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Exhibit 2.2
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
dated as of
October 26, 2000
among
FLOWERS INDUSTRIES, INC.,
KELLOGG COMPANY
and
KANSAS MERGER SUBSIDIARY, INC.
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS.....................................................................................2
Section 1.01. Definitions.................................................................2
ARTICLE 2 THE TRANSACTION.................................................................................6
Section 2.01. The Spin-Off................................................................6
Section 2.02. The Merger..................................................................6
Section 2.03. Conversion of Shares........................................................7
Section 2.04. Surrender and Payment.......................................................8
Section 2.05. Dissenting Shares...........................................................9
Section 2.06. Equity Compensation Arrangements; Share Equivalents.........................9
Section 2.07. Adjustments.................................................................9
Section 2.08. Withholding Rights.........................................................10
Section 2.09. Lost Certificates..........................................................10
Section 2.10. Associated Rights..........................................................10
Section 2.11. Calculation of Adjustment Amount...........................................10
ARTICLE 3 THE SURVIVING CORPORATION......................................................................10
Section 3.01. Articles of Incorporation..................................................11
Section 3.02. Bylaws.....................................................................11
Section 3.03. Directors and Officers.....................................................11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................11
Section 4.01. Corporate Existence and Power..............................................11
Section 4.02. Corporate Authorization....................................................12
Section 4.03. Governmental Authorization.................................................12
Section 4.04. Non-Contravention..........................................................13
Section 4.05. Capitalization.............................................................13
Section 4.06. SEC Filings................................................................14
Section 4.07. Financial Statements.......................................................14
Section 4.08. Disclosure Documents.......................................................16
Section 4.09. Absence of Certain Changes.................................................16
Section 4.10. No Undisclosed Material Liabilities........................................18
Section 4.11. Compliance with Laws and Court Orders......................................18
Section 4.12. Litigation.................................................................18
Section 4.13. Finders' Fees..............................................................18
Section 4.14. Opinion of Financial Advisers..............................................19
Section 4.15. Taxes......................................................................19
Section 4.16. Employee Benefit Plans.....................................................20
Section 4.17. Environmental Matters......................................................23
Section 4.18. Antitakeover Statute and Rights Agreement..................................24
Section 4.19. Insurance..................................................................24
Section 4.20. Certain Contracts; Indemnities; Indebtedness...............................24
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ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARENT.......................................................25
Section 5.01. Corporate Existence and Power..............................................25
Section 5.02. Corporate Authorization....................................................25
Section 5.03. Governmental Authorization.................................................26
Section 5.04. Non-Contravention..........................................................26
Section 5.05. Disclosure Documents.......................................................26
Section 5.06. Finders' Fees..............................................................26
Section 5.07. Adequate Funds.............................................................26
ARTICLE 6 COVENANTS OF THE COMPANY.......................................................................27
Section 6.01. Conduct of the Company.....................................................27
Section 6.02. Shareholder Meeting; SEC Filings...........................................29
Section 6.03. Access to Information......................................................30
Section 6.04. No Solicitation............................................................30
Section 6.05. Third Party Standstill Agreements..........................................33
Section 6.06. Rights Agreement...........................................................33
Section 6.07. Spin-Off...................................................................33
ARTICLE 7 COVENANTS OF PARENT............................................................................34
Section 7.01. Obligations of Merger Subsidiary...........................................34
Section 7.02. Director and Officer Liability.............................................34
ARTICLE 8 COVENANTS OF PARENT AND THE COMPANY............................................................35
Section 8.01. Reasonable Efforts.........................................................35
Section 8.02. Certain Filings............................................................36
Section 8.03. Public Announcement........................................................36
Section 8.04. Further Assurances.........................................................37
Section 8.05. Notices of Certain Events..................................................37
ARTICLE 9 CONDITIONS TO THE MERGER.......................................................................37
Section 9.01. Conditions to Obligations of Each Party....................................37
Section 9.02. Conditions to the Obligations of Parent and Merger Subsidiary..............38
Section 9.03. Conditions to the Obligations of the Company...............................38
ARTICLE 10 TERMINATION....................................................................................39
Section 10.01. Termination................................................................39
Section 10.02. Effect of Termination......................................................40
ARTICLE 11 MISCELLANEOUS..................................................................................41
Section 11.01. Notices....................................................................41
Section 11.02. Survival of Representations and Warranties; Indemnification................42
Section 11.03. Amendments; No Waivers.....................................................42
Section 11.04. Expenses...................................................................42
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Section 11.05. Successors and Assigns.....................................................43
Section 11.06. Governing Law..............................................................44
Section 11.07. Jurisdiction...............................................................44
Section 11.08. Waiver of Jury Trial.......................................................44
Section 11.09. Counterparts; Effectiveness; Benefit.......................................44
Section 11.10. Entire Agreement...........................................................44
Section 11.11. Captions...................................................................45
Section 11.12. Severability...............................................................45
Section 11.13. Specific Performance.......................................................45
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ANNEX A Distribution Agreement
SCHEDULE I Per Share Adjustment Amount
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AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER dated as of
October 26, 2000, (this "Agreement") among Flowers Industries, Inc., a Georgia
corporation (the "Company"), Kellogg Company, a Delaware corporation ("Parent"),
and Kansas Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Subsidiary").
WHEREAS, prior to the Effective Time (as defined below), the
assets of the Company will consist of (i) 100% of the shares of Common Stock of
Flowers Foods, Inc., a Georgia corporation ("Spinco") and (ii) 46,197,466 shares
of common stock, $0.01 par value of Keebler Foods Company, a Delaware
corporation ("ELF"), representing a majority of the outstanding voting power of
ELF on a fully diluted basis (the "ELF Shares") and the liabilities of the
Company will consist of certain of the Company's debt;
WHEREAS, the Company and Spinco are simultaneously herewith
entering into a Distribution Agreement (the "Distribution Agreement") in the
form of ANNEX A hereto pursuant to which all of the outstanding shares of Spinco
common stock will be distributed to the Company's shareholders (the
"Distribution"), and to effect the various transactions contemplated thereby
and, with the exception of this Agreement, by the other Transaction Agreements
(as defined below) provided that all conditions precedent to the Distribution
set forth in the Distribution Agreement have been satisfied, immediately prior
to the Effective Time (all such transactions being referred to collectively as
the "Spin-Off");
WHEREAS, (i) Parent, FK Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of the Company ("Newco") and ELF have
entered into an Agreement and Plan of Merger dated the date hereof (the "ELF
Merger Agreement") pursuant to which Newco will merge with and into ELF (the
"ELF Merger") on the terms and conditions set forth therein; (ii) Parent and the
Company have entered into a Voting Agreement (the "ELF Voting Agreement")
pursuant to which the Company has agreed to execute a written consent with
respect to the ELF Shares in favor of the approval of the ELF Merger and
adoption of the ELF Merger Agreement; and (iii) in the ELF Merger, each share of
Common Stock of ELF, other than the ELF Shares and any Common Stock of ELF held
by ELF or Parent, will be converted into the right to receive $42.00 in cash;
WHEREAS, the respective Boards of Directors of Parent, Merger
Subsidiary and the Company have approved this Agreement, and deem it advisable
and in the best interests of their respective shareholders to consummate the
merger of Merger Subsidiary with and into the Company on the terms and
conditions set forth herein (the "Merger;" the Spin-Off, the Merger and the
other transactions contemplated by the Transaction Agreements sometimes being
hereinafter collectively referred to as the "Transaction");
WHEREAS, the Company, Parent and Merger Subsidiary desire to
make certain representations, warranties, covenants and agreements in connection
with this Agreement and the Distribution Agreement (this Agreement, the
Distribution Agreement and the other agreements
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attached hereto or thereto sometimes being hereinafter collectively referred to
as the "Transaction Agreements");
WHEREAS, the Merger will occur only after and conditioned upon
the Spin-Off; and
WHEREAS, for federal income Tax (as defined below) purposes,
it is intended that the Transaction will be treated at the Company's shareholder
level as an integrated transaction in redemption and disposition of the
Company's outstanding capital stock.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. DEFINITIONS.
(a) The following terms, as used herein, have the following
meanings:
"Adjustment Amount" has the meaning ascribed to that term in
Schedule I.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person except that ELF shall not be considered an Affiliate of the
Company for purposes of Section 4.16.
"Antitrust Division" means the Antitrust Division of the
United States Department of Justice.
"Benefit Arrangement" means any employment, severance or
similar contract or arrangement (oral or written) providing for compensation,
bonus, profit-sharing, stock option, or other stock-related rights or other
forms of incentive or deferred compensation, perquisites, vacation benefits,
insurance coverage (including any self-insured arrangements), health or medical
benefits, disability benefits, worker's compensation, supplemental unemployment
benefits, severance benefits and post-employment or retirement benefits
(including compensation, pension, health, medical or life insurance or other
benefits) that on or after January 1, 1994 (i) is not and was not an Employee
Plan, (ii) is or was entered into, maintained, administered or contributed to,
as the case may be, by the Company or any of its Affiliates and (iii) is not an
Employee Arrangement (as defined in the ELF Merger Agreement).
"Business Day" means a day other than Saturday, Sunday or
other day on which commercial banks in New York, New York are authorized or
required by law to close.
"Code" means the Internal Revenue Code of 1986.
"Company Balance Sheet" means the consolidated balance sheet
of the Company as of January 1, 2000 and the footnotes thereto set forth in the
Company 10-K.
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"Company 10-K" means the Company's annual report on Form 10-K
for the fiscal year ended January 1, 2000.
"Controlled Group Liability" means any and all liabilities (i)
under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections
412 and 4971 of the Code, (iv) as a result of a failure to comply with the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code and (v) under corresponding or similar provisions of foreign
laws or regulations, other than such liabilities that arise solely out of, or
relate solely to, the Employee Arrangements listed in the Company Disclosure
Schedule.
"Delaware Law" means the General Corporation Law of the State
of Delaware.
"Employee Arrangement" means any Benefit Arrangement or
Employee Plan.
"Employee Plan" means any "employee benefit plan," as defined
in Section 3(3) of ERISA, that on or after January 1, 1994 (i) is or was subject
to any provision of ERISA, (ii) is or was maintained, administered or
contributed to by the Company or any of its Affiliates and (iii) is not an
Employee Arrangement (as defined in the ELF Merger Agreement).
"Environmental Claims" means any written, or to the Company's
knowledge, threatened claim, demand, or notice to or other suit, action,
proceeding, investigation of the Company or any of its Subsidiaries by any
person alleging any potential liability (including potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, or penalties) arising out of, based on, or resulting from the
presence, or Release into the environment, of any Hazardous Substance at any
location, whether or not owned, leased, operated or used by the Company or any
of its Subsidiaries.
"Environmental Laws" means in each case as in effect on the
date hereof all Laws of any Governmental Entity or agreements with any
Governmental Authority or other third party relating to human health, safety or
the environment, including relating to emissions, discharges, Releases or
threatened Releases of Hazardous Substances, or otherwise relating to the
manufacture, generation, processing, distribution, use, sale, treatment,
receipt, storage, disposal, transport or handling of Hazardous Substances,
including the Comprehensive Environmental Response, Compensation and Liability
Act, the Resource Conservation and Recovery Act and the Occupational Safety and
Health Act.
"Environmental Permits" means all permits, licenses,
certificates or approvals necessary for the operation of the Company as
currently conducted to comply with all applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of
1974.
"ERISA Affiliate" of any entity means any other entity that,
together with such entity, would be treated as a single employer under Section
414 of the Code.
"FTC" means the United States Federal Trade Commission.
"Georgia Law" means the Georgia Business Corporation Code.
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"Governmental Entity" means any federal, state, local or
foreign government or any court, tribunal, administrative agency or commission
or other governmental or other regulatory authority or agency, domestic, foreign
or supranational.
"Hazardous Substance" means (i) chemicals, pollutants,
contaminants, hazardous wastes, toxic substances, and oil and petroleum
products, (ii) any substance that is or contains friable asbestos, urea
formaldehyde foam insulation, polychlorinated biphenyls, petroleum or
petroleum-derived substances or wastes, radon gas or related materials, (iii)
any substance that requires removal or remediation under any Environmental Law,
or is defined, listed or identified as a "hazardous waste" or "hazardous
substance" thereunder, or (iv) any substance that is toxic, explosive,
corrosive, flammable, radioactive, or otherwise hazardous.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
"Law" means any applicable federal, state, local or foreign
law, statute, common law, ordinance, directive, rule, regulation, judgment,
order, injunction, decree, arbitration award, agency requirement, license or
permit of any Governmental Entity.
"Lien" means, with respect to any property or asset, any
mortgage, lien, pledge, charge, security interest, encumbrance or other adverse
claim of any kind in respect of such property or asset. For purposes of this
Agreement, a Person shall be deemed to own subject to a Lien, any property or
asset that it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such property or asset.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the financial condition, business, assets, or results
of operations of such Person and its Subsidiaries, taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) of ERISA.
"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"Per Share Adjustment Amount" has the meaning ascribed to that
term in Schedule I.
"Person" means an individual, corporation, partnership,
limited liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Releases" means any releasing, disposing, discharging,
injecting, spilling, leaking, pumping, dumping, emitting, escaping, emptying,
migration, transporting, placing, including into or upon, any land, soil,
surface water, ground water or air, or otherwise entering into the environment,
that is not in compliance with Environmental Laws.
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"Rights" means the preferred stock purchase rights issued
pursuant to the terms of the Rights Agreement.
"Rights Agreement" means the agreement dated as of April 2,
1999 between the Company and First Union National Bank, as Rights Agent.
"SEC" means the Securities and Exchange Commission.
"Share Equivalent" means any stock option, warrant,
performance share or right of conversion issued pursuant to a stock option,
compensatory plan, or similar arrangements.
"Shares" means the shares of common stock, $0.625 par value,
of the Company.
"Subsidiary" means, with respect to any Person, any entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such Person. For
purposes of this Agreement, except in the context of references in Sections
4.07(a), and 4.07(b) to the Company and its Subsidiaries, ELF shall not be
deemed to be a Subsidiary of the Company.
"Title IV Plan" means a plan subject to Title IV of ERISA,
other than any Multiemployer Plan.
"Withdrawal Liability" means liability to or with respect to a
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan, as those terms are defined in Part I of Subtitle E of Title
IV of ERISA.
Any reference in this Agreement to a statute shall be to such
statute, as amended from time to time, and to the rules and regulations
promulgated thereunder.
Any reference to "including" or "include" means "including,
without limitation" or "include, without limitation."
(b) Each of the following terms is defined in the Section set
forth opposite such term:
TERM SECTION
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Acquisition Agreement............................... 6.04
Adverse Recommendation Change....................... 6.04
Arbitrator.......................................... 2.11
Certificates........................................ 2.04
Company Disclosure Schedule......................... Article 4
Company Proxy Statement............................. 4.08
Company SEC Documents............................... 4.06
Company Securities.................................. 4.05
Company Shareholder Meeting......................... 6.02
Confidentiality Agreement........................... 6.03
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Distribution........................................ Recitals
Distribution Agreement.............................. Recitals
Effective Time...................................... 2.02
ELF................................................. Recitals
ELF Merger.......................................... Recitals
ELF Merger Agreement................................ Recitals
ELF Shares.......................................... Recitals
ELF Voting Agreement................................ Recitals
Exchange Agent...................................... 2.04
Excluded Employee................................... 4.09
GAAP................................................ 4.07
Indemnified Person.................................. 7.03
IRS................................................. 4.15
Merger.............................................. Recitals
Merger Consideration................................ 2.03
Newco............................................... Recitals
Notice of Superior Proposal......................... 6.04
Parent.............................................. Recitals
Preferred Shares.................................... 4.05
Registration Statement ............................. 4.08
Series A Preferred Stock............................ 4.05
Spinco.............................................. Recitals
Superior Proposal................................... 6.04
Surviving Corporation............................... 2.02
Takeover Proposal................................... 6.04
Tax or Taxes........................................ 4.15
Tax Return.......................................... 4.15
Taxing Authority.................................... 4.15
Transaction......................................... Recitals
Transaction Agreements.............................. Recitals
ARTICLE 2
THE TRANSACTION
Section 2.01. THE SPIN-OFF. Provided that all conditions
precedent to the Spin-Off set forth in the Distribution Agreement have been
satisfied, prior to the Effective Time, the Company will cause each Person that
is intended to be a party to any Transaction Agreement (other than the Merger
Agreement) to enter into each such Transaction Agreement, and, on the terms and
subject to the conditions of the Transaction Agreements, immediately prior to
the Effective Time, the Company shall effect, and cause Spinco to effect, the
Spin-Off.
Section 2.02. THE MERGER.
(a) At the Effective Time, Merger Subsidiary shall be merged
with and into the Company in accordance with Delaware Law and Georgia Law,
whereupon the separate exis-
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tence of Merger Subsidiary shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation").
(b) As soon as practicable after satisfaction or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Company
and Merger Subsidiary will file a certificate of merger with each of the
Delaware Secretary of State and the Georgia Secretary of State and make all
other filings or recordings required by Delaware Law and Georgia Law in
connection with the Merger. The Merger shall become effective at such time (the
"Effective Time") as the certificates of merger are duly filed with the Georgia
Secretary of State and Delaware Secretary of State or at such later time as is
specified in the certificates of merger provided that the Effective Time shall
not occur unless and until the Spin-Off shall have occurred.
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, powers, privileges and franchises and
be subject to all of the obligations, liabilities, restrictions and disabilities
of the Company and Merger Subsidiary, all as provided under Georgia Law.
Section 2.03. CONVERSION OF SHARES.
(a) At the Effective Time:
(i) except as otherwise provided in Section
2.03(a)(ii) or Section 2.05, each Share outstanding
immediately prior to the Effective Time other than any Shares
that are Share Equivalents, together with the associated
Right, shall be converted into the right to receive an amount
equal to (1) $42.00 multiplied by 46,197,466, divided by (2)
the number of Shares issued and outstanding immediately prior
to the Effective Time, less (3) the Per Share Adjustment
Amount, in cash per share, without interest (the "Merger
Consideration");
(ii) each Share held by the Company as treasury stock
or owned by Parent or any of its Subsidiaries immediately
prior to the Effective Time shall be canceled, and no payment
shall be made with respect thereto; and
(iii) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the
Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving
Corporation.
(b) The Merger and the Spin-Off shall be effected such that
the shares of Spinco to be distributed in the Spin-Off and the Merger
Consideration are distributed or paid, as the case may be, only to the same
holders of Shares provided that the Spin-Off shall occur prior to the Merger.
Section 2.04. SURRENDER AND PAYMENT.
(a) Prior to the Effective Time, Parent shall appoint an agent
(the "Exchange Agent") reasonably acceptable to the Company for the purpose of
exchanging certificates repre-
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senting Shares (the "Certificates") for the Merger Consideration. Promptly after
the Effective Time, Parent will cause to be deposited with the Exchange Agent
the Merger Consideration to be paid in respect of the Shares converted pursuant
to Section 2.03(a)(i). Promptly after the Effective Time, Parent will send, or
will cause the Exchange Agent to send, to each holder of record of Shares at the
Effective Time a letter of transmittal and instructions (which shall specify
that the delivery shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates to the Exchange Agent) for use in such
exchange.
(b) Each holder of Shares that have been converted into the
right to receive the Merger Consideration pursuant to Section 2.03(a)(i) will be
entitled to receive, upon surrender to the Exchange Agent of a Certificate,
together with a properly completed letter of transmittal, and all other
documents the Exchange Agent may reasonably require, the Merger Consideration
payable for each Share represented by such Certificate. Until so surrendered,
each such Certificate shall represent after the Effective Time for all purposes
only the right to receive such Merger Consideration. No interest shall be paid
or will accrue on the Merger Consideration payable pursuant to the provisions of
this Article 2.
(c) If any portion of the Merger Consideration is to be paid
to a Person other than the Person in whose name the surrendered Certificate is
registered, it shall be a condition to such payment that the Certificate so
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the Person requesting such payment shall pay to the Exchange
Agent any transfer or other taxes required as a result of such payment to a
Person other than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not payable.
(d) At the Effective Time, the stock transfer books of the
Company will be closed and there shall be no further registration or transfers
of Shares. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth, in
this Article 2.
(e) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.04(a) (and any interest or other income
earned thereon) that remains unclaimed by the holders of Shares six months after
the Effective Time shall be returned to Parent, upon demand, and any such holder
who has not exchanged Shares for the Merger Consideration in accordance with
this Section 2.04 prior to that time shall thereafter look only to Parent for
payment of the Merger Consideration in respect of such Shares without any
interest thereon. Notwithstanding the foregoing, Parent shall not be liable to
any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property, escheat or similar Laws. Any amounts remaining
unclaimed by holders of Shares three years after the Effective Time (or such
earlier date immediately prior to such time when the amounts would otherwise
escheat to or become property of any Governmental Entity) shall become, to the
extent permitted by applicable Law, the property of Parent free and clear of any
claims or interest of any Person previously entitled thereto.
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(f) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.04(a) to pay for Shares for which
appraisal rights have been requested shall be returned to Parent, upon demand.
Section 2.05. DISSENTING SHARES. Notwithstanding Section 2.03,
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Georgia Law shall not
be converted into a right to receive the Merger Consideration, unless such
holder fails to perfect, withdraws or otherwise loses its right to appraisal.
If, after the Effective Time, such holder fails to perfect, withdraws or loses
its right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares. Except as required by
applicable Law or with the prior written consent of Parent, the Company shall
not make any payment with respect to, or settle or offer to settle, any such
demands. The exercise of appraisal rights under Georgia Law whether or not
perfected shall not affect any holder's right to receive a pro-rata share of the
Spin-Off.
Section 2.06. EQUITY COMPENSATION ARRANGEMENTS; SHARE
EQUIVALENTS.
(a) At or immediately prior to the Effective Time, each Share
Equivalent outstanding under any stock option or equity compensation plan or
arrangement of the Company, whether or not vested or exercisable, shall be
canceled, and the Company shall pay each holder of any such Share Equivalent
which shall have been granted or issued under the 1989 Executive Stock Incentive
Plan at or promptly after the Effective Time for each such Share Equivalent an
amount in cash determined by multiplying (i) the excess, if any, of the Change
in Control Price (as defined in the 1989 Executive Stock Incentive Plan) per
Share over the applicable exercise price of such Share Equivalent, if any, by
(ii) the number of Shares such holder could have purchased (assuming full
vesting of all Share Equivalents) had such holder exercised or converted such
Share Equivalent into Shares immediately prior to the Effective Time.
(b) Prior to the Effective Time, the Company shall (i) obtain
any consents from holders of Share Equivalents granted under the Company's stock
option or equity compensation plans or arrangements and (ii) make any amendments
to the terms of such stock option or compensation plans or arrangements that, in
the case of either clauses (i) or (ii), the Company deems reasonably necessary
to give effect to the transactions contemplated by Section 2.06(a).
Notwithstanding any other provision of this Section, payment may be withheld in
respect of any such plans or arrangements until such necessary consents are
obtained, and the Company shall withhold from such payments all amounts required
by applicable Law or regulation to be withheld for taxes or otherwise.
Section 2.07. ADJUSTMENTS. If, during the period between the
date of this Agreement and the Effective Time, any change in the outstanding
Shares shall occur, including by reason of any reclassification,
recapitalization, stock split or combination, exchange or readjustment of
Shares, or stock dividend thereon (but excluding the Spin-Off) with a record
date during such period, the Merger Consideration and any other amounts payable
pursuant to Section 2.06
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shall be appropriately adjusted to provide to the holders of Shares the same
economic effect as contemplated by this Agreement prior to such event.
Section 2.08. WITHHOLDING RIGHTS. Each of the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable to any Person pursuant to this Article 2 such
amounts as it is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local or foreign tax Law. If
the Surviving Corporation or Parent, as the case may be, so withholds amounts,
such amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the Shares in respect of which the Surviving Corporation
or Parent, as the case may be, made such deduction and withholding.
Section 2.09. LOST CERTIFICATES. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond, in
such reasonable amount as the Surviving Corporation may direct, as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will pay, in exchange for such lost, stolen or destroyed
Certificate, the Merger Consideration to be paid in respect of the Shares
represented by such Certificate, as contemplated by this Article.
Section 2.10. ASSOCIATED RIGHTS. References in this Agreement
to Shares shall include, unless the context requires otherwise, the associated
Rights.
Section 2.11. CALCULATION OF ADJUSTMENT AMOUNT. At least 15
Business Days prior to the Effective Time, the Company shall prepare in good
faith and deliver to Parent an estimate of the Adjustment Amount, calculated in
accordance with Schedule I. The Company and Parent agree to negotiate in good
faith and to use reasonable best efforts to agree on the Adjustment Amount at
least 10 Business Days prior to the Effective Time. If the Company and Parent
agree on the amount of the Adjustment Amount, then the Adjustment Amount shall
equal such agreed amount. In the event that the Company and Parent do not agree
on the Adjustment Amount at least 10 Business Days prior to the Effective Time,
the parties may jointly engage Morgan Stanley Dean Witter, or the parties may
mutually agree to engage another nationally recognized investment banking firm
or accounting firm (the "Arbitrator"), to calculate the Adjustment Amount. If
the Adjustment Amount is not mutually agreed by the Company and Parent, at least
two Business Days prior to the Effective Time, the Arbitrator shall calculate
the Adjustment Amount in accordance with Schedule I and shall deliver such
amount to the Company and Parent, and the Adjustment Amount shall equal the
amount so calculated and delivered. The fees and expenses of the Arbitrator
shall be shared equally between Spinco and Parent.
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01. ARTICLES OF INCORPORATION. The articles of
incorporation of the Company in effect at the Effective Time shall be the
articles of incorporation of the Surviving Corporation until amended in
accordance with applicable Law, provided that, at the Effective
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Time, Article First of such articles of incorporation shall be amended to read
as follows: "The name of the Corporation is Keebler Holding Corp."
Section 3.02. BYLAWS. The bylaws of Merger Subsidiary in
effect at the Effective Time shall be the bylaws of the Surviving Corporation
until amended in accordance with applicable Law.
Section 3.03. DIRECTORS AND OFFICERS. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable Law, (i) the directors of Merger Subsidiary at the
Effective Time shall be the directors of the Surviving Corporation and (ii) the
officers of Merger Subsidiary at the Effective Time shall be the officers of the
Surviving Corporation.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the corresponding sections or
subsections of the disclosure schedule delivered by the Company to Parent on or
prior to the date hereof (the "Company Disclosure Schedule") the Company
represents and warrants to Parent that:
Section 4.01. CORPORATE EXISTENCE AND POWER.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Georgia and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company. The Company has heretofore made available to Parent true and complete
copies of the articles of incorporation and bylaws of the Company as currently
in effect.
(b) Spinco is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Georgia and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not materially impair, delay or prevent the ability of
Spinco to consummate the transactions contemplated by the Transaction
Agreements. Spinco is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where such qualification is necessary,
except for those jurisdictions where failure to be so qualified would not
materially impair, delay or prevent the ability of Spinco to consummate the
transactions contemplated by the Transaction Agreements. Spinco has heretofore
made available to Parent true and complete copies of the articles of
incorporation and bylaws of Spinco as currently in effect.
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Section 4.02. CORPORATE AUTHORIZATION.
(a) The execution, delivery and performance by the Company and
Spinco of the Transaction Agreements and the consummation by the Company and
Spinco of the transactions contemplated by such Transaction Agreements are
within the Company's and Spinco's corporate powers and, except for the
affirmative vote of the holders of a majority of the outstanding Shares in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action on the part of the Company and will be duly
authorized by all necessary corporate action on the part of Spinco prior to the
Effective Time. The affirmative vote of the holders of a majority of the
outstanding Shares is the only vote of the holders of any of the Company's
capital stock necessary in connection with the consummation of the Merger. Each
Transaction Agreement to which the Company or Spinco is or will be a party is or
when executed by such party, will constitute, a valid and binding agreement of
such party, each enforceable in accordance with its terms.
(b) The Company's Board of Directors has (i) determined that
the Transaction Agreements, including this Agreement and the transactions
contemplated hereby, taken as a whole, are fair to and in the best interests of
the Company's shareholders, (ii) declared advisable and approved the Transaction
Agreements and the transactions contemplated hereby and thereby and (iii)
resolved (subject to Section 6.04(c)) to recommend approval and adoption of this
Agreement and the Merger by its shareholders. Prior to the Effective Time,
Spinco's Board of Directors will have approved the Transaction Agreements and
the transactions contemplated hereby and thereby.
Section 4.03. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and performance by the Company and Spinco of the Transaction Agreements
and the consummation by the Company and Spinco of the transactions contemplated
hereby and thereby require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the filing of certificates of merger with
respect to the Merger with the Delaware Secretary of State and the Georgia
Secretary of State, (ii) compliance with any applicable requirements of the HSR
Act, (iii) compliance with any applicable requirements of the 1933 Act, the 1934
Act and any other applicable securities or takeover laws, (iv) the filing of
listing applications with respect to the Spinco shares to be distributed in the
Spin-Off, and (v) any actions or filings the absence of which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company or materially impair, delay or prevent the ability
of the Company or Spinco to consummate the transactions contemplated by the
Transaction Agreements.
Section 4.04. NON-CONTRAVENTION. The execution, delivery and
performance by each of the Company and Spinco of the Transaction Agreements to
which each is a party and the consummation of the transactions contemplated
hereby and thereby do not and will not (i) contravene, conflict with, or result
in any violation or breach of any provision of the articles of incorporation or
bylaws of the Company or Spinco, (ii) contravene, conflict with, or result in a
violation or breach of any provision of any Law, (iii) require any consent or
other action by any Person under, constitute (with or without notice or lapse of
time or both) a default under, or cause or permit the termination, cancellation,
acceleration or other change of any right or obligation or the loss of any
benefit to which the Company or Spinco is entitled under, any provision of any
agreement or other instrument binding upon the Company or Spinco or their
respective
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properties, or any license, franchise, permit, certificate, approval or other
similar authorization affecting, or relating in any way to, the assets or
business of the Company or Spinco or (iv) result in the creation or imposition
of any Lien on any asset of the Company or Spinco, except, in the case of
clauses (ii), (iii) and (iv), for such matters as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company or materially impair, delay or prevent the consummation of the
transactions contemplated by the Transaction Agreements by the Company or
Spinco.
Section 4.05. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
350,000,000 Shares, par value $0.625 per share and 249,523 shares of preferred
stock, par value $100.00 per share (the "Preferred Shares"), of which 100,000
shares are designated Series A Junior Participating Cumulative Preferred Stock
("Series A Preferred Stock"). As of October 25, 2000, there were: 100,085,442
Shares (excluding 2,728,794 Share Equivalents payable in cash or Shares)
outstanding and 442,451 Shares held in the Company's treasury. The Company has
no shares of Series A Preferred Stock outstanding nor any Shares or Series A
Preferred Stock reserved for or otherwise subject to issuance, except that as of
October 25, 2000 there were (i) 12,350,000 Shares reserved for issuance pursuant
to those Employee Plans and Benefit Arrangements listed in Section 4.16 of the
Company's Disclosure Schedule and (ii) 10,467 shares of Series A Preferred Stock
reserved for issuance pursuant to the Rights Agreement. All shares of capital
stock of the Company outstanding have been duly authorized and validly issued
and are fully paid and nonassessable. Section 4.05 of the Company Disclosure
Schedule sets forth a complete and accurate list of all outstanding Share
Equivalents by grantee (together with the exercise prices therefor). All Shares
issuable upon exercise of Share Equivalents have been duly authorized and, when
issued in accordance with the terms thereof, will be validly issued and will be
fully paid and nonassessable.
(b) Except as set forth in this Section 4.05 and for changes
since October 25, 2000 resulting from the exercise of Share Equivalents
outstanding on such date, there are no outstanding (i) shares of capital stock
or equity, debt or other securities of the Company, (ii) securities of the
Company or any other issuer convertible into or exchangeable for shares of
capital stock, equity, debt or other securities of the Company or (iii) options
or other rights to acquire from the Company or any of its Affiliates or other
obligation of the Company or any of its Affiliates to issue any capital stock,
equity, debt or other securities or securities convertible into or exchangeable
for capital stock or voting equity, debt or other securities of the Company (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company to
(i) repurchase, redeem or otherwise acquire any of the Company Securities, (ii)
to register any Company Securities under the 1933 Act or any state securities
law, (iii) to grant preemptive or antidilutive rights with respect to any
Company Securities or (iv) to grant any stock options (either upon the exercise
of any option or otherwise).
(c) Immediately following the Effective Time, the Company will
not own any equity, debt or other securities of any Person other than ELF.
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Section 4.06. SEC FILINGS.
(a) The Company has made available to Parent (i) the Company's
annual reports on Form 10-K for its fiscal years ended January 1, 2000, January
2, 1999, and January 3, 1998, (ii) its quarterly reports on Form 10-Q for its
fiscal quarters ended April 22, 2000 and July 15, 2000, (iii) its proxy
statements relating to meetings of the shareholders of the Company held since
January 3, 1998 and (iv) all of its other reports, statements, schedules and
registration statements filed with the SEC since January 3, 1998 (the documents
referred to in this Section 4.06(a), collectively, the "Company SEC Documents").
(b) As of its filing date, each Company SEC Document complied
as to form in all material respects with the applicable requirements of the 1933
Act and the 1934 Act, as the case may be.
(c) As of its filing date each Company SEC Document, including
each amendment or supplement thereto, filed pursuant to the 1934 Act did not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) Each Company SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed pursuant to the 1933
Act, as of the date such statement or amendment became effective, did not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading.
Section 4.07. FINANCIAL STATEMENTS.
(a) The audited consolidated financial statements and
unaudited consolidated interim financial statements (including the related
notes) of the Company included in the Company SEC Documents fairly present in
all material respects, in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated in the notes thereto), the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject to normal year-end adjustments, that are not expected to be material in
amount in the case of any unaudited interim financial statements except for any
non-recurring non-cash changes, which may be required relating to impaired
assets).
(b) Section 4.07(b) of the Company Disclosure Schedule
contains the unaudited pro forma consolidated balance sheet of Spinco and its
Subsidiaries as of July 15, 2000, together with the related unaudited pro forma
consolidated statement of income for the six-month period then ended, and the
unaudited pro forma consolidated statement of income of Spinco and its
Subsidiaries for the year ended January 1, 2000. Such statements present
information as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) as of July 15, 2000 or, with
respect to the income statements, as if the Spin-Off had occurred (on the terms
and subject to the conditions set forth in the Transaction Agreements) as of the
beginning of the period presented. Such statements are based on, and
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should be read in conjunction with, the historical consolidated financial
statements included in the Company SEC Documents. Such balance sheet fairly
presents in all material respects the consolidated financial position of Spinco
and its Subsidiaries as of its date, as if the Spin-Off had occurred (on the
terms and subject to the conditions set forth in the Transaction Agreements) on
such date, and each such consolidated statement of income, fairly presents in
all material respects the results of operations of Spinco and its Subsidiaries
for the periods set forth therein, as if the Spin-Off had occurred (on the terms
and subject to the conditions set forth in the Transaction Agreements) as of the
beginning of such period (subject to notes and normal year-end adjustments that
are not expected to be material in amount). The accounts reflected in the
unaudited pro forma consolidated financial statements referred to in this
subsection have been prepared in accordance with GAAP on a basis consistent with
the historical audited consolidated financial statements of the Company and its
Subsidiaries (including Spinco and its Subsidiaries) and were prepared in
accordance with the requirements of SEC Regulation S-X as it relates to pro
forma financial statements.
(c) Section 4.07(c)(i) of the Company Disclosure Schedule
contains the unaudited pro forma consolidated balance sheet of the Company and
ELF as of July 15, 2000, together with the related unaudited pro forma
consolidated statement of income, for the six-month period then ended, and the
unaudited pro forma consolidated statement of income of the Company and ELF for
the year ended January 1, 2000. Such statements present information as if the
Spin-Off had occurred (on the terms and subject to the conditions set forth in
the Transaction Agreements) as of July 15, 2000 or, with respect to the income
statements, as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) as of the beginning of the
period presented. Such statements are based on, and should be read in
conjunction with, the historical consolidated financial statements included in
the Company SEC Documents. Such balance sheet fairly presents in all material
respects the consolidated financial position of the Company and ELF as of its
date, as if the Spin-Off had occurred (on the terms and subject to the
conditions set forth in the Transaction Agreements) on such date, and each such
consolidated statement of income fairly presents in all material respects the
results of operations of the Company and ELF for the periods set forth therein,
as if the Spin-Off had occurred (on the terms and subject to the conditions set
forth in the Transaction Agreements) as of the beginning of such period (subject
to notes and normal year-end adjustments that are not expected to be material in
amount). The accounts reflected in the unaudited pro forma financial statements
referred to in this subsection have been prepared in accordance with GAAP on a
basis consistent with the historical audited consolidated financial statements
of the Company and its Subsidiaries (including Spinco and its Subsidiaries) and
were prepared in accordance with the requirements of SEC Regulation S-X as it
relates to pro forma financial statements. Except for liabilities or obligations
of the Company under the Transaction Agreements as set forth in Section
4.07(c)(ii) of the Company Disclosure Schedule, the balance sheet referred to in
this subsection does not reflect any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) of the Company and
immediately following the Effective Time, the Company and its Subsidiaries will
not have any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise).
Section 4.08. DISCLOSURE DOCUMENTS. The proxy statement of the
Company to be filed with the SEC in connection with the Merger (the "Company
Proxy Statement"), the registration statement on Form 10, Form S-1 or Form S-4
relating to the Spin-Off (the "Registration
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Statement") and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the 1934
Act and the 1933 Act. At the time the Company Proxy Statement or any amendment
or supplement thereto is first mailed to shareholders of the Company, and at the
time such shareholders vote on adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, and the Registration
Statement at the time it becomes effective and at the time the Registration
Statement is mailed to stockholders of the Company, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The representations and warranties
contained in this Section 4.08 will not apply to statements or omissions
included in the Company Proxy Statement or the Registration Statement based upon
information furnished to the Company by Parent specifically for use therein.
Section 4.09. ABSENCE OF CERTAIN CHANGES. Except (i) as
disclosed in the Company SEC Documents filed after January 1, 2000 and prior to
the date hereof, or (ii) as expressly contemplated by the Transaction Agreements
or (iii) as disclosed in Section 4.09 of the Company Disclosure Schedule, since
January 1, 2000, the business of the Company has been conducted in the ordinary
course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts that, either individually or in the aggregate, has had or
would reasonably be expected to have a Material Adverse Effect on the Company;
(b) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the Company that
has had or would reasonably be expected to have a Material Adverse Effect on the
Company;
(c) any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of capital stock of the Company
(other than quarterly cash dividends on the Shares on customary record and
payment dates in an amount not greater than $0.1325 per Share per quarter), or
any repurchase, redemption or other acquisition by the Company of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company;
(d) any amendment of any material term of any outstanding
security of the Company or any amendment of the Company's Articles of
Incorporation or By-Laws;
(e) any incurrence, assumption or guarantee by the Company of
any indebtedness for borrowed money other than borrowings made in the ordinary
course of business and in amounts and on terms consistent with past practices
under the Company's revolving credit agreement;
(f) any creation or other incurrence by the Company of any
Lien on any material asset other than in the ordinary course of business
consistent with past practices and other than those that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
the Company;
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(g) any making of any material loan, advance or capital
contributions to or investment in any Person not wholly-owned, directly or
indirectly, by the Company, other than immaterial amounts in the ordinary course
of business consistent with past practices;
(h) any change in any method of accounting, method of tax
accounting or accounting principles or practice by the Company, except for any
such change which is required by reason of a concurrent change in GAAP or
Regulation S-X under the 1934 Act;
(i) any (i) grant of any bonus, severance or termination pay
or award under a long term incentive plan to (or amendment to any existing
arrangement with) any director, officer or (to the extent material in the
aggregate) employees of the Company, (ii) establishment, adoption or amendment
(except as required by applicable law) of any collective bargaining, bonus,
profit-sharing, thrift, pension, retirement or other benefit plan or arrangement
covering any director, officer or employee of the Company, (iii) increase in
compensation, bonus or other benefits payable to any director, or executive
officer of the Company (other than changes made applicable to Company employees
generally); or (iv) other than in the ordinary course of business, consistent
with past practices, increase in compensation bonus or other benefits payable to
any employee of the Company not described in clause (iii);
(j) any material labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, or any material lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees;
(k) any agreement to do any of the foregoing;
PROVIDED, HOWEVER, that the limitations of this Section 4.09 shall not apply to
any actions taken in respect of (i) any individual who, after giving effect to
the Spin-Off, will be an executive officer, director or employee of Spinco or
any of its Subsidiaries (an "Excluded Employee") or (ii) any other individual so
long as, in any such instance, any liabilities resulting from such actions are
the responsibility of Spinco or any of its Subsidiaries, do not result in any
direct or indirect obligations or liabilities on the part of the Company and
such actions do not and would not have a Material Adverse Effect on the Company
or materially impair, delay or prevent the consummation of the transactions
contemplated by the Transaction Agreements.
Section 4.10. NO UNDISCLOSED MATERIAL LIABILITIES. There are
no liabilities or obligations of the Company or any of its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, other than:
(a) liabilities or obligations disclosed in the Company
Balance Sheet or in the notes thereto or in the Company SEC Documents filed
prior to the date hereof;
(b) liabilities or obligations incurred in the ordinary course
of business consistent with past practice that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Company;
(c) liabilities or obligations under the Transaction
Agreements, or in connection with the transactions contemplated hereby or
thereby; and
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(d) liabilities or obligations disclosed in the Company
Disclosure Schedule.
Section 4.11. COMPLIANCE WITH LAWS AND COURT ORDERS. Neither
the Company nor Spinco or any of their respective Subsidiaries nor any of their
respective properties is in violation of, or has since January 1, 2000 violated,
any applicable Law, except for violations that have not had and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company or materially impair, delay or prevent the
consummation of the transactions contemplated by the Transaction Agreements. The
Company and Spinco are in compliance with the terms of all required governmental
licenses, authorizations, permits, consents and approvals, except where the
failure to so comply would not, individually or in the aggregate, have a
Material Adverse Effect on the Company or materially impair, delay or prevent
the consummation of the transactions contemplated by the Transaction Agreements.
Section 4.12. LITIGATION. Except as disclosed in Section 4.12
of the Company Disclosure Schedule, there is no action, suit, investigation or
proceeding pending, or, to the knowledge of the Company, threatened, against the
Company, or against Spinco or any of its their respective Subsidiaries before
any court or arbitrator or before or by any Governmental Entity, that, if
determined or resolved adversely, would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company or
materially impair, delay or prevent the consummation of the transactions
contemplated by the Transaction Agreements. Neither the Company nor Spinco is
subject to any outstanding order, writ, injunction or decree that, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company or materially impair, delay or prevent the consummation of
the transactions contemplated by the Transaction Agreements.
Section 4.13. FINDERS' FEES. Except for UBS Warburg LLC and
Morgan Stanley & Co. Incorporated, copies of whose engagement agreements have
been provided to Parent, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Company in connection with the transactions contemplated by the Transaction
Agreements.
Section 4.14. OPINION OF FINANCIAL ADVISERS. The Company has
received an opinion of each of UBS Warburg LLC and Morgan Stanley & Co.
Incorporated each dated as of the date of this Agreement and each to the effect
that, as of the date of such opinion, the Merger Consideration to be received by
the Company's shareholders is fair from a financial point of view. Complete and
correct signed copies of such opinions will be delivered to Parent as soon as
practicable after the date of this Agreement.
Section 4.15. TAXES. Except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company:
(a) The Company and each of its Subsidiaries has timely filed
(or has had timely filed on its behalf) or will timely file or cause to be
timely filed all Tax Returns required by applicable Law to be filed by it prior
to or as of the Effective Time, and all such Tax Returns are, or will be at the
time of filing, true and complete in all respects.
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(b) The Company and each of its Subsidiaries has timely paid
(or has had timely paid on its behalf), or, where payment is not yet due, has
established (or has had established on its behalf and for its sole benefit and
recourse) or (with respect to new Taxes for periods, or portions thereof,
beginning after the date hereof) will establish or cause to be established in
accordance with GAAP on or before the Effective Time, an adequate accrual for
the payment of, all Taxes and interest due with respect to any period or portion
thereof ending prior to or as of the Effective Time.
(c) The federal income Tax Returns filed with respect to the
Company have been examined and settled with the Internal Revenue Service (the
"IRS") (or the applicable statutes of limitation for the assessment of federal
income Taxes for such periods have expired) for all years through fiscal year
1995.
(d) There are no Liens or encumbrances for Taxes on any of the
assets of the Company, other than those for taxes not yet due and payable.
Neither the Company nor any of its Subsidiaries is a party to any Tax sharing or
indemnification agreement.
(e) The Company and each of its Subsidiaries has complied with
all applicable Laws, rules and regulations relating to the reporting, payment
and withholding of Taxes.
(f) Except as set forth in Section 4.15 of the Company
Disclosure Schedule, no federal, state, local or foreign audits or
administrative proceedings are pending with regard to any Taxes or Tax Return of
the Company and the Company has not received a written notice of any proposed
audit or proceeding regarding any pending audit or proceeding.
(g) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
within the meaning of Section 355(a)(1)(A) of the Code in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code
(A) in the two years prior to the date of this Agreement (nor will it constitute
such a corporation in the two years prior to the date of the Effective Time) or
(B) in a distribution which otherwise constitutes part of a "plan" or "series of
related transactions" within the meaning of Section 355(e) of the Code in
conjunction with the Merger.
(h) "Tax" or "Taxes" shall mean (i) any and all taxes,
charges, fees, levies or other assessments, including income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, use, goods and services, service use,
license, value added, capital, net worth, payroll, profits, withholding,
franchise, transfer and recording taxes, fees and charges, and any other taxes,
assessment or similar charges imposed by the IRS or any taxing authority
(whether domestic or foreign including any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)) (a "Taxing Authority"), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments, (ii) any liability for the payment of any
amount of the type described in clause (i) as a result of being or having been,
before the Effective Time, a member of an affiliated, consolidated, combined or
unitary group, or a party to any agreement or arrangement, as a result of which
liability of the Company and each
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of its subsidiaries to a Taxing Authority is determined or taken into account
with reference to the liability of any other Person (including, e.g., liability
under Treasury Regulation 1.1502-6 or similar liability under any other Law),
and (iii) any liability with respect to the payment of any amount of the type
described in (i) or (ii) as a result of any existing express or implied
obligation (including, but not limited to, an indemnification obligation). "Tax
Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any Taxing Authority or
jurisdiction (foreign or domestic) with respect to Taxes, including information
returns, any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
Section 4.16. EMPLOYEE BENEFIT PLANS. Except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company:
(a) Section 4.16 of the Company Disclosure Schedule includes
the name of, and the Company has made available to Parent copies of each
material Employee Plan (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof together with the most
recent annual report (Form 5500 including, if applicable, Schedule B thereto)
and actuarial valuation report prepared in connection with any such Employee
Plan. Section 4.16 of the Company Disclosure Schedule identifies each such
Employee Plan that is (i) a Multiemployer Plan, (ii) a Title IV Plan or (iii)
maintained in connection with any trust described in Section 501(c)(9) of the
Code.
(b) Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received from the IRS a favorable determination
letter stating that the Employee Plan is so qualified; the Company is not aware
of any facts or circumstances which would jeopardize the qualified status of the
Employee Plan if not cured; each trust created under any Employee Plan has been
determined by the IRS to be exempt from tax under Section 501(a) of the Code as
of and since its creation. The Company has made available to Parent the most
recent determination letter of the Internal Revenue Service relating to each
such Employee Plan. Each Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including ERISA and the
Code.
(c) Section 4.16 of the Company Disclosure Schedule includes
the name of, and the Company has made available to Parent copies or descriptions
of, each Benefit Arrangement (and, if applicable, related trust agreements) and
all amendments thereto and summary plan descriptions thereof, if applicable.
Each such Benefit Arrangement has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations and has been maintained in good standing
with applicable regulatory authorities.
(d) There has been no failure of a group health plan (as
defined in Section 5000(b)(1) of the Code) to meet the requirements of Code
Sections 4980B(f), 9801 or 9802 with respect to a qualified beneficiary (as
defined in Section 4980B(g)) or other individual. Neither the Company nor any of
its ERISA Affiliates has contributed to a nonconforming group health plan (as
defined in Section 5000(c)) and neither the Company nor any ERISA Affiliate of
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the Company has incurred a tax under Section 5000(a) that is or could become a
liability of the Company.
(e) No Title IV Plan has or has incurred an accumulated
funding deficiency within the meaning of Section 302 of ERISA or Section 412 of
the Code, nor has any waiver of the minimum funding standards of Section 302 of
ERISA and Section 412 of the Code been requested of or granted by the IRS with
respect to any Title IV Plan, nor has any lien in favor of any Title IV Plan
arisen under Section 412(n) of the Code or Section 302(f) of ERISA.
(f) There does not now exist, nor, to the Company's knowledge,
do any circumstances exist that could result in, any Controlled Group Liability
that would be a liability of the Company or any of its ERISA Affiliates
following the Effective Time. None of the Company and its ERISA Affiliates has
incurred any Withdrawal Liability that has not been satisfied in full. With
respect to each Employee Plan that is a Multiemployer Plan, none of the Company
and its ERISA Affiliates has received any notification, nor has reasonable cause
to believe, that any such Employee Plan is in reorganization, has been
terminated, is insolvent, or may reasonably be expected to be in reorganization,
to be insolvent, or to be terminated. If the Company and its ERISA Affiliates
were to experience a complete withdrawal from all such Multiemployer Plans, the
total withdrawal liability would not exceed the amount set forth in Section
4.16(f) of the Company Disclosure Schedule. The transactions contemplated by
this Agreement, including the Transaction, will not result in partial or
complete withdrawal from any such Multiemployer Plan.
(g) All material contributions required to be made to any
Employee Arrangement or any trust or other arrangement funding any Employee
Arrangement by applicable Law or regulation or by any plan document or other
contractual undertaking, and all material premiums due or payable with respect
to insurance policies funding any Employee Arrangement, for any period have been
timely made or paid in full.
(h) With respect to each Employee Plan that is a Title IV
Plan: (i) no reportable event within the meaning of Section 4043(c) of ERISA for
which the 30-day notice requirement has not been waived and for which a prior
notice requirement exists has occurred, and the consummation of the transactions
contemplated by this Agreement, including the Transaction, will not result in
the occurrence of any such reportable event; (ii) all premiums to the Pension
Benefit Guaranty Corporation ("PBGC") have been timely paid in full; (iii) no
material liability (other than for premiums to the PBGC) under Title IV of ERISA
has been or is expected to be incurred by the Company or any of its ERISA
Affiliates; (iv) the unfunded current liability of each such Employee Plan does
not exceed the amount set forth in Section 4.16(h) of the Company Disclosure
Schedule for such Plan, based on the assumptions used for the most recent
actuarial valuation of such Plans, a copy of which has been made available to
Parent; and (v) the PBGC has not instituted proceedings to terminate any such
Employee Plan and, to the Company's knowledge, no condition exists that presents
a risk that such proceedings will be instituted or which would constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such Employee Plan.
(i) The Company Disclosure Schedule sets forth: (i) an
accurate and complete list of each material Employee Arrangement under which the
execution and delivery of this
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Agreement or the Transaction Agreements or the consummation of the transactions
contemplated hereby, including the Transaction, could (either alone or in
conjunction with any other event such as termination of employment) result in,
cause the accelerated vesting, funding or delivery of, or increase the amount or
value of, any payment or benefit to any employee, officer or director of the
Company or any of its Subsidiaries, or for which the Company or any of its
Subsidiaries could be liable, or would limit the right of the Company or any of
its Subsidiaries to amend, merge, terminate or receive a reversion of assets
from any material Employee Arrangement or related trust; (ii) the aggregate
liabilities of the Company and its Subsidiaries with respect to bonuses and
other incentive compensation in connection with or as a result of the
consummation of the transactions contemplated hereby, including the Transaction,
(iii) the aggregate liabilities of the Company and its ERISA Affiliates,
together with any corresponding assets held in any grantor trust of the Company
and its ERISA Affiliates, pursuant to each Employee Arrangement (other than
Employee Plans that are qualified under Section 401(a) of the Code) providing
any supplemental or excess retirement benefits or other deferred compensation
(whether elective or non-elective), in each case determined as of the date set
forth in the Company Disclosure Schedule, and (iv) the estimated maximum amount
of the "excess parachute payments" within the meaning of Section 280G of the
Code that could become payable by the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement or the Transaction
Agreements and the consummation of the transactions contemplated hereby,
including the Transaction. No outstanding options to purchase Shares granted to
any current or former employee or director of the Company or any of its ERISA
Affiliates contain any provision that would entitle the holder to receive any
cash payment with respect thereto in connection with the consummation of the
transactions contemplated hereby except as provided for in Section 2.06 hereof.
(j) There are no pending or threatened claims (other than
claims for benefits in the ordinary course), investigations, lawsuits or
arbitrations which have been asserted or instituted, and, to the Company's
knowledge, no set of circumstances exists which may give rise to a claim or
lawsuits, against the Employee Arrangements, any fiduciaries thereof with
respect to their duties to such Employee Arrangements or the assets of any of
the trusts under any of such Employee Arrangements which could result in any
liability of the Company or any of its ERISA Affiliates to the PBGC, the
Department of Treasury, the Department of Labor, or any other U.S. or foreign
governmental authority, or to any of such Employee Arrangements, any participant
in any such Employee Arrangement, or any other party. Without limiting the
generality of the foregoing, neither the Company nor any of its ERISA Affiliates
has any actual or contingent liability under any such Employee Arrangement or
under any applicable Law or regulation for pay or benefits incurred as a result
of corporate restructuring, downsizing, layoffs or similar events that has not
been fully satisfied or adequately reserved for in the audited consolidated
financial statements (including the related notes) and unaudited consolidated
financial statements (including the related notes) of the Company included in
the Company SEC Documents.
Section 4.17. ENVIRONMENTAL MATTERS.
(a) Except as disclosed in the Company SEC Documents or as set
forth in Section 4.17 of the Company Disclosure Schedule, except where
noncompliance, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the
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Company, the Company is in compliance with all applicable Environmental Laws and
Environmental Permits.
(b) Except as disclosed in the Company SEC Documents or as
disclosed in Section 4.17 of the Company Disclosure Schedule, there are no
written (or, to the knowledge of the Company, other) Environmental Claims
pending or, to the knowledge; of the Company threatened, against the Company
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company.
(c) The Company has made available to Parent all material
information, including such studies, analyses and test results, in the
possession, custody or control of or otherwise known and available to the
Company or its Subsidiaries relating to the environmental conditions on, under
or about any of the properties or assets owned, leased, or operated by the
Company at any time or for which the Company is responsible under any
Environmental Law.
(d) Except as disclosed in the Company SEC Documents or as
disclosed in Section 4.17 of the Company Disclosure Schedule, prior to and
during the period of ownership or operation by the Company, in each case to the
knowledge of the Company, no Hazardous Substance was generated, treated, stored,
disposed of, used, handled or manufactured at, or transported, shipped or
disposed of from, currently or previously owned or leased properties that could
result in Liability for the Company or its Subsidiaries that would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company and there were no conditions or Releases of Hazardous Substance in,
on, under or affecting any currently or previously owned or leased properties
that would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
(e) Except as disclosed in the Company SEC Documents, or as
set forth in Section 4.17 of the Company Disclosure Schedule, none of the
Company or its Subsidiaries in each case has received from any Governmental
Entity or other third party any written (or, to the knowledge of the Company,
other) notice that the Company or its predecessors is or may be a potentially
responsible party in respect of or may otherwise bear liability for any actual
or threatened Release of Hazardous Substance at any site or facility that is,
has been or would be listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System or any
similar or analogous federal, state, provincial, territorial, municipal, county,
local or other domestic or foreign list, schedule, inventory or database of
Hazardous Substance sites or facilities, except where such notice or the
circumstances referred to therein would not, individually or in aggregate,
reasonably be expected to have a Material Adverse Effect on the Company.
Section 4.18. ANTITAKEOVER STATUTE AND RIGHTS AGREEMENT.
(a) No "fair price," "interested shareholder," "business
combination," or similar antitakeover statute or regulation enacted under
Georgia or other Law applicable to the Company is applicable to the transactions
contemplated by the Merger and the Transaction Agreements.
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(b) The Board of Directors of the Company has approved an
amendment to the Rights Agreement which is, and at the Effective Time shall be,
effective, and has taken all other action necessary to render the Rights
inapplicable to the Merger, this Agreement and the transactions contemplated
hereby. The Company has delivered to Parent a true and correct copy of the
Rights Agreement in effect as of the execution and delivery of this Agreement,
including a copy of such amendment.
Section 4.19. INSURANCE. Section 4.19 of the Company
Disclosure Schedule contains a complete and accurate list in all material
respects of all policies of directors' and officers' liability insurance and
fiduciary insurance owned or held by, or the premiums and the brokerage fees of
which are paid by, the Company. The Company, Spinco and Spinco's Subsidiaries
are covered by valid and currently effective insurance policies issued in favor
of the Company or Spinco or Spinco's Subsidiaries, respectively, that are
customary and appropriate under the circumstances. All such policies are in full
force and effect, all premiums due thereon have been paid, and the Company has
complied with the provisions of such policies.
Section 4.20. CERTAIN CONTRACTS; INDEMNITIES; INDEBTEDNESS.
(a) Except for assets or properties to be transferred to
Spinco or its Subsidiaries pursuant to the Transaction Agreements, none of
Spinco or any of its Subsidiaries presently uses in the conduct of its business
any assets or properties, whether tangible, intangible or mixed, which are also
utilized by the Company (after giving pro-forma effect to the Spin-Off), and,
other than the contracts, arrangements or understandings which are set forth in
Section 4.20(a) of the Company Disclosure Schedule, which in each instance are
ordinary course commercial arrangements on arms-length terms, none of Spinco or
any of its Subsidiaries is presently directly or indirectly a party to any
contract, arrangement or understanding with the Company (other than the
Transaction Agreements). After giving effect to the Spin-Off, the Company will
include all of the Company's direct or indirect right, title and interest in and
to (i) the ELF Shares, and (ii) all assets reflected on the unaudited pro forma
consolidated balance sheet of the Company and ELF as of July 15, 2000 referred
to in Section 4.07(c) of this Agreement. The termination of all contracts,
arrangements and understandings between the Company on the one hand and Spinco
and its Subsidiaries on the other hand, to the extent contemplated by the
Distribution Agreement would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The unaudited pro forma consolidated
balance sheet of the Company and ELF as of July 15, 2000 referred to in Section
4.07(c) of this Agreement reflects all assets of the Company principally used in
the business of the Company as of July 15, 2000, other than assets or properties
of the Company that will be transferred to Spinco or its Subsidiaries.
(b) Except as set forth in Section 4.20(b) of the Company
Disclosure Schedule, there are no outstanding claims for indemnification against
the Company or any of its Subsidiaries under any written contract, agreement or
understanding or, to the knowledge of the Company, under any oral contract,
agreement or understanding.
(c) Except (i) as set forth in Section 4.20(c) of the Company
Disclosure Schedule and (ii) as expressly contemplated by the Transaction
Agreements immediately following the Effective Time, the Company will not be
party to any oral or written contract, agreement or understanding.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company that:
Section 5.01. CORPORATE EXISTENCE AND POWER. Each of Parent
and Merger Subsidiary is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not reasonably be expected to materially impair, delay or
prevent the ability of Parent and Merger Subsidiary to consummate the
transactions contemplated by the Transaction Agreements. Since the date of its
incorporation, Merger Subsidiary has not engaged in any activities other than in
connection with or as contemplated by this Agreement or in connection with
arranging any financing required to consummate the transactions contemplated by
the Merger or the Transaction Agreements.
Section 5.02. CORPORATE AUTHORIZATION. The execution, delivery
and performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby are within the corporate powers of Parent and Merger Subsidiary and have
been duly authorized by all necessary corporate action. This Agreement has been
duly executed and delivered by Parent and Merger Subsidiary and constitutes a
valid and binding agreement of each of Parent and Merger Subsidiary, enforceable
against it in accordance with its terms.
Section 5.03. GOVERNMENTAL AUTHORIZATION. The execution,
delivery and performance by Parent and Merger Subsidiary of this Agreement and
the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the filing of certificates of merger with
respect to the Merger with the Delaware Secretary of State and the Georgia
Secretary of State, (ii) compliance with any applicable requirements of the HSR
Act, (iii) compliance with any applicable requirements of the 1933 Act, the
1934 Act and any other applicable securities or takeover laws, whether state or
foreign and (iv) any actions or filings the absence of which would not
reasonably be expected to materially impair, delay or prevent the ability of
Parent and Merger Subsidiary to consummate the transactions contemplated by the
Transaction Agreements.
Section 5.04. NON-CONTRAVENTION. The execution, delivery and
performance by Parent and Merger Subsidiary of this Agreement and the
consummation by Parent and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene, conflict with, or result in any
violation or breach of any provision of the certificate of incorporation or
bylaws of Parent or Merger Subsidiary, (ii) contravene, conflict with, or result
in any violation or breach of any provision of any Law or (iii) require any
consent or other action by any Person under, constitute (with or without notice
or lapse of time or both) a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Parent or Merger Subsidiary is entitled under, any
provision of any agreement or other instrument binding upon Parent or Merger
Subsidiary, except, in the case of clauses (ii) and (iii), for such matters as
would not reasonably be expected to materially impair,
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<PAGE> 30
delay or prevent the consummation of the transactions contemplated by the
Transaction Agreements.
Section 5.05. DISCLOSURE DOCUMENTS. The information with
respect to Parent and any of its Subsidiaries that Parent furnishes to the
Company specifically for use in the Company Proxy Statement will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading at the time such Company Proxy
Statement, or any amendment or supplement thereto, is first mailed to
shareholders of the Company and the time such shareholders vote on adoption of
this Agreement.
Section 5.06. FINDERS' FEES. There is no investment banker,
broker, finder or other intermediary that has been retained by or is authorized
to act on behalf of Parent which might be entitled to any fee or commission from
the Company upon consummation of the transactions contemplated by this
Agreement.
Section 5.07. ADEQUATE FUNDS. Parent has commitment letters in
customary form from nationally-recognized lending institutions for and will have
at the Effective Time sufficient funds for the payment of the aggregate Merger
Consideration and to perform its obligations under the Transaction Agreements
and under the ELF Merger Agreement.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
Section 6.01. CONDUCT OF THE COMPANY. From the date hereof
until the Effective Time, the Company shall conduct its business in the ordinary
course consistent with past practices and shall use its reasonable best efforts
to preserve intact its business organizations and relationships with third
parties and to keep available the services of its present officers and
employees. Without limiting the generality of the foregoing, except with the
prior written consent of Parent (which shall not be unreasonably withheld) as
provided by this Agreement, the Transaction Agreements, or as set forth in
Section 6.01 the Company Disclosure Schedule, from the date hereof until the
Effective Time, the Company shall not:
(a) declare, set aside or pay any dividend or other
distribution with respect to any share of its capital stock, other than
quarterly cash dividends on customary record and payment dates on the Shares not
to exceed $0.1325 per Share per quarter;
(b) repurchase, redeem or otherwise acquire or offer to
acquire any shares of capital stock or other securities of, or other ownership
interests in, the Company;
(c) issue, deliver, pledge, encumber or sell any Shares, or
any securities convertible into Shares, or any Share Equivalents or other
rights, warrants or options to acquire any Shares, other than issuances of
shares pursuant to Share Equivalents that are outstanding on the date hereof;
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(d) amend its Articles of Incorporation or By-Laws or other
comparable organizational documents or amend any material terms of the
outstanding securities of the Company;
(e) merge or consolidate with any other Person, make any
investment in any other Person, including any joint venture, or acquire the
stock or assets or rights of any other Person other than (i) pursuant to
existing contracts or commitments as set forth in the Company Disclosure
Schedule, (ii) in each case in the ordinary course of business consistent with
past practices, purchases of raw materials, services and items used or consumed
in the manufacturing process, or (iii) capital expenditures made consistent with
the Company's capital expenditure program, in an amount not to exceed $40
million in the aggregate for 2000 and $38.5 million in the aggregate for 2001;
(f) incur any indebtedness (whether or not reflected on the
Company Balance Sheet) for borrowed money, guarantee any such indebtedness,
enter into any new or amend existing facilities relating to indebtedness, issue
or sell any debt securities or warrants or other rights to acquire any debt
securities or guarantee any debt securities, other than any indebtedness
incurred in the ordinary course of business consistent with past practices under
the Company's revolving credit agreement;
(g) except as required under Section 2.06 or by applicable
Law, or as may be mutually agreed upon between Parent and the Company, enter
into or adopt any new, or amend any existing, Employee Plan or Benefit
Arrangement, or materially change any actuarial or other assumption used to
calculate funding obligations with respect to any Employee Plan or Benefit
Arrangement, or change the manner in which contributions to any pension plan are
made or the basis on which such contributions are determined, except for
amendments or changes in the ordinary course of business consistent with past
practices solely to reflect any administrative or other non-substantive changes
to any Benefit Plan or Employee Arrangement and which do not increase the
liability of the Company therefor;
(h) except to the extent required by written employment
agreements existing on the date of this Agreement, or by applicable Law,
increase the compensation payable or to become payable to its directors,
officers or employees (excluding (i) raises for hourly employees of the Company
in the ordinary course consistent with past practice and (ii) raises in the
ordinary course consistent with past practice for salaried employees scheduled
to be effective January 1, 2000) or pay any benefit or amount to any such person
that is not otherwise required by an Employee Plan or Benefit Arrangement as in
effect on the date of this Agreement;
(i) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or assets
(including securitizations) except pursuant to the ELF Merger and except for
transactions involving immaterial properties or assets that are in the ordinary
course of business consistent with past practices;
(j) make any tax election that has, or fail to make any tax
election which failure would have, individually or in the aggregate, a material
effect on the tax liability or tax attributes of the Company or settle or
compromise any material income tax liability of the
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Company or file any Tax Return (other than in a manner consistent with past
practice) or change any method of Tax accounting;
(k) take any action to cause ELF to pay any dividend or make
any distribution to its stockholders other than the payment of quarterly cash
dividends on customary record and payment dates not to exceed $0.1125 per share
of ELF Common Stock per quarter and the special dividend as permitted by Section
6.06 of the ELF Merger Agreement;
(l) (i) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization for the Company or (ii) enter into any material agreement or
exercise any discretion providing for acceleration of any material payment or
performance as a result of a change of control of the Company or take any action
which would give rise to any liability or obligation of the Company following
the Effective Time for which the Company will not be indemnified by Spinco under
the Distribution Agreement;
(m) engage in or allow any transfer of assets or liabilities
or other transactions between the Company, on the one hand, and Spinco and any
of its Subsidiaries, on the other hand, except (i) payments in the ordinary
course of its business consistent with past practice or (ii) as expressly
contemplated by the Transaction Agreements to occur prior to the Effective Time;
(n) sell, assign, encumber, pledge, hypothecate or otherwise
dispose of any of the ELF Shares or any interest therein or enter into any
voting agreement or grant any proxy or consent with respect thereto, except for
the ELF Voting Agreement;
(o) renew any collective bargaining agreement or enter into
any new collective bargaining agreement;
(p) renew or enter into any non-compete, exclusivity or
similar material agreement that would restrict or limit the operations of the
Company, or, after the Effective Time, of Parent;
(q) renew, enter into, amend or waive any right under any
material contract with or loan to any Affiliate of the Company, other than as
expressly contemplated by the Transaction Agreements;
(r) make any loan, advance or capital contributions to or
investment in any Person, other than immaterial amounts in the ordinary course
of business consistent with past practices;
(s) enter into, modify or amend in any material respect, or
terminate any contract filed as an exhibit to any Company SEC Document or any
other contract to which the Company is a party which is or would be required to
be filed as an exhibit to the Company SEC Documents;
(t) settle or compromise any material litigation, or waive,
release or assign any material claims;
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<PAGE> 33
(u) adopt any change, other than as required by the SEC or by
GAAP, in its accounting policies, procedures or practices; or
(v) agree or commit to do any of the foregoing.
The parties agree that the provisions of Section 6.01, shall
apply to Spinco and its Subsidiaries as well as to the Company; provided,
however, that Parent agrees to grant its approval to any of the foregoing
actions involving solely Spinco or its Subsidiaries so long as such action would
not (x) give rise to any liability or obligation on the part of the Company
following the Effective Time, (y) adversely affect the credit quality or
financial strength of the parties which will indemnify the Company after the
Effective Time pursuant to the Distribution Agreement or (z) interfere with the
timely consummation of the Merger. Subject to the foregoing, the Company agrees
to use its best efforts to operate the business of Spinco and its Subsidiaries
in a manner that minimizes the liabilities incurred within the Company.
Section 6.02. SHAREHOLDER MEETING; SEC FILINGS. The Company
shall cause a meeting of its shareholders (the "Company Shareholder Meeting") to
be duly called and held as soon as reasonably practicable for the purpose of
voting on the approval and adoption of this Agreement and the Merger. In
connection with such meeting and the transactions contemplated by the
Transaction Agreements, the Company will (i) promptly prepare and file with the
SEC, use its best efforts to have cleared or declared effective by the SEC, as
the case may be, and thereafter mail to its shareholders as promptly as
practicable the Company Proxy Statement and the Registration Statement and any
amendments or supplements thereto and all other proxy materials for such
meeting, (ii) use its reasonable best efforts (including postponing or
adjourning the Company Shareholder Meeting to solicit additional proxies) to
obtain the necessary approvals by its shareholders of this Agreement and the
transactions contemplated hereby and (iii) otherwise comply with all legal
requirements applicable to such meeting. The Company shall provide Parent and
its legal counsel with sufficient opportunity to comment upon the form and
substance of the Company Proxy Statement (including any amendments or
supplements thereto) prior to filing such with the SEC and the Company shall use
its reasonable efforts to incorporate Parent's reasonable comments into the
Company Proxy Statement (including any amendments or supplements thereto). The
Company shall provide to Parent copies of any comments received from the SEC in
connection therewith and shall consult with Parent in responding to the SEC.
Subject to Section 6.04, the Company Proxy Statement shall contain the
unqualified recommendation of the Board of Directors of the Company that its
shareholders vote in favor of the approval and adoption of this Agreement and
the Merger.
Section 6.03. ACCESS TO INFORMATION. From the date hereof
until the Effective Time and subject to applicable Law and the Confidentiality
Agreement dated as of July 24, 2000 between the Company and Parent (the
"Confidentiality Agreement"), the Company shall (i) give Parent, its counsel,
financial advisors, auditors, lenders and other authorized representatives
reasonable access to the offices, properties, books and records of the Company,
(ii) furnish to Parent, its counsel, financial advisors, auditors and other
authorized representatives such financial, operating data and other information
as such Persons may reasonably request, (iii) instruct its employees, counsel,
financial advisors, auditors and other authorized representatives of the Company
to cooperate with Parent in its investigation of the Company and (iv) promptly
advise Parent orally and in writing of any fact or circumstances reasonably
likely to have a Material
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Adverse Effect on the Company or to cause a condition contained in Article 9 not
to be satisfied. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Company and Spinco and its Subsidiaries. No information or knowledge
obtained by Parent in any investigation pursuant to this Section shall affect or
be deemed to modify any representation or warranty made by the Company
hereunder.
Without limiting the generality of the foregoing, as soon as
reasonably practicable after the date hereof, the Company shall provide to
Parent a copy of the most recent statement of withdrawal liability that it or
any of its Affiliates has obtained from each Employee Plan that is a
Multiemployer Plan and, to the extent that such a statement has not yet been
obtained for any such Employee Plan, or to the extent such a statement has been
obtained but reflects withdrawal liability as of a date earlier than July 1,
2000 with respect to any such Employee Plan, the Company shall use, and shall
cause its Affiliates to use, its reasonable best efforts to obtain a current
withdrawal liability statement from such Employee Plan and provide it to Parent.
Section 6.04. NO SOLICITATION.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, or authorize or permit any director, officer or employee of the
Company or any of its Subsidiaries or any investment banker, attorney,
accountant or other advisor or representative of the Company or any of its
Subsidiaries to, directly or indirectly, (i) solicit, initiate, negotiate or
encourage, or take any other action knowingly to facilitate, any Takeover
Proposal (as defined below) or (ii) enter into, continue or otherwise
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or otherwise cooperate in any way with,
any Takeover Proposal, in each case other than a Takeover Proposal made by
Parent; provided, however, that at any time prior to obtaining approval of the
Company's shareholders as contemplated by Section 6.02 hereof, the Board of
Directors of the Company may, in response to a bona fide written Takeover
Proposal that such Board of Directors reasonably determines in good faith is
reasonably likely to result in an Adverse Recommendation Change (as defined
below) or, after consultation with its independent financial advisors,
constitutes a Superior Proposal (as defined below), and which Takeover Proposal
was unsolicited and did not otherwise result from a breach of this Section 6.04,
(x) furnish information with respect to the Company and its Subsidiaries to the
person making such Takeover Proposal (and its representatives) pursuant to a
confidentiality agreement with terms not more favorable to such person than the
Confidentiality Agreement, provided that all such information is provided on a
prior or substantially concurrent basis to Parent, and (y) participate in
discussions or negotiations with the person making such Takeover Proposal (and
its representatives) regarding such Takeover Proposal, provided that the Company
shall have delivered to Parent prior written notice advising Parent that it
intends to participate in such discussions or negotiations. The Company will
immediately cease all existing activities, discussions and negotiations with any
parties conducted heretofore with respect to any Takeover Proposal and request
the return of all confidential information regarding the Company and ELF
provided to any such parties prior to the date hereof pursuant to the terms of
any confidentiality agreements or otherwise.
The term "Takeover Proposal" means any inquiry, proposal or
offer from any person relating to, or that is reasonably likely to lead to, any
direct or indirect acquisition, in one
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transaction or a series of transactions, including any merger, consolidation,
tender offer, exchange offer, binding share exchange, business combination,
recapitalization, liquidation, dissolution, joint venture, purchase or similar
transaction, of (A) assets or businesses that constitute or represent 20% or
more of the total revenue, operating income or assets of the Company and its
Subsidiaries, taken as a whole, (B) 20% or more of the outstanding shares of the
Company's common stock or capital stock of, or other equity or voting interests
in, any of the Company's Subsidiaries directly or indirectly holding the assets
or businesses referred to in clause (A) above or (C) any or all of the ELF
Shares.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw (or modify in a manner adverse to Parent or
Merger Subsidiary) or propose publicly to withdraw (or modify in a manner
adverse to Parent or Merger Subsidiary) the recommendation or declaration of
advisability by such Board of Directors or any such committee of this Agreement
or the Merger, provided, that in the event that prior to the approval of the
Merger by the shareholders of the Company, the Board of Directors of the Company
receives a Superior Proposal (as determined in accordance with Section 6.04(b))
that is unsolicited and did not result from a breach of Section 6.04(a), the
Board of Directors of the Company may, if it believes in good faith such action
is required under Georgia law to avoid a breach of its fiduciary duties, after
receipt of advice from its outside legal counsel, withdraw or modify in a manner
adverse to Parent or Merger Subsidiary the recommendation or declaration of
advisability of this Agreement or the Merger (each such action being referred to
herein as an "Adverse Recommendation Change"), (ii) adopt or approve, or
recommend or propose publicly to adopt or approve, or recommend any Takeover
Proposal, or withdraw its approval of the Merger, or propose publicly to
withdraw its approval of the Merger, (iii) cause or permit the Company to enter
into any letter of intent, memorandum of understanding, agreement in principle,
acquisition agreement, merger agreement, option agreement, joint venture
agreement, partnership agreement or other agreement (each, an "Acquisition
Agreement") constituting or related to, or which is intended to or is reasonably
likely to lead to, any Takeover Proposal (other than a confidentiality agreement
referred to in Section 6.04(a)) or (iv) agree or resolve to take any of the
actions prohibited by clauses (i), (ii) or (iii) of this sentence; and provided,
however, that the Company shall not exercise its right to make an Adverse
Recommendation Change until after the fifth Business Day following Parent's
receipt of written notice (a "Notice of Superior Proposal") from the Company
advising Parent that the Board of Directors of the Company has received a
Superior Proposal and specifying the terms and conditions of the Superior
Proposal and identifying the Person making such Superior Proposal (it being
understood and agreed that any amendment to the price or any other material term
of a Superior Proposal shall require a new Notice of Superior Proposal and a new
five Business Day period). Any such Adverse Recommendation Change shall not
change the approval by the Board of Directors of the Company of the Merger and
this Agreement under Georgia law or for purposes of causing any state takeover
statute or other state law to be inapplicable to the transactions contemplated
hereby, including the Merger. The Company shall submit this Agreement to its
shareholders at a duly held meeting of shareholders even if the Board of
Directors of the Company shall have made an Adverse Recommendation Change.
Nothing in this Section 6.04 shall (x) permit the Company to terminate this
Agreement, (y) permit the Company to enter into any agreement with respect to
any Takeover Proposal or (z) affect any other obligation of the Company under
this Agreement.
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The term "Superior Proposal" means any bona fide binding
written offer not solicited by or on behalf of the Company or any of its
Subsidiaries made by a third party that, if consummated, would result in such
third party (or in the case of a direct merger between such third party and the
Company, the shareholders of such third party) acquiring, directly or
indirectly, (i) more than 50% of the voting power of the Company's common stock,
(ii) all or substantially all the assets of the Company and its Subsidiaries or
(iii) all or substantially all of the ELF Shares, taken as a whole, for
consideration consisting of cash and/or securities that the Board of Directors
of the Company determines in its reasonable good faith judgment (after
consultation with a financial advisor of nationally recognized reputation) to be
superior from a financial point of view to the shareholders of the Company,
taking into account, among other things, any changes to the terms of this
Agreement proposed by Parent in response to such Superior Proposal or otherwise.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.04, the Company promptly shall advise
Parent in writing of any request for information that the Company reasonably
believes could lead to or contemplates a Takeover Proposal or of any Takeover
Proposal together with a copy of such Takeover Proposal, or any inquiry the
Company reasonably believes could lead to any Takeover Proposal.
(d) Nothing contained in this Section 6.04 or elsewhere in
this Agreement shall prohibit the Company from (i) taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) promulgated under the 1934
Act or (ii) making a disclosure to the Company's shareholders if outside legal
counsel advises that failure so to disclose would be inconsistent with
applicable Law; provided, however, that in no event shall the Company or its
Board of Directors or any committee thereof take, agree or resolve to take any
action prohibited by Section 6.04(b)(i) or 6.04(b)(ii).
Section 6.05. THIRD PARTY STANDSTILL AGREEMENTS. During the
period from the date of this Agreement until the Effective Time or earlier
termination of this Agreement, the Company shall not terminate, amend, modify or
waive any provision of any confidentiality or standstill agreement relating to
the making of a Takeover Proposal to which it is a party (other than any
involving Parent or its Subsidiaries). During such period, the Company agrees to
use all reasonable efforts to enforce, to the fullest extent permitted under
applicable Law, the provisions of any such agreements, including seeking
injunctions to prevent any breaches of such agreements and to enforce
specifically the terms and provisions thereof in any court of the United States
or any state thereof having jurisdiction.
Section 6.06. RIGHTS AGREEMENT. The Board of Directors of the
Company shall take all further action (in addition to that referred to in
Section 4.18(b)) reasonably requested in writing by Parent in order to render
the Rights inapplicable to the transactions contemplated by this Agreement.
Except as provided with respect to the transactions contemplated by this
Agreement and the Transaction Agreements, the Board of Directors of the Company
shall not, without the prior written consent of Parent, (a) amend the Rights
Agreement or (b) take any action with respect to, or make any determinations
under, the Rights Agreement, including a redemption of the Rights or any action
to facilitate a Takeover Proposal.
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Section 6.07. SPIN-OFF.
(a) The Company shall use its best efforts to satisfy the
conditions to the Spin-Off set forth in Section 3.02 of the Distribution
Agreement and shall effect the Spin-Off if such conditions have been satisfied.
The Company shall cause Spinco to comply with its obligations under the
Distribution Agreement. Notwithstanding anything in this Section 6.07 to the
contrary, the parties acknowledge and agree that this Section 6.07 shall not
require the Company or Spinco, to waive any condition to the Spin-Off set forth
in Section 3.02 of the Distribution Agreement. At or prior to the Spin-Off, the
Company shall take those actions required by Section 3.02 of the Distribution
Agreement to be taken at or prior to the Spin-Off.
(b) The Company shall keep Parent informed on a regular basis
concerning the developments in the transactions contemplated by the Transaction
Agreements and the means by which such transactions are effected and, subject to
any existing agreements as to the means of effecting the transactions that are
reflected in the Distribution Agreement, the Company shall give reasonable
consideration to Parent's views on the means by which such transactions are
effected.
ARTICLE 7
COVENANTS OF PARENT
Parent agrees that:
Section 7.01. OBLIGATIONS OF MERGER SUBSIDIARY. Parent will
take all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement.
Section 7.02. DIRECTOR AND OFFICER LIABILITY. Parent shall
cause the Surviving Corporation, and the Surviving Corporation hereby agrees, to
do the following:
(a) For six years after the Effective Time, the Surviving
Corporation shall indemnify and hold harmless each present officer and director
of the Company (each an "Indemnified Person") to the fullest extent permitted by
Georgia Law or any other applicable laws or provided under the Company's
articles of incorporation and bylaws in effect on the date hereof in respect of
its decision to vote for the approval of the ELF Merger and the implementation
of such decision, provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law.
(b) The Surviving Corporation shall be entitled to control the
defense of any action, suit, investigation or proceeding with counsel of its own
choosing reasonably acceptable to the Indemnified Person and the Indemnified
Person shall cooperate in the defense thereof. The Surviving Corporation shall
not be liable for the fees, costs or expenses of any other counsel for an
Indemnified Person, other than local counsel, unless a conflict of interest
shall be caused thereby in which case the Surviving Corporation shall pay the
fees, costs and expenses of one additional counsel of the Indemnified Person's
choosing but reasonably acceptable to the Surviving Corporation, provided that
the Surviving Corporation shall not be liable for (i) the fees of more than one
counsel for all Indemnified Persons or (ii) any settlement effected without its
written consent (which consent shall not be unreasonably withheld).
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(c) For six years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering each
such Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date hereof;
provided if the aggregate annual premiums for such insurance at any time during
such period shall exceed 200% of the per annum rate of premium and brokerage
costs paid by the Company as of the date hereof for such insurance, then the
Surviving Corporation shall provide only such coverage as shall then be
available at an annual premium equal to 200% of such rate.
(d) If Parent, the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any Person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors and
assigns of Parent or the Surviving Corporation, as the case may be, shall assume
the obligations set forth in this Section 7.02.
(e) The rights of each Indemnified Person under this Section
7.02 shall be in addition to any rights such Person may have under the articles
of incorporation or bylaws of the Company or any of its Subsidiaries, under
Georgia Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company. These rights shall survive consummation of
the Merger and are intended to benefit, and shall be enforceable by, each
Indemnified Person.
(f) Notwithstanding any provision of this Section 7.02 to the
contrary, to the extent any obligation is also a Spinco Group Liability (as
defined in the Distribution Agreement) such matter shall be addressed as a
Spinco Group Liability pursuant to the Distribution Agreement rather than this
Section 7.02. In the event of a conflict between the Distribution Agreement and
this Section 7.02 with respect to the subject matter of Section 7.02(a), this
Section 7.02 shall govern.
ARTICLE 8
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
Section 8.01. REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement, the
Company and Parent will use their reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, and to assist and cooperate
with the other parties in doing all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement. In furtherance and not in limitation of the foregoing, each of
Parent and the Company agrees (i) to make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as reasonably practicable after the
date hereof and to supply as promptly as reasonably practicable
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any additional information and documentary material that may be requested by the
FTC or the Antitrust Division or any other Governmental Entity pursuant to the
HSR Act and (ii) to use reasonable efforts to cause the expiration or
termination of the applicable waiting periods under the HSR Act (and to obtain
the necessary approvals under any foreign laws, rules or regulations) as soon as
reasonably practicable; provided, that Parent shall not be required to agree,
and the Company shall not agree without Parent's consent, to waive any rights or
to accept any limitation on its operations or to dispose of any assets in
connection with obtaining any such consent or authorization, but at Parent's
written request the Company shall agree to any such waiver, limitation or
disposal, which agreement may, at the Company's option, be conditioned upon and
effective only as of the Effective Time. Each party shall: (1) promptly notify
the other party of any communication from the FTC, the Antitrust Division or any
State Attorney General or any other Governmental Entity, and subject to
applicable Law, permit the other party to review in advance any proposed written
communication to any of the foregoing and to accept all reasonable additions,
deletions or changes suggested in connection therewith; (2) with respect to this
Transaction not agree to participate in any substantive meetings or discussions
with any Governmental Entity in respect of any filings, investigations, or
inquiry concerning the transactions contemplated by this Agreement unless it
consults with the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to attend and
participate thereat; and (3) with respect to this Transaction furnish the other
party's counsel, subject to appropriate confidentiality procedures, with copies
of all correspondence, filings, and communications (and memoranda setting forth
the substance thereof) between them and their respective representatives and any
Governmental Entity or their respective staffs.
(b) In connection with obtaining financing in connection with
the transactions contemplated by this Agreement, at the reasonable request of
Parent, the Company (i) agrees to enter into such agreements, agrees to use
reasonable best efforts to deliver such officers certificates and opinions as
are customary in a financing and as are, in the good faith determination of the
persons executing such officers' certificates or opinions, accurate, and agrees
to pledge, grant security interests in, and otherwise grant liens on, its assets
pursuant to such agreements as may be reasonably requested, provided that no
obligation of the Company under any such agreement, pledge, or grant shall be
effective until the Effective Time; provided, that, all expenses, liabilities or
costs of the Company incurred in connection herewith shall be the responsibility
of Parent and any obligations entered into in connection herewith are terminated
in the event this Agreement is terminated in accordance with its terms and (ii)
with reasonable assurances of confidentiality acceptable to the Company will
provide to the lenders specified by Parent financial and other information in
the Company's possession with respect to the Company, Spinco, the Merger and the
Transaction, will make the Company's senior officers and financial and
accounting personnel reasonably available to assist such lenders, and otherwise
will cooperate in connection with the consummation of such financing.
Section 8.02. CERTAIN FILINGS. The Company and Parent shall
cooperate with one another and use their reasonable best efforts (i) in
connection with the preparation of the Company Proxy Statement and the
Registration Statement, (ii) in determining whether any action by or in respect
of, or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by the Merger and the Transaction Agreements and (iii) in taking
such actions or making any such filings, furnishing information
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required in connection therewith or with the Company Proxy Statement and
Registration Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
Section 8.03. PUBLIC ANNOUNCEMENT. The initial press release
concerning this Agreement and the Transaction shall be a joint release.
Thereafter Parent and the Company will consult with each other before issuing
any press release or making any public statement with respect to this Agreement
or the transactions contemplated hereby and, except as may be required by
applicable Law or any listing agreement with any national securities exchange,
will not issue any such press release or make any such public statement prior to
such consultation.
Section 8.04. FURTHER ASSURANCES. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be authorized
to execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Subsidiary, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
Section 8.05. NOTICES OF CERTAIN EVENTS. Each of the Company
and Parent shall promptly notify the other of:
(a) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting the Company, Parent, Spinco or any of their respective
Subsidiaries that relate to the consummation of the transactions contemplated by
the Merger or the Transaction Agreements.
ARTICLE 9
CONDITIONS TO THE MERGER
Section 9.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) this Agreement and the transactions contemplated hereby
shall have been approved and adopted by the shareholders of the Company in
accordance with Georgia Law;
(b) no federal, state or foreign statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which has the effect of
making the Merger or the transactions contemplated hereby illegal
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or otherwise prohibiting the consummation of the Merger or the transactions
contemplated hereby;
(c) any applicable waiting period under the HSR Act relating
to the Merger shall have expired or been terminated; and
(d) the Distribution (as defined in the Distribution
Agreement) shall have been consummated in accordance with the terms and subject
to the conditions set forth in the Distribution Agreement.
Section 9.02. CONDITIONS TO THE OBLIGATIONS OF PARENT AND
MERGER SUBSIDIARY. The obligations of Parent and Merger Subsidiary to consummate
the Merger are subject to the satisfaction of the following further conditions:
(a) the Company shall have performed in all material respects
all of its obligations hereunder required to be performed by it at or prior to
the Effective Time;
(b) the representations and warranties of the Company
contained in Section 4.05 shall be true in all respects (except for any de
minimis inaccuracy) both when made and as of the Effective Time as though made
at and as of the Effective Time, and all other representations and warranties of
the Company contained in this Agreement and in any certificate or other writing
delivered by the Company pursuant hereto, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect
or any similar standard or qualification, shall be true when made and at and as
of the Effective Time as if made at and as of such time (or, if given as of a
specific date, at and as of such date) with only such exceptions as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company;
(c) Parent shall have received a certificate signed by an
executive officer of the Company to the foregoing effect;
(d) all consents and approvals of any Governmental Entity
required in connection with the consummation of the transactions contemplated by
the Transaction Agreements shall have been obtained, except for such consents or
approvals which, if not obtained, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company or a
Material Adverse Effect on Parent or result in criminal liability or material
fines;
(e) as of immediately prior to the Effective Time, holders of
no more than 10% of the outstanding Shares shall have taken actions to assert
appraisal rights under Georgia Law; and
(f) the ELF Merger Agreement shall have been approved and
adopted by the stockholders of ELF in accordance with Delaware Law whether by
consent or otherwise and all other conditions to consummation of the ELF Merger
(other than the consummation of the Merger), shall have been satisfied or, to
the extent permitted, waived.
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Section 9.03. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) each of Parent and Merger Subsidiary shall have performed
in all material respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Time;
(b) the representations and warranties of Parent and Merger
Subsidiary contained in this Agreement and in any certificate or other writing
delivered by Parent or Merger Subsidiary pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect or any similar standard or qualification, shall be true
when made and at and as of the Effective Time as if made at and as of such time
(or, if given as of a specific date, at and as of such date) with only such
exceptions as would not reasonably be expected to materially impair, delay or
prevent the ability of Parent and Merger Subsidiary to consummate the
transactions contemplated by this Agreement; and
(c) the Company shall have received a certificate signed by an
executive officer of Parent and Merger Subsidiary to the foregoing effect.
ARTICLE 10
TERMINATION
Section 10.01. TERMINATION. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the shareholders of the
Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before
June 30, 2001, provided that the right to terminate this
Agreement pursuant to this Section 10.01(b)(i) shall not be
available to any party whose breach of any provision of this
Agreement results in the failure of the Merger to be
consummated by such time;
(ii) there shall be any Law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or
any judgment, injunction, order or decree of any Governmental
Entity having competent jurisdiction enjoining Company or
Parent from consummating the Merger is entered and such
judgment, injunction, order or decree shall have become final
and nonappealable; or
(iii) this Agreement shall not have been approved and
adopted in accordance with Georgia Law by the Company's
shareholders by reason of the failure to obtain the required
vote at a duly held meeting of shareholders (including any
adjournment thereto);
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(c) by Parent, if
(i) the Board of Directors of the Company shall have
failed to recommend or shall have withdrawn, or modified in a
manner adverse to Parent, its approval or recommendation of
this Agreement or the Merger, shall have approved or
recommended a Superior Proposal, or shall have resolved to do
any of the foregoing;
(ii) the Company shall have (1) failed to perform in
any material respect any obligation or to comply in any
material respect with any agreement or covenant of the Company
to be performed or complied with by it under this Agreement,
such that the conditions set forth in Sections 9.02(a) or
9.02(c) cannot be satisfied or (2) breached any of its
representations or warranties such that the conditions set
forth in Sections 9.02(b) or 9.02(c) cannot be satisfied,
which failure under clause (1) or (2) shall not be cured
within 15 Business Days of notice from Parent (or such longer
period during which the Company exercises reasonable best
efforts to cure and reasonably expects to accomplish such
cure); or
(iii) the ELF Voting Agreement or the ELF Merger
Agreement is terminated for any reason, or the Company is in
breach of or fails to perform its obligations thereunder, or
the ELF Merger Agreement is consummated pursuant to the
proviso to Section 9.01(d) of such Agreement;
(d) by the Company, if Parent or Merger Subsidiary shall have
(i) failed to perform in any material respect any obligation or to comply in any
material respect with any agreement or covenant of Parent or Merger Subsidiary
to be performed or complied with by it under this Agreement such that the
condition set forth in Section 9.03(a) cannot be satisfied or (ii) breached any
of such party's representations or warranties contained in this Agreement such
that the condition set forth in Section 9.03(b) cannot be satisfied, which
failure or breach described in such clause (i) or (ii) shall not be cured within
15 Business Days of notice from the Company (or such longer period during which
Parent exercises reasonable best efforts to cure and reasonably expects to
accomplish such cure).
The party desiring to terminate this Agreement pursuant to this Section 10.01
(other than pursuant to Section 10.01(a)) shall give notice of such termination
to the other party.
Section 10.02. EFFECT OF TERMINATION. If this Agreement is
terminated pursuant to Section 10.01, this Agreement shall become void and of no
effect with no liability on the part of any party (or any shareholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto, provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance of
the obligations of the other party or (ii) failure of either party to perform a
covenant hereof, such party shall be fully liable for any and all liabilities
and damages incurred or suffered by the other party as a result of such failure.
The provisions of Sections 11.04, 11.06, 11.07, 11.08 and this Section 10.02
shall survive any termination hereof pursuant to Section 10.01.
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ARTICLE 11
MISCELLANEOUS
Section 11.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission) and shall be given,
if to Parent or Merger Subsidiary, to:
Kellogg Company
One Kellogg Square
Battle Creek, Michigan 49016
Attention: Janet L. Kelly
Fax: (616) 961-6598
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff
Fax: (212) 403-2000
if to the Company, to:
Flowers Industries, Inc.
1919 Flowers Circle
Thomasville, Georgia 31757
Attention: G. Anthony Campbell
Fax: (912) 225-5433
with a copy to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street
Atlanta, Georgia 30308-3242
Attention: Robert W. Smith
Lizanne Thomas
Fax: (404) 581-8330
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5 p.m. in the place of
receipt and such day is a Business Day in the place of receipt. Otherwise, any
such
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notice, request or communication shall be deemed not to have been received until
the next succeeding Business Day in the place of receipt.
Section 11.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION. The representations and warranties contained in Article 4 and
in any certificate or other writing delivered pursuant to Section 9.02(c) shall
survive the Effective Time for a period of two years (or, in the case of the
representations and warranties contained in Section 4.15, until the expiration
of the applicable statutes of limitations), and Spinco shall indemnify and hold
harmless Parent, its Affiliates (including the Company) and their respective
directors, officers, employees, controlling persons, agents and representatives
and their successors and assigns (collectively, the "Parent Indemnitees") from
and against all Damages (as defined in the Distribution Agreement) asserted
against or incurred or suffered by any Parent Indemnitee in any way, directly or
indirectly arising out of, relating to or resulting from the failure of any
representation or warranty of the Company contained in this Agreement to have
been true and correct when made or as of the Effective Time (or at and as of
such different date or period specified for such representation and warranty) as
though such representation and warranty were made at and as of the Effective
Time (or such different date or period) without giving effect to any materiality
or Material Adverse Effect or knowledge qualification. The procedures set forth
in Sections 4.05 and 4.06 of the Distribution Agreement shall apply to any
claims made by any Parent Indemnitee under this Section 11.02.
Section 11.03. AMENDMENTS; NO WAIVERS.
(a) Any provision of this Agreement may be amended or waived
prior to the Effective Time if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement or, in the case of a waiver, by each party against whom the waiver is
to be effective, provided that, after the adoption of this Agreement by the
shareholders of the Company and without their further approval, no such
amendment or waiver shall reduce the amount or change the kind of consideration
to be received in exchange for the Shares.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by Law.
Section 11.04. EXPENSES.
(a) Except as otherwise provided in this Section, all costs
and expenses incurred in connection with this Agreement shall be paid by the
party incurring such cost or expense.
(b) If:
(i) Parent shall terminate this Agreement pursuant to
Section 10.01(c)(i);
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(ii) either the Company or Parent shall terminate
this Agreement pursuant to Section 10.01(b)(iii) and prior to
the Company Shareholder Meeting a third party or the Company
shall have publicly announced a Takeover Proposal or a
Takeover Proposal shall have been made known to the Company
(other than a Takeover Proposal by Parent);
(iii) either Parent or the Company shall terminate
this Agreement pursuant to Section 10.01(b)(i) and prior to
June 30, 2001 a third party or the Company shall have publicly
announced a Takeover Proposal, or a Takeover Proposal shall
have been made known to the Company (other than a Takeover
Proposal by Parent); or
(iv) Parent is entitled to receive, or has received,
a payment from ELF pursuant to Section 11.04(b) of the ELF
Merger Agreement and (A) the conditions set forth in Section
9.02 of this Agreement have been satisfied, (B) Parent has not
(1) failed to perform in any material respect any obligation
or to comply in any material respect with any agreement or
covenant of Parent to be performed or complied with by it
under this Agreement or (2) breached any of its
representations or warranties contained in this Agreement such
that this Agreement may be terminated by the Company pursuant
to Section 10.01(d) hereof and (C) ELF has not (1) failed to
perform in any material respect any obligation or to comply in
any material respect with any agreement or covenant of ELF to
be performed or complied with by it under the ELF Merger
Agreement or (2) breached any of its representations or
warranties such that the ELF Merger Agreement has been or may
be terminated pursuant to Section 10.01(d) thereof;
then, in the case of a termination by the Company pursuant to clause (ii) or
(iii), the Company shall pay to Parent (by wire transfer of immediately
available funds not later than the date of termination or, in the case of
termination by Parent pursuant to clause (i), (ii) or (iii), one Business Day
after such termination of this Agreement or, in the case of clause (iv), on the
date such payment is, or was, due from ELF) an amount equal to $58.2 million.
Notwithstanding the preceding provisions of this Section 11.04(b), such amount
shall not be paid to Parent if the ELF Merger shall have been consummated. The
Company shall be entitled to deduct and withhold from any payments made to
Parent under this Section 11.04(b) such amounts as may be required to be
deducted or withheld therefrom under the Code or under any applicable provisions
of state or local tax Law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for purposes of this Section 11.04(b) as
having been paid to Parent.
Section 11.05. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of each other party hereto, except that Parent or
Merger Subsidiary may transfer or assign, in whole or from time to time in part,
to one or more of its Affiliates and the corresponding obligations, the right to
enter into the transactions contemplated by this Agreement, but no such transfer
or assignment will relieve Parent or Merger Subsidiary of its obligations
hereunder.
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<PAGE> 47
Section 11.06. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the law of the State of Delaware, without
regard to the conflicts of law rules of such state.
Section 11.07. JURISDICTION. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may be
brought in any federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
Law, any objection that it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.01 shall be deemed
effective service of process on such party.
Section 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
Section 11.09. COUNTERPARTS; EFFECTIVENESS; BENEFIT. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the other
parties hereto. Except as provided in Sections 2.03, 2.06, 7.02 and 11.02, no
provision of this Agreement is intended to confer any rights, benefits,
remedies, obligations, or liabilities hereunder upon any Person other than the
parties hereto and their respective successors and assigns.
Section 11.10. ENTIRE AGREEMENT. This Agreement and the
Confidentiality Agreement constitute the entire agreement between the parties
with respect to the subject matter of this Agreement and supersede all prior
agreements and understandings, both oral and written, between the parties with
respect to the subject matter of this Agreement.
Section 11.11. CAPTIONS. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 11.12. SEVERABILITY. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of
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<PAGE> 48
the parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
Section 11.13. SPECIFIC PERFORMANCE. The parties hereto agree
that irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled (without posting a bond or similar indemnity) to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically the
performance of the terms and provisions hereof in any federal court located in
the State of Delaware or any Delaware state court, in addition to any other
remedy to which they are entitled at law or in equity.
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<PAGE> 49
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
FLOWERS INDUSTRIES, INC.
By: /s/ G. A. Campbell
-------------------------------
Name:
-----------------------------
Title:
----------------------------
KELLOGG COMPANY
By: /s/ Carlos M. Gutierrez
-------------------------------
Name:
-----------------------------
Title:
----------------------------
KANSAS MERGER SUBSIDIARY, INC.
By: /s/ Janet Langford Kelly
-------------------------------
Name:
-----------------------------
Title:
----------------------------
FLOWERS FOODS, INC. (for purposes of
Section 11.02 only)
By: /s/ G. A. Campbell
-------------------------------
Name:
-----------------------------
Title:
----------------------------
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SCHEDULE I
Capitalized terms used but not defined in paragraphs (a) or (c) of this
Schedule I shall have the meanings ascribed to them in the Agreement and Plan of
Restructuring and Merger to which this Schedule I is attached (the "AGREEMENT").
(a) "PER SHARE ADJUSTMENT AMOUNT" shall mean an amount equal to the
Adjustment Amount divided by the Outstanding Shares (as defined below).
"ADJUSTMENT AMOUNT" shall mean an amount, reasonably estimated, equal to the sum
of the following items (each, an "ITEM"):
1. All advisory fees and expenses payable by the Company in connection
with the transactions contemplated by the Agreement or the other
Transaction Agreements, to the extent such fees and expenses exceed $16
million;
2. All Liabilities (as defined in the Distribution Agreement) payable by
the Company under the Company's 1989 Executive Stock Incentive Plan,
1982 Incentive Stock Option Plan, Non-Employee Director Stock Option
Plan or any other compensation plan, program or arrangement of the
Company, including as set forth on Section 4.16(i) of the Company
Disclosure Schedule as a result of the transactions contemplated by the
Agreement or the Distribution Agreement;
3. The principal amount of all Company Debt (as defined in the
Distribution Agreement) plus the principal amount of any other debt or
similar obligations of the Company immediately prior to the
Distribution (as defined in the Distribution Agreement) to the extent
such debt is not expressly assumed by Spinco in accordance with the
terms of such debt or similar obligations or otherwise refinanced,
prepaid or satisfied by Spinco, including, without limitation, if
applicable, the Company's 7.15% Debentures due 2028 and the Loan
Facility Agreement by and among the Company, Suntrust Bank, Atlanta and
each of the participants party thereto, dated as of November 5, 1999,
and all other agreements referenced in section 4.04(1) of the Company
Disclosure Schedule;
4. Accrued interest on all amounts referred to in Item 3, in each case, as
of the Effective Time;
5. All costs and expenses related to the immediate retirement of any
amount referred to in Item 3 (other than, to the extent not assumed by
Spinco and to the extent not declared due and payable, the Company's
7.15% Debentures due 2028), including, without limitation, prepayment
penalties, and make-whole and gross-up provisions;
6. The Tax Amount (as defined below); and
7. The aggregate amount necessary to satisfy all Liabilities (as defined
in the Distribution Agreement) of the Company and its Affiliates
pursuant to the Agreements listed as items (a) through (l) of Section
4.04(2) of the Company Disclosure Schedule.
(b) The parties acknowledge and agree that the Adjustment Amount
constitutes a Spinco Group Liability (as defined in the Distribution Agreement).
In the event that an Item, that has been conclusively determined in accordance
with the procedure set forth in Article 4 of the Distribution Agreement, exceeds
or is less than the amount reflected in the Adjustment Amount for such Item, the
Company or Spinco, as the case may be, shall be entitled to indemnification from
the other for such excess amount or deficiency, as applicable, pursuant to such
Article 4.
<PAGE> 51
(c) For purposes of this Schedule I, the following terms shall have the
following meanings:
"ESTIMATED GAIN" shall mean the excess, if any, of (I) the sum
of (a) the Estimated 311(b) Gain, (b) the amount of any deferred intercompany
income or gain within the meaning of Treasury Regulation Section 1.1502-13 that
is Reasonably Expected By The Accountants to be required to be taken into
account as a result of the Transaction (or any transaction undertaken in
anticipation thereof) and the amount of any excess loss account Reasonably
Expected By The Accountants to be required to be taken into income under
Treasury Regulation Section 1.1502-19 as a result of the Transaction (or any
transaction undertaken in anticipation thereof) and (c) the amount of any other
income or gain of the Company or any of its Subsidiaries that is Reasonably
Expected By The Accountants to be required to be recognized for federal income
Tax purposes (including pursuant to Code Section 355(e) and (f)) as a result of
the Transaction (or any transaction undertaken in anticipation thereof) over
(II) the amount of any net operating loss (in excess of the amount of any income
or gain of the Company or any of its Subsidiaries for the Pre-Closing Period,
other than the income or gain set forth in clause (I) above) of the Company or
any of its Subsidiaries arising in the Pre-Closing Period that is Reasonably
Expected By The Accountants to be allowable (without restriction or limitation)
under federal income Tax law to offset the income or gain set forth in clause
(I) above for the taxable period of the Company ending on the date of the
Merger.
"ESTIMATED 311(b) GAIN" shall mean the excess, if any, of (a)
the sum of (i) the product of the number of shares of Spinco stock outstanding
on the Distribution Date after the Distribution and the Spinco Stock Price and
(ii) the product of (A) the number of Share Equivalents or other equity-based
derivatives in Spinco outstanding on the date of the Distribution after the
Distribution and (B) the excess, if any, of the Spinco Stock Price over the
exercise price of such Share Equivalents or derivatives over (b) the federal
income Tax basis (other than any basis in respect of which loss is Reasonably
Expected By The Accountants to be disallowed under Treasury Regulation Section
1.1502-20), as Reasonably Expected By The Accountants, of the Company in the
stock of Spinco (provided that such basis shall have been reduced by the amount,
as Reasonably Expected By The Accountants, of any liability for federal income
Tax purposes (or any capital lease obligation) of the Company that is assumed by
Spinco or any Subsidiary of Spinco, or to which assets received by Spinco or any
Subsidiary of Spinco are taken subject to).
"EXCHANGE" shall mean the New York Stock Exchange or such
other national securities exchange or automated quotation system of a registered
securities association as the Spinco stock is to be traded on.
"OUTSTANDING SHARES" shall mean the number of Shares issued
and outstanding immediately prior to the Effective Time, excluding all Shares
constituting Restricted Stock Awards pursuant to the 1989 Executive Stock
Incentive Plan.
"PRE-CLOSING PERIOD" shall mean the taxable periods (or
portions thereof) ending, with respect to the Company, on or prior to the date
of the Distribution.
"RATE" shall mean the sum of the highest federal income Tax
rate applicable to corporations under the Code on the date of the Distribution
and four percent.
"REASONABLY EXPECTED BY THE ACCOUNTANTS" shall mean that the
taxpayer's position is "more likely than not" to prevail under the Code, as
mutually agreed by (a) accountants designated by the Company and (b) at the
election of the Company, either
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PricewaterhouseCoopers, LLP, Detroit, or a Big Five accounting firm mutually
selected by the Company and Parent.
"RELEVANT DATE" shall mean the date of the Distribution, or if
Spinco stock is not traded on the Exchange on such date, then the first date
following the date of the Distribution on which the Spinco stock is so traded.
"SPINCO STOCK PRICE" shall mean the average of the high and
the low trading prices on the Relevant Date of Spinco stock on the Exchange, as
reported in The Wall Street Journal.
"TAX AMOUNT" shall mean the product of the Rate and the
Estimated Gain.
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