notice to Midas of any inquiry, the assertion of any claim or
the commencement of any suit, action or proceeding in respect of which indemnity
for U.S. federal taxes or any other taxes may be sought under this Agreement
against Midas or any member of the Midas Group and will give Midas such
information with respect thereto as Midas may reasonably request. Upon notice to
Whitman, Midas may at its own expense participate in any such inquiry, audit or
other administrative proceeding and assume the defense or prosecution, as the
case may be, of any suit, action or proceeding; provided, that each Midas
representative is satisfactory to Whitman, and Midas shall thereafter consult
with Whitman upon Whitman's request for such consultation from time to time with
respect to such inquiry, suit, action or proceeding. Whitman is authorized and
empowered to settle any claim, suit, action or proceeding in respect of which
indemnity for U.S. federal taxes or any other taxes may be sought against Midas
or any member of the Midas Group. Anything in this Section 4.01 to the contrary
notwithstanding, if Whitman determines to terminate Midas' participation in any
such inquiry or in the defense
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of any such suit, action or proceeding, then upon receipt of notice from Whitman
to such effect, Midas shall have no further right to commence or continue such
discussions or submissions with respect to the matter, and Whitman shall have
the right to close and to cause Midas to close such audit or contest.
Anything in this Section 4.01 or elsewhere in this Agreement to the
contrary notwithstanding, if Whitman permits Midas to litigate any U.S. federal
tax issue or other tax issue in any forum, Midas shall pay and shall indemnify
and hold harmless each member of the Whitman Group from any and all costs,
expenses and/or liabilities of any type or nature, including, without
limitation, any tax liability (including interest and penalties thereon), that
are incurred by or imposed upon Whitman or any member of the Whitman Group which
Whitman or such Whitman Group member would not otherwise have incurred.
Section 4.02. Code Section 355 Distribution Related Professional and
Consulting Fees.
The Tax Benefits arising out of any professional fees or consulting fees in
connection with the Code section 355 Distribution of Midas or other members of
the Midas Group that are paid for by Whitman or by members of the Whitman Group
which are allowed as a deduction to Midas or to any other member of the Midas
Group, rather than as a deduction to Whitman or to a member of the Whitman Group
which paid for such professional or consulting fees in question, shall be
reimbursed to Whitman or to the member of the Whitman Group that actually made
the payment of such professional or consulting fees. The amount thereof shall be
payable by Midas to Whitman within ten (10) days of the receipt by Midas of
written notice of such item, together with a computation of the amount due and
supporting documentation in such detail as Midas may reasonably request to
verify the computation of the amount due;
Section 4.03. Retention of Books and Records.
Midas and Whitman each agrees that they will take provisions to insure that
both they and the members of the Midas group and the members of the Whitman
Group, respectively, will retain all Tax Returns, related schedules and
workpapers, and all material records and other documents relating thereto
existing on the date hereof or created through or with respect to taxable
periods beginning on or before the Distribution Date, until the later of (a) the
expiration of the statute of limitations (including extensions) of the taxable
years to which such Tax Returns and other documents relate, or (b) September 16,
2008.
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Section 4.04. Cooperation With Respect to Tax Return Filings, Examinations
and Tax Related Controversies.
(a) Midas' Obligations.
In addition to any obligations imposed pursuant to the Distribution
Agreement, Midas and each other member of the Midas Group shall fully cooperate
with Whitman and its representatives, in a prompt and timely manner, in
connection with (i) the preparation and filing of and (ii) any inquiry, audit,
examination, investigation, dispute, or litigation involving, any Tax Return
filed or required to be filed by or for any member of the Whitman Group for any
taxable period beginning on or before the Distribution Date. Such cooperation
shall include, but not be limited to, (x) the execution and delivery to Whitman
by the appropriate Midas Group member of any power of attorney required to allow
Whitman and its counsel to represent Midas or such other Midas Group member in
any controversy which Whitman shall have the right to control pursuant to the
terms of Section 4.01 of this Agreement, and (y) making available to Whitman,
during normal business hours, and within sixty (60) days of any request
therefor, all books, records and information, and the assistance of all officers
and employees, necessary or useful in connection with any tax inquiry, audit,
examination, investigation, dispute, litigation or any other matter.
(b) Whitman's Obligations.
Except as otherwise provided in this Article IV, Whitman shall fully
cooperate with Midas and its representatives, in a prompt and timely manner, in
connection with (i) the preparation and filing of and (ii) any inquiry, audit,
examination, investigation, dispute, or litigation involving, any Tax Return
filed or required to be filed by or for any member of the Midas Group which
includes Whitman or any other member of the Whitman Group. Such cooperation
shall include, but not be limited to, (x) the execution and delivery to Midas by
Whitman of any power of attorney required to allow Midas and its counsel to
participate on behalf of Midas or other Midas Group members in any inquiry,
audit or other administrative proceeding and to assume the defense or
prosecution, as the case may be, of any suit, action or proceeding pursuant to
the terms of and subject to the conditions set forth in Section 4.01 of this
Agreement, (y) making available to Midas, during normal business hours, and
within sixty (60) days of any request therefor, all books, records and
information, and the assistance of all officers and employees, necessary or
useful in connection with any tax inquiry, audit, examination, investigation,
dispute, litigation or any other matter.
(c) Remedy for Failure to Comply.
If Whitman reasonably determines that Midas is not for any reason
fulfilling its obligations under Section 4.04(a), or if Midas reasonably
determines that Whitman is not for any reason fulfilling its obligations under
Section 4.04(b), then Whitman or Midas, as the case may be, shall have the right
to appoint, at the
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expense of the other, an independent entity such as a nationally-recognized
public accounting firm to assist the other in meeting its obligations under this
Section 4.04. Such entity shall have complete access, during normal business
hours, to all books, records and information, and the complete cooperation of
all officers and employees, of Midas or Whitman, as the case may be. The remedy
provided in this Section 4.04(c) shall not be deemed exclusive.
Section 4.05. Certain Post-Distribution Date Transactions.
(a) With Respect to U.S. Federal Income Taxes.
Midas shall, and shall cause each Midas Group member to, comply with each
representation and statement made, or to be made, to the IRS or other
governmental authority in connection with any rulings obtained, or to be
obtained, by Whitman with respect to the Distribution, and any other transaction
contemplated by this Agreement. Midas further agrees that during the three-year
period following the Distribution Date, it (i) shall continue and shall cause
MDS Automotive Holdings B.V. to continue to be engaged in an active trade or
business within the meaning of Section 355(b)(2) of the Code, (ii) shall not
issue any shares of, or options with respect to, its stock, except that it may
issue shares of, or options with respect to, its stock if such issuances would
not exceed (when aggregated with prior issuances) twenty percent (20%) of the
issued and outstanding stock of Midas immediately following the Distribution,
(iii) shall not purchase any shares of its stock other than through stock
purchases permitted by the ruling issued to Whitman by the IRS regarding the
Distribution, (iv) shall not liquidate or merge with any other corporation or
transfer substantially all of its assets to any other corporation, and (v) shall
not recommend to its shareholders that they agree to an acquisition of their
stock in Midas by another entity. Anything in this Section 4.05 to the contrary
notwithstanding, an act or omission otherwise inconsistent with the
representations herein shall be permitted if, in the opinion of nationally
recognized counsel to Midas, which counsel shall be satisfactory to Whitman, or
pursuant to a supplemental ruling letter obtained from the IRS and satisfactory
to Whitman, such act or omission would not adversely affect the rulings issued
by the IRS or by any other governmental authority with respect to the
Distribution. Nothing in this Section 4.05 should be interpreted as altering the
obligations of Midas or of any other member of the Midas Group under Section
3.03(b) of this Agreement.
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ARTICLE V
TAX ALLOCATION AGREEMENTS TERMINATED
Section 5.01 Complete Agreement and Termination of Tax Allocation
Agreements.
This Agreement shall constitute the entire agreement between the parties
with respect to the subject matter hereof and shall supersede all previous
negotiations and commitments and the prior Tax Allocation Agreements, which
shall be replaced and superseded in their entirety by this Agreement and shall
be of no further force and effect.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Severability. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
Section 6.02. Modification of Agreement. No modification, amendment or
waiver of any provision of this Agreement shall be effective unless the same
shall be in writing and signed by each of the parties hereto and then such
modification, amendment or waiver shall be effective only in the specific
instance and for the purpose for which given.
Section 6.03. Conflict with the Distribution Agreement.
In the event and to the extent that there shall be a conflict between the
provisions of this Agreement and the Distribution Agreement, the provisions of
this Agreement shall control.
Section 6.04. Notices. All notices or other communications required or
permitted under this Agreement shall be delivered by hand, mailed by certified
or registered mail, postage prepaid with return receipt requested, or sent by
cable, telegram, telex or telecopy (confirmed by regular, first-class mail), to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice) and shall be deemed given on the date on
which such notice is received:
(a) In the case of Whitman, to
Whitman Corporation
3501 Algonquin Road
Rolling Meadows, Illinois 60008
Attention: Chief Financial Officer
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(b) In the case of Midas and International:
Midas Group, Inc.
225 N. Michigan Avenue
Chicago, Illinois 60601
Attention: Chief Financial Officer
Section 6.05. Application to Present and Future Subsidiaries. This
Agreement is being entered into by Whitman, Midas and International on behalf of
themselves and each member of the Whitman Group and the Midas Group,
respectively. This Agreement shall constitute a direct obligation of each such
member and shall be deemed to have been readopted and affirmed on behalf of any
corporation which becomes a member of the Whitman Group or of the Midas Group in
the future. Whitman, Midas and International hereby guarantee the performance of
all actions, agreements and obligations provided for under this Agreement of
each member of the Whitman Group and the Midas Group, respectively. Whitman,
Midas and International shall, upon the written request of the other, cause any
of their respective group members formally to execute this Agreement. This
Agreement shall be binding upon, and shall inure to the benefit of, the
successors, assigns and persons controlling any of the corporations bound
hereby.
Section 6.06. Term. This Agreement shall commence on the date of
execution indicated above and shall continue in effect until otherwise agreed to
in writing by the parties hereto, or their respective successors or assigns.
Section 6.07. Titles and Headings. Titles and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.
Section 6.08. Singular and Plural. As used herein, the singular shall
include the plural and vice versa.
Section 6.09. Governing Law. This Agreement shall be governed by the laws
of the State of Delaware.
Section 6.10. Counterparts. This Agreement maybe executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become a binding agreement when one or more counterparts have been signed
by each party and delivered to the other parties.
Section 6.11. Form of Payments and Late Payments. Any payment owed by one
party to another under this Agreement shall be made in the currency in
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which the tax to which such payment relates, and shall be paid in immediately
available funds and in such other manner as the party to whom such payment is
owed may reasonably request. Any payments required by this Agreement that are
not made when due shall bear interest at the prime rate plus six percent (6%)
from the due date of the payment to the date paid.
Section 6.12. Treatment of Payment. The parties agree that, in the
absence of any change in law or fact, any indemnification payments made under
this Agreement shall be treated, for tax purposes, as occurring before the
Distribution Date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all on the day and year first
above written.
WHITMAN CORPORATION
By: /s/ Louis J. Corna
--------------------
Vice President-Taxes
MIDAS INC.
By: /s/ R. Lee Barclay
-----------------------
Chief Financial Officer
MIDAS INTERNATIONAL
CORPORATION
By: /s/ R. Lee Barclay
-----------------------
Chief Financial Officer
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