Exhibit 99.2
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BUSINESS COMBINATION AGREEMENT
Dated as of October 27, 2003,
Between
XXXXX & XXXXXXXXXX TOBACCO CORPORATION
And
X.X. XXXXXXXX TOBACCO HOLDINGS, INC.
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TABLE OF CONTENTS
Page
ARTICLE I
The Formation of Xxxxxxxx American, Sub and B&W Opco, the
Asset Contribution, the Assumption of Liabilities, the B&W
Opco Stock Contribution and the Merger
SECTION 1.01. The Formation of Xxxxxxxx American, Sub and B&W Opco......................................4
SECTION 1.02. The Asset Contribution and the Assumption of Liabilities..................................4
SECTION 1.03. The B&W Opco Stock Contribution...........................................................5
SECTION 1.04. The Merger................................................................................6
SECTION 1.05. Closing...................................................................................7
SECTION 1.06. Effective Time............................................................................7
SECTION 1.07. Effects of the Merger.....................................................................7
SECTION 1.08. Certificate of Incorporation and By-Laws of the Surviving Corporation.....................8
SECTION 1.09. Board of Directors and Officers of Xxxxxxxx American; Governance Matters..................8
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations
SECTION 2.01. Effect on Capital Stock...................................................................8
SECTION 2.02. Exchange of Certificates..................................................................9
ARTICLE III
Representations and Warranties of RJR
SECTION 3.01. Organization, Standing and Power.........................................................12
SECTION 3.02. RJR Subsidiaries; Equity Interests.......................................................13
SECTION 3.03. Capital Structure........................................................................13
SECTION 3.04. Authority; Execution and Delivery; Enforceability........................................16
SECTION 3.05. No Conflicts; Consents...................................................................17
SECTION 3.06. SEC Documents; Undisclosed Liabilities...................................................19
SECTION 3.07. Disclosure Documents.....................................................................21
SECTION 3.08. Absence of Certain Changes or Events.....................................................21
SECTION 3.09. Taxes....................................................................................23
SECTION 3.10. Absence of Changes in Benefit Plans......................................................26
SECTION 3.11. ERISA Compliance; Excess Parachute Payments..............................................26
SECTION 3.12. Litigation...............................................................................31
SECTION 3.13. Compliance with Applicable Laws..........................................................31
SECTION 3.14. Title to Properties......................................................................32
SECTION 3.15. Intellectual Property....................................................................32
SECTION 3.16. Labor and Employment Matters.............................................................33
SECTION 3.17. Contracts................................................................................34
SECTION 3.18. Brokers; Schedule of Fees and Expenses...................................................35
SECTION 3.19. Opinions of Financial Advisors...........................................................35
SECTION 3.20. Insurance................................................................................36
SECTION 3.21. Absence of B&W Transaction Material Adverse Effect.......................................36
ARTICLE IV
Representations and Warranties of B&W
SECTION 4.01. Organization, Standing and Power.........................................................37
SECTION 4.02. B&W Subsidiaries; Equity Interests.......................................................37
SECTION 4.03. The Contributed Assets...................................................................38
SECTION 4.04. Authority; Execution and Delivery; Enforceability........................................38
SECTION 4.05. No Conflicts; Consents...................................................................39
SECTION 4.06. B&W Financial Statements; Undisclosed Liabilities........................................40
SECTION 4.07. Information Supplied.....................................................................42
SECTION 4.08. Absence of Certain Changes or Events.....................................................42
SECTION 4.09. Taxes....................................................................................44
SECTION 4.10. Absence of Changes in Benefit Plans......................................................46
SECTION 4.11. ERISA Compliance; Excess Parachute Payments..............................................46
SECTION 4.12. Litigation...............................................................................51
SECTION 4.13. Compliance with Applicable Laws..........................................................51
SECTION 4.14. Title to Properties......................................................................52
SECTION 4.15. Intellectual Property....................................................................52
SECTION 4.16. Labor and Employment Matters.............................................................53
SECTION 4.17. Contracts................................................................................54
SECTION 4.18. Brokers; Schedule of Fees and Expenses...................................................55
SECTION 4.19. Insurance................................................................................56
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SECTION 4.20. Absence of RJR Transaction Material Adverse Effect.......................................56
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business......................................................................56
SECTION 5.02. No Solicitation by RJR...................................................................66
SECTION 5.03. No Solicitation by B&W...................................................................70
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the Proxy Statement; Stockholders Meeting................74
SECTION 6.02. Access to Information; Confidentiality; Cooperation......................................76
SECTION 6.03. Reasonable Best Efforts; Notification....................................................77
SECTION 6.04. RJR Stock Options........................................................................79
SECTION 6.05. Benefit Plans............................................................................83
SECTION 6.06. Indemnification..........................................................................86
SECTION 6.07. Fees and Expenses........................................................................87
SECTION 6.08. Public Announcements.....................................................................89
SECTION 6.09. Transfer Taxes...........................................................................89
SECTION 6.10. Affiliates...............................................................................89
SECTION 6.11. Stock Exchange Listing...................................................................89
SECTION 6.12. Rights Agreements; Consequences if Rights Triggered......................................90
SECTION 6.13. Tax Matters..............................................................................90
SECTION 6.14. Intercompany Accounts....................................................................92
SECTION 6.15. Post-Effective Time Intercompany Agreements..............................................92
SECTION 6.16. Post-Effective Time Merger...............................................................92
SECTION 6.17. Satisfaction of Macon Bonds..............................................................92
SECTION 6.18. Further Assurances.......................................................................92
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligations...................................................93
SECTION 7.02. Conditions to Obligations of B&W.........................................................94
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SECTION 7.03. Conditions to Obligations of RJR.........................................................95
SECTION 7.04. Frustration of Closing Conditions........................................................97
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination..............................................................................97
SECTION 8.02. Effect of Termination....................................................................99
SECTION 8.03. Amendment................................................................................99
SECTION 8.04. Extension; Waiver........................................................................99
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver...............................100
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties...........................................100
SECTION 9.02. Notices.................................................................................100
SECTION 9.03. Definitions.............................................................................101
SECTION 9.04. Interpretation; Disclosure Letters......................................................105
SECTION 9.05. Severability............................................................................106
SECTION 9.06. Counterparts............................................................................106
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries..........................................106
SECTION 9.08. Governing Law...........................................................................106
SECTION 9.09. Assignment..............................................................................106
SECTION 9.10. Enforcement.............................................................................107
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LIST OF EXHIBITS
Exhibit Title
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Exhibit A Form of B&W Opco Formation Agreement
Exhibit B Form of Lane Stock Purchase Agreement
Exhibit C Form of Xxxxxxxx American Rights Plan
Exhibit D Form of Joinder Agreement
Exhibit E Form of Noncompetition Agreement
Exhibit F Form of Governance Agreement
Exhibit G-1 Articles of Incorporation of Xxxxxxxx American
Exhibit G-2 By-Laws of Xxxxxxxx American
Exhibit G-3 Certificate of Incorporation of Sub
Exhibit G-4 By-Laws of Sub
Exhibit G-5 Articles of Incorporation of B&W Opco
Exhibit G-6 By-Laws of B&W Opco
Exhibit H The Board of Directors and executive officers of
Xxxxxxxx American and the Surviving Corporation
Exhibit I Form of Affiliate Agreement
Exhibit J Form of Dividend Policy Letter
Exhibit K Term Sheet for Manufacturing Contracts
INDEX OF DEFINED TERMS
Defined Term Section
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"20-Day RJR Average Closing Price" Section 1.03(a)
"Acquiring Person" Section 3.05(c)
"Action" Section 9.03
"Adjusted Cash Deferred Stock Unit" Section 6.04(iv)
"Adjusted Option" Section 6.04(i)
"Adjusted SAR" Section 6.04(ii)
"Adjusted Stock Deferred Stock Unit" Section 6.04(iii)
"Affected B&W Employees" Section 6.05(b)
"affiliate" Section 9.03
"Agreement" Recitals
"Asset Contribution" Recitals
"Assumption of Liabilities" Recitals
"B&W " Recitals
"B&W Affiliated Group" Section 4.09(a)
"B&W Alternative Acquisition Agreement" Section 5.03(b)
"B&W Audited Historical Financial Statements" Section 4.06(a)
"B&W Benefit Agreements" Section 4.08(iii)
"B&W Benefit Plans" Section 4.10
"B&W Board" Section 5.03(a)
"B&W Business" Section 9.03
"B&W Commonly Controlled Entity" Section 4.11(i)
"B&W Company" Section 4.02(a)
"B&W Disclosure Letter" Article IV
"B&W Material Adverse Effect" Section 9.03
"B&W Multiemployer Pension Plan" Section 4.11(c)
"B&W Opco " Recitals
"B&W Opco 2002 Balance Sheet" Sheet 4.06(a)
"B&W Opco Common Stock" Recitals
"B&W Opco Financial Statements Section 4.06(a)
"B&W Opco Formation Agreement" Recitals
"B&W Opco Income Statements" Section 4.06(a)
"B&W Opco Interim 2003 Balance Sheet Section 4.06(a)
"B&W Opco Stock Contribution" Recitals
"B&W Pension Plans" Section 4.11(a)
"B&W Personnel" Section 4.08(iii)
"B&W SEC Financial Statements Section 4.06(b)
"B&W Subsidiary" Section 4.01
"B&W Takeover Proposal" Section 5.03(d)
"B&W Tax Ruling" Section 7.02(f)
"B&W Termination Fee" Section 6.07(c)
"B&W Transaction Material Adverse Effect" Section 9.03
"B&W U.S. Holdings" Section 6.02(b)
"B&W Welfare Plans" Section 4.11(a)
"BAT" Recitals
"Certificate of Merger" Section 1.06
"Certificates" Section 2.02(b)
"Closing Date" Section 1.05
"Closing" Section 1.05
"CMS" Recitals
"Code" Recitals
"Commercial Agreements" Section 6.03(a)
"Complete Withdrawal" Section 3.11(c)
"Confidentiality Agreement" Section 6.02(a)
"Consent" Section 3.05(b)
"Contract" Section 3.05(a)
"DGCL" Section 1.04
"Distribution Date" Section 3.05(c)
"Dividend Policy Letter" Section 7.02(c)
"EC Filings" Section 6.03(a)
"EC Merger Regulation" Section 3.05(b)
"Effective Time" Section 1.06
"Employee Benefits Liability" Section 4.11(i)
"Environmental Condition" Section 9.03
"Environmental Law" Section 9.03
"ERISA" Section 3.11(a)
"Exchange Act" Section 3.05(b)
"Exchange Agent" Section 2.02(a)
"Exchange Ratio" Section 2.01(c)
"Excluded Assets" Section 4.03
"Excluded Liabilities" Section 4.06(a)
"Excluded Subsidiary" Article IV
"Filed RJR SEC Documents" Section 3.06(c)
"Form 8-A" Section 3.05(b)
"Form S-4" Section 3.05(b)
"GAAP" Section 3.06(b)
"Governance Agreement" Recitals
"Governmental Entity" Section 3.05(b)
"Hazardous Materials" Section 9.03
"HSR Act" Section 3.05(b)
"HSR Filing" Section 6.03(a)
"Insolvent" Section 9.03
"Intellectual Property" Section 9.03
"In-the-Money Options" Section 1.03(a)
"IRS" Section 3.09(c)
ii
"Joinder Agreement" Recitals
"JPM" Section 3.18
"Judgment" Section 3.05(a)
"Lane Seller" Recitals
"Lane Stock Purchase Agreement" Recitals
"Lane Stock Sale" Recitals
"Law" Section 3.05(a)
"Xxxxxx" Section 3.18
"Liens" Section 3.02(a)
"Manufacturing Contracts" Recitals
"Maximum Premium" Section 6.06(b)
"Merger Consideration" Section 2.01(c)
"Merger" Recitals
"Noncompetition Agreement" Recitals
"Notice of Superior B&W Proposal" Section 5.03(b)
"Notice of Superior RJR Proposal" Section 5.02(b)
"NYSE" Section 1.03(a)
"Option Withholding Amount" Section 1.03(a)
"Outside Date" Section 8.01(b)
"Partial Withdrawal" Section 3.11(c)
"Permits" Section 3.01
"person" Section 9.03
"Primary RJR Executives" Section 3.11(e)
"Proxy Statement" Section 3.05(b)
"Regulatory Requirement" Section 6.03(b)
"Representatives" Section 5.02(a)
"Restraints" Section 7.01(d)
"Xxxxxxxx American Common Stock" Recitals
"Xxxxxxxx American Loan" Recitals
"Xxxxxxxx American Preferred Stock" Recitals
"Xxxxxxxx American Stock Consideration" Section 1.03(a)
"Xxxxxxxx American" Recitals
"RJR " Recitals
"RJR Adverse Recommendation Change" Section 5.02(b)
"RJR Affiliated Group" Section 3.09(a)
"RJR Alternative Acquisition Agreement" Section 5.02(b)
"RJR Benefit Agreements" Section 3.08(vi)
"RJR Benefit Plans" Section 3.10
"RJR Board" Section 3.04(b)
"RJR By-Laws" Section 3.01
"RJR Capital Stock" Section 3.03
"RJR Cash Deferred Stock Unit" Section 6.04(d)
"RJR Charter" Section 3.01
"RJR Common Stock" Recitals
"RJR Commonly Controlled Entity" Section 3.10
"RJR Director Deferrals" Section 6.04(d)
"RJR Director Grants" Section 6.04(d)
iii
"RJR Disclosure Letter" Article III
"RJR Material Adverse Effect" Section 9.03
"RJR Multiemployer Pension Plan" Section 3.11(c)
"RJR Pension Plans" Section 3.11(a)
"RJR Personnel" Section 3.08(b)
"RJR Preferred Stock" Section 3.03
"RJR Restricted Shares" Section 3.03
"RJR Rights Agreement" Section 3.03
"RJR Rights" Section 3.03
"RJR SEC Documents" Section 3.06(a)
"RJR Share Calculation" Section 1.03(a)
"RJR Stock Deferred Stock Unit" Section 6.04(d)
"RJR Stock Option" Section 6.04(d)
"RJR Stock Plans" Section 6.04(d)
"RJR Stockholder Approval" Section 3.04(c)
"RJR Stockholders Meeting" Section 6.01(d)
"RJR Subsidiary" Section 3.01
"RJR Takeover Proposal" Section 5.02(e)
"RJR Tax Ruling" Section 7.03(e)
"RJR Termination Fee" Section 6.07(b)
"RJR Transaction Material Adverse Effect" Section 9.03
"RJR Voting Debt" Section 3.03
"RJR Welfare Plans" Section 3.11(a)
"RJR-T" Recitals
"Xxxxxxxx-Xxxxx Act" Section 3.06(b)
"SARs" Section 3.03
"SEC" Section 3.05(b)
"Section 11(a)(ii) Event" Section 3.05(c)
"Section 13 Event" Section 3.05(c)
"Section 203" Section 3.04(b)
"Securities Act" Section 3.06(b)
"Series A Preferred Stock" Section 3.03
"SF Contribution" Recitals
"Share Issuance" Section 1.04
"Stock Acquisition Date" Section 3.05(c)
"Sub" Recitals
"subsidiary" Section 9.03
"Superior B&W Proposal" Section 5.03(d)
"Superior RJR Proposal" Section 5.02(e)
"Surviving Corporation" Section 1.04
"Tax Return" Section 3.09(g)
"Tax Ruling" Section 6.13(a)
"Taxes" Section 3.09(g)
"Transaction Agreements" Recitals
"Transactions" Section 1.04
"Transfer Taxes" Section 6.09
"Triggering Event" Section 3.05(c)
iv
BUSINESS COMBINATION AGREEMENT, dated as of
October 27, 2003 (this "Agreement"), between XXXXX &
XXXXXXXXXX TOBACCO CORPORATION, a
Delaware
corporation ("B&W"), and X.X. XXXXXXXX TOBACCO
HOLDINGS, INC., a
Delaware corporation ("RJR").
WHEREAS the respective Boards of Directors of each of the parties
hereto have approved this Agreement and the transactions contemplated hereby and
declared it advisable and in the best interests of each corporation and its
respective stockholder or stockholders that B&W and RJR engage in a business
combination transaction to be effected as set forth in this Agreement;
WHEREAS B&W and RJR have agreed that they will form a new North
Carolina corporation ("Xxxxxxxx American");
WHEREAS B&W and RJR will each receive 50 shares of common stock, par
value $0.01 per share, of Xxxxxxxx American (the "Xxxxxxxx American Common
Stock") in connection with the formation of Xxxxxxxx American;
WHEREAS RJR has agreed it will contribute to Xxxxxxxx American all of
the stock of Santa Fe Natural Tobacco Co., a New Mexico corporation, in exchange
for shares of voting preferred stock, par value $0.01 per share, of Xxxxxxxx
American (the "Xxxxxxxx American Preferred Stock"), having the terms set forth
in the Articles of Incorporation of Xxxxxxxx American (the "SF Contribution");
WHEREAS immediately prior to the B&W Opco Stock Contribution (as
defined below), X. X. Xxxxxxxx Tobacco Company, a New Jersey corporation and a
wholly owned subsidiary of RJR ("RJR-T"), will loan $400,000,000 to Xxxxxxxx
American in exchange for a note (the "Xxxxxxxx American Loan");
WHEREAS B&W has agreed that it will, immediately prior to the Effective
Time (as defined in Section 1.06), form a new North Carolina corporation ("B&W
Opco") and enter into a formation agreement with B&W Opco and Xxxxxxxx American
in the form of Exhibit A hereto (the "B&W Opco Formation Agreement"), pursuant
to which the Contributed Assets (as defined in the B&W Opco Formation Agreement)
2
will be contributed to B&W Opco (the "Asset Contribution") and the Assumed
Liabilities (as defined in the B&W Opco Formation Agreement) will be assumed by
B&W Opco (the "Assumption of Liabilities"), in each case on the terms and
subject to the conditions set forth in the B&W Opco Formation Agreement;
WHEREAS B&W has agreed that it will, immediately following the Asset
Contribution and the Assumption of Liabilities and simultaneously with the
Effective Time, and otherwise on the terms and subject to the conditions set
forth in this Agreement, contribute to Xxxxxxxx American (the "B&W Opco Stock
Contribution") shares of common stock of B&W Opco, representing all the issued
and outstanding shares of common stock, par value $0.01 per share, of B&W Opco
(the "B&W Opco Common Stock") in exchange for shares of Xxxxxxxx American Common
Stock as described in Section 1.03;
WHEREAS simultaneously with the B&W Opco Stock Contribution and
otherwise on the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, a newly formed, wholly owned subsidiary of
Xxxxxxxx American incorporated in
Delaware ("Sub"), will merge with and into RJR
(the "Merger"), whereby each issued and outstanding share of common stock, par
value $0.01 per share, of RJR, the "RJR Common Stock") shall be converted into
the right to receive one share of Xxxxxxxx American Common Stock, as described
in Section 2.01(c) of this Agreement;
WHEREAS simultaneously with the execution and delivery of this
Agreement, American Cigarette Company Overseas B.V., a Netherlands corporation
("Lane Seller"), Cigarette Manufacturing Supplies Inc., a
Delaware corporation
("CMS"), and RJR are entering into an agreement (the "Lane Stock Purchase
Agreement") in the form of Exhibit B hereto, pursuant to which, at the Effective
Time, Lane Seller will sell to Xxxxxxxx American (the "Lane Stock Sale") all the
capital stock of CMS;
WHEREAS immediately following the Effective Time and the Lane Stock
Sale, (a) Xxxxxxxx American will contribute the B&W Opco Common Stock to RJR and
(b) subsequently, RJR-T will merge with and into B&W Opco, with B&W Opco as the
surviving corporation (such contribution and merger, together, the
"Post-Effective Time Contribution and Merger");
3
WHEREAS, B&W and Xxxxxxxx American, or certain of their respective
affiliates, will enter into manufacturing contracts (the "Manufacturing
Contracts") consistent with the terms and conditions set forth in Exhibit K;
WHEREAS simultaneously with the Asset Contribution, British American
Tobacco p.l.c., a public limited company incorporated under the laws of England
and Wales ("BAT"), B&W and Xxxxxxxx American will enter into a noncompetition
agreement (the "Noncompetition Agreement") in the form of Exhibit E hereto and a
governance agreement in the form of Exhibit F hereto (the "Governance Agreement"
and, together with this Agreement, the Lane Stock Purchase Agreement (and the
joinder agreement whereby Xxxxxxxx American will assume RJR's obligations
thereunder), the B&W Opco Formation Agreement, the Noncompetition Agreement, the
Joinder Agreement to be entered into by Xxxxxxxx American, B&W and RJR (the
"Joinder Agreement") in the form of Exhibit D hereto, the Commercial Agreements
(as defined in Section 6.03(a)) and all other agreements, instruments and other
documents entered into to make effective or implement the Transactions (as
defined in Section 1.04), the "Transaction Agreements")), in each case pursuant
to which BAT, B&W, Xxxxxxxx American and RJR, as the case may be, will be
granted the rights and become subject to the obligations set forth therein;
WHEREAS for Federal income tax purposes it is intended that the Asset
Contribution and the Assumption of Liabilities, on the one hand, and the B&W
Opco Stock Contribution and the Merger, on the other hand, qualify as exchanges
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code") and that the Merger also qualifies as a reorganization
within the meaning of Section 368(a) of the Code;
WHEREAS for Federal income tax purposes it is intended that the SF
Contribution qualify as an exchange within the meaning of Section 351 of the
Code and also as a reorganization within the meaning of Section 368(a) of the
Code; and
WHEREAS the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transactions
contemplated by this Agreement and also to prescribe various conditions to the
transactions contemplated by this Agreement.
4
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
The Formation of Xxxxxxxx American, Sub and B&W Opco, the
Asset Contribution, the Assumption of Liabilities, the B&W
Opco Stock Contribution and the Merger
SECTION 1.01. The Formation of Xxxxxxxx American, Sub and B&W Opco. (a)
As promptly as practicable after the date hereof, B&W and RJR shall cause
Xxxxxxxx American to be organized under the laws of the State of North Carolina.
On or prior to the Closing Date (as defined in Section 1.05), and in any event
prior to the B&W Opco Stock Contribution, Xxxxxxxx American shall cause Sub to
be organized under the laws of the State of
Delaware, and B&W shall cause B&W
Opco to be organized under the laws of the State of North Carolina. The Articles
of Incorporation and By-Laws of Xxxxxxxx American shall be in the form of
Exhibits G-1 and G-2, respectively. The Certificate of Incorporation and By-Laws
of Sub shall be in the form of Exhibits G-3 and G-4, respectively. The Articles
of Incorporation and By-Laws of B&W Opco shall be in the form of Exhibits G-5
and G-6, respectively. Upon formation of Xxxxxxxx American, each of B&W and RJR
shall contribute $10 to Xxxxxxxx American in exchange for 50 shares of Xxxxxxxx
American Common Stock.
(b) The parties hereto agree that Xxxxxxxx American, Sub and B&W Opco
shall not (i) carry on any business or conduct any operations other than the
execution of the Transaction Agreements to which they are a party, the
performance of their respective obligations hereunder and thereunder, the
consummation of the Transactions and matters ancillary thereto or (ii) issue any
capital stock, rights to purchase or receive capital stock or other equity,
voting or ownership interests on or prior to the Effective Time other than as
described in the Transaction Agreements.
SECTION 1.02. The Asset Contribution and the Assumption of Liabilities.
(a) On the Closing Date, immediately prior to the Effective Time, B&W, B&W Opco
and Xxxxxxxx American shall enter into the B&W Opco Formation
5
Agreement and shall effect the Asset Contribution and the Assumption of
Liabilities.
SECTION 1.03. The B&W Opco Stock Contribution. (a) On the Closing Date,
immediately following the Asset Contribution and the Assumption of Liabilities
and simultaneously with the occurrence of the Effective Time, B&W shall
contribute, transfer and deliver to Xxxxxxxx American the B&W Opco Common Stock
in exchange for that number (rounded up to the nearest whole share) of fully
paid and nonassessable shares of Xxxxxxxx American Common Stock (the "Xxxxxxxx
American Stock Consideration") equal to the product of (i) 0.724138 (i.e., 42%
divided by 58%) and (ii) the RJR Share Calculation. The "RJR Share Calculation"
shall be equal to:
(A) the number of shares of RJR Common Stock issued and
outstanding immediately prior to the Effective Time;
plus
(B) the aggregate number of shares of RJR Common Stock that
would be issued upon the exercise or settlement, as the case may be, of
all RJR Stock Options (as defined in Section 6.04(d)), other
equity-based or equity-related awards or other rights to receive or
purchase RJR Common Stock outstanding or in existence immediately prior
to the Effective Time (assuming exercise or settlement at that time),
in each case that have a strike price or exercise price, if applicable,
that is less than the 20-Day RJR Average Closing Price (as defined
below) (the "In-the-Money Options");
less
(C) the quotient (rounded up to the nearest whole number)
obtained by dividing (1) the aggregate proceeds that would be received
by RJR upon exercise of all In-the-Money Options by (2) the 20-Day RJR
Average Closing Price;
less
(D) the quotient (rounded up to the nearest whole number)
obtained by dividing (1) the Option
6
Withholding Amount by (2) the 20-Day RJR Average Closing Price;
The "Option Withholding Amount" means the product obtained by multiplying (x)
0.345 and (y)(1) the 20-Day RJR Average Closing Price multiplied by the
aggregate number of shares of RJR Common Stock that would be issued upon the
exercise of all In-the-Money Options less (2) the aggregate proceeds that would
be received by RJR upon exercise of all In-the-Money Options. The "20-Day RJR
Average Closing Price" means the average of the closing sales prices of RJR
Common Stock, as reported by the New York Stock Exchange, Inc. ("NYSE")
Composite Transactions Tape (as reported by The Wall Street Journal (Northeast
edition), or, if not reported thereby, as reported in another authoritative
source selected by B&W and RJR) on the NYSE trading day that is two NYSE trading
days prior to the Closing Date and on each of the 19 NYSE trading days prior to
such NYSE trading day. It is the understanding of the parties that, after giving
effect to the Transactions, B&W will own 42% of the outstanding Xxxxxxxx
American Common Stock (applying the treasury stock method described above). For
purposes of determining the RJR Share Calculation, any restricted stock or
equity awards of RJR that are taken into treasury, cancelled or cashed-out upon
the occurrence of the Effective Time will be deemed to have been cancelled or
cashed-out prior to determining the RJR Share Calculation. Any equity-based
awards (other than restricted or unrestricted stock) granted to RJR directors by
RJR on or after the date of this Agreement that remain outstanding as of the
Effective Time shall be deemed to be equal to the aggregate number of shares of
RJR Common Stock into which such equity units are exercisable, convertible or
exchangeable for purposes of determining the RJR Share Calculation, and such
number of shares of RJR Common Stock so determined shall be included in clause
(A) of the definition of the RJR Share Calculation.
(b) At the time of the B&W Opco Stock Contribution, Xxxxxxxx American
shall deliver to B&W certificates, registered in the name of B&W, representing
the Xxxxxxxx American Stock Consideration.
SECTION 1.04. The Merger. On the terms and subject to the conditions
set forth in this Agreement, and in accordance with the
Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into RJR at the
Effective Time. At the Effective Time, the separate
7
corporate existence of Sub shall cease, and RJR shall continue as the surviving
corporation (the "Surviving Corporation"). The Asset Contribution, the
Assumption of Liabilities, the B&W Opco Stock Contribution, the Merger, the
Xxxxxxxx American Loan, the issuance by Xxxxxxxx American of the Xxxxxxxx
American Stock Consideration and the Xxxxxxxx American Common Stock in
connection with the Merger (the "Share Issuance") and the other transactions
contemplated by the Transaction Agreements are referred to in this Agreement
collectively as the "Transactions".
SECTION 1.05. Closing. The closing (the "Closing") of the Transactions
shall take place at the offices of Cravath, Swaine & Xxxxx LLP, 000 Xxxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. on the second business day
following the satisfaction (or, to the extent permitted by Law (as defined in
Section 3.05(a)), waiver by all parties) of the conditions set forth in Section
7.01, or, if on such day any condition set forth in Section 7.02 or 7.03 has not
been satisfied (or, to the extent permitted by Law, waived by the party or
parties entitled to the benefits thereof), as soon as practicable after all the
conditions set forth in Article VII have been satisfied (or, to the extent
permitted by Law, waived by the party or parties entitled to the benefits
thereof), or at such other place, time and date as shall be agreed in writing
between B&W and RJR. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date".
SECTION 1.06. Effective Time. Prior to the Closing, RJR shall prepare,
or RJR shall cause Xxxxxxxx American to prepare, and on the Closing Date RJR or
Xxxxxxxx American shall file with the Secretary of State of the State of
Delaware, a certificate of merger (in any such case, the "Certificate of
Merger") executed in accordance with the relevant provisions of the DGCL.
Xxxxxxxx American or the Surviving Corporation shall make all other filings or
recordings required under the DGCL as soon as practicable on or after the
Closing Date. The Merger shall become effective at such time as the Certificate
of Merger is duly filed with such Secretary of State, or at such other time as
B&W and RJR shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the "Effective Time").
SECTION 1.07. Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
8
SECTION 1.08. Certificate of Incorporation and By-Laws of the Surviving
Corporation. (a) The Certificate of Incorporation of RJR shall be amended to be
substantially in the form of the Certificate of Incorporation of Sub immediately
prior to the Effective Time, and the Certificate of Incorporation of RJR, as so
amended, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable Law.
(b) The By-Laws of Sub as in effect immediately prior to the Effective
Time shall be the By-Laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable Law.
SECTION 1.09. Board of Directors and Officers of Xxxxxxxx American;
Governance Matters. The Board of Directors and the executive officers of
Xxxxxxxx American shall be as set forth on or designated in accordance with
Exhibit H hereto until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be,
it being agreed that if any director shall be unable to serve as a director at
the Effective Time, then the party which designated such individual as indicated
in Exhibit H shall designate another individual to serve in such individual's
place.
ARTICLE II
Effect of the Merger on the Capital Stock of
the Constituent Corporations
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
RJR Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one fully paid and nonassessable
share of common stock, par value $0.01 per share, of the Surviving Corporation.
(b) Cancelation of Treasury Stock and RJR-Owned Stock. Each share of
RJR Common Stock that is owned by RJR, Xxxxxxxx American or Sub shall no longer
be
9
outstanding and shall automatically be canceled and retired and shall cease to
exist, and no Xxxxxxxx American Common Stock or other consideration shall be
delivered or deliverable in exchange therefor. Each share of Xxxxxxxx American
Common Stock that is owned by RJR or Sub at the Effective Time shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered or deliverable in exchange
therefor.
(c) Conversion of RJR Common Stock. Except as set forth in Section
2.01(b), each share of RJR Common Stock issued and outstanding immediately prior
to the Effective Time shall be converted into the right to receive one (the
"Exchange Ratio") fully paid and nonassessable share of Xxxxxxxx American Common
Stock. The shares of Xxxxxxxx American Common Stock to be issued upon the
conversion of shares of RJR Common Stock pursuant to this Section 2.01(c) is
referred to as the "Merger Consideration". As of the Effective Time, all such
shares of RJR Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of RJR Common Stock shall cease to
have any rights with respect thereto, except the right to receive Merger
Consideration and certain dividends or other distributions in accordance with
Section 2.02(c), in each case upon surrender of such certificate in accordance
with Section 2.02, without interest.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. Promptly
following the Effective Time, Xxxxxxxx American shall deposit with a bank or
trust company designated by RJR prior to the Effective Time and reasonably
acceptable to B&W (the "Exchange Agent"), for the benefit of the holders of
Certificates (as defined in Section 2.02(b)), for exchange in accordance with
this Article II, through the Exchange Agent, certificates representing the
shares of Xxxxxxxx American Common Stock issuable pursuant to Section 2.01 as a
result of the Merger and upon surrender of Certificates. From time to time as
necessary following the Effective Time, Xxxxxxxx American shall deposit with the
Exchange Agent, for the benefit of the holders of Certificates, the amount of
cash necessary to pay dividends and other distributions in accordance with
Section 2.02(c).
10
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, Xxxxxxxx American shall cause the Exchange Agent to mail to each
holder of record of a certificate or certificates (the "Certificates") that
immediately prior to the Effective Time represented outstanding shares of RJR
Common Stock whose shares were converted into the right to receive Merger
Consideration pursuant to Section 2.01 (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as B&W and RJR
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for Merger Consideration. Upon surrender of a
Certificate for cancelation to the Exchange Agent, together with such letter of
transmittal, duly completed and executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Xxxxxxxx American Common Stock pursuant to the
provisions of this Article II and certain dividends and other distributions in
respect of Xxxxxxxx American Common Stock in accordance with Section 2.03(c),
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of RJR Common Stock that is not registered in the
transfer records of RJR, a certificate representing the appropriate number of
shares of Xxxxxxxx American Common Stock may be issued and the proper amount of
cash paid to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer, and the person requesting such
issuance and payment shall pay any transfer or other taxes required by reason of
the issuance of shares of Xxxxxxxx American Common Stock and payment of cash to
a person other than the registered holder of such Certificate or establish to
the satisfaction of Xxxxxxxx American that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender Merger Consideration as
contemplated by this Section 2.02 and certain dividends and other distributions
in respect of Xxxxxxxx American Common Stock in accordance
11
with Section 2.03(c). No interest shall be paid or accrue on any cash payable
upon surrender of any Certificate.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to Xxxxxxxx American Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of Xxxxxxxx American Common Stock
issuable upon surrender thereof. Subject to applicable Law, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificate representing whole shares of Xxxxxxxx American Common Stock issued
in exchange therefor, without interest, (i) promptly after the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Xxxxxxxx American Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Xxxxxxxx American Common
Stock.
(d) No Further Ownership Rights in RJR Common Stock. The Xxxxxxxx
American Common Stock issued and any cash paid upon the surrender for exchange
of Certificates in accordance with the terms of this Article II shall be deemed
to have been issued and paid in full satisfaction of all rights pertaining to
shares of RJR Common Stock formerly represented by such Certificates, subject,
however, to the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective Time that may
have been declared or made by RJR on such shares of RJR Common Stock in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time, and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of shares of RJR Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be canceled and exchanged as provided
in this Article II.
(e) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an
12
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 Surviving Corporation will cause the Exchange
Agent to deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of RJR Common Stock
formerly represented thereby and unpaid dividends and distributions on shares of
Xxxxxxxx American Common Stock deliverable in respect thereof pursuant to this
Agreement.
ARTICLE III
Representations and Warranties of RJR
RJR represents and warrants to B&W that as of the date of this
Agreement, except as set forth in the disclosure letter dated the date of this
Agreement (with specific reference to the particular Section or subsection of
this Agreement to which the information set forth in such disclosure letter
relates; provided, however, that any information set forth in one section of
such disclosure letter shall be deemed to apply to each other Section or
subsection thereof or hereof to which its relevance is readily apparent)
delivered by RJR to B&W prior to the execution of this Agreement (the "RJR
Disclosure Letter"):
SECTION 3.01. Organization, Standing and Power. Each of RJR and each
subsidiary (as defined in Section 9.03) of RJR (each, a "RJR Subsidiary") is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
and possesses all governmental franchises, licenses, permits and authorizations
(collectively, "Permits") and approvals necessary to enable it to own, lease or
otherwise hold its properties and assets and to conduct its businesses as
presently conducted, other than such Permits and approvals the lack of which,
individually or in the aggregate, has not had and is not reasonably likely to
have a RJR Material Adverse Effect (as defined in Section 9.03). RJR and each
RJR Subsidiary is duly qualified to do business in each jurisdiction where the
nature of its business or the
13
ownership or leasing of its properties makes such qualification necessary, other
than jurisdictions in which the failure to so qualify has not had and is not
reasonably likely to have a RJR Material Adverse Effect. RJR has made available
to B&W true and complete copies of the Restated Certificate of Incorporation of
RJR (the "RJR Charter") and the Amended and Restated By-Laws of RJR (the "RJR
By-Laws"), and the comparable charter and organizational documents of each RJR
Subsidiary, in each case as amended through the date of this Agreement.
SECTION 3.02. RJR Subsidiaries; Equity Interests. (a) Section 3.02 of
the RJR Disclosure Letter lists as of the date of this Agreement each RJR
Subsidiary and its jurisdiction of organization. All the outstanding shares of
capital stock of, or other equity, voting or ownership interests in, each RJR
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned by RJR, by a RJR Subsidiary or by RJR and another RJR Subsidiary, free and
clear of all pledges, claims, liens, charges, mortgages, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens").
(b) Except for the capital stock of, or other equity, voting or
ownership interests in, the RJR Subsidiaries, RJR does not own, directly or
indirectly, any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest in any person.
SECTION 3.03. Capital Structure. The authorized capital stock of RJR
consists of 290,000,000 shares of RJR Common Stock and 50,000,000 shares of
preferred stock, par value $0.01 per share (the "RJR Preferred Stock" and,
together with RJR Common Stock, the "RJR Capital Stock"), of which 2,000,000
shares are designated as Series A Junior Participating Preferred Stock (the
"Series A Preferred Stock"). At the close of business on October 24, 2003, (i)
84,630,925 shares of RJR Common Stock, excluding treasury shares (including
1,071,012 restricted shares that are subject to a right of repurchase by, or
forfeiture to, RJR ("RJR Restricted Shares")) were outstanding, none of which
were held by any RJR Subsidiary, (ii) 31,256,949 shares of RJR Common Stock were
held by RJR in its treasury, (iii) 2,544,479 shares of RJR Common Stock were
subject to outstanding RJR Stock Options, with a weighted average exercise price
of $29.23 per share, and 5,925,480 additional shares of RJR Common Stock were
14
reserved and available for issuance pursuant to RJR Stock Plans (as defined in
Section 6.04(d)) in accordance with the present terms of such plans, (iv)
2,000,000 shares of Series A Preferred Stock were reserved for issuance upon the
exercise of the rights (the "RJR Rights") issued pursuant to the Rights
Agreement dated as of May 17, 1999 (as amended from time to time prior to the
date of this Agreement, the "RJR Rights Agreement"), between RJR and The Bank of
New York, as Rights Agent, and (v) no shares of RJR Preferred Stock were issued
and outstanding or held by RJR in its treasury. Except as set forth above, at
the close of business on October 24, 2003, no shares of capital stock of, or
other equity, voting or ownership interests in, RJR were issued, reserved for
issuance or outstanding. Section 3.03(a) of the RJR Disclosure Letter sets forth
a true and complete list, as of the close of business on October 24, 2003, of
(a) all outstanding RJR Stock Options and all other rights, if any, to purchase
or receive RJR Common Stock under RJR Stock Plans or otherwise, the number of
shares of RJR Common Stock subject to each RJR Stock Option or other purchase
right, the grant dates and exercise prices and vesting schedule of each such RJR
Stock Option or other purchase right and the names of the holders, (b) all RJR
Restricted Shares, the date any repurchase or forfeiture right lapses for each
RJR Restricted Share, any repurchase price for any RJR Restricted Share and the
names of the holders thereof, (c) all outstanding RJR Cash Deferred Stock Units
(as defined in Section 6.04(d)), the grant dates and names of the holders
thereof, (d) all outstanding RJR Stock Deferred Stock Units (as defined in
Section 6.04(d)), the grant dates and the names of the holders thereof, (e) all
outstanding RJR SARs (as defined in Section 6.04(d)), the grant dates and base
values and vesting schedules of each such RJR SAR and the names and holders
thereof and (f) all outstanding RJR Director Deferrals (as defined in Section
6.04(d)), the dates of deferral and the names of the account holders thereof.
Other than the RJR Stock Options, the RJR Stock Deferred Stock Units and the RJR
Rights, there are no outstanding rights of any person to receive RJR Common
Stock, whether on a deferred basis or otherwise. Other than the RJR Cash
Deferred Stock Units, the RJR SARs, the RJR Stock Deferred Stock Units and the
RJR Director Deferrals, there are no outstanding stock appreciation rights
("SARs") or other outstanding rights (other than the RJR Rights) that are in any
way linked to the price of RJR Common Stock or the value of RJR or any part
thereof, whether or not granted in
15
tandem with a related RJR Stock Option. All outstanding shares of RJR Capital
Stock are, and all such shares that may be issued prior to the Effective Time
will be when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right, subscription right or any
similar right under any provision of the DGCL, the RJR Charter, the RJR By-Laws
or any Contract (as defined in Section 3.05(a)) to which RJR is a party or
otherwise bound. There are not any bonds, debentures, notes or other
indebtedness of RJR having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
holders of RJR Capital Stock may vote ("RJR Voting Debt"). Except as set forth
above, there are no options, warrants, rights, convertible or exchangeable
securities, other securities, "phantom" stock rights, SARs, stock-based
performance units, commitments, Contracts, arrangements or undertakings of any
kind to which RJR or any RJR Subsidiary is a party or by which any of them is
bound (x) obligating RJR or any RJR Subsidiary to issue, grant, deliver or sell,
or cause to be issued, granted, delivered or sold, additional shares of capital
stock of or other equity, voting or ownership interests in, or any security
convertible or exercisable for or exchangeable into any capital stock of or
other equity, voting or ownership interest in, RJR or of any RJR Subsidiary or
any RJR Voting Debt, (y) obligating RJR or any RJR Subsidiary to issue, grant,
sell, extend or enter into any such option, warrant, call, right, security,
unit, commitment, Contract, arrangement or undertaking or (z) that give any
person the right to receive any economic benefit or right similar to or derived
from the economic benefits and rights accruing to holders of the capital stock
of RJR or any RJR Subsidiary. There are not any outstanding contractual
obligations of RJR or any RJR Subsidiary to (i) repurchase, redeem or otherwise
acquire any shares of capital stock of, or other equity, voting or ownership
interests in, RJR or any RJR Subsidiary or (ii) vote or dispose of any shares of
capital stock of, or other equity, voting or ownership interest in, any of its
subsidiaries. RJR has made available to B&W a true and complete copy of the RJR
Rights Agreement, as amended through the date of this Agreement.
During the period from October 24, 2003, to the date of this Agreement,
there have been no issuances by RJR of any shares of capital stock of, or other
equity, voting
16
or ownership interests in, RJR other than issuances of shares of RJR Common
Stock (and associated RJR Rights) pursuant to the exercise of RJR Stock Options
outstanding on the date of this Agreement in accordance with their terms or
awards pursuant to RJR Stock Plans that are required by their terms as in effect
on the date of this Agreement. To the knowledge of RJR, there are no irrevocable
proxies and no voting agreements with respect to any shares of the capital stock
or other voting securities of RJR or any RJR Subsidiary.
SECTION 3.04. Authority; Execution and Delivery; Enforceability. (a)
Each of RJR and each RJR Subsidiary has all requisite corporate power and
authority to execute and deliver each Transaction Agreement to which it is or
will be a party, to perform its obligations hereunder and thereunder and to
consummate the Transactions, subject, in the case of the Merger, to receipt of
the RJR Stockholder Approval (as defined in Section 3.04(c)). The execution and
delivery by each of RJR and each RJR Subsidiary of each Transaction Agreement to
which it is or will be a party, the performance by it of its obligations
hereunder and thereunder and the consummation by RJR and each RJR Subsidiary of
the Transactions have been or will be duly authorized by all necessary corporate
action on the part of RJR and each RJR Subsidiary, subject, in the case of the
Merger, to receipt of the RJR Stockholder Approval. Each of RJR and each RJR
Subsidiary has duly executed and delivered (or will duly execute and deliver on
or prior to the Closing Date) each Transaction Agreement to which it is or will
be a party, and each Transaction Agreement to which it is or will be a party
constitutes (or will constitute on or prior to the Closing Date) its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.
(b) The Board of Directors of RJR (the "RJR Board"), at a meeting duly
called and held at which all directors were present, duly and unanimously
adopted resolutions (i) approving this Agreement and the other Transaction
Agreements, the Merger and the other Transactions, (ii) determining that the
terms of the Merger and the other Transactions are fair to and in the best
interests of RJR and its stockholders, (iii) recommending that RJR's
stockholders adopt this Agreement and (iv) declaring that this Agreement is
advisable, which resolutions have not been subsequently rescinded, modified
17
or withdrawn in any way except as permitted by Section 5.02(b). Such resolutions
are sufficient to render the provisions of Section 203 of the DGCL ("Section
203") inapplicable to B&W, Xxxxxxxx American, Sub and B&W Opco, this Agreement
and the other Transaction Agreements, the Merger and the other Transactions. To
RJR's knowledge, no other state takeover statute or similar statute or
regulation applies or purports to apply to RJR with respect to this Agreement
and the other Transaction Agreements, the Merger or any other Transaction.
(c) The only vote of holders of any class or series of RJR Capital
Stock necessary to approve and adopt this Agreement and the Merger is the
adoption of this Agreement by the holders of a majority of the outstanding
shares of RJR Common Stock (the "RJR Stockholder Approval"). The affirmative
vote of the holders of RJR Capital Stock, or any of them, is not necessary to
approve any Transaction Agreement other than this Agreement or consummate any
Transaction other than the Merger.
SECTION 3.05. No Conflicts; Consents.
(a) The execution and delivery by each of RJR and each RJR Subsidiary of each
Transaction Agreement to which it is or will be a party and the performance by
it of its obligations hereunder and thereunder do not, and the consummation of
the Merger and the other Transactions and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancelation or acceleration of any obligation or to loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of any
Lien upon any of the properties or assets of RJR or any RJR Subsidiary under,
any provision of (i) the RJR Charter, the RJR By-Laws or the comparable charter
or organizational documents of any RJR Subsidiary, (ii) any material contract,
commitment, obligation, lease, license, indenture, note, debenture, bond,
guarantee, agreement, permit, concession, franchise or other instrument (a
"Contract") to which RJR or any RJR Subsidiary is a party or by which any of
their respective properties or assets is bound or (iii) subject to the filings
and other matters referred to in Section 3.05(b), any judgment, order or decree
("Judgment") or statute, law, ordinance, rule or regulation ("Law") applicable
to RJR or
18
any RJR Subsidiary or their respective properties or assets, other than, in the
case of clauses (ii) and (iii) above, any such items that, individually or in
the aggregate, have not had and are not reasonably likely to have a RJR Material
Adverse Effect.
(b) No consent, approval, license, Permit, order or authorization
("Consent") of, or registration, declaration or filing with, or Permit from, any
domestic or foreign (whether national, federal, state, provincial, local or
otherwise) government or any court of competent jurisdiction, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign (a "Governmental Entity"), is required to be obtained or
made by or with respect to RJR or any RJR Subsidiary in connection with the
execution, delivery and performance by RJR or any RJR Subsidiary of any
Transaction Agreement to which it is a party or the consummation of the
Transactions, other than (i) compliance with and filings under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) any required approval of the Transactions by the European Commission
pursuant to Council Regulation No. 4064189 of the European Community, as amended
(the "EC Merger Regulation"), (iii) any required approvals or filings under the
antitrust laws of member states of the European Union, (iv) the filing with the
Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating
to the adoption of this Agreement by RJR's stockholders (as amended or
supplemented from time to time, the "Proxy Statement"), (B) a registration
statement on Form S-4 to be filed with the SEC by Xxxxxxxx American in
connection with the Share Issuance (as amended or supplemented from time to
time, the "Form S-4"), (C) a registration statement on Form 8-A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), in connection
with the Share Issuance (the "Form 8-A") and (D) such reports under Section 13
and Section 16 of the Exchange Act as may be required in connection with this
Agreement and the other Transaction Agreements, the Merger and the other
Transactions, (v) any filings required in connection with the Tax Rulings (as
defined in Section 6.13(a)), (vi) the filing of the Certificate of Merger with
the Secretary of State of the State of
Delaware and appropriate documents with
the relevant authorities of the other jurisdictions in which RJR is qualified to
do business, (vii) the filing of Articles of Merger with the Secretary of State
of the
19
States of North Carolina and New Jersey for the merger of RJR-T with B&W Opco
and appropriate documents with the relevant authorities of the other
jurisdictions in which RJR-T is qualified to do business, (viii) such filings
with and approvals of the NYSE as are required to permit the shares of Xxxxxxxx
American Common Stock that are to be issued in the Share Issuance to be listed
on the NYSE, (ix) such filings with and approvals of the Bureau of Alcohol,
Tobacco, Firearms and Explosives, state licensing authorities and state taxing
authorities as are required to consummate the Transactions, (x) compliance with
any such filings as may be required under applicable Environmental Law (as
defined in Section 9.03), (xi) such filings as may be required in connection
with the taxes described in Section 6.09 and (xii) such other items that the
failure of which to obtain or make, individually or in the aggregate, are not
reasonably likely to have a RJR Material Adverse Effect.
(c) RJR and the RJR Board have taken all action necessary to (i) render
the RJR Rights inapplicable to this Agreement, the other Transaction Agreements,
the Merger and the other Transactions and (ii) ensure that (A) neither B&W nor
any of its affiliates or associates is or will become an "Acquiring Person" (as
defined in the RJR Rights Agreement) by reason of or as a result of the
approval, execution, delivery or adoption of any Transaction Agreement or the
approval, adoption or consummation of the Merger or any other Transaction, (B)
none of a "Distribution Date", "Triggering Event", "Section 11(a)(ii) Event",
"Section 13 Event" or "Stock Acquisition Date" (in each case as defined in the
RJR Rights Agreement) shall occur by reason of or as a result of the approval,
execution, delivery or adoption of any Transaction Agreement or the approval,
adoption or consummation of the Merger or any other Transaction and (C) the RJR
Rights shall expire immediately prior to the Effective Time.
SECTION 3.06. SEC Documents; Undisclosed Liabilities. (a) RJR has filed
all reports, schedules, forms, statements and other documents required to be
filed with the SEC by RJR since January 1, 2003 (the documents referred to in
this Section 3.06(a) being referred to collectively as the "RJR SEC Documents").
(b) As of its respective date, each RJR SEC Document complied as to
form in all material respects with the requirements of the Exchange Act or the
Securities Act
20
of 1933, as amended (the "Securities Act"), as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such RJR SEC
Document, and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of RJR included in
RJR SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of RJR and its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods shown
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Each of the principal executive officer of RJR and the principal
financial officer of RJR (or each former principal executive officer of RJR and
each former principal financial officer of RJR, as applicable) has made all
certifications required by Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act of
2002 (the "Xxxxxxxx-Xxxxx Act") and the rules and regulations of the SEC
promulgated thereunder with respect to RJR SEC Documents. For purposes of the
preceding sentence, "principal executive officer" and "principal financial
officer" shall have the meanings given to such terms in the Xxxxxxxx-Xxxxx Act.
(c) Except as set forth in the RJR SEC Documents filed by RJR with the
SEC and publicly available prior to the date of this Agreement (the "Filed RJR
SEC Documents"), neither RJR nor any RJR Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise
and other than liabilities or obligations of any nature arising out of any
Action relating to the development, packaging, labeling, delivery, sale, resale,
distribution, marketing, promotion, use or consumption of, or exposure to,
tobacco products, including smoking and health-related and safety-related
claims) that are required by GAAP to be set forth on a consolidated balance
sheet of RJR and its consolidated subsidiaries or
21
in the notes thereto and that, individually or in the aggregate, has had or is
reasonably likely to have a RJR Material Adverse Effect.
(d) None of the RJR Subsidiaries is, or has at any time since January
1, 2002, been, subject to the reporting requirements of Sections 13(a) and 15(d)
of the Exchange Act.
SECTION 3.07. Disclosure Documents. (a) Each document required to be
filed by RJR or Xxxxxxxx American with the SEC or required to be distributed or
otherwise disseminated to RJR's stockholders in connection with the Merger and
the other Transactions, including the Proxy Statement and the Form S-4, and any
amendments or supplements thereto, when filed, distributed or disseminated, as
applicable, will comply as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act.
(b) (i) At the time the Proxy Statement or any amendment or supplement
thereto is first mailed to the stockholders of RJR, and at the time such
stockholders vote on adoption of this Agreement, the Proxy Statement, as amended
or supplemented, if applicable, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading and (ii) at the time
the Form S-4 or any amendment or supplement thereto becomes effective, the Form
S-4, as amended or supplemented, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except that no representation or warranty
is made by RJR in this Section 3.07 with respect to statements made or
incorporated by reference therein based on information supplied by B&W
specifically for inclusion or incorporation by reference in such documents.
SECTION 3.08. Absence of Certain Changes or Events. From December 31,
2002, until the date of this Agreement, (a) RJR has conducted its business in
the ordinary course consistent with past practice and (b) there has not been:
22
(i) a RJR Material Adverse Effect;
(ii) (A) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
capital stock of RJR or any RJR Subsidiaries other than dividends or
distributions by a direct or indirect wholly owned RJR Subsidiary to its parent
and regular quarterly cash dividends with respect to the RJR Common Stock as
described in the Filed RJR SEC Documents or (B) any purchase, redemption or
other acquisition for value by RJR or any RJR Subsidiary of any capital stock of
RJR or any RJR Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(iii) any split, combination or reclassification of any RJR Capital
Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of RJR
Capital Stock;
(iv) any amendment of any material term of any outstanding security of
RJR or any RJR Subsidiary;
(v) any incurrence, assumption or guarantee by RJR or any RJR
Subsidiary of any indebtedness for borrowed money in an aggregate principal
amount in excess of $10,000,000;
(vi) (1) except in the ordinary course of business consistent with past
practice (I) any granting by RJR or any RJR Subsidiary to any current or former
director, officer, employee or consultant of RJR or any RJR Subsidiary
(collectively, "RJR Personnel") of any bonus opportunity or any increase in
compensation or benefits or (II) any payment by RJR or any RJR Subsidiary to any
RJR Personnel of any bonus, in each case, except to the extent required under
any employment agreement in effect on December 31, 2002, and in accordance with
its terms as of such date, (2) any granting by RJR or any RJR Subsidiary to any
RJR Personnel of any severance or termination pay or the right to receive any
severance or termination pay or increases therein, except to the extent required
under any agreement in effect on December 31, 2002, (3) any entry by RJR or any
XXX
00
Xxxxxxxxxx into, or any amendment of, (I) any employment, deferred compensation,
severance, termination, employee benefit, loan, indemnification, stock
repurchase, consulting or similar agreement between RJR or any RJR Subsidiary,
on the one hand, and any RJR Personnel, on the other hand, or (II) any agreement
between RJR or any RJR Subsidiary, on the one hand, and any RJR Personnel, on
the other hand, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving RJR of the
nature contemplated by this Agreement (all such agreements under this clause
(3), including any such agreement which is entered into on or after the date of
this Agreement, collectively, "RJR Benefit Agreements"), (4) any amendment of
any incentive award (including RJR Stock Options, stock appreciation rights,
performance units, restricted stock, stock repurchase rights or other
equity-based or equity-related awards) or any removal or modification of any
restrictions in any such award or (5) any amendment to, or material modification
of, any RJR Stock Plan;
(vii) any change in financial reporting or accounting methods,
principles or practices by RJR or any RJR Subsidiary materially affecting
the consolidated assets, liabilities or results of operations of RJR,
except insofar as may have been required by a change in GAAP;
(viii) any material elections with respect to Taxes (as defined in
Section 3.09(g)) by RJR or any RJR Subsidiary or settlement or compromise
by RJR or any RJR Subsidiary of any material Tax liability or refund; or
(ix) any sale, lease (as lessor), license or other disposition of, or
the creation or existence of any Lien on, any properties or assets, except
in the ordinary course of business consistent with past practice.
SECTION 3.09. Taxes. (a) RJR and each RJR Subsidiary and any
consolidated, combined, affiliated or unitary group of which RJR or any RJR
Subsidiary is or has ever been a member (each, a "RJR Affiliated Group") has
timely filed, or has caused to be timely filed on its behalf, all Tax Returns
(as defined below) required to be
24
filed by it, and all such Tax Returns are true, complete and accurate, except to
the extent any failure to file or any inaccuracies in any filed Tax Returns,
individually or in the aggregate, have not had and are not reasonably likely to
have a RJR Material Adverse Effect. All Taxes shown to be due on such Tax
Returns, or otherwise owed by RJR, any RJR Subsidiary or any RJR Affiliated
Group, have been timely paid, except to the extent that any failure to pay,
individually or in the aggregate, has not had and is not reasonably likely to
have a RJR Material Adverse Effect.
(b) The most recent financial statements contained in the Filed RJR SEC
Documents reflect an adequate reserve for all Taxes payable by RJR and the RJR
Subsidiaries (in addition to any reserve for deferred Taxes to reflect timing
differences between book and Tax items) for all taxable periods and portions
thereof through the date of such financial statements, except to the extent any
failure to make such a reserve, individually or in the aggregate, has not had
and is not reasonably likely to have a RJR Material Adverse Effect. No
deficiency, audit examination, refund litigation, proposed adjustment or matter
in controversy with respect to any Taxes has been proposed, asserted or assessed
against RJR, any RJR Subsidiary or any RJR Affiliated Group, except to the
extent any such proposal, assertion or assessment, individually or in the
aggregate, has not had and is not reasonably likely to have a RJR Material
Adverse Effect. No requests for waivers of the time to assess any Taxes of RJR,
any RJR Subsidiary or any RJR Affiliated Group are pending, and there is no
effective agreement or other document extending, or having the effect of
extending, the period of assessment or collection of any Taxes of RJR, any RJR
Subsidiary or any RJR Affiliated Group, except to the extent any such deficiency
or request for waiver, individually or in the aggregate, has not had and is not
reasonably likely to have a RJR Material Adverse Effect.
(c) The Federal income Tax Returns of RJR and each RJR Subsidiary have
been examined by and settled with the United States Internal Revenue Service
("IRS"), or have closed by virtue of the expiration of the relevant statute of
limitations, for all years through 1982. All material assessments for Taxes due
and owing by RJR, any RJR Subsidiary or any RJR Affiliated Group with respect to
25
completed and settled examinations or any concluded litigation have been fully
paid.
(d) There are no material Liens for Taxes (other than for current Taxes
not yet due and payable) on the assets of RJR or any RJR Subsidiary. Neither RJR
nor any RJR Subsidiary is bound by any agreement with respect to Taxes.
(e) RJR and each RJR Subsidiary have complied with all applicable Laws
relating to the payment and withholding of Taxes (including withholding of Taxes
pursuant to Sections 1441, 1442, 3121 and 3402 of the Code and similar
provisions under any domestic or foreign (whether national, Federal, state,
provincial, local or otherwise)) and have, within the time and the manner
prescribed by Law, withheld from and paid over to the proper Governmental
Entities all amounts required to be so withheld and paid over under applicable
Laws.
(f) Neither RJR nor any RJR Subsidiary has taken or agreed to take any
action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely (i) to prevent the Asset Contribution and Assumption of
Liabilities, on the one hand, or the B&W Opco Stock Contribution and the Merger,
on the other hand, from qualifying as an exchange within the meaning of Section
351 of the Code or (ii) to prevent the SF Contribution from qualifying as an
exchange within the meaning of Section 351 of the Code and also as a
reorganization within the meaning of Section 368(a) of the Code.
(g) For purposes of this Agreement:
"Taxes" means all (i) domestic or foreign (whether national, Federal,
state, provincial, local or otherwise) taxes, assessments, duties or
similar charges of any kind whatsoever, including all corporate franchise,
income, sales, use, ad valorem, receipts, value added, profits, license,
withholding, payroll, employment, excise, property, net worth, capital
gains, transfer, stamp, documentary, payroll, alternative minimum,
recapture and other taxes, including any interest, fines, penalties and
additions imposed with respect to such amounts; (ii) liability for the
payment of any amounts of the type described in clause (i) as a result of
being a member of an affiliated, consolidated, combined, unitary or
26
aggregate group and (iii) liability for the payment of any amounts as a
result of an express or implied obligation to indemnify any other person
with respect to the payment of any amounts of the type described in clause
(i) or (ii).
"Tax Return" means all domestic or foreign (whether national, Federal,
state, provincial, local or otherwise) Tax returns, declarations,
statements, reports, schedules, forms and information returns and any
amended Tax return relating to Taxes.
SECTION 3.10. Absence of Changes in Benefit Plans. From December 31,
2002, through the date of this Agreement, there has not been (a) any
termination, adoption or amendment in any material respect or any agreement to
terminate, adopt or amend in any material respect, by RJR or any RJR Subsidiary
of any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock appreciation, restricted stock, stock repurchase rights, stock option,
"phantom stock", performance, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding and whether or not subject to the laws of the
United States) maintained or contributed to, or required to be maintained or
contributed to, by RJR, any RJR Subsidiary or any other person that, together
with RJR, is treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code or any other applicable Law (each, a "RJR Commonly Controlled
Entity"), in each case, providing benefits to any RJR Personnel (all such plans,
arrangements or understandings, including any such plan, arrangement or
understanding which is entered into or adopted on or after the date of this
Agreement, collectively, "RJR Benefit Plans") or (b) any material change in the
manner in which contributions to any RJR Pension Plans (as defined in Section
3.11(a)) are made or the basis on which such contributions are determined.
Neither RJR nor any RJR Subsidiary is a party to any RJR Benefit Agreement.
SECTION 3.11. ERISA Compliance; Excess Parachute Payments. (a) The RJR
Disclosure Letter contains a list of all "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) ("RJR Pension Plans"), "employee welfare benefit plans"
(as defined in
27
Section 3(1) of ERISA) ("RJR Welfare Plans") and all other RJR Benefit Plans
maintained or contributed to, or required to be maintained or contributed to, by
RJR or any RJR Subsidiary. Each RJR Benefit Plan has been administered in
compliance with its terms and applicable Law, except where the failure to be so
administered, individually or in the aggregate, has not had and is not
reasonably likely to have a RJR Material Adverse Effect. RJR has made available
to B&W true, complete and correct copies of (i) each RJR Benefit Plan and RJR
Benefit Agreement (or, in the case of any unwritten RJR Benefit Plan or RJR
Benefit Agreement, a description thereof), (ii) the most recent annual report on
Form 5500 filed with the IRS with respect to each RJR Benefit Plan for which
such annual report was required, (iii) the most recent summary plan description
for each RJR Benefit Plan for which such summary plan description is required,
(iv) the most recent actuarial valuation report for each RJR Benefit Plan for
which such actuarial valuation report was required or prepared and (v) each
trust agreement and group annuity contract relating to any RJR Benefit Plan.
(b) All RJR Pension Plans intended to be tax qualified are so qualified
and have been the subject of determination letters from the IRS or other
Governmental Entity with respect to all Tax Law changes through and including
the Economic Growth and Tax Relief Reconciliation Act of 2001 or have a
remaining period of time under applicable Law to amend such RJR Pension Plans to
comply with applicable Tax Law and to submit such amendment to the IRS for a
determination letter to the effect that such RJR Pension Plans are qualified and
exempt from United States Federal income Taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no determination letter has been revoked (nor, to
the knowledge of RJR, has revocation been threatened). No event has occurred
since the date of the most recent determination letter or application therefor
relating to any such RJR Pension Plan that would adversely affect the
qualification of such RJR Pension Plan or increase the costs relating thereto or
require security under Section 307 of ERISA, except for events that,
individually or in the aggregate, are not reasonably likely to have a RJR
Material Adverse Effect. All RJR Pension Plans required to have been approved by
any non-U.S. Governmental Entity have been so approved or timely submitted for
approval and no such approval has been revoked (nor, to the knowledge of RJR,
has revocation been
28
threatened). No event has occurred since the date of the most recent approval or
application therefor relating to any such RJR Pension Plan that would affect any
such approval relating thereto or increase the costs relating thereto, except
for events that, individually or in the aggregate, are not reasonably likely to
have a RJR Material Adverse Effect. RJR has made available to B&W a true,
complete and correct copy of the most recent determination or approval letter
received with respect to each RJR Pension Plan, as well as a true, complete and
correct copy of each pending application for a determination or approval letter,
if any.
(c) No RJR Pension Plan, other than any RJR Pension Plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a "RJR
Multiemployer Pension Plan"), had, as of the respective last annual valuation
date for each such RJR Pension Plan, an "unfunded benefit liability" (as such
term is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions
that have been furnished to B&W. No RJR Pension Plan has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived, nor has any waiver of the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code been requested of
or granted by the IRS with respect to any RJR Pension Plan. With respect to each
RJR Benefit Plan, (i) there has not occurred any prohibited transaction in which
RJR, any RJR Subsidiary or any of its or their respective employees or, to the
knowledge of RJR, any trustee or other fiduciary or administrator of any RJR
Benefit Plan or trust created thereunder has engaged that is reasonably likely
to subject RJR, any RJR Subsidiary or any of its or their respective employees,
or, to the knowledge of RJR, any trustee or other fiduciary or administrator of
any RJR Benefit Plan or any trust created thereunder, to any Tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or the sanctions
imposed under Title I of ERISA or any other applicable Law of a magnitude that
would result in a RJR Material Adverse Effect and (ii) none of RJR, any RJR
Subsidiary or any of its or their respective employees, or, to the knowledge of
RJR, any trustee or other fiduciary of any RJR Benefit Plan or any trust created
thereunder, has engaged in any transaction or acted in a manner that is
reasonably likely to, or failed to act in a manner that is reasonably likely to,
subject RJR, any RJR Subsidiary, or,
29
to the knowledge of RJR, any trustee or other fiduciary of any RJR Benefit Plan
or any trust created thereunder, to any liability for breach of fiduciary duty
under ERISA or any other applicable Law of a magnitude that would result in a
RJR Material Adverse Effect. No RJR Benefit Plan or trust has been terminated,
nor has there been any "reportable event" (as that term is defined in Section
4043 of ERISA) with respect to any RJR Benefit Plan during the last five years.
Neither RJR nor any RJR Subsidiary has incurred a "complete withdrawal" or a
"partial withdrawal" (as such terms are defined in Sections 4203 and 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and 4205
with respect to any RJR Multiemployer Pension Plan.
(d) (i) No RJR Welfare Plan is unfunded, funded through a "welfare
benefits fund" (as such term is defined in Section 419(e) of the Code) or
self-insured, except for the provision of severance and vacation benefits; (ii)
There are no understandings, agreements or undertakings, written or oral, that
are reasonably likely to prevent any RJR Welfare Plan (including any such plan
covering retirees or other former employees) from being amended or terminated
without a RJR Material Adverse Effect on or at any time after the Effective Time
(except for ordinary administrative expenses); and (iii) No RJR Welfare Plan
provides benefits after termination of employment, except where the cost thereof
is borne entirely by the former employee (or his eligible dependents or
beneficiaries) or as required by Section 4980B(f) of the Code.
(e) Except with respect to the individuals set forth in Section 3.11(e)
of the RJR Disclosure Letter (the "Primary RJR Executives"), no amount that
could be received (whether in cash or property or the vesting of property) as a
result of the Merger or any other Transaction by any RJR Personnel who is a
"disqualified individual" (as defined in Treas. Reg. Section 1.280G-1) under any
RJR Benefit Plan, RJR Benefit Agreement or other compensation arrangement is
reasonably likely to be characterized as an "excess parachute payment" (as
defined in Section 280G(b)(1) of the Code) and no such disqualified individual
is entitled to receive any additional payment (e.g., any Tax gross-up or other
payment) from RJR, the Surviving Corporation, Xxxxxxxx American or any other
person in the event that the
30
excise Tax required by Section 4999(a) of the Code is imposed on such
disqualified individual.
(f) The execution and delivery by RJR and each RJR Subsidiary of each
Transaction Agreement to which it is a party do not, and the consummation of the
Merger and the other Transactions and compliance with the terms hereof and
thereof will not (either alone or in combination with any other event) (i)
entitle any RJR Personnel to any additional compensation, severance or other
benefits, (ii) accelerate the time of payment or vesting or trigger any payment
or funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any RJR Benefit Plan or RJR Benefit Agreement or (iii) result in
any breach or violation of, or a default (with or without notice or lapse of
time or both) under, any RJR Benefit Plan or RJR Benefit Agreement.
(g) The deduction of any amount payable pursuant to the terms of the
RJR Benefit Plans or RJR Benefit Agreements will not be subject to disallowance
under Section 162(m) of the Code or any other applicable Law.
(h) Since January 1, 2001, and through the date of this Agreement,
neither RJR nor any RJR Subsidiary has received notice of, and, to the knowledge
of RJR, there are no (i) pending termination proceedings or other suits, claims
(except claims for benefits payable in the normal operation of the RJR Benefit
Plans), actions or proceedings against or involving any RJR Benefit Plan or RJR
Benefit Agreement that, individually or in the aggregate, are reasonably likely
to have a RJR Material Adverse Effect or (ii) pending investigations (other than
routine inquiries) by any Governmental Entity with respect to any RJR Benefit
Plan or RJR Benefit Agreement. All contributions, premiums and benefit payments
under or in connection with the RJR Benefit Plans or RJR Benefit Agreements that
are required to have been made by RJR or any RJR Subsidiary have been timely
made, accrued or reserved for in all material respects.
(i) Neither RJR nor any RJR Subsidiary has any material liability or
obligations, including under or on account of a RJR Benefit Plan or RJR Benefit
Agreement, arising out of the hiring of persons to provide services to RJR or
any RJR Subsidiary and treating such persons as consultants or independent
contractors and not as employees
31
of RJR or any RJR Subsidiary, other than the obligations of RJR or any RJR
Subsidiary under any Contract, arrangement or understanding with any such
person.
SECTION 3.12. Litigation. There is no Action pending or, to the
knowledge of RJR, any Action threatened or investigation pending or threatened
against RJR or any RJR Subsidiary, except for Actions or investigations that (a)
arise out of or relate to the development, packaging, labeling, delivery, sale,
resale, distribution, marketing, promotion, use or consumption of, or exposure
to, tobacco products, including smoking and health-related and safety-related
claims or (b) individually or in the aggregate, have not had and are not
reasonably likely to have a RJR Material Adverse Effect. There is no Judgment
outstanding against RJR or any RJR Subsidiary that, individually or in the
aggregate, has had or is reasonably likely to have a RJR Material Adverse
Effect. Section 3.12 of the RJR Disclosure Letter sets forth a list of all
material litigation in which RJR or any RJR Subsidiary is currently a party
(other than litigation of the type described in clause (a) above).
SECTION 3.13. Compliance with Applicable Laws. RJR and the RJR
Subsidiaries are in compliance with all applicable Laws and Permits, including
Environmental Laws and those relating to occupational health and safety, except
for instances of noncompliance that, individually and in the aggregate, have not
had and are not reasonably likely to have a RJR Material Adverse Effect. Neither
RJR nor any RJR Subsidiary has received any written communication during the
past two years from a Governmental Entity that alleges that RJR or a RJR
Subsidiary has any liability under or is not in compliance with any applicable
Law or Permit, including Environmental Law, except for such liabilities and
instances of noncompliance that, individually or in the aggregate, have not had
and are not reasonably likely to have a RJR Material Adverse Effect. There
exists no Environmental Condition (as defined in Section 9.03) that,
individually or in the aggregate, has had or is reasonably likely to have a RJR
Material Adverse Effect. There are no capital expenditures in excess of
$10,000,000 required to be made for pollution control equipment or other
remedial measures pursuant to Environmental Laws that have not been reserved
for, or reflected on, the Filed RJR SEC Documents. This Section 3.13 does not
relate to matters with respect to
32
Taxes, which are the subject of Section 3.09, and employment and labor matters,
which are the subject of Sections 3.10, 3.11 and 3.16.
SECTION 3.14. Title to Properties. RJR and each of the RJR Subsidiaries
has good and marketable title to, or valid leasehold interests in, all its
properties and assets except for such as are no longer used in the conduct of
its businesses or as have been disposed of in the ordinary course of business
consistent with past practice and except for defects in title, easements,
restrictive covenants and similar encumbrances or impediments that, individually
or in the aggregate, have not had and are not reasonably likely to have a RJR
Material Adverse Effect. All such assets and properties, other than assets and
properties in which RJR or any of the RJR Subsidiaries has leasehold interests,
are free and clear of all Liens except for Liens that, individually or in the
aggregate, have not had and are not reasonably likely to have a RJR Material
Adverse Effect.
SECTION 3.15. Intellectual Property. (a) RJR and the RJR Subsidiaries
own, or are validly licensed or otherwise have the right to use, in each case
free and clear of any Liens, all Intellectual Property (as defined in Section
9.03) used or necessary to carry on its business as now being conducted except
for Intellectual Property the failure of which to own or have the right to use
is not reasonably likely to have a RJR Material Adverse Effect. The consummation
of the Transactions will not conflict with the rights of RJR or any RJR
Subsidiary in its Intellectual Property except for conflicts that, individually
or in the aggregate, are not reasonably likely to have a RJR Material Adverse
Effect.
(b) None of RJR or any RJR Subsidiary has infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
or other proprietary information of any other person, except for any such
infringement, misappropriation or other conflict that, individually or in the
aggregate, has not had and is not reasonably likely to have a RJR Material
Adverse Effect. During the two years preceding the date of this Agreement, (i)
none of RJR or any RJR Subsidiary has received any written material charge,
complaint, claim, demand or notice alleging any such infringement,
misappropriation or other conflict (including any claim that RJR or any RJR
Subsidiary must license or refrain from using any
33
Intellectual Property or other proprietary information of any other person), and
(ii) none of RJR or any RJR Subsidiary is party to or the subject of any pending
or, to the knowledge of RJR, threatened, Action before or by any Governmental
Entity with respect to any such infringement, misappropriation or conflict, in
each case except for such suits, claims, actions, investigations or proceedings
that have not had and are not reasonably likely to have a RJR Material Adverse
Effect. To RJR's knowledge, no other person has infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property owned by,
licensed to or otherwise used by RJR or any RJR Subsidiary, except for any such
infringement, misappropriation or other conflict that, individually or in the
aggregate, has not had and is not reasonably likely to have a RJR Material
Adverse Effect.
(c) Each of RJR and the RJR Subsidiaries has taken all reasonable and
necessary steps to protect their material Intellectual Property and rights
thereunder, and, to the knowledge of RJR, no such rights to material
Intellectual Property have been lost or are in jeopardy of being lost as a
result of any act or omission by RJR or any RJR Subsidiary.
SECTION 3.16. Labor and Employment Matters. There are no collective
bargaining or other labor union agreements to which RJR or any RJR Subsidiary is
a party or by which any of them is bound. To the knowledge of RJR, since January
1, 2001, neither RJR nor any RJR Subsidiary has encountered any labor union
organizing activity or had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, except for any such labor union organizing
activity or actual or threatened employee strikes, work stoppages, slowdowns or
lockouts that, individually or in the aggregate, have not had and are not
reasonably likely to have a RJR Material Adverse Effect. Except with respect to
instances that, individually or in the aggregate, are not reasonably likely to
have a RJR Material Adverse Effect, RJR and each RJR Subsidiary (a) is, and
since January 1, 2001, has been, in compliance with all applicable Laws relating
to employment and employment practices, occupational safety and health
standards, terms and conditions of employment and wages and hours, and (b) is
not, and since January 1, 2001, has not, engaged in any unfair labor practice.
During the two years preceding the date of this Agreement, RJR has not received
written
34
notice of any unfair labor practice charge against RJR or any RJR Subsidiary
which is pending.
SECTION 3.17. Contracts. (a) Section 3.17 of the RJR Disclosure Letter
sets forth a list as of the date of this Agreement of each of the following
types of Contracts to which RJR or any RJR Subsidiary is a party:
(i) any material Contract granting any person a right of first refusal,
first offer or other right to purchase any asset of RJR or any RJR
Subsidiary;
(ii) any material loan agreement, indenture, mortgage, promissory note,
pledge, hypothecation, deed of trust, conditional sale or title retention
agreement, security agreement, equipment financing obligation, guaranty or
other source of contingent liability;
(iii) any Contract for the purchase or other acquisition by RJR or any
RJR Subsidiary of goods or services or other assets that provides for
annual payments by RJR or any RJR Subsidiary of $20,000,000 or more, other
than in the ordinary course of business;
(iv) any Contract providing for the sale or other disposition after the
date of this Agreement by RJR or any RJR Subsidiary to another person of
goods or services for $20,000,000 or more, other than in the ordinary
course of business;
(v) any partnership, joint venture or other similar Contract or
arrangement;
(vi) any Contract relating to the acquisition or disposition of any
business (whether by merger, consolidation, sale of stock, sale of assets
or otherwise) or the making of any capital expenditures, in each case
after the date of this Agreement, in excess of $20,000,000;
(vii) any material license, assignment, transfer or similar Contract
pursuant to which any third party has rights to use or own any material
Intellectual Property of RJR;
35
(viii) any material Contract that would materially restrict the ability
of Xxxxxxxx American or any of its subsidiaries to compete in any line of
business in any geographic area;
(ix) any Contract with any RJR Personnel (other than RJR Benefit
Agreements or RJR Benefit Plans); or
(x) any Contract providing for indemnification of any person with
respect to material liabilities relating to any former (not current)
business of RJR, any RJR Subsidiary or any affiliate or predecessor person
thereof.
(b) None of RJR, any of the RJR Subsidiaries or, to the knowledge of
RJR, any other party thereto is in violation of or in default under (nor does
there exist any condition which upon the passage of time or the giving of notice
or both would cause such a violation of or default under) any Contract to which
it is a party or by which it or any of its properties or other assets is bound,
except for violations or defaults that, individually or in the aggregate, have
not had and are not reasonably likely to have a RJR Material Adverse Effect.
Neither RJR nor any of the RJR Subsidiaries has entered into any Contract with
any affiliate of RJR (other than any RJR Subsidiary) that is currently in effect
other than Contracts that are filed as exhibits to the Filed RJR SEC Documents.
Each Contract listed or described in Section 3.17 of the RJR Disclosure Letter
or required to be so listed or described is a valid and binding obligation of
RJR or the RJR Subsidiary party thereto.
SECTION 3.18. Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Xxxxxx Brothers
Inc. ("Xxxxxx") and X.X. Xxxxxx Xxxxx ("JPM"), the fees and expenses of which
will be paid by RJR, is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the Merger and the other
Transactions based upon arrangements made by or on behalf of RJR. RJR has
furnished to B&W a true and complete copies of all agreements between RJR and
Xxxxxx and between RJR and JPM relating to the Merger and the other
Transactions.
SECTION 3.19. Opinions of Financial Advisors. RJR has received the oral
opinion of each of Xxxxxx and JPM
36
as of the date of this Agreement (which oral advice will be confirmed in a
written opinion dated as of the date of this Agreement), to the effect that, as
of such date, and based upon and subject to the matters set forth therein, the
consideration to be received in the Merger by the holders of RJR Common Stock is
fair to such holders from a financial point of view.
SECTION 3.20. Insurance. Except to the extent that insurance coverage
with respect to tobacco product-related liabilities is unobtainable or is
obtainable only at a cost which RJR reasonably believes to be prohibitive or
unreasonable, RJR and each RJR Subsidiary have insurance with coverages of a
type and in a manner that RJR believes is prudent and reasonable in the
circumstances. No written notice of cancelation or threat thereof in writing
with respect to any such material policy has been received. All such material
policies are in full force and effect and neither RJR nor any RJR Subsidiary is
in default, whether as to payment of premium or otherwise, in any material
respect under the terms of any such policy, nor, to the knowledge of RJR, has
RJR or any RJR Subsidiary done or omitted to do any act or thing which could
render any such material insurance policy void or voidable.
SECTION 3.21. Absence of B&W Transaction Material Adverse Effect. RJR
represents, acknowledges and agrees that no state of fact or circumstance with
respect to the B&W Business (as defined in Section 9.03) existing as of the date
of this Agreement constitutes a B&W Transaction Material Adverse Effect (as
defined in Section 9.03).
ARTICLE IV
Representations and Warranties of B&W
B&W represents and warrants to RJR that as of the date of this
Agreement, except as set forth in the disclosure letter dated the date of this
Agreement (with specific reference to the particular Section or subsection of
this Agreement to which the information set forth in such disclosure letter
relates; provided, however, that any information set forth in one section of
such disclosure letter shall be deemed to apply to each other Section or
subsection thereof or hereof to which its relevance is
37
readily apparent) delivered by B&W to RJR prior to the execution of this
Agreement (the "B&W Disclosure Letter"); provided, however, for avoidance of
doubt, the parties hereto agree that the representations and warranties set
forth in this Article IV, except for Section 4.03, do not apply to any Excluded
Subsidiary (as defined in the B&W Opco Formation Agreement) or its business,
financial condition, properties, assets, liabilities or results of operations:
SECTION 4.01. Organization, Standing and Power. Each of B&W and each
subsidiary of B&W (each a "B&W Subsidiary", taking into account the proviso in
the definition of "subsidiary") is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has
full corporate power and authority and possesses all Permits and approvals
necessary to enable it to own, lease or otherwise hold its properties and assets
and to conduct its businesses as presently conducted, other than such Permits
and approvals the lack of which, individually or in the aggregate, has not had
and is not reasonably likely to have a B&W Material Adverse Effect (as defined
in Section 9.03). B&W and each B&W Subsidiary is duly qualified to do business
in each jurisdiction where the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, other than
jurisdictions in which the failure to so qualify has not had and is not
reasonably likely to have a B&W Material Adverse Effect. B&W has made available
to RJR true and complete copies of the charter and organizational documents of
each B&W Subsidiary, in each case as amended through the date of this Agreement.
SECTION 4.02. B&W Subsidiaries; Equity Interests. (a) Section 4.02 of
the B&W Disclosure Letter lists as of the date of this Agreement each B&W
Subsidiary and its jurisdiction of organization. All the outstanding shares of
capital stock of, or other equity, voting or ownership interests in, each B&W
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned by B&W, by a B&W Subsidiary or by B&W and another B&W Subsidiary, free and
clear of all Liens. None of such outstanding shares of capital stock of, or
other equity, voting or ownership interests in, any B&W Subsidiary has been
issued in violation of, and is not subject to, any preemptive, subscription or
similar rights under any
38
provision of applicable Law, its charter or constituent documents, any Contract
to which such B&W Subsidiary is subject, bound or a party or otherwise. There
are no outstanding warrants, options, rights, "phantom" stock rights, Contracts,
convertible or exchangeable securities or other commitments (other than this
Agreement) (i) pursuant to which B&W or any affiliate of B&W (a "B&W Company")
is or may become obligated to issue, sell, purchase, return or redeem any shares
of capital stock or other securities of a B&W Subsidiary or (ii) that give any
person the right to receive any economic benefits or rights similar to or
derived from the economic benefits or rights accruing to holders of shares of
capital stock of a B&W Subsidiary. There are no equity securities of a B&W
Subsidiary reserved for issuance for any purpose.
(b) Except for the capital stock of, or equity, voting or other
ownership interests in, the B&W Subsidiaries and the Excluded Subsidiaries (as
defined in the B&W Opco Formation Agreement), B&W does not, and will not after
giving effect to the Asset Contribution, own, directly or indirectly, any
capital stock, membership interest, partnership interest, joint venture interest
or equity, voting or other ownership interest in any person.
SECTION 4.03. The Contributed Assets. The Contributed Assets to be
transferred, conveyed or assigned to B&W Opco at the Closing will include all of
the properties, assets and rights used primarily, or held for use primarily, in
the operation or conduct of the B&W Business, other than the Excluded Assets (as
defined in the B&W Opco Formation Agreement).
SECTION 4.04. Authority; Execution and Delivery; Enforceability. Each
of B&W and each B&W Company has all requisite corporate power and authority to
execute and deliver each Transaction Agreement to which it is or will be a
party, to perform its obligations hereunder and thereunder and to consummate the
Transactions. The execution and delivery by each of B&W and each B&W Company of
each Transaction Agreement to which it is or will be a party, the performance by
it of its obligations hereunder and thereunder and the consummation by B&W and
each B&W Company of each of the Transactions to which it is or will be a party
have been or will be duly authorized by all necessary corporate action on the
part of B&W and such B&W Company, as the case may be. Each of B&W and each B&W
Company has duly executed and delivered (or will duly
39
execute and deliver on or prior to the Closing Date) each Transaction Agreement
to which it is or will be a party, and each Transaction Agreement to which it is
or will be a party constitutes (or will constitute on or prior to the Closing
Date) its legal, valid and binding obligation, enforceable against it in
accordance with its terms.
SECTION 4.05. No Conflicts; Consents. (a) The execution and delivery by
each of B&W and each B&W Company of each Transaction Agreement to which it is or
will be a party and the performance by it of its obligations hereunder and
thereunder do not, and the consummation of the Asset Contribution, the
Assumption of Liabilities, the B&W Opco Stock Contribution and the other
Transactions and compliance with the terms hereof and thereof will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Lien upon any of the Contributed
Assets under, any provision of (i) the B&W certificate of incorporation or the
B&W by-laws or the comparable charter or organizational documents of any other
B&W Company, (ii) any material Contract to which B&W or any B&W Company is a
party or by which any of their respective properties or assets is bound or (iii)
subject to the filings and other matters referred to in Section 4.05(b), any
Judgment or Law applicable to B&W, B&W Opco or any other B&W Company or their
respective properties or assets, other than, in the case of clauses (ii) and
(iii) above, any such items that, individually or in the aggregate, have not had
and are not reasonably likely to have a B&W Material Adverse Effect.
(b) No Consent of, or registration, declaration or filing with, or
Permit from, any Governmental Entity is required to be obtained or made by or
with respect to B&W or any B&W Subsidiary in connection with the execution,
delivery and performance by B&W or any B&W Company of any Transaction Agreement
to which it is a party or the consummation by it of the Transactions, other than
(i) compliance with and filings under the HSR Act, (ii) any required approval of
the Transactions by the European Commission pursuant to the EC Merger
Regulation, (iii) any required approvals or filings under the antitrust laws of
40
member states of the European Union, (iv) the filing with the SEC of (A) the
Form S-4, (B) the Form 8-A and (C) such reports under Section 13 and Section 16
of the Exchange Act as may be required in connection with this Agreement and the
other Transaction Agreements, the Merger and the other Transactions, (v) any
filings required in connection with the Tax Rulings, (vi) filing of the
Certificate of Merger with the Secretary of State of the State of
Delaware and
appropriate documents with the relevant authorities of the other jurisdictions
in which the B&W Subsidiaries are qualified to do business, (vii) such filings
with and approvals of the NYSE as are required to permit the shares of Xxxxxxxx
American Common Stock that are to be issued in the Share Issuance to be listed
on the NYSE, (viii) such filings with and approvals of the Bureau of Alcohol,
Tobacco, Firearms and Explosives, state licensing authorities and state taxing
authorities as are required to transfer Permits to B&W Opco or to otherwise
consummate the Transactions, (ix) compliance with any such filings as may be
required under applicable Environmental Law, (x) such filings as may be required
in connection with the taxes described in Section 6.09 and (xi) such other items
that the failure of which to obtain or make, individually or in the aggregate,
are not reasonably likely to have a B&W Material Adverse Effect.
SECTION 4.06. B&W Financial Statements; Undisclosed Liabilities. (a)
The B&W Disclosure Letter sets forth (i) the audited consolidated balance sheets
of B&W and its subsidiaries for each of the three fiscal years ended as of
December 31, 2002, and the related audited consolidated statements of income and
cash flows and, in each case, the notes thereto (if any) (collectively, the "B&W
Audited Historical Financial Statements"), (ii) the unaudited pro forma
consolidated balance sheet of B&W Opco and the B&W Subsidiaries as of December
31, 2002, giving pro forma effect to the Asset Contribution and Assumption of
Liabilities as if they had occurred on such date (the "B&W Opco 2002 Balance
Sheet"), (iii) the unaudited pro forma consolidated balance sheet of B&W Opco
and the B&W Subsidiaries as of September 30, 2003, giving pro forma effect to
the Asset Contribution and Assumption of Liabilities as if they had occurred on
such date (the "B&W Opco Interim 2003 Balance Sheet") and (iv) the unaudited pro
forma consolidated income statement of B&W Opco and the B&W Subsidiaries for
each of the years ended December 31, 2001 and 2002, and the nine month period
ended
41
September 30, 2003, giving pro forma effect to the Asset Contribution and
Assumption of Liabilities as if they had occurred on January 1 of the applicable
fiscal years or period (the "B&W Opco Income Statements" and, together with the
B&W Opco 2002 Balance Sheet and the B&W Opco Interim 2003 Balance Sheet, the
"B&W Opco Financial Statements"). The B&W Opco Financial Statements and the B&W
Audited Historical Financial Statements (x) have been prepared from the books
and records of B&W regularly maintained to prepare the financial statements of
B&W, (y) were prepared in accordance with GAAP (other than the absence of notes
thereto, if applicable) and the accounting methods and policies of B&W applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and (z) fairly present, subject, in the case of unaudited
statements to normal year-end adjustments and the absence of accompanying notes
to the unaudited statements, in all material respects the financial condition
and results of operations of (A) B&W and its subsidiaries or (B) the B&W
Business (other than Excluded Assets and Excluded Liabilities (as defined in the
B&W Opco Formation Agreement)), as the case may be, as of the dates and for the
periods indicated.
(b) The financial statements of B&W Opco and the B&W Subsidiaries
required to be included in the Form S-4 (the "B&W SEC Financial Statements") (i)
will be prepared from the books and records of B&W regularly maintained to
prepare the financial statements of B&W, (ii) will be prepared in accordance
with GAAP and the accounting methods and policies of B&W applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto), and (iii) will fairly present, subject to normal year-end adjustments,
in all material respects the financial condition, results of operations and cash
flows of the B&W Business (other than Excluded Assets and Excluded Liabilities)
as of the dates and for the periods indicated.
(c) Neither B&W nor any B&W Subsidiary is, or has at any time since
January 1, 2002, been, subject to the reporting requirements of Sections 13(a)
and 15(d) of the Exchange Act.
(d) Except as set forth on the B&W Opco Interim 2003 Balance Sheet,
neither B&W nor any B&W Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise and other than
42
liabilities or obligations of any nature arising out of any Action relating to
the development, packaging, labeling, delivery, sale, resale, distribution,
marketing, promotion, use or consumption of, or exposure to, tobacco products,
including smoking and health-related and safety-related claims) that will
constitute an Assumed Liability that are required by GAAP to be set forth on
such balance sheet or in the notes thereto and that, individually or in the
aggregate, has had or is reasonably likely to have a B&W Material Adverse
Effect.
SECTION 4.07. Information Supplied. None of the information supplied or
to be supplied by B&W for inclusion or incorporation by reference in (i) the
Proxy Statement or any amendment or supplement thereto will, at the date it is
first mailed to stockholders of RJR or at the time such stockholders vote on
adoption of this Agreement, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading or (ii) the Form S-4 or any amendment or
supplement thereto will, at the time it becomes effective, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4.08. Absence of Certain Changes or Events. From December 31,
2002, until the date of this Agreement, (a) B&W has conducted its business only
in the ordinary course consistent with past practice and (b) there has not been:
(i) a B&W Material Adverse Effect;
(ii) any incurrence, assumption or guarantee by B&W or any B&W
Subsidiary of any indebtedness for borrowed money in an aggregate
principal amount in excess of $10,000,000 or that would constitute an
Assumed Liability;
(iii) (A) except in the ordinary course of business consistent with
past practice (1) any granting by B&W or any B&W Subsidiary to any current
or former director, officer, employee or consultant primarily employed or
engaged in the business to be transferred to B&W Opco as a result of the
Asset
43
Contribution and Assumption of Liabilities (collectively "B&W Personnel") of any
bonus opportunity or any increase in compensation or benefits or (2) any payment
by B&W or any B&W Subsidiary to any B&W Personnel of any bonus, in each case
except to the extent required under employment agreements in effect as of
December 31, 2002, and in accordance with its terms as of such date, (B) any
granting by B&W or any B&W Subsidiary to any B&W Personnel of severance or
termination pay or the right to receive any severance or termination pay or
increases therein, except to the extent required under any agreement in effect
as of December 31, 2002, (C) any entry by B&W or any B&W Subsidiary into, or any
amendment of, (1) any employment, deferred compensation, severance, termination,
employee benefit, loan, indemnification, stock repurchase, consulting or similar
agreement between B&W or any B&W Subsidiary, on the one hand, and any B&W
Personnel, on the other hand, or (2) any agreement between B&W or any B&W
Subsidiary, on the one hand, and any B&W Personnel, on the other hand, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving B&W of the nature contemplated by
this Agreement (all such agreements under this clause (C) including any such
agreement which is entered into on or after the date of this Agreement,
collectively, "B&W Benefit Agreements"), (D) any amendment of any incentive
award (including performance units, restricted stock, stock repurchase rights or
other equity-based or equity-related awards) or any removal or modification of
any restrictions in any such award or (E) any amendment to, or modification of,
any plan, arrangement or material understanding providing B&W Personnel with the
awards described in clause (D);
(iv) any change in financial reporting or accounting methods, principles
or practices by B&W or any B&W Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of B&W and the B&W Subsidiaries,
except insofar as may have been required by a change in GAAP;
(v) any elections by B&W or any B&W Subsidiary with respect to Taxes of
the B&W Business (other than with respect to an Excluded Asset or Excluded
Liability) or settlement or compromise by B&W or any B&W Subsidiary of any
material Tax liability or refund of the B&W Business (other than with respect to
an Excluded Asset or Excluded
44
Liability), except for elections, settlements or compromise that is not
reasonably likely to have a B&W Material Adverse Effect; or
(vi) any sale, lease (as lessor), license or other disposition of,
or the creation or existence of any Lien on, any properties or assets,
except (A) in the ordinary course of business consistent with past
practice and (B) sales, leases, licenses, dispositions of and the creation
of Liens with respect to, any Excluded Assets.
SECTION 4.09 Taxes. (a) B&W and each B&W Subsidiary and any
consolidated, combined, affiliated or unitary group of which B&W or any B&W
Subsidiary is or has ever been a member (each, a "B&W Affiliated Group") has
timely filed, or has caused to be timely filed on its behalf, all Tax Returns
required to be filed by it, and all such Tax Returns are true, complete and
accurate, except to the extent any failure to file or any inaccuracies in any
filed Tax Returns, individually or in the aggregate, has not had and is not
reasonably likely to have a B&W Material Adverse Effect. All Taxes shown to be
due on such Tax Returns, or otherwise owed by B&W, any B&W Subsidiary or any B&W
Affiliated Group, have been timely paid, except to the extent that any failure
to pay, individually or in the aggregate, has not had and is not reasonably
likely to have a B&W Material Adverse Effect.
(b) The B&W Audited Historical Financial Statements reflect an
adequate reserve for all Taxes payable by B&W and the B&W Subsidiaries (in
addition to any reserve for deferred Taxes to reflect timing differences between
book and Tax items) for all taxable periods and portions thereof through the
date of such financial statements, except to the extent any failure to make such
a reserve, individually or in the aggregate, has not had and is not reasonably
likely to have a B&W Material Adverse Effect. No deficiency, audit examination,
refund litigation, proposed adjustment or matter in controversy with respect to
any Taxes has been proposed, asserted or assessed against B&W, any B&W
Subsidiary or any B&W Affiliated Group since January 1, 2001, except to the
extent any such proposal, assertion or assessment,
45
individually or in the aggregate, has not had and is not reasonably likely to
have a B&W Material Adverse Effect. No requests for waivers of the time to
assess any Taxes of B&W, any B&W Subsidiary or any B&W Affiliated Group are
pending, and there is no effective agreement or other document extending, or
having the effect of extending, the period of assessment or collection of any
Taxes of B&W, any B&W Subsidiary or any B&W Affiliated Group, except to the
extent any such deficiency or request for waiver, individually or in the
aggregate, has not had and is not reasonably likely to have a B&W Material
Adverse Effect.
(c) The Federal income Tax Returns of B&W and each B&W Subsidiary have
been examined by and settled with the IRS, or have closed by virtue of the
expiration of the relevant statute of limitations, for all years through 1995.
All material assessments for Taxes due and owing by B&W, any B&W Subsidiary or
any B&W Affiliated Group with respect to completed and settled examinations or
any concluded litigation have been fully paid, except to the extent any failure
to pay any such assessment for Taxes, individually or in the aggregate, has not
had and is not reasonably likely to have a B&W Material Adverse Effect.
(d) There are no material Liens for Taxes (other than for current Taxes
not yet due and payable) on the Contributed Assets.
(e) Neither B&W nor any B&W Subsidiary has taken or agreed to take any
action or knows of any fact, agreement, plan or other circumstance that is
reasonably likely (i) to prevent the Asset Contribution and Assumption of
Liabilities, on the one hand, or the B&W Opco Stock Contribution and the Merger,
on the other hand, from qualifying as an exchange within the meaning of Section
351 of the Code, or to prevent the Merger also from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (ii) to
prevent the SF Contribution from qualifying as an exchange within the meaning of
Section 351 of the Code and also as a reorganization within the meaning of
Section 368(a) of the Code.
(f) None of B&W, any B&W Subsidiary or any B&W Company has taken any
action, other than in the ordinary course of business, that would have the
effect of deferring any liability for Taxes for any B&W Subsidiary from any
taxable period ending on or before the Closing Date to any taxable period ending
thereafter, whether pursuant to
46
Section 481(a) of the Code or any similar provision of law or regulations or for
any other reason.
SECTION 4.10 Absence of Changes in Benefit Plans. From December 31,
2002, through the date of this Agreement, there has not been (a) any
termination, adoption or amendment in any material respect or any agreement to
terminate, adopt or amend in any material respect, by B&W or any B&W Subsidiary
of any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock appreciation, restricted stock, stock repurchase rights, stock option,
"phantom stock", performance, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding and whether or not subject to the laws of the
United States) maintained or contributed to, or required to be maintained or
contributed to, by B&W or any B&W Subsidiary, in each case, providing benefits
to any B&W Personnel (all such plans, arrangements or understandings, including
any such plan, arrangement or understanding which is entered into or adopted on
or after the date of this Agreement, collectively, "B&W Benefit Plans") or (b)
any material change in the manner in which contributions to any B&W Pension
Plans (as defined in Section 4.11(a)) are made or the basis on which such
contributions are determined. Neither B&W nor any B&W Subsidiary is a party to
any B&W Benefit Agreement.
SECTION 4.11 ERISA Compliance; Excess Parachute Payments. (a) The
B&W Disclosure Letter contains a list of all "employee pension benefit plans"
(as defined in Section 3(2) of ERISA) ("B&W Pension Plans"), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) ("B&W Welfare Plans") and
all other B&W Benefit Plans. Each B&W Benefit Plan has been administered in
compliance with its terms and applicable Law, except where the failure to be so
administered, individually or in the aggregate, has not had and is not
reasonably likely to have a B&W Material Adverse Effect. B&W has made available
to RJR true, complete and correct copies of (i) each B&W Benefit Plan and B&W
Benefit Agreement (or, in the case of any unwritten B&W Benefit Plan or B&W
Benefit Agreement, a description thereof), (ii) the most recent annual report on
Form 5500 filed with the IRS with respect to each B&W Benefit Plan for which
such annual report was required,
47
(iii) the most recent summary plan description for each B&W Benefit Plan for
which such summary plan description is required, (iv) the most recent actuarial
valuation report for each B&W Benefit Plan for which such actuarial valuation
report was required or prepared and (v) each trust agreement and group annuity
contract relating to any B&W Benefit Plan.
(b) All B&W Pension Plans intended to be tax qualified are so qualified
and have been the subject of determination letters from the IRS or other
Governmental Entity with respect to all Tax Law changes through and including
the Economic Growth and Tax Relief Reconciliation Act of 2001 or have a
remaining period of time under applicable Law to amend such B&W Pension Plans to
comply with applicable Tax Law and to submit such amendment to the IRS for a
determination letter to the effect that such B&W Pension Plans are qualified and
exempt from United States Federal income Taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no determination letter has been revoked (nor, to
the knowledge of B&W, has revocation been threatened). No event has occurred
since the date of the most recent determination letter or application therefor
relating to any such B&W Pension Plan that would adversely affect the
qualification of such B&W Pension Plan or increase the costs relating thereto or
require security under Section 307 of ERISA, except for events that,
individually or in the aggregate, are not reasonably likely to have a B&W
Material Adverse Effect. All B&W Pension Plans required to have been approved by
any non-U.S. Governmental Entity have been so approved or timely submitted for
approval and no such approval has been revoked (nor, to the knowledge of B&W,
has revocation been threatened). No event has occurred since the date of the
most recent approval or application therefor relating to any such B&W Pension
Plan that would affect any such approval relating thereto or increase the costs
relating thereto, except for events that, individually or in the aggregate, are
not reasonably likely to have a B&W Material Adverse Effect. B&W has made
available to RJR a true, complete and correct copy of the most recent
determination or approval letter received with respect to each B&W Pension Plan,
as well as a true, complete and correct copy of each pending application for a
determination or approval letter, if any.
48
(c) No B&W Pension Plan, other than any B&W Pension Plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a "B&W
Multiemployer Pension Plan"), had, as of the respective last annual valuation
date for each such B&W Pension Plan, an "unfunded benefit liability" (as such
term is defined in Section 4001(a)(18) of ERISA), based on actuarial assumptions
that have been furnished to RJR. No B&W Pension Plan has an "accumulated funding
deficiency" (as such term is defined in Section 302 of ERISA or Section 412 of
the Code), whether or not waived, nor has any waiver of the minimum funding
standards of Section 302 of ERISA or Section 412 of the Code been requested of
or granted by the IRS with respect to any B&W Pension Plan. With respect to each
B&W Benefit Plan, (i) there has not occurred any prohibited transaction in which
B&W, any B&W Subsidiary or any of its or their respective employees or, to the
knowledge of B&W, any trustee or other fiduciary or administrator of any B&W
Benefit Plan or trust created thereunder has engaged that is reasonably likely
to subject B&W, any B&W Subsidiary or any of its or their respective employees,
or, to the knowledge of B&W, any trustee or other fiduciary or administrator of
any B&W Benefit Plan or any trust created thereunder, to any Tax or penalty on
prohibited transactions imposed by Section 4975 of the Code or the sanctions
imposed under Title I of ERISA or any other applicable Law of a magnitude that
would result in a B&W Material Adverse Effect and (ii) none of B&W, any B&W
Subsidiary or any of its or their respective employees, or, to the knowledge of
B&W, any trustee or other fiduciary of any B&W Benefit Plan or any trust created
thereunder, has engaged in any transaction or acted in a manner that is
reasonably likely to, or failed to act in a manner that is reasonably likely to,
subject B&W, any B&W Subsidiary, or, to the knowledge of B&W, any trustee or
other fiduciary of any B&W Benefit Plan or any trust created thereunder, to any
liability for breach of fiduciary duty under ERISA or any other applicable Law
of a magnitude that would result in a B&W Material Adverse Effect. No B&W
Benefit Plan or trust has been terminated, nor has there been any "reportable
event" (as that term is defined in Section 4043 of ERISA) with respect to any
B&W Benefit Plan during the last five years. Neither B&W nor any B&W Subsidiary
has incurred a "complete withdrawal" or a "partial withdrawal" (as such terms
are defined in Sections 4203 and 4205, respectively, of ERISA) since the
effective date of such
49
Sections 4203 and 4205 with respect to any B&W Multiemployer Pension Plan.
(d) (i) No B&W Welfare Plan is unfunded, funded through a "welfare
benefits fund" (as such term is defined in Section 419(e) of the Code) or
self-insured, except for the provision of severance and vacation benefits; (ii)
There are no understandings, agreements or undertakings, written or oral, that
are reasonably likely to prevent any B&W Welfare Plan (including any such plan
covering retirees or other former employees) from being amended or terminated
without a B&W Material Adverse Effect on or at any time after the Effective Time
(except for ordinary administrative expenses); and (iii) No B&W Welfare Plan
provides benefits after termination of employment, except where the cost thereof
is borne entirely by the former employee (or his eligible dependents or
beneficiaries) or as required by Section 4980B(f) of the Code.
(e) No amount that could be received (whether in cash or property or the
vesting of property) as a result of the Merger or any other Transaction by any
B&W Personnel who is a "disqualified individual" (as defined in Treas. Reg.
Section 1.280G-1) under any B&W Benefit Plan, B&W Benefit Agreement or other
compensation arrangement is reasonably likely to be characterized as an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code)and no such
disqualified individual is entitled to receive any additional payment (e.g., any
Tax gross-up or other payment) from B&W, B&W Opco, Xxxxxxxx American or any
other person in the event that the excise Tax required by Section 4999(a) of the
Code is imposed on such disqualified individual.
(f) The execution and delivery by B&W, B&W Opco and each B&W Subsidiary of
each Transaction Agreement to which it is a party do not, and the consummation
of the Merger and the other Transactions and compliance with the terms hereof
and thereof will not (either alone or in combination with any other event) (i)
entitle any B&W Personnel to any additional compensation, severance or other
benefits, (ii) accelerate the time of payment or vesting or trigger any payment
or funding (through a grantor trust or otherwise) of compensation or benefits
under, increase the amount payable or trigger any other material obligation
pursuant to, any B&W Benefit Plan or B&W Benefit Agreement, (iii) result in any
breach or
50
violation of, or a default (with or without notice or lapse of time or
both) under, any B&W Benefit Plan or B&W Benefit Agreement or (iv) constitute a
severance of employment of any B&W Personnel under any severance or termination
benefit plan, program, policy, agreement or arrangement of B&W or any B&W
Subsidiary.
(g) Since January 1, 2001, and through the date of this Agreement, neither
B&W nor any B&W Subsidiary has received notice of, and, to the knowledge of B&W,
there are no (i) pending termination proceedings or other suits, claims (except
claims for benefits payable in the normal operation of the B&W Benefit Plans),
actions or proceedings against or involving any B&W Benefit Plan or B&W Benefit
Agreement that, individually or in the aggregate, are reasonably likely to have
a B&W Material Adverse Effect or (ii) pending investigations (other than routine
inquiries) by any Governmental Entity with respect to any B&W Benefit Plan or
B&W Benefit Agreement. All contributions, premiums and benefit payments under or
in connection with the B&W Benefit Plans or B&W Benefit Agreements that are
required to have been made by B&W or any B&W Subsidiary have been timely made,
accrued or reserved for in all material respects.
(h) Neither B&W nor any B&W Subsidiary has any material liability or
obligations that constitute Assumed Liabilities, including under or on account
of a B&W Benefit Plan or B&W Benefit Agreement, arising out of the hiring of
persons to provide services to B&W or any B&W Subsidiary and treating such
persons as consultants or independent contractors and not as employees of B&W or
any B&W Subsidiary, other than the obligations of B&W or any B&W Subsidiary
under any Contract, arrangement or understanding with any such person.
(i) There does not exist, nor do any circumstances exist that could
reasonably be expected to result in, any Employee Benefits Liability that could
reasonably be expected to result in a B&W Material Adverse Effect. "Employee
Benefits Liability" means any liability of any B&W Commonly Controlled Entity
under (i) Sections 302, 405 and 409 or Title IV of ERISA, (ii) Sections 412,
4971 and 4975 of the Code, (iii) Sections 601 et seq. and 701 et seq. of ERISA
and Section 4980B and Sections 9801 et seq. of the Code or (iv) any
corresponding or similar provision of any applicable Federal, state, local or
non-U.S. laws, rules or regulations. "B&W
51
Commonly Controlled Entity" means any person that, together with B&W, is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Code or any
other applicable Law.
SECTION 4.12 Litigation. There is no Action pending or, to the
knowledge of B&W, any Action threatened or investigation pending or threatened
against B&W or any B&W Subsidiary pursuant to which the plaintiff seeks damages
that are or would be Assumed Liabilities or which relate to Contributed Assets
or Assumed Liabilities, except for Actions or investigations that (a) arise out
of or relate to the development, packaging, labeling, delivery, sale, resale,
distribution, marketing, promotion, use or consumption of, or exposure to,
tobacco products, including smoking and health-related and safety-related claims
or (b) individually or in the aggregate, have not had and are not reasonably
likely to have a B&W Material Adverse Effect. There is no Judgment that
constitutes an Assumed Liability outstanding against B&W or any B&W Subsidiary
that, individually or in the aggregate, has had or is reasonably likely to have
a B&W Material Adverse Effect. Section 4.12 of the B&W Disclosure Letter sets
forth a list of all material litigation in which B&W or any B&W Subsidiary is
currently a party (other than litigation of the type described in clause (a)
above).
SECTION 4.13 Compliance with Applicable Laws. B&W and each of the
B&W Subsidiaries are in compliance with all applicable Laws and Permits,
including Environmental Laws and those relating to occupational health and
safety, except for instances of noncompliance that, individually and in the
aggregate, have not had and are not reasonably likely to have a B&W Material
Adverse Effect. Neither B&W nor any B&W Subsidiary has received any written
communication during the past two years from a Governmental Entity that alleges
that B&W or a B&W Subsidiary has liability under or is not in compliance with
any applicable Law or Permit, including Environmental Law, except for such
liabilities and instances of noncompliance that, individually or in the
aggregate, have not had and are not reasonably likely to have a B&W Material
Adverse Effect. There exists no Environmental Condition that, individually or in
the aggregate, has had or is reasonably likely to have a B&W Material Adverse
Effect. There are no capital expenditures in excess of $10,000,000 required to
be made for pollution control equipment or other remedial measures
52
pursuant to Environmental Laws at any of the Contributed Assets that have not
been reserved for, or reflected on, the B&W Opco Interim 2003 Balance Sheet.
This Section 4.13 does not relate to matters with respect to Taxes, which are
the subject of Section 4.09, and employment and labor matters, which are the
subject of Sections 4.10, 4.11 and 4.16.
SECTION 4.14 Title to Properties. B&W and each of the B&W
Subsidiaries has good and marketable title to, or valid leasehold interests in,
all the Contributed Assets, except for such as are no longer used in the conduct
of the business to be transferred to B&W Opco as a result of the Contribution of
Assets and Assumption of Liabilities or as have been disposed of in the ordinary
course of business consistent with past practice and except for defects in
title, easements, restrictive covenants and similar encumbrances or impediments
that, individually or in the aggregate, have not had and are not reasonably
likely to have a B&W Material Adverse Effect. All such Contributed Assets, other
than assets and properties in which B&W or any of the B&W Subsidiaries has
leasehold interests, are free and clear of all Liens, except for Liens that,
individually or in the aggregate, have not had and are not reasonably likely to
have a B&W Material Adverse Effect.
SECTION 4.15 Intellectual Property. (a) B&W and each of the B&W
Subsidiaries own, or are validly licensed or otherwise have the right to use, in
each case free and clear of any Liens, all Intellectual Property used or
necessary to carry on the business to be transferred to B&W Opco as a result of
the Asset Contribution and Assumption of Liabilities as it is now being
conducted, except for Intellectual Property the failure of which to own or have
the right to use is not reasonably likely to have a B&W Material Adverse Effect.
The consummation of the Transactions will not conflict with the rights of B&W or
any B&W Subsidiary in the Intellectual Property used or necessary to carry on
the business to be transferred to B&W Opco except for conflicts that,
individually or in the aggregate, are not reasonably likely to have a B&W
Material Adverse Effect.
(b) None of B&W or any B&W Subsidiary has infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property or other
proprietary information of any other person, except for any
53
such infringement, misappropriation or other conflict that, individually or in
the aggregate, has not had and is not reasonably likely to have a B&W Material
Adverse Effect. During the two years preceding the date of this Agreement, (i)
none of B&W or any B&W Subsidiary has received any written material charge,
complaint, claim, demand or notice alleging any such infringement,
misappropriation or other conflict (including any claim that B&W or any B&W
Subsidiary must license or refrain from using any Intellectual Property or other
proprietary information of any other person), and (ii) none of B&W or any B&W
Subsidiary is party to or the subject of any pending or, to the knowledge of
B&W, threatened, Action before or by any Governmental Entity with respect to any
such infringement, misappropriation or conflict, in each case except for such
suits, claims, actions, investigations or proceedings that have not had and are
not reasonably likely to have a B&W Material Adverse Effect. To B&W's knowledge,
no other person has infringed upon, misappropriated or otherwise come into
conflict with any Intellectual Property owned by, licensed to or otherwise used
by B&W or any B&W Subsidiary that constitutes a Contributed Asset, except for
any such infringement, misappropriation or other conflict that, individually or
in the aggregate, has not had and is not reasonably likely to have a B&W
Material Adverse Effect.
(c) B&W and the B&W Subsidiaries have taken all reasonable and
necessary steps to protect their material Intellectual Property that constitutes
Contributed Assets and rights thereunder, and, to the knowledge of B&W, no such
rights to material Intellectual Property that constitutes Contributed Assets
have been lost or are in jeopardy of being lost as a result of any act or
omission by B&W or any B&W Subsidiary.
SECTION 4.16 Labor and Employment Matters. There are no collective
bargaining or other labor union agreements to which B&W or any B&W Subsidiary is
a party or by which any of them is bound. To the knowledge of B&W, since January
1, 2001, neither B&W nor any B&W Subsidiary has encountered any labor union
organizing activity or had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts, except for any such labor union organizing
activity or actual or threatened employee strikes, work stoppages, slowdowns or
lockouts that, individually or in the aggregate, have not had and are not
reasonably likely to have a B&W Material Adverse
54
Effect. Except with respect to instances that, individually or in the aggregate,
are not reasonably likely to have a B&W Material Adverse Effect B&W (a) is, and
since January 1, 2001, has been, in compliance with all applicable Laws relating
to employment and employment practices, occupational safety and health
standards, terms and conditions of employment and wages and hours, and (b) is
not, and since January 1, 2001, has not, engaged in any unfair labor practice.
During the two years preceding the date of this Agreement, B&W has not received
written notice of any unfair labor practice charge against B&W or any B&W
Subsidiary which is pending.
SECTION 4.17 Contracts. (a) Section 4.17 of the B&W Disclosure
Letter sets forth a list as of the date of this Agreement of each of the
following types of Contracts relating to the B&W Business (except to the extent
such Contracts relate solely to Excluded Assets or Excluded Liabilities):
(i) any material Contract granting any person a right of first
refusal, first offer or other right to purchase any Contributed Asset;
(ii) any material loan agreement, indenture, mortgage, promissory
note, pledge, hypothecation, deed of trust, conditional sale or title
retention agreement, security agreement, equipment financing obligation,
guaranty or other source of contingent liability;
(iii) any Contract for the purchase or other acquisition by B&W or
any B&W Subsidiary of goods or services or other assets that provides for
annual payments by B&W or any B&W Subsidiary of $20,000,000 or more, other
than in the ordinary course of business;
(iv) any Contract providing for the sale or other disposition after
the date of this Agreement by B&W or any B&W Subsidiary to another person
of goods or services for $20,000,000 or more, other than in the ordinary
course of business;
(v) any partnership, joint venture or other similar Contract or
arrangement;
55
(vi) any Contract relating to the acquisition or disposition
of any business (whether by merger, consolidation, sale of stock, sale
of assets or otherwise) or the making of any capital expenditures, in
each case after the date of this Agreement, in excess of $20,000,000;
(vii) any material license, assignment, transfer or similar
Contract pursuant to which any third party has rights to use or own any
material Intellectual Property of B&W;
(viii) any material Contract that would materially restrict
the ability of Xxxxxxxx American or any of its subsidiaries to compete
in any line of business in any geographic area;
(ix) any Contract with (A) B&W or any affiliate of B&W (other
than B&W or a B&W Subsidiary) or (B) any B&W Personnel (other than B&W
Benefit Agreements or B&W Benefit Plans); or
(x) any Contract providing for indemnification of any person
with respect to material liabilities relating to any former (not
current) business of B&W, any B&W Subsidiary or any affiliate or
predecessor person thereof.
(b) None of B&W, any of the B&W Subsidiaries or, to the
knowledge of B&W, any other party thereto is in violation of or in default under
(nor does there exist any condition that, upon the passage of time or the giving
of notice or both, would cause such a violation of or default under) any
Contract that constitutes a Contributed Asset, except for violations or defaults
that, individually or in the aggregate, have not had and are not reasonably
likely to have a B&W Material Adverse Effect. Each Contract listed or described
in Section 4.17 of the B&W Disclosure Letter or required to be so listed or
described is a valid and binding obligation of B&W or the B&W Subsidiary party
thereto.
SECTION 4.18. Brokers; Schedule of Fees and Expenses. No
broker, investment banker, financial advisor or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the Merger and the other Transactions based upon arrangements
made by or on behalf of B&W; provided,
56
however, that an affiliate of B&W (other than a B&W Subsidiary) has engaged, and
will pay the fees and expenses of, Xxxxxxx, Xxxxx & Co. in connection with the
Transactions.
SECTION 4.19. Insurance. Except to the extent that insurance
coverage with respect to tobacco product-related liabilities is unobtainable or
is obtainable only at a cost which B&W reasonably believes to be prohibitive or
unreasonable, B&W and each B&W Subsidiary have insurance with coverage of a type
and in a manner that B&W believes is prudent and reasonable in the
circumstances. No written notice of cancelation or threat thereof in writing
with respect to any such material policy has been received. All such material
policies are in full force and effect and neither B&W nor any B&W Subsidiary is
in default, whether as to payment of premium or otherwise, in any material
respect under the terms of any such policy, nor, to the knowledge of B&W, has
B&W or any B&W Subsidiary done or omitted to do any act or thing which could
render any such material insurance policy void or voidable.
SECTION 4.20. Absence of RJR Transaction Material Adverse
Effect. B&W represents, acknowledges and agrees that no state of fact or
circumstance with respect to the RJR and the RJR Subsidiaries existing as of the
date of this Agreement constitutes a RJR Transaction Material Adverse Effect.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Conduct of Business by
RJR. Except for matters set forth in the RJR Disclosure Letter or otherwise
expressly permitted by the Transaction Agreements, from the date of this
Agreement to the Effective Time, RJR shall, and shall cause each RJR Subsidiary
to, use its reasonable best efforts to conduct its business in the usual,
regular and ordinary course consistent with past practice and, to the extent
consistent therewith, use its reasonable best efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and keep its relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings
57
with them. In addition, and without limiting the generality of the foregoing,
except for matters set forth in the RJR Disclosure Letter or otherwise expressly
permitted by the Transaction Agreements, from the date of this Agreement to the
Effective Time, RJR shall not, and shall not permit any RJR Subsidiary to, do
any of the following:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect
of, any of its capital stock, other than (1) dividends and
distributions by a direct or indirect wholly owned subsidiary of RJR to
its parent and (2) regular quarterly cash dividends with respect to RJR
Common Stock, not in excess of $0.95 per share, with usual declaration,
record and payment dates and in accordance with RJR's past dividend
policy, (B) split, combine, subdivide or reclassify any of its capital
stock or issue, propose or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (C) purchase, redeem or otherwise acquire for
value any shares of RJR Capital Stock or capital stock of any RJR
Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities (provided that
RJR may repurchase shares of RJR Common Stock on or prior to the day
that is two NYSE trading days prior to the Closing Date in an aggregate
amount not to exceed (A) the number of shares of RJR Common Stock
issued pursuant to RJR Stock Options outstanding on the date of this
Agreement and in accordance with their present terms between the date
of this Agreement and the day that is three NYSE trading days prior to
the Closing Date less (B) the number of shares of RJR Common Stock that
were automatically surrendered to RJR to offset mandatory withholding
tax as a result of option exercises in such period);
(ii) issue, deliver, sell or grant (or become obligated to
issue, deliver, sell or grant) (A) any shares of its capital stock, (B)
any RJR Voting Debt or other equity, voting or other ownership
interests in RJR or any RJR Subsidiary, (C) any securities convertible
into or exchangeable for, or any options, warrants or rights to
acquire, any such shares, RJR Voting Debt, equity, voting or other
ownership
58
interests or convertible or exchangeable securities, (D) any "phantom"
stock, "phantom" stock rights, SARs or stock-based performance units or
(E) any options, warrants, rights, securities, units, commitments,
Contracts, arrangements or undertakings of any kind that give any
person the right to receive any economic benefit or rights similar to
or derived from the economic benefits and rights accruing to holders of
capital stock of RJR or any RJR Subsidiary, in each case other than (1)
the issuance of RJR Common Stock (and associated RJR Rights) upon the
exercise of RJR Stock Options outstanding on the date of this Agreement
and in accordance with their present terms, (2) the issuance of
additional shares of restricted stock (and associated RJR Rights) or,
with respect to directors of the RJR Board, unrestricted stock (and
associated RJR Rights) pursuant to RJR Stock Plans, in accordance with
their present terms, in the ordinary course of business consistent with
past practice (provided that the vesting of such shares of restricted
stock shall not accelerate as a result of the execution and delivery of
this Agreement, the consummation of the Merger or any of the
Transactions) and (3) the issuance of RJR Capital Stock upon the
exercise of RJR Rights;
(iii) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof for a purchase price,
including assumed debt, during any twelve-month period in excess of
$50,000,000 in the aggregate or (B) any assets that are material,
individually or in the aggregate, to RJR and the RJR Subsidiaries,
taken as a whole, except purchases of inventory in the ordinary course
of business consistent with past practice;
(v) except as required to comply with applicable Law or any
Contract, RJR Benefit Plan or RJR Benefit Agreement in effect on the
date of this Agreement, (A) increase in any manner the compensation or
59
benefits of, or pay any bonus to, any RJR Personnel, except for
increases or bonuses in the ordinary course of business consistent with
past practice, (B) pay to any RJR Personnel any material benefit not
provided for under any Contract, RJR Benefit Plan or RJR Benefit
Agreement as in effect on the date of this Agreement other than the
payment of base compensation (inclusive of overtime, commissions,
incentive pay and the like) in the ordinary course of business
consistent with past practice, (C) except to the extent expressly
permitted under Section 5.01(a)(ii), grant any awards under any RJR
Benefit Plan (including the grant of stock options, stock appreciation
rights, performance units, restricted stock, stock repurchase rights or
other stock-based or stock-related awards or the removal or
modification of existing restrictions in any Contract, RJR Benefit Plan
or RJR Benefit Agreement or awards made thereunder), (D) take any
action to fund or in any other way secure the payment of compensation
or benefits under any Contract, RJR Benefit Plan or RJR Benefit
Agreement, except in the ordinary course of business consistent with
past practice, (E) take any action to accelerate the vesting or payment
of any compensation or benefit under any Contract, RJR Benefit Plan or
RJR Benefit Agreement, (F) adopt, enter into, amend or terminate any
RJR Benefit Plan or RJR Benefit Agreement, except in the ordinary
course of business consistent with past practice, or (G) make any
material determination under any RJR Benefit Plan or RJR Benefit
Agreement that is inconsistent with the ordinary course of business or
past practice;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of RJR and the RJR Subsidiaries,
except insofar as may have been required by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
any properties or assets, except (A) sales of inventory and excess or
obsolete assets in the ordinary course of business consistent with past
practice and (B) other sales of properties and assets during any twelve
month period with a fair market value not greater than $25,000,000 in
the aggregate;
60
(viii) (A) incur any indebtedness for borrowed money or assume
or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of RJR or any RJR Subsidiary, assume or guarantee any debt
securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except for (1) indebtedness in an aggregate principal
amount not to exceed $50,000,000 and (2) short-term borrowings incurred
in the ordinary course of business consistent with past practice or (B)
make any loans, advances or capital contributions to, or investments
in, any other person, other than (1) to or in RJR or any direct or
indirect wholly owned subsidiary of RJR, (2) extensions of trade credit
in the ordinary course of business consistent with past practice, (3)
in respect of travel expenses or similar advances to employees in the
ordinary course of business and (4) investments in non-wholly owned
subsidiaries of RJR during any twelve month period in an amount not to
exceed $75,000,000 in the aggregate;
(ix) operate its business other than in accordance with RJR's
existing business plan, including the implementation of scheduled cost
reductions and reduction-in-force measures;
(x) make or agree to make any new capital expenditure or
expenditures that in the aggregate are in excess of $75,000,000 in any
twelve month period;
(xi) make any material Tax election or settle or compromise
any material Tax liability or refund;
(xii) (A) pay, settle, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, settlement, discharge
or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the
date of this Agreement, of liabilities incurred in the ordinary course
of business or reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes
thereto) of XXX
00
included in the Filed RJR SEC Documents as of the date of this
Agreement or incurred since that date in the ordinary course of
business consistent with past practice, (B) cancel any material
indebtedness (individually or in the aggregate) or waive any claims or
rights of substantial value or (C) subject to Section 5.02, waive, fail
to enforce the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which RJR or any
RJR Subsidiary is a party;
(xiii) other than in the ordinary course of business
consistent with past practice, enter into or modify or otherwise amend
in any material respect any Contract that contains any provision that
materially restricts the ability of RJR or any RJR Subsidiary or which,
following the consummation of Merger, could restrict the ability of
Xxxxxxxx American or any of its subsidiaries or B&W or any of its
subsidiaries or any of their respective affiliates to compete in any
business or with any person or in any geographic area;
(xiv) enter into any material joint venture, partnership or
other similar arrangement; or
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Conduct of Business by B&W. Except for matters set forth
in the B&W Disclosure Letter or otherwise expressly permitted by the Transaction
Agreements, from the date of this Agreement to the Effective Time, B&W shall,
and shall cause each B&W Subsidiary to, use its reasonable best efforts to
conduct its business in the usual, regular and ordinary course consistent with
past practice and, to the extent consistent therewith, use its reasonable best
efforts to preserve intact its current business organization, keep available the
services of its current officers and employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them. In addition, and without limiting the generality of
the foregoing, except for matters set forth in the B&W Disclosure Letter or
otherwise expressly permitted by the Transaction Agreements, from the date of
this Agreement to the Effective Time, B&W shall not permit any B&W Subsidiary to
do any of the following:
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(i) issue, deliver, sell or grant (or become obligated to
issue, sell, deliver or grant) (A) any shares of capital stock of a B&W
Subsidiary, (B) any equity, voting or other ownership interests in a
B&W Subsidiary, (C) any securities convertible into or exchangeable
for, or any options, warrants or rights to acquire, any such shares,
equity, voting or other ownership interests or convertible or
exchangeable securities, (D) any "phantom" stock, "phantom" stock
rights, SARs or stock-based performance units relating to any B&W
Subsidiary or (E) any options, warrants, rights, securities, units,
commitments, Contracts, arrangements or undertakings of any kind that
give any person the right to receive any economic benefit or rights
similar to or derived from the economic benefits and rights accruing to
holders of capital stock of B&W or any B&W Subsidiary;
(ii) declare, set aside or pay any non-cash dividends on, or
make any other non-cash distributions (stock or property) in respect
of, any of its capital stock, other than capital stock of an Excluded
Subsidiary;
(iii) amend the certificate of incorporation, by-laws or other
comparable charter or organizational documents of any B&W Subsidiary;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof for a purchase price,
including assumed debt, during any twelve-month period in excess of
$50,000,000 in the aggregate or (B) any assets that are material,
individually or in the aggregate, to B&W and the B&W Subsidiaries,
taken as a whole, in each case if such acquisition of equity interests,
assets, business, corporation, partnership, joint venture, association
or other business organization or division would constitute a
Contributed Asset, except purchases of inventory in the ordinary course
of business consistent with past practice;
(v) except as required to comply with applicable Law or any
Contract, B&W Benefit Plan or B&W Benefit
63
Agreement in effect on the date of this Agreement, (A) increase in any
manner the compensation or benefits of, or pay any bonus to, any B&W
Personnel, except for increases or bonuses in the ordinary course of
business consistent with past practice, (B) pay to any B&W Personnel
any material benefit not provided for under any Contract, B&W Benefit
Plan or B&W Benefit Agreement in effect on the date of this Agreement
other than the payment of base compensation (inclusive of overtime,
commissions, incentive pay and the like) in the ordinary course of
business consistent with past practice, (C) take any action to fund or
in any other way secure the payment of compensation or benefits under
any Contract, B&W Benefit Plan or B&W Benefit Agreement, except in the
ordinary course of business consistent with past practice, (D) take any
action to accelerate the vesting or payment of any compensation or
benefits under any Contract, B&W Benefit Plan or B&W Benefit Agreement,
(E) adopt, enter into, amend or terminate any B&W Benefit Plan or B&W
Benefit Agreement, except in the ordinary course of business consistent
with past practice or (F) make any material determination under any B&W
Benefit Plan or B&W Benefit Agreement that is inconsistent with the
ordinary course of business or past practice;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of B&W and the B&W Subsidiaries,
except insofar as may have been required by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose of
or subject to any Lien any properties or assets used or held for use in
the operation or conduct of the B&W Business, except (A) sales of
inventory and excess or obsolete assets in the ordinary course of
business consistent with past practice (B) sales of properties and
assets during any twelve month period with a fair market value not
greater than $10,000,000 in the aggregate and (C) sales, leases,
licenses, dispositions and creations of Liens with respect to Excluded
Assets;
(viii) (A) incur any indebtedness for borrowed money or assume
or guarantee any such indebtedness of another person, issue or sell any
debt securities or
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warrants or other rights to acquire any debt securities of B&W or any
B&W Subsidiary, assume or guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except
for (1) short-term borrowings incurred in the ordinary course of
business consistent with past practice or (2) indebtedness or
securities that do not constitute Assumed Liabilities or (B) make any
loans, advances or capital contributions to, or investments in, any
other person, if such loan, advance, capital contribution or investment
constitutes a Contributed Asset, other than (1) to or in B&W or any B&W
Subsidiary, (2) extensions of trade credit in the ordinary course of
business consistent with past practice and (3) in respect of travel
expenses or similar advances to employees in the ordinary course of
business;
(ix) make or agree to make any new capital expenditure or
expenditures that in the aggregate are in excess of $55,000,000 in any
twelve month period;
(x) make any material Tax election or settle or compromise any
material Tax liability or refund, in each case with respect to the
Contributed Assets or the Assumed Liabilities;
(xi) (A) pay, settle, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, settlement, discharge
or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the
date of this Agreement, of liabilities incurred in the ordinary course
of business or reflected or reserved against in, or contemplated by,
the B&W Opco Financial Statements (or the notes thereto) or incurred
since the date of such statements in the ordinary course of business
consistent with past practice, (B) cancel any material indebtedness
(individually or in the aggregate) or waive any claims or rights of
substantial value or (C) subject to Section 5.03, waive, fail to
enforce the benefits of, or agree to modify in any manner, any
confidentiality, standstill
65
or similar agreement to which B&W or any B&W Subsidiary is a party;
(xii) other than in the ordinary course of business consistent
with past practice, enter into or modify or otherwise amend in any
material respect any Contract that contains any provision that
materially restricts the ability of B&W or any B&W Subsidiary or which,
following the consummation of the Merger, could restrict the ability of
Xxxxxxxx American or any of its subsidiaries or RJR or any of its
subsidiaries or any of their respective affiliates to compete in any
business or with any person or in any geographic area;
(xiii) enter into any material joint venture, partnership or
other similar arrangement;
(xiv) make any material changes to its practices relating to
the collection of accounts receivable, acquisition or disposition of
inventory or payment of accounts payable, other than in the ordinary
course of business consistent with past practice; or
(xv) authorize any of, or commit or agree to take any of, the
foregoing actions.
(c) Other Actions. RJR and B&W shall not, and shall not permit
any of their respective subsidiaries to, take any action that would, or that is
reasonably likely to, result in (i) any of the representations and warranties of
such party set forth in this Agreement that is qualified as to materiality or
Material Adverse Effect becoming untrue, (ii) any of such representations and
warranties that is not so qualified becoming untrue in any material respect or
(iii), except as otherwise permitted by Section 5.02 or 5.03, any condition to
the Merger set forth in Article VII not being satisfied.
(d) Advice of Changes. Each of RJR and B&W shall promptly
advise the other party orally and in writing to the extent it has knowledge that
(i) any representation or warranty made by it contained in any Transaction
Agreement is untrue or inaccurate in any material respect (without regard to any
qualification as to Material Adverse Effect), (ii) it has failed to comply with
or satisfy in any material respect any material obligation to be performed by it
under any Transaction Agreement and (iii) any change or event that has had or is
reasonably
66
likely to have a RJR Transaction Material Adverse Effect or B&W Transaction
Material Adverse Effect, as the case may be; provided, however, that (A) no
notification pursuant to this Section 5.01(d) shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under any
Transaction Agreement and (B) no breach of this Section 5.01(d) shall result in
the failure of either of the conditions set forth in Section 7.02(b) or 7.03(b).
SECTION 5.02. No Solicitation by RJR. (a) RJR shall not, nor
shall it authorize or permit any RJR Subsidiary to, nor shall it authorize or
permit any officer, director or employee of, or any investment banker, attorney,
accountant or other advisor or representative (collectively, "Representatives")
of, RJR or any RJR Subsidiary to, directly or indirectly, (i) solicit, initiate
or encourage the submission of, or take any other action to facilitate, any RJR
Takeover Proposal (as defined in Section 5.02(e)), (ii) enter into any agreement
with respect to any RJR Takeover Proposal (except a confidentiality agreement in
accordance with this Section 5.02(a)) or (iii) enter into, participate in or
continue any discussions or negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate in any way with, any RJR
Takeover Proposal; provided, however, that, prior to obtaining the RJR
Stockholder Approval, RJR and its Representatives may, in response to a bona
fide written RJR Takeover Proposal that the RJR Board determines in good faith
(after consultation with a financial advisor of nationally recognized reputation
and outside legal counsel) constitutes or is reasonably likely to result in a
Superior RJR Proposal (as defined in Section 5.02(e)), and which RJR Takeover
Proposal was unsolicited, was made after the date of this Agreement and did not
otherwise result from a breach of this Section 5.02, subject to compliance with
Section 5.02(c), (x) furnish information with respect to RJR and the RJR
Subsidiaries to the person making such RJR Takeover Proposal and its
Representatives pursuant to a customary confidentiality agreement not materially
less restrictive of the other party than the Confidentiality Agreement (as
defined in Section 6.02(a)) and (y) participate in discussions or negotiations
with the person making such RJR Takeover Proposal and its Representatives
regarding such RJR Takeover Proposal.
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Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative or
affiliate of RJR or any RJR Subsidiary, whether or not such person is purporting
to act on behalf of RJR or any RJR Subsidiary or otherwise, shall be deemed to
be a breach of this Section 5.02(a) by RJR. Upon execution of this Agreement,
RJR shall, and shall cause its Representatives to, (i) cease immediately all
discussions and negotiations regarding any proposal that constitutes, or may
reasonably be expected to lead to, a RJR Takeover Proposal and (ii) promptly
request each person, if any, that has executed a confidentiality agreement in
the last twelve months to return or destroy all information heretofore furnished
to such person by or on behalf of RJR or any RJR Subsidiary.
(b) Neither the RJR Board nor any committee thereof shall (i)
(A) withdraw (or modify in a manner adverse to B&W) the recommendation by the
RJR Board or any such committee of this Agreement and the Merger, (B) determine
that this Agreement or the Merger is no longer advisable, (C) recommend that the
stockholders of RJR reject this Agreement or the Merger, (D) recommend the
approval or adoption of any RJR Takeover Proposal or (E) resolve, agree or
propose publicly to take any such actions, in each case unless the RJR Board or
a committee thereof determines in good faith (after consultation with outside
legal counsel) that failure to take any such action would be inconsistent with
its fiduciary duties under applicable Law (each such action set forth in this
Section 5.02(b)(i) being referred to herein as a "RJR Adverse Recommendation
Change"), (ii) adopt or approve any RJR Takeover Proposal, or withdraw its
approval of this Agreement or the Merger, or resolve or agree to take any such
actions, (iii) without limiting Section 5.02(b)(i), propose publicly to adopt or
approve any RJR Takeover Proposal or propose publicly to withdraw its approval
of this Agreement or the Merger or resolve or agree to take any such actions or
(iv) cause or permit RJR or any RJR Subsidiary 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, a "RJR Alternative Acquisition
Agreement") constituting or related to, or which is intended to or is reasonably
likely to lead to, any RJR Takeover Proposal (other than a confidentiality
agreement referred to in
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Section 5.02(a)) or resolve or agree to take any such actions. Notwithstanding
the foregoing, prior to obtaining the RJR Stockholder Approval, the RJR Board
may, in response to a Superior RJR Proposal that was unsolicited and that did
not otherwise result from a breach of Section 5.02(a), cause RJR to terminate
this Agreement pursuant to Section 8.01(f) and concurrently approve, recommend
and enter into a binding RJR Alternative Acquisition Agreement containing the
terms of a Superior RJR Proposal; provided, however, that RJR shall not
terminate this Agreement pursuant to Section 8.01(f), and any purported
termination pursuant to Section 8.01(f) shall be void and of no force or effect,
unless RJR shall have complied with all provisions of this Section 5.02,
including the notification provisions in this Section 5.02, and with all
applicable requirements of Sections 6.07(b) (including the payment of the RJR
Termination Fee (as defined in Section 6.07(b)) prior to or simultaneously with
such termination); provided, further, however, that RJR may not exercise its
right to terminate this Agreement pursuant to Section 8.01(f), (x) until after
the fifth business day following B&W's receipt of written notice from RJR
advising B&W that the RJR Board has received a Superior RJR Proposal and that
such RJR Board will, subject to any action taken by B&W pursuant to this
sentence, cause RJR to accept such Superior RJR Proposal, specifying the terms
and conditions of the Superior RJR Proposal and identifying the person making
such Superior RJR Proposal (a "Notice of Superior RJR Proposal") (it being
understood and agreed that any amendment to the price or any other material term
of a Superior RJR Proposal shall require a new Notice of Superior RJR Proposal
and a new five business day period) and (y) unless after such fifth business day
such Superior RJR Proposal remains a Superior RJR Proposal and the RJR Board so
determines in accordance with the definition of "Superior RJR Proposal".
(c) In addition to the obligations of RJR set forth in
paragraphs (a) and (b) of this Section 5.02, RJR promptly shall advise B&W
orally and in writing of any RJR Takeover Proposal or any request for
information or inquiry that would reasonably be expected to lead to or
contemplates a RJR Takeover Proposal, the identity of the person making any such
RJR Takeover Proposal, request or inquiry and the material terms of any such RJR
Takeover Proposal request or inquiry. RJR shall (i) keep B&W fully informed of
the status, including any change to the
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material terms of, any such RJR Takeover Proposal, (ii) provide to B&W as soon
as practicable after receipt or delivery thereof with copies of all
correspondence and other written material sent or provided to RJR from any third
party in connection with any RJR Takeover Proposal or sent or provided by RJR to
any third party in connection with any RJR Takeover Proposal and (iii) to the
extent not previously provided, provide to B&W as soon as practicable copies of
all information provided to any Person in connection with a RJR Takeover
Proposal.
(d) Nothing contained in Section 5.02(a) shall prohibit RJR
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) and Rule 14d-9 promulgated under the Exchange Act or from making any
other disclosure to RJR's stockholders if, in the good faith judgment of the RJR
Board (after consultation with outside legal counsel), failure so to disclose
would be inconsistent with its obligations under applicable Law.
(e) For purposes of this Agreement:
"RJR Takeover Proposal" means any inquiry, proposal or offer
from any person relating to, or that would reasonably be expected to
lead to, any direct or indirect acquisition or purchase, in one
transaction or a series of transactions, of assets or businesses that
constitute 20% or more of the revenues, net income, EBITDA (earnings
before interest expense, taxes, depreciation and amortization) or the
assets of RJR and the RJR Subsidiaries, taken as a whole, or 20% or
more of any class of equity securities of RJR, any tender offer or
exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of
RJR, or any merger, consolidation, tender offer, exchange offer, stock
acquisition, asset acquisition, business combination, recapitalization,
liquidation, dissolution, joint venture, binding share exchange or
similar transaction involving RJR or any of the RJR Subsidiaries
pursuant to which any person or the stockholders of any person would
own 20% or more of any class of equity securities of RJR or of any
resulting parent company of RJR, other than the Transactions
contemplated by this Agreement and the other Transaction Agreements.
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"Superior RJR Proposal" means any bona fide binding written
offer (not solicited by or on behalf of RJR or any RJR Subsidiary or
any of their respective Representatives) made by a third party that if
consummated would result in such third party (or its stockholders)
owning, directly or indirectly, more than 42% of the shares of RJR
Common Stock then outstanding (or of the surviving entity in a merger
or the direct or indirect parent of the surviving entity in a merger)
or all or substantially all the assets of RJR and the RJR Subsidiaries,
taken as a whole, which the RJR Board determines in good faith (after
consultation with a financial advisor of nationally recognized
reputation and outside legal counsel) to be (i) more favorable to the
stockholders of RJR from a financial point of view than the Merger and
the other Transactions (taking into account all the terms and
conditions of such proposal and this Agreement (including any changes
to the financial terms of this Agreement proposed by B&W in response to
such offer or otherwise)) and (ii) reasonably capable of being
completed, taking into account all financial, legal, regulatory and
other aspects of such proposal.
SECTION 5.03. No Solicitation by B&W.
(a) B&W shall not, nor shall it authorize or permit any B&W Subsidiary
to, nor shall it authorize or permit any Representative of, B&W or any
B&W Subsidiary to, directly or indirectly, (i) solicit, initiate or
encourage the submission of, or take any action to facilitate, any B&W
Takeover Proposal (as defined in Section 5.03(d)), (ii) enter into any
agreement with respect to any B&W Takeover Proposal or (iii) enter
into, participate in or continue any discussions or negotiations
regarding, or furnish to any person any information with respect to, or
otherwise cooperate in any way with, any B&W Takeover Proposal;
provided, however, that prior to RJR obtaining the RJR Stockholder
Approval, B&W and its Representatives may, in response to a bona fide
written B&W Takeover Proposal that the Board of Directors of B&W (the
"B&W Board") determines in good faith (after consultation with a
financial advisor of nationally recognized reputation and outside legal
counsel) constitutes or is reasonably likely to result in, a Superior
B&W Proposal (as defined in Section 5.03(d)), and which B&W Takeover
Proposal was unsolicited, was made after the date of this Agreement and
did not otherwise result from a breach of this
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Section 5.03, subject to compliance with Section 5.03(c), (x) furnish
information with respect to B&W and the B&W Subsidiaries to the person
making such B&W Takeover Proposal and its Representatives pursuant to a
customary confidentiality agreement not materially less restrictive of
the other party than the Confidentiality Agreement and (y) participate
in discussions or negotiations with the person making such B&W Takeover
Proposal and its Representatives regarding such B&W Takeover Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative
or affiliate of B&W or any B&W Subsidiary, whether or not such person
is purporting to act on behalf of B&W or any B&W Subsidiary or
otherwise, shall be deemed to be a breach of this Section 5.03(a) by
B&W. Upon execution of this Agreement, B&W shall, and shall cause its
Representatives to, (i) cease immediately all discussions and
negotiations regarding any proposal that constitutes, or may reasonably
be expected to lead to, a B&W Takeover Proposal and (ii) promptly
request each person, if any, that has executed a confidentiality
agreement in the last twelve months to return or destroy all
information primarily relating to the B&W Business heretofore furnished
to such person by or on behalf of B&W or any B&W Subsidiary.
(b) Neither the B&W Board nor any committee thereof shall (i)
adopt or approve any B&W Takeover Proposal, or withdraw its approval of
this Agreement or the Transactions, or resolve or agree to take any
such actions, (ii) propose publicly to adopt or approve any B&W
Takeover Proposal or propose publicly to withdraw its approval of this
Agreement or the Transactions, or resolve or agree to take any such
actions, or (iii) cause or permit B&W or any B&W Subsidiary 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, a "B&W Alternative Acquisition Agreement") constituting or
related to, or which is intended to or is reasonably likely to lead to,
any B&W Takeover Proposal (other than a confidentiality agreement
referred to in Section 5.03(a)), or resolve or agree to take any such
actions. Notwithstanding the foregoing, prior to RJR obtaining the RJR
Stockholder Approval, B&W may, in response to a Superior B&W Proposal
(as defined in Section 5.03(d)) that was unsolicited and that did not
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otherwise result from a breach of Section 5.03(a), terminate this
Agreement pursuant to Section 8.01(g) and concurrently approve and
enter into a binding B&W Alternative Acquisition Agreement containing
the terms of a Superior B&W Proposal; provided, however, that B&W shall
not terminate this Agreement pursuant to Section 8.01(g), and any
purported termination pursuant to Section 8.01(g) shall be void and of
no force or effect, unless B&W shall have complied with all provisions
of this Section 5.03, including the notification provisions in this
Section 5.03, and with all applicable requirements of Sections 6.07(c)
(including the payment of the B&W Termination Fee (as defined in
Section 6.07(c)) prior to or simultaneously with such termination);
provided, further, however, that B&W shall not exercise its right to
terminate this Agreement pursuant to Section 8.01(g), (x) until after
the fifth business day following RJR's receipt of written notice from
B&W advising RJR that the B&W Board has received a Superior B&W
Proposal and that such B&W Board will, subject to any action taken by
RJR pursuant to this sentence, accept such Superior B&W Proposal,
specifying the terms and conditions of the Superior B&W Proposal and
identifying the person making such Superior B&W Proposal (a "Notice of
Superior B&W Proposal") (it being understood and agreed that any
amendment to the price or any other material term of a Superior B&W
Proposal shall require a new Notice of Superior B&W Proposal and a new
five business day period) and (y) unless after such fifth business day
such Superior B&W Proposal remains a Superior B&W Proposal and the B&W
Board so determines in accordance with the definition of "Superior B&W
Proposal".
(c) In addition to the obligations of B&W set forth in
paragraphs (a) and (b) of this Section 5.03, B&W promptly shall advise
RJR orally and in writing of any B&W Takeover Proposal or any request
for information or inquiry that would reasonably be expected to lead to
or contemplates a B&W Takeover Proposal, the identity of the person
making any such B&W Takeover Proposal, request or inquiry and the
material terms of any such B&W Takeover Proposal, request or inquiry.
B&W shall (i) keep RJR fully informed of the status, including any
change to the material terms of any such B&W Takeover Proposal, (ii)
provide to RJR as soon as practicable after receipt or delivery thereof
with copies of all correspondence and other written material sent or
provided to B&W from any third party in connection with any B&W
Takeover Proposal or
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sent or provided by B&W to any third party in connection with any B&W
Takeover Proposal and (iii) to the extent not previously provided,
provide to RJR as soon as practicable copies of all information
provided to any person in connection with a B&W Takeover Proposal.
(d) For purposes of this Agreement:
"B&W Takeover Proposal" means any inquiry, proposal or offer
from any person relating to, or that would reasonably be expected to
lead to, any direct or indirect acquisition or purchase, in one
transaction or a series of transactions, of assets or businesses that
constitute 20% or more of the revenues, net income, EBITDA (earnings
before interest expense, taxes, depreciation and amortization)
reflected on the B&W Opco Financial Statements for 2002 or of the
Contributed Assets, or 20% or more of any class of equity securities of
B&W, or any merger, consolidation, tender offer, exchange offer, stock
acquisition, asset acquisition, business combination, recapitalization,
liquidation, dissolution, joint venture, binding share exchange or
similar transaction involving B&W or any of the B&W Subsidiaries
pursuant to which any person or the stockholders of any person would
own 20% or more of any class of equity securities of B&W or of any
resulting parent company of B&W, other than the Transactions
contemplated by this Agreement and the other Transaction Agreements.
"Superior B&W Proposal" means any bona fide binding written
offer (not solicited by or on behalf of B&W or any B&W Subsidiary or
any of their respective Representatives) made by a third party that if
consummated would result in such third party (or its stockholders)
owning, directly or indirectly, a majority of the shares of B&W Common
Stock then outstanding (or of the surviving entity in a merger or the
direct or indirect parent of the surviving entity in a merger) or all
or substantially all the assets of B&W and the B&W Subsidiaries, taken
as a whole, which the B&W Board determines in good faith (after
consultation with a financial advisor of nationally recognized
reputation and outside legal counsel) to be (i) more favorable to B&W
or the stockholder of B&W from a financial point of view than the
Transactions (taking into account all the terms and conditions of such
proposal and this Agreement (including any
74
changes to the financial terms of this Agreement proposed by RJR in
response to such offer or otherwise)) and (ii) reasonably capable of
being completed, taking into account all financial, legal, regulatory
and other aspects of such proposal.
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the Proxy
Statement; Stockholders Meeting. (a) As soon as reasonably practicable following
the date of this Agreement, RJR and Xxxxxxxx American shall prepare and file
with the SEC (i) the Proxy Statement in preliminary form and (ii) the Form S-4,
in which the Proxy Statement will be included as a prospectus, and each of RJR
and B&W shall use its reasonable best efforts to respond as promptly as
reasonably practicable to any comments of the SEC with respect thereto. Each of
RJR and B&W shall use its reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as reasonably practicable after
such filing. RJR shall use its reasonable best efforts to cause the Proxy
Statement to be mailed to RJR's stockholders as promptly as reasonably
practicable after the Form S-4 is declared effective under the Securities Act.
RJR shall also take any action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be taken under any
applicable state securities laws in connection with the issuance of Xxxxxxxx
American Common Stock in the Merger, and RJR shall furnish all information
concerning RJR and the holders of RJR Common Stock and rights to acquire RJR
Common Stock pursuant to RJR Stock Plans as may be reasonably requested in
connection with any such action. The parties shall notify each other promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or the
Form S-4 or for additional information and shall supply each other with copies
of all correspondence between such party or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement, the Form S-4 or the Merger. Notwithstanding the foregoing, prior to
filing the Form S-4 (or any amendment or supplement thereto) or filing or
mailing the Proxy
75
Statement (or any amendment or supplement thereto) or responding to any comments
of the SEC with respect thereto, each of RJR and B&W, as the case may be, (i)
shall provide the other party with a reasonable opportunity to review and
comment on such document or response, (ii) shall include in such document or
response all comments reasonably proposed by such other party and (iii) shall
not file or mail such document or respond to the SEC prior to receiving such
other party's approval, which approval shall not be unreasonably withheld or
delayed.
(b) If, prior to the Effective Time, any event occurs with respect to
RJR or any RJR Subsidiary, or any change occurs with respect to other
information supplied by RJR for inclusion in the Form S-4 or the Proxy
Statement, which is required to be described in an amendment of, or a supplement
to, the Form S-4 or the Proxy Statement, RJR shall promptly notify B&W of such
event, and RJR and B&W shall cooperate in the prompt filing with the SEC of any
necessary amendment or supplement to the Form S-4 or the Proxy Statement and, as
required by Law, in disseminating the information contained in such amendment or
supplement to RJR's stockholders.
(c) If, prior to the Effective Time, any event occurs with respect to
the B&W Business (other than with respect to an Excluded Asset or an Excluded
Liability), or any change occurs with respect to other information supplied by
B&W for inclusion in the Form S-4 or the Proxy Statement, which is required to
be described in an amendment of, or a supplement to, the Form S-4 or the Proxy
Statement, B&W shall promptly notify RJR of such event, and B&W and RJR shall
cooperate in the prompt filing with the SEC of any necessary amendment or
supplement to the Form S-4 or the Proxy Statement and, as required by Law, in
disseminating the information contained in such amendment or supplement to RJR's
stockholders.
(d) RJR shall, as soon as reasonably practicable following
effectiveness of the Form S-4, duly call, give notice of, convene and hold a
meeting of its stockholders (the "RJR Stockholders Meeting") for the purpose of
seeking the RJR Stockholder Approval. RJR shall use its reasonable best efforts
to cause the Proxy Statement to be mailed to RJR's stockholders as soon as
reasonably practicable after the Form S-4 is declared effective under the
Securities Act. RJR shall, through the RJR Board, recommend to its stockholders
that they give RJR Stockholder Approval,
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except to the extent that the RJR Board shall have withdrawn or modified its
approval or recommendation of this Agreement or the Merger as permitted by
Section 5.02(b). Without limiting the generality of the foregoing, RJR agrees
that its obligations pursuant to the first sentence of this Section 6.01(d)
shall not be affected by (i) the commencement, public proposal, public
disclosure or communication to RJR of any RJR Takeover Proposal or (ii) the
withdrawal or modification by the RJR Board of its approval or recommendation of
this Agreement or the Merger.
SECTION 6.02. Access to Information; Confidentiality; Cooperation. (a)
Each of RJR and B&W shall, and shall cause each of its respective subsidiaries
to, afford to the other party and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, Contracts,
commitments, personnel and records, and, during such period, each of RJR and B&W
shall, and shall cause each of its respective subsidiaries to, furnish promptly
to the other party (i) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of Federal or state securities laws and (ii) all other information concerning
its business, properties and personnel as such other party may reasonably
request; provided, however, that such access (A) shall not unreasonably disrupt
the normal operations of any party, (B) shall be subject to any legal
restrictions on a party's ability to provide any information and (iii) shall not
result in a waiver of the attorney-client privilege or the protection of
attorney work-product. All information exchanged pursuant to this Section 6.02
shall be subject to the confidentiality agreement dated as of June 24, 2003,
between RJR and B&W U.S. Holdings, Inc. ("B&W U.S. Holdings"), the indirect
corporate parent of B&W (the "Confidentiality Agreement").
(b) From the date hereof through the Effective Time, (i) B&W shall
permit RJR and its officers and representatives to meet with the officers and
employees of B&W and the B&W Subsidiaries responsible for the preparation of the
B&W Audited Historical Financial Statements and the B&W Opco Financial
Statements, the internal controls of the B&W Business and the disclosure
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controls and procedures of the B&W Business and (ii) RJR shall permit B&W and
its officers and representatives to meet with the officers and employees of RJR
and the RJR Subsidiaries responsible for the preparation of the RJR SEC Filings,
the internal controls of RJR and the disclosure controls and procedures of the
RJR, in each case to discuss such matters as are reasonably necessary or
appropriate for Xxxxxxxx American and its officers to satisfy their obligations
under Sections 302 and 906 of the Xxxxxxxx-Xxxxx Act, and any rules and
regulations promulgated thereunder or relating thereto and each party will
require its officers and employees responsible for such matters to provide the
other party and its officers such information as may be reasonably requested in
complying with such obligations.
SECTION 6.03. Reasonable Best Efforts; Notification. (a) Upon the terms
and subject to the conditions set forth in this Agreement, each of the parties
shall use its reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other Transactions, including (i) the taking of all reasonable acts
necessary to cause the conditions to Closing to be satisfied as soon as
reasonably practicable, (ii) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or any other Transaction Agreement or the
consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, (v) the negotiation and execution of the Manufacturing
Contracts containing the terms and conditions set forth on Exhibit K and such
other terms and conditions reasonably satisfactory to Xxxxxxxx American, B&W and
RJR (it being the understanding of the parties that certain subsidiaries
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of Xxxxxxxx American and certain subsidiaries of BAT will enter into
Manufacturing Contracts to replace the existing manufacturing Contracts that B&W
has entered into with various BAT subsidiaries) and the negotiation and
execution of certain other supply arrangements related thereto (collectively,
the "Commercial Agreements") and (vi) the execution and delivery of any
additional instruments necessary to consummate the Transactions and to fully
carry out the purposes of the Transaction Agreements. In connection with and
without limiting the foregoing, B&W and RJR shall duly (x) file with the U.S.
Federal Trade Commission and the Antitrust Division of the Department of Justice
the notification and report form (the "HSR Filing") required under the HSR Act
with respect to the transactions contemplated by this Agreement as promptly as
practicable after the date of this Agreement and (y) make all necessary
notifications, if any, under the EC Merger Regulation (the "EC Filings"). The
HSR Filing shall be in substantial compliance with the requirements of the HSR
Act and the EC Filings shall be in substantial compliance with the EC Merger
Regulation. Subject to Section 6.03(c), each party shall cooperate with the
other party to the extent necessary to assist the other party in the preparation
of its HSR Filing and the EC Filings, to request early termination of the
waiting period required by the HSR Act and, if requested, to promptly amend or
furnish additional information with respect to the HSR Filing and the EC
Filings. In connection with and without limiting the foregoing, RJR and the RJR
Board shall (x) take all action necessary to ensure that no state takeover
statute or similar statute or regulation is or becomes applicable to any
Transaction or this Agreement or any other Transaction Agreement and (y) if any
state takeover statute or similar statute or regulation becomes applicable to
any Transaction or this Agreement or any other Transaction Agreement, take all
action necessary to ensure that the Merger and the other Transactions may be
consummated as promptly as practicable on the terms contemplated by the
Transaction Agreements.
(b) Nothing in Section 6.03(a) shall require B&W or RJR to dispose of
any of its assets or to limit its freedom of action with respect to any of its
businesses, or to consent to any disposition of the other party's assets or
limits on the other party's freedom of action with respect to any of its
businesses, or to commit or agree to any of the foregoing (each, a "Regulatory
Requirement"),
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and nothing in Section 6.03(a) shall authorize either B&W or RJR to commit or
agree to any Regulatory Requirement, to obtain any consents, approvals, permits
or authorizations, in connection with, or to remove any impediments to, the
Merger relating to the HSR Act or to avoid the entry of, or to effect the
dissolution of, any injunction, temporary restraining order or other order in
any suit, action or proceeding relating to the HSR Act.
(c) Without limiting the generality of Section 6.03(a) upon the terms
and subject to the conditions set forth in this agreement, each of the parties
hereto (i) will, and will cause each of its affiliates to, execute and deliver
each Transaction Agreement to which it is a party on or prior to the Closing
Date and (ii) will cause Xxxxxxxx American (A) to execute and deliver the
Joinder Agreement and each other Transaction Agreement to which it is a party on
or prior to the Closing Date and (B) as the sole stockholder of Sub to adopt
this Agreement.
(d) The parties hereto agree that, other than as expressly set forth in
Articles I and II of this Agreement, such party will not permit Xxxxxxxx
American (and will cause Xxxxxxxx American not to permit Sub) or B&W Opco to
issue, sell or deliver (or become obligated to issue, sell or deliver) any
shares of capital stock of, or equity, voting or other ownership interests in,
or any security convertible or exercisable into, any capital stock or other
equity, voting or other ownership interest in Xxxxxxxx American, B&W Opco or
Sub.
SECTION 6.04. RJR Stock Options. (a) As soon as practicable following
the date of this Agreement, the RJR Board (or, if appropriate, any committee
administering RJR Stock Plans) shall adopt such resolutions or take such other
actions as may be required to effect the following:
(i) adjust the terms of all outstanding RJR Stock Options to provide
that, at the Effective Time, each RJR Stock Option outstanding immediately
prior to the Effective Time shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under such RJR
Stock Option, the same number of shares of Xxxxxxxx American Common Stock
(rounded down to the nearest whole share) as the holder of such RJR Stock
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such RJR Stock Option in full
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immediately prior to the Effective Time, at a price per share (rounded up
to the nearest whole cent) equal to (A) the aggregate exercise price for
the shares of RJR Common Stock otherwise purchasable pursuant to such RJR
Stock Option divided by (B) the number of shares of Xxxxxxxx American
Common Stock that such RJR Stock Option is deemed to constitute an option
to acquire (each, as so adjusted, an "Adjusted Option"); provided, however,
that, any RJR Stock Option that is intended to be an "incentive stock
option" (as defined in Section 422 of the Code), and that may not be
adjusted in the foregoing manner and remain an incentive stock option,
shall be adjusted in accordance with the requirements of Section 424 of the
Code in a manner that most closely produces the economic results obtained
with respect to other Adjusted Options (it being understood that it is the
intention of the parties that RJR Stock Options so assumed by Xxxxxxxx
American qualify, to the maximum extent permissible following the Effective
Time, as incentive stock options to the extent that such RJR Stock Options
qualified as incentive stock options prior to the Effective Time);
(ii) adjust the terms of all outstanding RJR SARs to provide that, at
the Effective Time, each RJR SAR outstanding immediately prior to the
Effective Time shall be deemed to constitute a right to receive an SAR, on
the same terms and conditions as were applicable under such RJR SAR,
denominated in shares of Xxxxxxxx American Common Stock (each, as so
adjusted, an "Adjusted SAR") that shall represent a right to receive, the
excess of (a) the fair market value of a share of Xxxxxxxx American Common
Stock on the date of exercise over (b) the base value of the Adjusted SAR;
(iii) adjust the terms of all outstanding RJR Stock Deferred Stock
Units to provide that, at the Effective Time, each RJR Stock Deferred Stock
Unit outstanding immediately prior to the Effective Time shall be deemed to
constitute a right to receive a deferred stock unit, on the same terms and
conditions as were applicable under such RJR Stock Deferred Stock
Unit,(each, as so adjusted, an "Adjusted Stock Deferred Stock Unit"), that
is equal in value to one share of Xxxxxxxx American Common Stock;
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(iv) adjust the terms of all outstanding RJR Cash Deferred Stock Units
to provide that, at the Effective Time, each RJR Cash Deferred Stock Unit
outstanding immediately prior to the Effective Time shall be deemed to
constitute a right to receive a deferred stock unit, on the same terms and
conditions as were applicable under such RJR Cash Deferred Stock Unit
(each, as so adjusted, an "Adjusted Cash Deferred Stock Unit"), that is
equal in value to one share of Xxxxxxxx American Common Stock;
(v) make such other changes to the RJR Stock Plans as RJR and B&W may
agree are appropriate to give effect to the Merger;
(vi) take such action as necessary under the RJR Stock Plans to ensure
that all restrictions or limitations on transfer and vesting and all
repurchase rights with respect to the RJR Stock Options, RJR SARs, RJR
Stock Deferred Stock Units, RJR Cash Deferred Stock Units, RJR Director
Deferrals and RJR Director Grants and RJR Restricted Shares, to the extent
that such restrictions or limitations shall not have already lapsed, and
all other terms thereof, shall remain in full force and effect pursuant to
their terms with respect to the corresponding Adjusted Options, Adjusted
SARs, Adjusted Stock Deferred Stock Units and Adjusted Cash Deferred Stock
Units and shares of Xxxxxxxx American Common Stock after giving effect to
the Merger and the assumption of the RJR Stock Plans by Xxxxxxxx American
as set forth below; and
(vii) ensure that, after the Effective Time, no RJR Stock Options, RJR
SARs, RJR Director Deferrals, RJR Director Grants, RJR Stock Deferred Stock
Units and RJR Cash Deferred Stock Units may be granted or deferred under
any RJR Stock Plan.
(b) At the Effective Time, by virtue of the Merger and without the need
of any further corporate action, Xxxxxxxx American shall assume the RJR Stock
Plans, with the result that all the obligations of RJR under the RJR Stock
Plans, each outstanding Adjusted Option, Adjusted SARs, Adjusted Cash Deferred
Stock Units and Adjusted Stock Deferred Stock Units and the agreements
evidencing the grants thereof shall be obligations of Xxxxxxxx American
following the Effective Time. As soon as practicable after
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the Effective Time, Xxxxxxxx American shall deliver to the holders of Adjusted
Options, Adjusted SARs, Adjusted Stock Deferred Stock Units and Adjusted Cash
Deferred Stock Units appropriate notices setting forth such holders' rights
pursuant to the respective RJR Stock Plans and the agreements evidencing the
grants of such Adjusted Options, Adjusted SARs, Adjusted Stock Deferred Stock
Units and Adjusted Cash Deferred Stock Units and that such Adjusted Options,
Adjusted SARs, Adjusted Stock Deferred Stock Units and Adjusted Cash Deferred
Stock Units and agreements shall be assumed by Xxxxxxxx American and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 6.04 after giving effect to the Merger).
(c) Xxxxxxxx American shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Xxxxxxxx American Common
Stock for delivery upon exercise of the Adjusted Options assumed in accordance
with this Section 6.04. As soon as reasonably practicable after the Effective
Time, Xxxxxxxx American shall file a registration statement on Form S-8 (or any
successor or other appropriate form) registering a number of shares of Xxxxxxxx
American Common Stock subject to such Adjusted Options and shall use its
reasonable best efforts to maintain the effectiveness of such registration
statement (and maintain the current status of the prospectus or prospectuses
required thereby) for so long as any Adjusted Options remain outstanding. Prior
to the Effective Time, RJR shall take, and shall cause Xxxxxxxx American to
take, all actions as may be reasonably required to cause the transactions
contemplated by this Section 6.04 and any other acquisition of equity securities
of Xxxxxxxx American or disposition of equity securities of RJR (including
derivative Securities) by any person who is or a director or officer of RJR or
who is or will become a director or officer of Xxxxxxxx American to be exempt
under Rule 16b-3 promulgated under the Exchange Act.
(d) In this Agreement:
"RJR Cash Deferred Stock Unit" means any right or credit to a deferral
account, denominated in shares of RJR Common Stock, to receive payment in cash
of an amount equal to the value of such shares of RJR Common Stock under the
Equity Incentive Award Plan for Directors of RJR and Subsidiaries or the
Deferred Compensation Plan for Directors of XXX.
00
"RJR Director Deferrals" means any cash compensation payments
of a director of the RJR Board that are deferred and credited to an
account for such director under the Deferred Compensation Plan for
Directors of RJR.
"RJR Director Grants" means any grant of stock options, stock
awards or deferred stock units to purchase or receive RJR Common Stock
made to a director of the RJR Board pursuant to the terms of the Equity
Incentive Award Plan for Directors of RJR and Subsidiaries.
"RJR SAR" means any stock appreciation right to receive in
cash, RJR Common Stock or a combination thereof, the excess of (i) the
fair market value of a share of the RJR Common Stock on the date of
exercise over (ii) the base value of the stock appreciation right
granted under any RJR Stock Plan or otherwise multiplied by (iii) the
number of stock appreciation rights exercised.
"RJR Stock Deferred Stock Unit" means any right or credit to a
deferral account, denominated in shares of RJR Common Stock, to receive
payment in cash or stock of an amount equal to the value of such shares
of RJR Common Stock under the Equity Incentive Award Plan for Directors
of RJR and Subsidiaries or the Deferred Compensation Plan for Directors
of RJR.
"RJR Stock Option" means any option or right to purchase RJR
Common Stock granted under any RJR Stock Plan or otherwise.
"RJR Stock Plans" means the RJR 1999 Long Term Incentive Plan
and the Equity Incentive Award Plan for Directors of RJR and
Subsidiaries and any other plan or arrangement providing for the grant
of options, SARs or other equity-based awards to service providers
(including employees, directors, officers and consultants) to RJR or
any RJR Subsidiary or any predecessors thereto.
SECTION 6.05. Benefit Plans. (a) Xxxxxxxx American will cause
the Surviving Corporation to honor, in accordance with their respective terms,
but only to the extent of the Surviving Corporation's liabilities under, the RJR
Benefit Plans, RJR Benefit Agreements, B&W Benefit
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Plans and B&W Benefit Agreements, including any rights or benefits arising as a
result of the transactions contemplated by this Agreement (either alone or in
combination with any other event). Xxxxxxxx American shall also cause B&W Opco
to honor all liabilities, obligations and commitments of B&W Opco as set forth
in the B&W Opco Formation Agreement.
(b) Xxxxxxxx American agrees that (i) the employees of B&W Opco and
each subsidiary of B&W Opco immediately prior to the Effective Time (the
"Affected B&W Employees") who remain employed by Xxxxxxxx American and its
subsidiaries will continue to be provided with benefits under employee benefit
plans, programs, policies or arrangements (other than (x) stock options or other
plans involving the issuance of securities of Xxxxxxxx American and (y)
severance or termination benefit plans, programs, policies, agreements or
arrangements of Xxxxxxxx American) which in the aggregate are no less favorable
than those provided by B&W and any B&W Subsidiary to the Affected B&W Employees
immediately prior to the B&W Opco Stock Contribution during (A) the period
commencing upon the B&W Opco Stock Contribution and ending 18 months thereafter
with respect to those Affected B&W Employees employed immediately prior to the
Effective Time at the locations set forth on Section 6.05(b) of the B&W
Disclosure Letter (provided, however, that with respect to welfare benefits,
such period shall end no later than December 31, 2005)and (B) the period
commencing upon the B&W Opco Stock Contribution and ending on the first
anniversary thereof with respect to all other Affected B&W Employees and (ii)
each Affected B&W Employee who is eligible as of the Closing Date (or who would
become eligible as of the Closing Date if his or her active service with
Xxxxxxxx American and its subsidiaries during the period he or she is covered
under clause (i) of this Section 6.05(b) is added to his or her eligible service
prior to the Closing Date) to receive a benefit under a retirement or retiree
welfare plan of B&W or any B&W Subsidiary shall receive such benefits in amounts
and at times required by such plans as in effect immediately prior to the
Closing Date.
(c) Xxxxxxxx American agrees that (i) for all purposes (including
eligibility, vesting and benefit accrual) under the employee benefit plans of
Xxxxxxxx American and its subsidiaries providing benefits to any Affected B&W
Employees after the B&W Opco Stock Contribution, each Affected B&W Employee
shall be credited with his or her years of service with B&W and the B&W
Subsidiaries (and any predecessor entities thereof) before the B&W Opco Stock
Contribution, to the same extent as such Affected B&W Employee was entitled,
before the B&W Opco Stock
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Contribution, to credit for such service under any similar B&W Benefit Plan and
(ii) any early retirement subsidies, eligibilities and features under any B&W
Benefit Plan which cover Affected B&W Employees as of the Closing Date shall
remain available to each such employee who is eligible for such right at the
Closing Date (or who would be eligible at the Closing Date if his or her age
and/or eligible service as of the Closing Date was combined with his or her
additional age and active service with Xxxxxxxx American and its subsidiaries
following the Closing Date), in each case, except for purposes of benefit
accrual under defined benefit pension plans to the extent such credit would
result in a duplication of accrued benefits in respect of the same period of
service. Following the B&W Opco Stock Contribution, Xxxxxxxx American shall, or
shall cause its subsidiaries to, (A) waive any pre-existing conditions,
exclusions, actively-at-work requirements and waiting periods under any welfare
benefit plan maintained by Xxxxxxxx American or any of its subsidiaries in which
Affected B&W Employees and their eligible dependents participate (except to the
extent that such pre-existing conditions, exclusions, actively-at-work
requirements and waiting periods would have been applicable under the comparable
B&W welfare benefit plans immediately prior to the B&W Opco Stock Contribution),
and (B) provide each Affected B&W Employee with credit for any co-payments and
deductibles incurred prior to the B&W Opco Stock Contribution (or such later
transition date to new welfare benefits plans) for the calendar year in which
the B&W Opco Stock Contribution (or such later transition date) occurs, in
satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that the Affected B&W Employees participate in after the B&W Opco
Stock Contribution.
(d) B&W shall fund the payments set forth on Section 6.05(d) of the B&W
Disclosure Letter.
(e) As soon as practicable following the date of this Agreement, B&W
shall offer to enter into retention bonus and pay guarantee agreements with key
B&W Personnel
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as contemplated by Section 6.05(e) of the B&W Disclosure Letter.
(f) Except to the extent any such actions shall require consent of
participants in RJR Benefit Plans or any employee who is a party to a RJR
Benefit Agreement, RJR has taken all action necessary to provide that none of
the execution and delivery of this Agreement, the consummation of the Merger and
the other Transactions contemplated hereby shall be treated as a "change in
control", "change of control" or similar concept under the RJR Stock Plans, any
other RJR Benefit Plans or the RJR Benefit Agreements (including the RJR Master
Trust and the RJR Excess Benefit Master Trust underlying the RJR Benefit Plans
and RJR Benefit Agreements).
(g) Except to the extent any such actions shall require consent of
participants in B&W Benefit Plans or any employee who is a party to a B&W
Benefit Agreement, B&W has taken all action necessary to provide that none of
the execution and delivery of this Agreement, the consummation of the Merger and
the other Transactions contemplated hereby shall be treated as a "change in
control", "change of control" or similar concept under the B&W Benefit Plans or
the B&W Benefit Agreements.
SECTION 6.06. Indemnification. (a) Xxxxxxxx American shall, to the
fullest extent permitted by Law, cause the Surviving Corporation to honor all
RJR's obligations to indemnify (including any obligations to advance funds for
expenses) the current or former directors or officers of RJR for acts or
omissions by such directors and officers occurring prior to the Effective Time
to the extent that such obligations of RJR exist on the date of this Agreement,
whether pursuant to the RJR Charter, RJR By-Laws or individual indemnity
agreements or otherwise, and such obligations shall survive the Merger and shall
continue in full force and effect in accordance with the terms of the RJR
Charter, the RJR By-Laws and such individual indemnity agreements from the
Effective Time until the expiration of the applicable statute of limitations
with respect to any claims against such directors and officers arising out of
such acts or omissions.
(b) For a period of six years after the Effective Time, Xxxxxxxx
American shall cause to be maintained in effect the current policies of
directors' and
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officers' liability insurance maintained by RJR (provided that Xxxxxxxx American
may substitute therefor policies with reputable and financially sound carriers
of at least the same coverage and amounts containing terms and conditions which
are no less advantageous) with respect to claims arising from or related to
facts or events which occurred at or before the Effective Time; provided,
however, that Xxxxxxxx American shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 200% of the
annual premiums paid as of the date of this Agreement by RJR for such insurance
(such 200% amount, the "Maximum Premium"). If such insurance coverage cannot be
obtained at all, or can only be obtained at an annual premium in excess of the
Maximum Premium, Xxxxxxxx American shall maintain the most advantageous policies
of directors' and officers' insurance obtainable for an annual premium equal to
the Maximum Premium.
SECTION 6.07. Fees and Expenses. (a) Except as provided below, all fees
and expenses incurred in connection with the Merger and the other Transactions
shall be paid by the party incurring such fees or expenses, whether or not the
Merger is consummated, except that each of RJR and B&W shall bear and pay
one-half of (1) the filing fees for the HSR Filing and the EC Filings, if any,
and (2) the costs and expenses incurred in connection with the filing, printing
and mailing of the Form S-4 and the Proxy Statement if the Closing shall not
occur (for whatever reason).
(b) In the event that (i) (A) a RJR Takeover Proposal has been made or
made known to RJR or its stockholders after the date of this Agreement (whether
or not conditional and whether or not withdrawn), (B) thereafter this Agreement
is terminated by either B&W or RJR pursuant to Section 8.01(b)(i) (but only if
the RJR Stockholders Meeting has not been held by the date that is five business
days prior to the date of such termination) or Section 8.01(b)(iii) and (C)
within 12 months after such termination, RJR or any of its subsidiaries enters
into any RJR Alternative Acquisition Agreement with respect to, or consummates,
any RJR Takeover Proposal (solely for purposes of this Section 6.07(b)(i)(C),
the term "RJR Takeover Proposal" shall have the meaning set forth in the
definition of RJR Takeover Proposal contained in Section 5.02(e) except that all
references in such
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definition to 20% shall be deemed references to 40%), (ii) this Agreement is
terminated by B&W pursuant to Section 8.01(d) or (iii) this Agreement is
terminated by RJR pursuant to Section 8.01(f), then, in each case, RJR shall pay
B&W a fee equal to $130,000,000 (the "RJR Termination Fee") by wire transfer of
same day funds to an account designated by B&W (x) in the case of a termination
by RJR pursuant to Section 8.01(f), prior to or simultaneously with such
termination, (y) in the case of a termination by B&W pursuant to Section
8.01(d), within two business days after such termination and (z) in the case of
a payment as a result of Section 6.07(b)(i), upon the occurrence of an event set
forth in Section 6.07(b)(i)(C). RJR acknowledges that the agreements contained
in this Section 6.07(b) are an integral part of the transactions contemplated by
this Agreement and that, without these agreements, B&W would not enter into this
Agreement; accordingly, if RJR fails promptly to pay the amounts due pursuant to
this Section 6.07(b) and, in order to obtain such payment, B&W commences a suit
that results in a judgment against RJR for the amounts set forth in this Section
6.07(b), RJR shall pay to B&W interest on the amounts set forth in this Section
6.07(b) at a rate per annum equal to three-month LIBOR (as reported in The Wall
Street Journal (Northeast edition) or, if not reported therein, in another
authoritative source selected by B&W) on the date such payment was required to
be made (or if no quotation for three-month LIBOR is available for such date, on
the next preceding date for which such a quotation is available) plus 1.5%.
(c) In the event that this Agreement is terminated by B&W pursuant to
Section 8.01(g), then B&W shall pay RJR a fee equal to $130,000,000 (the "B&W
Termination Fee") by wire transfer of same day funds to an account designated by
RJR prior to or simultaneously with such termination. B&W acknowledges that the
agreements contained in this Section 6.07(c) are an integral part of the
transactions contemplated by this Agreement and that, without these agreements,
RJR would not enter into this Agreement; accordingly, if B&W fails promptly to
pay the amounts due pursuant to this Section 6.07(c) and, in order to obtain
such payment, RJR commences a suit that results in a judgment against B&W for
the amounts set forth in this Section 6.07(c), B&W shall pay to RJR interest on
the amounts set forth in this Section 6.07(c) at a rate per annum equal to
three-month LIBOR (as reported in The Wall
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Street Journal (Northeast edition) or, if not reported therein, in another
authoritative source selected by RJR) on the date such payment was required to
be made (or if no quotation for three-month LIBOR is available for such date, on
the next preceding date for which such a quotation is available) plus 1.5%.
SECTION 6.08. Public Announcements. B&W and RJR shall consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to this
Agreement, the Merger and the other Transactions and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable Law, court process or by obligations
pursuant to any listing agreement with, or rules of, any securities exchange or
listing authority.
SECTION 6.09. Transfer Taxes. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar Taxes (including interest,
penalties and additions to any such Taxes) ("Transfer Taxes") incurred in
connection with the Asset Contribution and Assumption of Liabilities shall be
paid by B&W, and Xxxxxxxx American shall cooperate with B&W in preparing,
executing and filing any Tax Returns with respect to such Transfer Taxes. All
other Transfer Taxes incurred in connection with the Transactions shall be paid
by Xxxxxxxx American.
SECTION 6.10. Affiliates. Promptly following the date of execution of
this Agreement, RJR shall deliver to B&W a letter identifying all persons who
are expected by RJR to be, at the date of the RJR Stockholders Meeting,
"affiliates" of RJR for purposes of Rule 145 under the Securities Act. RJR shall
use its reasonable best efforts to cause each such person to deliver to Xxxxxxxx
American on or prior to the Effective Time a written agreement substantially in
the form attached as Exhibit I.
SECTION 6.11. Stock Exchange Listing. RJR and Xxxxxxxx American shall
use their reasonable best efforts to cause the shares of Xxxxxxxx American
Common Stock to be issued in the Share Issuance to be approved for listing on
the NYSE, subject to official notice of issuance, on or prior to the Closing
Date.
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SECTION 6.12. Rights Agreements; Consequences if Rights Triggered. (a)
The RJR Board shall take all action requested in writing by B&W in order to
render the RJR Rights inapplicable to the Merger and the other Transactions and
to terminate the RJR Rights Agreement at the Effective Time. Except as approved
in writing by B&W, the RJR Board shall not (i) amend the RJR Rights Agreement,
(ii) redeem any RJR Rights or (iii) take any action with respect to, or make any
determination under, the RJR Rights Agreement in respect of any person (other
than B&W or any of its affiliates) becoming an Acquiring Person unless the RJR
Board or a committee thereof determines in good faith (after consultation with
outside legal counsel and after compliance with all applicable provisions of
this Agreement) that failure to take such action would be inconsistent with its
fiduciary duties under applicable Law. If any Distribution Date, Triggering
Event, Section 11(a)(ii) Event, Section 13 Event or Stock Acquisition Date (in
each case, as defined in the RJR Rights Agreement) occurs under the RJR Rights
Agreement at any time during the period from the date of this Agreement to the
Effective Time, RJR and B&W shall make such adjustments to the Exchange Ratio as
RJR and B&W shall mutually agree so as to preserve the economic benefits that
RJR and B&W each reasonably expected on the date of this Agreement to receive as
a result of the consummation of the Merger and the other Transactions.
(b) Prior to the Effective Time, each of RJR and B&W shall take all
action necessary to cause Xxxxxxxx American to adopt the Xxxxxxxx American
Rights Plan in the form attached as Exhibit C.
SECTION 6.13. Tax Matters. (a) The parties intend the Asset
Contribution and the Assumption of Liabilities, on the one hand, and the B&W
Opco Stock Contribution and the Merger, on the other hand, to qualify as
exchanges under Section 351 of the Code and intend the Merger also to qualify as
a reorganization under Section 368(a) of the Code. The parties further intend
that the SF Contribution qualify as an exchange within the meaning of Section
351 of the Code and also as a reorganization within the meaning of Section
368(a) of the Code. Each of B&W and RJR shall use its reasonable best efforts to
cause the Asset Contribution and Assumption of Liabilities, on the one hand, and
the B&W Opco Stock Contribution and the Merger, on the other hand, to so
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qualify and to obtain the Tax Rulings. None of B&W, RJR or their respective
affiliates shall take any action or shall fail to take any action or suffer to
exist any condition which action or failure to act or condition would prevent,
or would be reasonably likely to prevent, (i) the Asset Contribution and
Assumption of Liabilities, on the one hand, and the B&W Opco Stock Contribution
and the Merger, on the other hand, from qualifying as exchanges within the
meaning of Section 351 of the Code and, in the case of the Merger, as a
reorganization within the meaning of Section 368(a) of the Code and (ii) the SF
Contribution from qualifying as an exchange within the meaning of Section 351
of the Code and also as a reorganization within the meaning of Section 368(a)
of the Code. The parties agree to act jointly and by mutual agreement in all
matters relating to seeking and obtaining the B&W Tax Ruling and the RJR Tax
Ruling (collectively, the "Tax Rulings"), including (A) to jointly submit to
the IRS a "pre-submission conference" memorandum and to hold a joint
pre-submission conference with the IRS to discuss the proposed Tax Rulings, (B)
to file either a joint or substantially identical statements of fact for the
Tax Rulings, (C) to submit to the IRS in connection with the Tax Rulings a
statement of the business purpose of the Transactions as mutually agreed by the
parties, (D) to file mutually agreed requests for the B&W Tax Ruling and the
RJR Tax Ruling, (E) not to conduct any conferences, meetings or other
communications with the IRS regarding the Tax Rulings without the presence of
the other party and/or its counsel and (F) to jointly provide additional
information requested by the IRS only after incorporating all reasonable
changes and comments of both parties.
(b) Any Tax sharing agreement between B&W and any B&W
Subsidiary shall be terminated as of the Closing. After the Closing, no party
shall have any rights or obligations under any such Tax sharing agreement.
(c) Xxxxxxxx American shall file all Tax Returns of any
B&W Subsidiary relating to Taxes measured with respect to taxable periods that
begin before the Closing and end after the Closing, provided, however, that
such Tax Returns shall be filed on a basis consistent with such B&W
Subsidiary's past practices and Xxxxxxxx American shall not file any such Tax
Return without the prior written consent of B&W, such consent not to be
unreasonably withheld.
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SECTION 6.14. Intercompany Accounts. B&W shall cause all
receivables, payables, accounts and indebtedness (other than trade receivables
and trade payables) between any B&W Subsidiary, on the one hand, and BAT or any
of its subsidiaries, on the other hand, to be satisfied or eliminated prior to
the Closing, and all arrangements related to such receivables, payables,
accounts and indebtedness (other than trade receivables and trade payables)
shall be terminated with respect to the B&W Subsidiaries.
SECTION 6.15. Post-Effective Time Intercompany Agreements.
Following the Effective Time, Xxxxxxxx American may terminate, without penalty
or further obligation, any Contract (other than any Transaction Agreement and
other than any Contract relating to a trade payable or trade receivable) that
is contributed to B&W Opco entered into prior to the Effective Time between B&W
or any of its subsidiaries, on the one hand, and BAT and one of its
subsidiaries, on the other hand, if such Contract is not disclosed in Section
4.17(a)(ix) of the B&W Disclosure Letter.
SECTION 6.16. Post-Effective Time Merger. Immediately
following the Effective Time, Xxxxxxxx American shall cause RJR-T to be merged
with and into B&W Opco, with B&W Opco as the surviving corporation, on terms
and conditions reasonably satisfactory to B&W and RJR.
SECTION 6.17. Satisfaction of Macon Bonds. Prior to the
Effective Time, B&W shall cause the redemption and full satisfaction of all
obligations of B&W arising out of or in connection with (a) the Xxxxx Xxxx
Industrial Authority Taxable Industrial Development Revenue Bonds (B&W) Series
1993A and (b) the Xxxxx Xxxx Industrial Authority Taxable Industrial
Development Revenue Bonds (B&W), Series 1993B. In connection with the
redemption of such bonds, B&W shall take all action necessary and proper to
cause the termination of each of the agreements relating to such bonds.
SECTION 6.18. Further Assurances. In the event that after the
Effective Time, any property, asset or right that was used primarily, or held
for use primarily, in the B&W Business prior to the Effective Time (other than
an Excluded Asset) has not been transferred to B&W Opco pursuant to the B&W
Opco Formation Agreement, B&W shall take all such actions as are necessary to
cause such
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property, asset or right, as the case may be, to be transferred to B&W Opco
without the payment of additional consideration.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligations. The
respective obligation of each party to effect each Transaction is subject to
the satisfaction or, to the extent legally permissible, waiver on or prior to
the Closing Date of the following conditions:
(a) Stockholder Approval. RJR Stockholder Approval shall
have been obtained.
(b) Listing. The shares of Xxxxxxxx American Common
Stock issuable to RJR's stockholders pursuant to the Share Issuance shall have
been approved for listing on the NYSE, subject to official notice of issuance.
(c) Antitrust. Any waiting period (and any extension
thereof) applicable to the Transactions under the HSR Act shall have been
terminated or shall have expired and any required approval of the Transactions
by the European Commission shall have been obtained pursuant to the EC Merger
Regulation.
(d) No Restraints. No temporary restraining order,
preliminary or permanent injunction or other Judgment or Law entered, enacted,
promulgated, enforced or issued by any court or other Governmental Entity of
competent jurisdiction (collectively, "Restraints") shall be in effect
preventing the consummation of the Transactions.
(e) Form S-4. The Form S-4 shall have become effective
under the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order, and Xxxxxxxx American shall have received all
state securities or "blue sky" authorizations necessary to issue Xxxxxxxx
American Common Stock pursuant to the Share Issuance.
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(f) Transactions. All closing conditions for each of the
Transactions shall have been satisfied (or waived by the party entitled to the
benefit thereof, to the extent legally permissible).
SECTION 7.02. Conditions to Obligations of B&W. The
obligations of B&W to effect each Transaction are further subject to the
following conditions:
(a) Representations and Warranties. The representations
and warranties of RJR (i) in Section 3.03 and Section 3.17(a)(viii) and in the
Lane Stock Purchase Agreement shall be true and correct in all material
respects and (ii) in this Agreement (other than Section 3.03 and Section
3.17(a)(viii)) shall be true and correct, other than for such failures in this
clause (ii) to be true and correct (ignoring for such purposes any materiality
or material adverse effect qualifiers therein) that, individually or in the
aggregate, have not had and are not reasonably likely to have a RJR Material
Adverse Effect, in the case of each of the foregoing clauses (i) and (ii), as
of the date of this Agreement. B&W shall have received a certificate signed on
behalf of RJR by the chief financial officer of RJR to such effect.
(b) Performance of Obligations of RJR. RJR shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement that are required to be performed at or
prior to the Closing Date, and B&W shall have received a certificate signed on
behalf of RJR by the chief financial officer of RJR to such effect.
(c) B&W shall have received a letter (the "Dividend
Policy Letter") from the chairman of Xxxxxxxx American and the chief executive
officer of Xxxxxxxx American, substantially in the form of Exhibit J.
(d) A RJR Transaction Material Adverse Effect shall not
have occurred since the date of this Agreement.
(e) Xxxxxxxx American (or one of its Subsidiaries) shall
have executed and delivered each Commercial Agreement to which it is intended
to be a party.
(f) Tax Ruling. B&W shall have received a private letter
ruling from the Internal Revenue Service (the "B&W Tax Ruling") regarding the
transactions
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contemplated by this Agreement, which ruling is reasonably acceptable to B&W,
to the effect that, based on the facts and representations provided in the
request for the B&W Tax Ruling, (i) the Asset Contribution and the Assumption
of Liabilities, on the one hand, and the B&W Opco Stock Contribution and the
Merger, on the other hand, each will be treated for federal income tax purposes
as an exchange described in Section 351 of the Code, (ii) B&W will not
recognize any gain for U.S. Federal income tax purposes as a result of the
Asset Contribution and Assumption of Liabilities or the B&W Opco Stock
Contribution and the Merger, (iii) Section 246A will not apply to limit B&W's
"dividends received deduction" under Section 243 with respect to dividends
received from Xxxxxxxx American and (iv) the Lane Stock Sale will not be
treated as a transaction resulting in a Section 301 distribution. The B&W Tax
Ruling shall also be to the effect that the Post-Effective Time Contribution
and Merger will be treated as a Section 351 exchange followed by a Section
368(a) reorganization, provided that in the absence of such a ruling regarding
the Post-Effective Time Contribution and Merger, B&W shall have received an
opinion of Cravath, Swaine & Xxxxx LLP to the same effect, dated the Closing
Date, which opinion is reasonably acceptable to B&W, and in rendering such
opinion Cravath, Swaine & Xxxxx LLP shall be entitled to rely on the facts and
representations provided in the request for the B&W Tax Ruling.
SECTION 7.03. Conditions to Obligations of RJR. The
obligation of RJR to effect each Transaction is further subject to the
following conditions:
(a) Representations and Warranties. The representations
and warranties of (i) B&W (A) in Section 4.02 and Section 4.17(a)(viii) shall
be true and correct in all material respects and (B) in this Agreement (other
than Section 4.02 and Section 4.17(a)(viii)) shall be true and correct and (ii)
Lane Seller and CMS in the Lane Stock Purchase Agreement shall be true and
correct, other than for such failures in the foregoing clauses (i)(B) and (ii)
to be true and correct (ignoring for such purposes any materiality or material
adverse effect qualifiers therein) that, individually or in the aggregate, have
not and are not reasonably likely to have a B&W Material Adverse Effect, in the
case of each of the foregoing clauses (i) and (ii), as of the date of this
Agreement. RJR shall have received a certificate signed on behalf of B&W and
Lane by
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the chief financial officers of B&W and Lane to such effect.
(b) Performance of Obligations of B&W. B&W shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement that are required to be performed at or
prior to the Closing Date, and RJR shall have received a certificate signed on
behalf of B&W by the chief financial officer of B&W to such effect.
(c) A B&W Transaction Material Adverse Effect shall not
have occurred since the date of this Agreement.
(d) B&W (or one of its affiliates) shall have executed
and delivered each Commercial Agreement to which it is intended to be a party.
(e) Tax Ruling. RJR shall have received a private letter
ruling from the IRS (the "RJR Tax Ruling") regarding the transactions
contemplated by this Agreement, which ruling is reasonably acceptable to RJR,
to the effect that, based on the facts and representations provided in the
request for the RJR Tax Ruling, (i) the B&W Opco Stock Contribution and the
Merger will be treated for federal income tax purposes as an exchange described
in Section 351 of the Code, (ii) the Lane Stock Sale will not be treated as a
transaction resulting in a Section 301 distribution and (iii) either (x) a
similar ruling that the Merger will also be treated as a reorganization within
the meaning of Section 368(a) of the Code or (y) an opinion of Xxxxx Day, dated
the Closing Date, which opinion is reasonably acceptable to RJR, that the
Merger will also be treated as a reorganization within the meaning of Section
368(a) of the Code, and in rendering such opinion Xxxxx Day shall be entitled
to rely on the facts and representations provided in the request for the RJR
Tax Ruling. The RJR Tax Ruling shall also be to the effect that the
Post-Effective Time Contribution and Merger will be treated as a Section 351
exchange followed by a Section 368(a) reorganization, provided that in the
absence of such ruling, RJR shall have received an opinion of Xxxxx Day to the
same effect, dated the Closing Date, which opinion is reasonably acceptable to
RJR, and in rendering such opinion Xxxxx Day shall be entitled to rely on the
facts and representations provided in the request for the RJR Tax Ruling.
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SECTION 7.04. Frustration of Closing Conditions. Neither RJR
nor B&W may rely on the failure of any condition set forth in Section 7.01,
7.02 or 7.03 to be satisfied if such failure was caused by such party's failure
to act in good faith and to use its reasonable best efforts to consummate the
Merger and the other Transactions, as required by and subject to Section 6.03.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated
at any time prior to the Effective Time, whether before or after receipt of the
RJR Stockholder Approval:
(a) by mutual written consent of B&W and RJR;
(b) by either B&W or RJR:
(i) if the Merger is not consummated on or
before October 27, 2004 (the "Outside Date"); provided,
however, that the right to terminate this Agreement pursuant
to this Section 8.01(b)(i) shall not be available to any
party whose breach of a representation, warranty or covenant
in this Agreement has been a principal cause of or resulted
in the failure of the Transactions to be consummated on or
before such date;
(ii) if any Restraint preventing the
consummation of the Transactions shall be in effect and shall
have become final and nonappealable; or
(iii) if the RJR Stockholder Approval shall not
have been obtained at the RJR Stockholders Meeting duly
convened therefore or at any adjournment or postponement
thereof at which a proper vote on such matters was taken;
(c) by B&W, if RJR breaches or fails to perform in any
material respect any of its representations, warranties or covenants contained
in this Agreement,
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which breach or failure to perform (i) would give rise to the failure of a
condition set forth in Section 7.02(a) or 7.02(b) and (ii) cannot be or has not
been cured within 30 days after the giving of written notice to RJR of such
breach (provided that B&W is not then in material breach of any representation,
warranty or covenant contained in this Agreement);
(d) by B&W, in the event that (i) a RJR Adverse
Recommendation Change has occurred in accordance with Section 5.02(b) or (ii)
without approval in writing from B&W, the RJR Board amends the RJR Rights
Agreement or redeems the RJR Rights or (iii) without approval in writing from
B&W, the RJR Board takes any action with respect to, or makes any determination
under, the RJR Rights Agreement and, as a result of such action or
determination, any person other than B&W or any of its affiliates becomes an
Acquiring Person (as defined in the RJR Rights Agreement as in effect on the
date of this Agreement), in each case in accordance with Section 6.12 (for the
avoidance of doubt, this clause (iii) shall not apply solely as a result of any
person becoming an Acquiring Person (as defined in the RJR Rights Agreement as
in effect on the date of this Agreement) and a Distribution Date, Triggering
Event, Section 11(a)(ii) Event, Section 13 Event or Stock Acquisition Date (in
each case, as defined in the RJR Rights Agreement as in effect on the date of
this Agreement) occurring as a result thereof);
(e) by RJR, if B&W breaches or fails to perform in any
material respect any of its representations, warranties or covenants contained
in this Agreement, which breach or failure to perform (i) would give rise to
the failure of a condition set forth in Section 7.03(a) or 7.03(b) and (ii)
cannot be or has not been cured within 30 days after the giving of written
notice to B&W of such breach (provided that RJR is not then in material breach
of any representation, warranty or covenant in this Agreement);
(f) by RJR in accordance with, and subject to the terms
and conditions of, Section 5.02(b); and
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(g) by B&W in accordance with, and subject to the terms
and conditions of, Section 5.03(b).
SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement by either RJR or B&W as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of B&W or RJR, other than the provisions of
Section 3.18, Section 4.18, the last sentence of Section 6.02(a), Section 6.07,
Section 6.08, this Section 8.02 and Article IX, which provisions shall survive
such termination. Nothing in this Section 8.02 shall be deemed to release any
party from any liability for any wilful and material breach by such party of
the terms and provisions of this Agreement or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by the
parties at any time before or after receipt of the RJR Stockholder Approval;
provided, however, that after receipt of the RJR Stockholder Approval, there
shall be made no amendment that by Law requires further approval by the
stockholders of RJR without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) waive compliance
with any of the agreements or conditions contained in this Agreement; provided,
however, that after receipt of the RJR Stockholder Approval, there shall be no
waiver that by Law requires further approval by the stockholders of RJR without
the further approval of such stockholders. Any agreement on the part of a party
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The failure of any party
to this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights nor shall any single or partial
exercise by any party to this Agreement of any of its rights under this
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Agreement preclude any other or further exercise of such rights or any other
rights under this Agreement.
SECTION 8.05. Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 8.01, an
amendment of this Agreement pursuant to Section 8.03 or an extension or waiver
pursuant to Section 8.04 shall, in order to be effective, require in the case
of B&W or RJR, action by its Board of Directors or the duly authorized designee
of its Board of Directors.
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement, including any
rights arising out of any breach of such representations or warranties, shall
survive the Effective Time. This Section 9.01 shall not limit this Article IX
or any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given upon receipt by the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to B&W, to:
Attention:
000 Xxxxx 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
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with a copy to:
Cravath, Swaine & Xxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxxxx, Esq.
(b) if to RJR, to:
Attention:
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxx Day
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
(c) if to Xxxxxxxx American, to both B&W and RJR as
specified above.
SECTION 9.03. Definitions. For purposes of this Agreement:
An "Action" means any claim, suit, action, arbitration,
inquiry, investigation or other proceeding of any nature (whether criminal,
civil, legislative, administrative, regulatory, prosecutorial or otherwise) by
or before any Governmental Entity.
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
"B&W Business" means the tobacco businesses of B&W and its
subsidiaries as such businesses have been
102
conducted in the United States and its territories and possessions on or prior
to the date of this Agreement.
A "B&W Material Adverse Effect" means any change, effect,
event, occurrence, state of facts or development that, individually or in the
aggregate, (a) is materially adverse to the business, financial condition or
results of operations of the B&W Business (other than with respect to the
Excluded Assets and Excluded Liabilities) and CMS, taken as a whole, or (b) is
reasonably likely to prevent or materially impede, interfere with, hinder or
delay the consummation by B&W and its affiliates of the Transactions, other
than, in each case, any change, effect, event, occurrence, state of facts or
development arising out of or related to (w) economic or political conditions
or the securities markets in general, (x) any failure, in and of itself, by B&W
to meet any internal or published projections, forecasts, or revenue or
earnings predictions, (y) the industry in which B&W and RJR participate or (z)
the announcement or existence of the Transactions.
A "B&W Transaction Material Adverse Effect" means any change,
effect, event, occurrence or development occurring after the date of this
Agreement that, individually or in the aggregate, (a) is reasonably likely to
render B&W Opco Insolvent following the Asset Contribution and Assumption of
Liabilities or (b) is reasonably likely to render Xxxxxxxx American Insolvent
following the consummation of the Transactions.
"Environmental Condition" means and includes the generation,
discharge, emission, release or threatened release into the environment
(including ambient air, surface water, groundwater or land), spill, receiving,
handling, use, storage, containment, treatment, transportation, shipment or
disposition of any Hazardous Materials by B&W or any B&W Subsidiary (or their
predecessors) or by RJR or any of its Subsidiaries (or their predecessors), as
the case may be, which has resulted in or may reasonably result in response
action under any Environmental Laws or as to which any liability is currently
or may in the future be imposed on such persons based on conditions existing
prior to the date of this Agreement or the actions or omissions prior to the
date of this Agreement of any person (or their predecessors) with respect to
any Hazardous Materials or reporting with respect thereto.
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"Environmental Law" means any applicable Law, Judgment or
Consent issued or promulgated by or entered into with any Governmental Entity
relating to pollution or the protection of the environment (including ambient
air, surface water, groundwater, land surface or subsurface strata), the
presence, management, release, disposal of, or exposure to, Hazardous
Materials, or the protection of human health and safety.
"Hazardous Materials" means any chemical, material, substance
or waste that is regulated pursuant to any environmental Law including
petroleum and petroleum by-products, asbestos and asbestos-containing
materials, urea formaldehyde foam insulation, polychlorinated biphenyls,
pesticides and herbicides, radon gas, or chlorofluorocarbons and
ozone-depleting substances.
"Insolvent" with respect to any person means, on the date of
determination, (a) such person will be unable to pay its liabilities,
subordinated, contingent or otherwise, as such liabilities become due, (b) such
person will be unable to continue to conduct its business as a going concern,
(c)(i) a judgment has been obtained against such person or its subsidiaries,
which judgment, if collected, would cause such person to be unable (A) to pay
its liabilities, subordinated, contingent or otherwise, as such liabilities
become due or(B) to continue to conduct its business as a going concern and
(ii) such person and its subsidiaries do not have the capital resources, taking
into account the other capital needs of such person and its subsidiaries, to
post an appeal bond or similar instrument necessary to stay the execution of
such judgment or (d) a voluntary or involuntary petition for bankruptcy has
been filed with respect to such person or any of its material subsidiaries. For
purposes of this definition, the value of the liabilities of a person and its
subsidiaries as of any date of determination will be equal to the amount that
such person and its subsidiaries would be required to include, under GAAP, on
such person's consolidated balance sheet as of such date.
"Intellectual Property" means trademarks (registered or
unregistered), service marks, brand names, certification marks, trade dress,
designs, assumed names, trade names, domain names and other indications of
origin, the goodwill associated with the foregoing and registrations in any
jurisdiction of, and applications in any jurisdiction to register, the
foregoing, including any
104
extension, modification or renewal of any such registration or application;
trade secrets and confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any person; registration or applications
for registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; any intellectual property or proprietary rights similar to
any of the foregoing; licenses, immunities, covenants not to xxx and the like
relating to any of the foregoing; patents (including all reissues, divisions,
continuations and extensions thereof), patent rights, know-how, processes,
technology and inventions and registrations in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application; and
any claims or causes of action arising out of or related to any infringement,
misuse or misappropriation of any of the foregoing.
A "person" means any individual, firm, corporation,
partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity, unincorporated organization or other entity.
A "RJR Material Adverse Effect" means any change, effect,
event, occurrence, state of facts or development that, individually or in the
aggregate, (A) is materially adverse to the business, financial condition or
results of operations of RJR and the RJR Subsidiaries, taken as a whole, or (B)
is reasonably likely to prevent or materially impede, interfere with, hinder or
delay the consummation by RJR and the RJR Subsidiaries of the Transactions,
other than, in each case, any change, effect, event, occurrence, state of facts
or development arising out of or related to (w) economic or political
conditions or the securities markets in general, (x) any failure, in and of
itself, by RJR to meet any internal or published projections, forecasts, or
revenue or earnings predictions, (y) the industry in which RJR and B&W
participate or (z) the announcement or existence of the Transactions.
A "RJR Transaction Material Adverse Effect" means any change,
effect, event, occurrence or development occurring after the date of this
Agreement that, individually or in the aggregate, (a) is reasonably likely to
render RJR Insolvent or (b) is reasonably likely to render Xxxxxxxx American
Insolvent following the consummation of the Transactions.
105
A "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly
by such first person; provided, however, that notwithstanding any provision
herein, for all purposes of this Agreement, the Excluded Subsidiaries shall be
deemed not to be subsidiaries of B&W.
SECTION 9.04. Interpretation; Disclosure Letters. When a
reference is made in this Agreement to a Section, Subsection, Schedule or
Exhibit, such reference shall be to a Section or Subsection of, or a Schedule
or an Exhibit to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein", "hereto" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as
a whole and not to any particular provision of this Agreement. The term "or" is
not exclusive. The word "extent" in the phrase "to the extent" shall mean the
degree to which a subject or other thing extends, and such phrase shall not
mean simply "if". A party to this Agreement will be deemed to have "knowledge"
of a particular fact or matter if an executive officer of such party or an
executive officer of such party's ultimate parent is actually aware of such
fact or matter or has been presented information or evidence which would lead a
reasonable and prudent individual to determine the existence of such fact or
matter. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. Any agreement or instrument
defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement or instrument as from time to time
amended, modified or supplemented (other than any amendment to the Filed RJR
SEC Documents after the date of this Agreement). References to a person are
also to its permitted successors and assigns.
106
SECTION 9.05. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
or Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Transactions is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the Transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.
The Transaction Agreements, taken together with the RJR Disclosure Letter, the
B&W Disclosure Letter and the Confidentiality Agreement, (a) constitute the
entire agreement, and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the Transactions and (b)
except for the provisions of Section 1.09 and Section 6.06, are not intended to
confer upon any person (including any stockholder of any party) other than the
parties any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 9.09. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the parties
without the prior written consent of the other parties hereto. Any purported
assignment without such prior written consent shall be void. Subject to the
preceding sentences, this Agreement will be binding upon,
107
inure to the benefit of, and be enforceable by, the parties hereto and their
respective successors and assigns.
SECTION 9.10. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court
located in the State of Delaware or in the Chancery Court of the State of
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any Federal court located in the
State of Delaware or Chancery Court of the State of Delaware in the event any
dispute arises out of this Agreement or any Transaction, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (c) irrevocably and
unconditionally waives (and agrees not to plead or claim) any objection to the
laying of venue of any action, suit or proceeding arising out of this Agreement
or any Transaction, (d) agrees that it will not bring any action relating to
this Agreement or any Transaction in any court other than any Federal court
sitting in the State of Delaware or Chancery Court of the State of Delaware and
(e) waives any right to trial by jury with respect to any action related to or
arising out of this Agreement or any Transaction.
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IN WITNESS WHEREOF, B&W and RJR have duly executed this
Agreement, all as of the date first written above.
XXXXX & XXXXXXXXXX TOBACCO CORPORATION,
by /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President/Law &
General Counsel Corporate
X.X. XXXXXXXX TOBACCO HOLDINGS, INC.,
by /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Chairman of the Board, President and
Chief Executive Officer
EXHIBIT A
FORMATION AGREEMENT, dated as of /-/,
200[ ] (this "Agreement"), among XXXXX & XXXXXXXXXX
TOBACCO CORPORATION, a Delaware corporation ("B&W"),
B&W OPCO, a North Carolina corporation ("B&W Opco"),
and XXXXXXXX AMERICAN INC., a North Carolina
corporation ("Xxxxxxxx American").
WHEREAS the respective Boards of Directors of B&W, B&W Opco and
Xxxxxxxx American have approved the execution, delivery and performance of this
Agreement;
WHEREAS B&W and X.X. Xxxxxxxx Tobacco Holdings, Inc., a Delaware
corporation ("RJR"), entered into the
Business Combination Agreement, dated as
of October 27, 2003 (the "Combination Agreement"), and each of B&W, RJR, B&W
Opco, Xxxxxxxx American and certain of their affiliates will engage in the
Transactions (as defined in the Combination Agreement);
WHEREAS B&W has agreed to contribute to B&W Opco, and B&W Opco has
agreed to accept from B&W, all of the assets, other than the Excluded Assets (as
defined below), of B&W in exchange for all of the outstanding capital stock of
B&W Opco (the "Asset Contribution");
WHEREAS B&W has agreed to assign to B&W Opco, and B&W Opco has agreed
to assume from B&W, all of the liabilities, other than the Excluded Liabilities
(as defined below), of B&W (the "Assumption of Liabilities");
WHEREAS B&W and B&W Opco have agreed to certain arrangements regarding
the employees of B&W; and
WHEREAS B&W and Xxxxxxxx American have agreed that the B&W Opco Stock
Contribution (as defined in the Combination Agreement) will occur immediately
following completion of the Asset Contribution and the Assumption of
Liabilities.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Action" means any claim, suit, action, arbitration, inquiry,
investigation or other proceeding of any nature (whether criminal, civil,
legislative, administrative, regulatory, prosecutorial or otherwise) by or
before any court, arbitrator or governmental entity or similar body.
An "affiliate" of any Person means another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.
"Asset Contribution" has the meaning set forth in the recitals to this
Agreement.
"Asset Disposition" means any sale, lease, transfer or other
disposition (or series of related sales, leases, transfers or dispositions) by
B&W Opco or any of its Subsidiaries including any disposition by means of a
merger, consolidation or similar transaction (each referred to for the purposes
of this definition as a "disposition") of (a) any shares of capital stock of a
Subsidiary (other than directors' qualifying shares or shares required by
applicable law to be held by a Person other than B&W Opco or one of its
Subsidiaries), (b) all or substantially all the assets of any division or line
of business of B&W Opco or any of its Subsidiaries or (c) any other assets of
B&W Opco or any of its Subsidiaries outside of the ordinary course of business
of B&W Opco or such Subsidiary, in each case, other than (i) a disposition by a
Subsidiary of B&W Opco to B&W Opco or by B&W Opco or any of its Subsidiaries to
a Subsidiary of B&W Opco, (ii) a disposition by B&W Opco or any Subsidiary of
B&W Opco to Xxxxxxxx American or any of its Subsidiaries (other than B&W Opco
and its Subsidiaries) if the transferee agrees to jointly and severally assume
the obligations of B&W Opco under this Agreement, such assumption to be in form
and substance reasonably satisfactory to B&W (provided that the obligations of
B&W Opco under this Agreement shall not be terminated as a result of such
assumption), (iii) a
disposition that constitutes a Restricted Payment but that is not otherwise
prohibited by Section 5.05(c) or (iv) any sale or disposition deemed to occur in
connection with creating or granting any liens to a third party that is not an
affiliate of Xxxxxxxx American in connection with a bona fide financing or that
arise as a matter of law.
"Assumed Liabilities" means all the Liabilities (other than the
Excluded Liabilities) of B&W or any of the Included Subsidiaries or otherwise to
the extent related to the B&W Business (including (a) all Liabilities of B&W and
the Included Subsidiaries arising out of the operation or conduct of their
respective businesses prior to the Asset Contribution, (b) all Liabilities of
B&W and its affiliates under the State Settlements and (c) all Liabilities of
B&W and the Included Subsidiaries arising out of or in connection with any
Action to the extent relating to the development, manufacture, packaging,
labeling, production, delivery, sale, resale, distribution, marketing,
promotion, use or consumption of, or exposure to tobacco products, including
smoking and health-related and safety-related claims).
"Assumption of Liabilities" has the meaning set forth in the recitals
to this Agreement.
"B&W" has the meaning set forth in the preamble to this Agreement.
"B&W Accounting Policies" has the meaning set forth in Section 2.04(a).
"B&W Benefit Plans" has the meaning assigned to such term in the
Combination Agreement.
"B&W Business" means the tobacco businesses of B&W and the Included
Subsidiaries as such businesses have been conducted in the United States and its
territories and possessions on or prior to the date of this Agreement.
"B&W Indemnitees" means B&W, each affiliate of B&W (other than Xxxxxxxx
American, B&W Opco and their respective Subsidiaries following the Effective
Time (as defined in the Combination Agreement)), each of their respective
Representatives and each of the heirs, executors, successors and assigns of any
of the foregoing.
"B&W Opco" has the meaning set forth in the preamble to this Agreement.
"B&W Opco Common Stock" means the common stock, par value $0.01 per
share, of B&W Opco.
"B&W Opco Indemnitees" means B&W Opco, Xxxxxxxx American and their
respective Subsidiaries and Representatives and each of the heirs, executors,
successors and assigns of any of the foregoing.
"B&W Opco Services" has the meaning assigned to such term in Section
2.06(b).
"B&W Opco Stock Contribution" has the meaning assigned to it in the
Combination Agreement.
"B&W Packaging" has the meaning assigned to such term in Section 2.05.
"B&W Services" has the meaning assigned to such term in Section
2.06(a).
"B&W Trademark" has the meaning assigned to such term in Section 2.05.
"Code" means the Internal Revenue Code of 1986, as amended.
"Combination Agreement" has the meaning set forth in the recitals to
this Agreement.
"Consent" has the meaning assigned to such term in Section 2.03.
"Consolidated Net Worth" means, as at any date of determination, the
total amount of shareholders' equity that would be shown on the balance sheet of
B&W Opco and its Subsidiaries, determined on a consolidated basis in accordance
with GAAP, as of such date of determination; provided, however, that
Consolidated Net Worth as so determined shall be adjusted by adding thereto the
sum, without duplication, of (i) all consolidated non-cash impairment and
amortization charges related to goodwill, trademarks and other intangible assets
of B&W Opco and its Subsidiaries during the period from the date of this
Agreement to such date of determination and (ii) all restructuring charges
related to B&W Opco and its
Subsidiaries that have been reflected in the consolidated financial statements
of Xxxxxxxx American that have been filed with the SEC during the period from
the date of this Agreement to such date of determination.
"Contributed Assets" means (other than the Excluded Assets), without
duplication, (a) all the capital stock of the Included Subsidiaries, (b) all the
business, properties, assets, goodwill and rights of B&W and the Included
Subsidiaries of whatever kind and nature, real or personal, tangible or
intangible, that are owned by, leased or licensed to B&W or any of the Included
Subsidiaries on the date of this Agreement (including any items arising under
insurance policies and all guarantees, warranties, indemnities and similar
rights in favor of B&W to the extent relating to any Contributed Asset or any
Assumed Liability and all assets of the B&W Benefit Plans the sponsorship of
which is transferred to B&W Opco in connection with this Agreement) and (c) an
amount in cash equal to the Estimated MSA Liability Amount.
"Employees" means all individuals employed immediately prior to the
Asset Contribution by B&W and the Included Subsidiaries, whether employed within
or outside the United States and whether or not subject to a labor or collective
bargaining agreement, including active employees, employees on vacation,
holiday, jury duty, bereavement leave or other leave of absence (including
employees on short-term disability and long-term disability).
"Employment Transfer Time" has the meaning assigned to such term in
Section 4.01.
"Estimated MSA Liability Amount" means the accrued MSA Liability Amount
as of the date of this Agreement, as estimated in writing by B&W not less than
two days nor more than five days prior to the date of this Agreement.
"Excluded Assets" means:
(a) all cash, cash equivalents and bank deposits of B&W and
its Subsidiaries other than (1) any cash described in clause (c) of the
definition of Contributed Assets or (2) any cash, cash equivalents,
deposits or other assets securing the obligations of B&W and its
Subsidiaries for workers' compensation,
licenses, permits and other similar obligations required under law;
(b) the capital stock of each of the Excluded Subsidiaries and
all the business, properties, assets, goodwill, rights and Liabilities
of the Excluded Subsidiaries;
(c) all receivables, accounts and indebtedness (other than
trade receivables) due to B&W from PLC or any of its Subsidiaries,
other than from any Included Subsidiary
(d) any loan agreements, security documents and other
contracts related to receivables, accounts and indebtedness described
in clause (c) of this definition or clauses (i) and (j) of the
definition of Excluded Liabilities;
(e) the $100 million bond filed by B&W in connection with the
appeal of Xxxxx v. X.X. Xxxxxxxx Tobacco Co. class action litigation in
Florida, collateral securing such bond and all interest and other
proceeds thereof;
(f) all other bonds, letters of credit or similar instruments
provided by B&W or any of its Subsidiaries in connection with any
tobacco-related litigation, collateral securing such bonds and all
interest and other proceeds thereof, including those listed on Schedule
1.01(a);
(g) all rights and interests of B&W and the Excluded
Subsidiaries under this Agreement and any other Transaction Agreement;
(h) all records prepared in connection with the Transactions;
(i) any tax records and copies of all other records of B&W or
any of its Subsidiaries;
(j) any service marks and service xxxx applications,
trademarks and trademark applications, trade dress, logos and slogans,
whether registered or unregistered, and the right to use any such
service marks and service xxxx applications, trademarks and trademark
applications, trade dress, logos and slogans,
in any jurisdiction other than the United States and its territories
and its possessions;
(k) any patents, patent applications, inventions, trade
secrets, proprietary processes, databases, software and formulae, and
the right to use any such patents, patent applications, inventions,
trade secrets, proprietary processes, databases, software and formulae,
to the extent registered or patented in, or otherwise protected by, any
jurisdiction other than the United States and its territories and its
possessions;
(l) all rights, claims and credits of B&W or any of its
Subsidiaries to the extent arising out of any other Excluded Asset or
any Excluded Liability, including any such items arising under
insurance policies and all guarantees, warranties, indemnities and
similar rights in favor of B&W or any of its Subsidiaries in respect of
any other Excluded Asset or any Excluded Liability;
(m) any capital stock of Xxxxxxxx American owned by B&W or any
of its Subsidiaries;
(n) any rights in the assets of the trusts established
pursuant to the Secular Trust Agreements by and among State Street Bank
and Trust Company, B&W, and the individuals party thereto listed on
Schedule 1.01(b) (the "SERP Trust Individuals"), to the extent held in
an account thereunder for the purpose of providing a fund to pay
benefits under the Supplemental Pension Plan for Executives of B&W (the
"B&W SERP") (defined in the Secular Trust Agreement as the "SERP
Account");
(o) any assets held in connection with the B&W Executive Life
Insurance Plan (the "B&W ELP");
(p) all rights to refunds, credits or offsets of Taxes
relating to the Contributed Assets or the Assumed Liabilities with
respect to Pre-Closing Tax Periods; and
(q) all assets identified on Schedule 1.01(c).
"Excluded Liabilities" means:
(a) any Liability of an Excluded Subsidiary or any other
Liability to the extent arising out of the business of an Excluded
Subsidiary;
(b) all obligations of B&W and the Excluded Subsidiaries under
this Agreement and any other Transaction Agreement;
(c) any Liability under the B&W SERP, to the extent it
pertains or relates to the service and/or accrued benefits of the SERP
Trust Individuals prior to the Employment Transfer Time, calculated on
the assumption that the SERP Trust Individual's employment terminated
immediately prior to the Employment Transfer Time;
(d) any liability under each Agreement Pertaining to Revisions
to Benefit Plans and Programs (the "Revision Agreement") entered into
at any time prior to the Employment Transfer Time between B&W and a
SERP Trust Individual, to the extent it pertains or relates to the B&W
SERP with respect to the period prior to the Employment Transfer Time;
(e) any liability under the B&W ELP and any liability under
any successor or substitute plan, program or arrangement in effect
immediately prior to the Employment Transfer Time providing life
insurance coverage to any person covered under the B&W ELP or any such
successor or substitute plan, program or arrangement, other than any
liability related to group term-life insurance payable in lieu of
continued B&W ELP participation;
(f) any liability under a Revision Agreement entered into at
any time prior to the Employment Transfer Time, to the extent it
pertains or relates to the B&W ELP or any successor or substitute plan,
program or arrangement described in clause (e) above, other than any
liability related to group term-life insurance payable to non-officers
in lieu of continued B&W ELP participation;
(g) any Liability to the extent such Liability relates to the
Excluded Assets;
(h) (i) all Taxes (other than U.S. federal and state excise
Taxes) of each Included Subsidiary
measured with respect to all Taxable periods ending on or before the
date of this Agreement and the portion through the end of the date of
this Agreement for any Taxable period that includes (but does not end
on) the date of this Agreement, provided, that for purposes of this
Agreement, (A) all real property Taxes, personal property Taxes and
similar ad valorem obligations levied with respect to the Contributed
Assets for a Tax period that includes (but does not end on) the date of
this Agreement shall be apportioned between B&W and B&W Opco based upon
the number of days of such period included in the Pre-Closing Tax
Period and the number of days of such Tax period after the date of this
Agreement (which period shall not include the date of this Agreement)
and (B) all other Taxes (other than U.S. federal and state excise
Taxes) for a Tax period that includes (but does not end on) the date of
this Agreement shall be determined based upon an actual closing of the
books as if such Tax period ended as of the close of business on the
date of this Agreement, (ii) any and all Taxes (other than U.S. federal
and state excise Taxes) of any member of an affiliated, consolidated,
combined, or unitary group of which an Included Subsidiary (or any of
their predecessors) is or was a member on or prior to the date of this
Agreement, including pursuant to Treas. Reg.Section 1.1502-6 or any
analogous or similar provision of Law, and (iii) all Taxes (other than
U.S. federal or state excise Taxes) of an Included Subsidiary arising
from or related to the Transactions;
(i) all Liabilities of B&W Opco or any of the Included
Subsidiaries in respect of (i) borrowed money, (ii) bonds, debentures,
notes or similar instruments issued in connection with borrowed money,
(iii) conditional sale or other title retention agreements related to
property or assets purchased by B&W or any of the Included
Subsidiaries, (iv) the deferred purchase price of property or services
(other than trade payables and other accounts payable generated in the
ordinary course), (v) interest rate protection agreements, foreign
currency exchange agreements or other interest or exchange rate hedging
arrangements and (vi) guarantees given by B&W or any Included
Subsidiary in respect of any of the foregoing (other than any letters
of credit); and
(j) all payables, accounts and indebtedness (other than trade
payables) owed by B&W to PLC or any of its Subsidiaries, other than to
any Included Subsidiary.
"Excluded Subsidiaries" means, collectively, the Subsidiaries of B&W
listed on Schedule 1.01(d) and the Subsidiaries of such listed Subsidiaries.
"Filings" means Xxxxxxxx American's Form S-4 initially filed with the
SEC on [ ], 200[ ] and any other document filed or required to be filed with the
SEC by Xxxxxxxx American or RJR in connection with the Transactions (including
any preliminary or final form thereof or any amendment or supplement thereto).
"Final Determination" means the final resolution of Liability for any
Tax for any taxable period by or as a result of (a) a final and unappealable
decision, judgment, decree or other order by any court of competent
jurisdiction, (b) a final settlement with the IRS, a closing agreement or
accepted offer in compromise under Sections 7121 or 7122 of the Code or a
comparable agreement under the laws of other jurisdictions, in each case which
resolves the entire Tax Liability for any taxable period, (c) any allowance of a
refund or credit in respect of an overpayment of Tax, but only after the
expiration of all periods during which such refund may be recovered by the
jurisdiction imposing the Tax, or (d) any other final disposition, including,
without limitation, by reason of the expiration of the applicable statute of
limitations.
"GAAP" means U.S. generally accepted accounting principles,
consistently applied by the applicable party (except to the extent relating to a
change in GAAP).
"Included Subsidiaries" means, collectively, the Subsidiaries of B&W
that are not Excluded Subsidiaries.
"Indemnifiable Losses" means all losses, Liabilities, damages
(including compensatory damages, punitive damages, exemplary damages, penalties,
sanctions and restitution), deficiencies, fines, expenses, Actions, demands,
judgments, orders, decrees or settlements, whether or not resulting from Third
Party Claims, including interest and penalties recovered by a third party with
respect thereto and out-of-pocket expenses and reasonable attorneys' and
accountants' fees and expenses incurred
in the investigation or defense of any of the same or in asserting, preserving
or enforcing any of an Indemnitee's rights hereunder, suffered or incurred by an
Indemnitee.
"Indemnifying Party" has the meaning assigned to such term in Section
5.03(a).
"Indemnitee" means any of the B&W Indemnitees or the B&W Opco
Indemnitees, as the case may be.
"Independent Firm" has the meaning set forth in Section 2.04(c).
"IRS" means the United States Internal Revenue Service.
"Liabilities" means any and all debts, liabilities, commitments and
obligations, whether fixed, contingent or absolute, matured or unmatured,
liquidated or unliquidated, accrued or not accrued, known or unknown, whenever
or however arising and whether or not the same would be required by GAAP to be
reflected in financial statements or disclosed in the notes thereto.
"Measurement Time" has the meaning set forth in Section 2.04(a).
"Minimum Required Working Capital Amount" means, with respect to any
date, the amount set forth on Schedule 1.01(e) with respect to such date.
"MSA" means the Master Settlement Agreement, dated as of November 23,
1998, among the 46 states and five U.S. territories listed on the signature
pages thereto, the District of Columbia, Xxxxxx Xxxxxx Incorporated, X.X.
Xxxxxxxx Tobacco Company, B&W and Lorillard Tobacco Company, as amended,
supplemented or replaced.
"MSA Liability Amount" means, with respect to any period, the total of
all amounts due by B&W for such period pursuant to (a) the State Settlements and
(b) attorney fee payment agreements adopted pursuant to any of the State
Settlements.
"Negotiation Period" has the meaning set forth in Section 2.04(b).
"Xxxxxxxx American" has the meaning set forth in the preamble to this
Agreement.
"Non-Assignable Assets" has the meaning set forth in Section 2.03.
"Notice of Dispute" has the meaning set forth in Section 2.04(b).
"Person" means any individual, firm, corporation, partnership, company,
limited liability company, trust, joint venture, association, governmental
entity, unincorporated organization or other entity.
"[PLC]" means [ ] P.L.C., a public limited company incorporated under
the laws of England and Wales.
"Pre-Closing Tax Period" means all taxable periods ending on or before
the day of this Agreement and the portion ending on the day of this Agreement of
any taxable period that includes (but does not end on) such day.
"RJR" has the meaning set forth in the preamble to this Agreement.
"Representative" of any Person means any officer, director, manager,
employee, consultant, attorney or other advisor or representative of such
Person.
"Restricted Payments" means, with respect to B&W Opco or any of its
Subsidiaries, (a) the declaration or payment of any dividends or any other
distributions of any sort in respect of its capital stock (including any payment
in connection with any merger or consolidation involving such Person) or similar
payment to the direct or indirect holders of its capital stock (other than
dividends or distributions payable solely in its capital stock and dividends or
distributions payable solely to B&W Opco or one of its Subsidiaries), (b) the
purchase, redemption or other acquisition or retirement for value of any capital
stock of B&W Opco held by any Person or of any capital stock of a Subsidiary of
B&W Opco held by any affiliate of Xxxxxxxx American (other than B&W Opco or a
Subsidiary of B&W Opco), including in connection with any merger or
consolidation and including the exercise of any option to exchange any capital
stock, or (c) the making of any investment in Xxxxxxxx American or any of its
Subsidiaries
(other than B&W Opco or one of its Subsidiaries); provided, however, that, with
respect to any calendar year, Restricted Payments shall not include the
declaration or payment of any dividends (other than extraordinary dividends or
liquidating dividends) or any other distributions of any sort by B&W Opco in
respect of its capital stock in an aggregate amount equal to the sum, without
duplication, of (i) (A) the aggregate amount of dividends (other than
extraordinary dividends or liquidating dividends) paid by Xxxxxxxx American to
the holders of Xxxxxxxx American common stock during such calendar year and (B)
the aggregate amount of cash required by Xxxxxxxx American to repurchase
Xxxxxxxx American common stock pursuant to Section 2.04(d) of the Governance
Agreement (as defined in the Combination Agreement) and (B) the aggregate amount
of interest, indebtedness and corporate overhead expenses paid by Xxxxxxxx
American or X.X. Xxxxxxxx Tobacco Holdings, Inc. during such calendar year
(including amounts paid in respect of payroll and other compensation expenses
(including pensions) and other post-retirement benefits), Taxes, insurance, SEC,
NYSE and other administrative fees and expenses, banking fees and expenses and
other types of corporate overhead and administrative costs and expenses
associated with being a public holding company); provided, further, however,
that, in the event Xxxxxxxx American owns any "significant subsidiary" (as
defined in Regulation S-X of the SEC) that is not a Subsidiary of B&W Opco, the
amount determined in clause (i) and (ii) above will be reduced by the amount of
such payments allocated to such significant subsidiary by Xxxxxxxx American as
determined by Xxxxxxxx American in good faith consistent with past practice.
"SEC" means the Securities and Exchange Commission.
"State Settlements" means (a) the MSA and (b) the Settlement Agreement,
dated as of August 25, 1997, among the State of Florida, Xxxxxx Xxxxxx
Incorporated, X.X. Xxxxxxxx Tobacco Company, B&W, Lorillard Tobacco Company and
United States Tobacco Company, as amended by the Stipulation of Amendment to
Settlement Agreement and For Entry of Consent Decree, dated as of September 11,
1998, (c) the Settlement Agreement and Stipulation for Entry of Consent Decree,
dated as of May 8, 1998, among the State of Minnesota, Xxxxxx Xxxxxx
Incorporated, X.X. Xxxxxxxx Tobacco Company, B&W and Lorillard Tobacco Company,
(d) the
Comprehensive Settlement Agreement and Release, dated as of October 17, 1997,
among the State of Mississippi, Xxxxxx Xxxxxx Incorporated, X.X. Xxxxxxxx
Tobacco Company, B&W and Lorillard Tobacco Company, as amended by the
Stipulation of Amendment to Settlement Agreement and For Entry of Agreed Order,
dated as of July 2, 1998, (e) the Comprehensive Settlement Agreement and
Release, dated as of January 16, 1998, among the State of Texas, Xxxxxx Xxxxxx
Incorporated, X.X. Xxxxxxxx Tobacco Company, B&W, Lorillard Tobacco Company and
United States Tobacco Company, as amended by the Stipulation of Amendment to
Settlement Agreement and For Entry of Consent Decree, dated as of July 24, 1998,
in each case, as amended, supplemented or replaced, and (f) the Trust Agreement,
dated July 19, 1999 among Xxxxxx Xxxxxx Incorporated, B&W, Lorillard Tobacco
Company and X.X. Xxxxxxxx Tobacco Company, as settlors, The Chase Manhattan
Bank, as trustee, and the Grower States listed therein, as amended, supplemented
or replaced.
"Submission Notice" has the meaning set forth in Section 2.04(c).
A "Subsidiary" of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
Person.
"Successor Company" has the meaning assigned to such term in Section
5.05(a).
"Taxes" means all (a) domestic or foreign (whether national, Federal,
state, provincial, local or otherwise) taxes, assessments, duties or similar
charges of any kind whatsoever, including all corporate franchise, income,
sales, use, ad valorem, receipts, value added, profits, license, withholding,
payroll, employment, excise, property, net worth, capital gains, transfer,
stamp, documentary, payroll, alternative minimum, recapture and other taxes,
including any interest, fines, penalties and additions imposed with respect to
such amounts; (b) Liability for the payment of any amounts of the type described
in clause (a) as a result of being a member of an affiliated, consolidated,
combined, unitary or aggregate group and (c) Liability for the payment of any
amounts as a
result of an express or implied obligation to indemnify any other person with
respect to the payment of any amounts of the type described in clause (a) or
(b).
"Third Party Claim" has the meaning set forth in Section 5.03(a).
"Transaction Agreements" has the meaning assigned to such term in the
Combination Agreement.
"Transactions" has the meaning assigned to such term in the Combination
Agreement.
"Working Capital" means, as of any time, (a) the sum of (i) Inventories
- FIFO basis (including leaf, finished goods, wrapping materials, spare parts
and miscellaneous), (ii) Accounts Receivable External (including domestic
accounts receivable, leaf (ELT) accounts receivable and miscellaneous accounts
receivable), (iii) Due from Affiliates - Trading and (iv) Other Debtors
(including salesforce contingent funds, sundry unidentified items, unamortized
strike/wage concessions, prepaid insurance, prepaid legal fees, etc. but
excluding LIC, home escrows and the Star note) less (b) the sum of, (i) Excise
Tax Payable (Federal and state), (ii) Accrued Liabilities (including marketing
accruals, provisions for payroll, vacation pay, profit sharing, etc.), (iii)
Accounts Payable and (iv) Due to Affiliates - Trading. For the avoidance of
doubt, Working Capital shall not include any accruals relating to the MSA
Liability Amount.
"Working Capital Statement" has the meaning set forth in Section
2.04(a).
ARTICLE II
Asset Contribution
SECTION 2.01. The Asset Contribution. Upon the effectiveness of this
Agreement, (a) B&W shall contribute, assign, convey, transfer and deliver to B&W
Opco, and B&W Opco shall acquire and accept from B&W, all right, title and
interest of B&W in and to the Contributed Assets and (b) B&W Opco shall issue to
B&W [ ] fully paid and nonassessable shares of B&W Opco Common Stock,
representing all of the outstanding capital stock of B&W Opco.
SECTION 2.02. Retention of Copies; Access. Notwithstanding anything to
the contrary contained in this Agreement and subject to Section 6.10, (a) B&W
may retain, at its expense, archival copies of contracts, books and records or
other documents or materials conveyed by this Agreement, and (b) B&W Opco will
permit B&W to have reasonable access to such contracts, books, records,
documents and materials on and after the date of this Agreement to make such
copies. B&W Opco will give B&W at least 30 calendar days' prior written notice
of B&W Opco's intention to dispose of any books, records or other documentation
which constitute Contributed Assets. B&W will have the opportunity to obtain
possession, at its own expense, of any such books, records or documentation as
B&W may reasonably require prior to B&W Opco's disposition thereof. In the
absence of bad faith or wilful misconduct, neither B&W nor B&W Opco will have
any liability arising out of or in connection with its retention and handling of
such records.
SECTION 2.03. Consents. Notwithstanding anything to the contrary
contained in this Agreement, if the contribution, assignment, conveyance,
transfer or delivery or attempted contribution, assignment, conveyance, transfer
or delivery to B&W Opco of any Contributed Asset is (a) prohibited by any
applicable Law or (b) would require any authorization, approval, consent or
waiver (each a "Consent") from a third Person and such Consent shall not have
been obtained prior to the effectiveness of this Agreement (each, a
"Non-Assignable Asset"), in either case, the Asset Contribution shall proceed,
but the Asset Contribution shall not constitute the contribution, assignment,
conveyance, transfer or delivery of such Non-Assignable Asset, and this
Agreement shall not constitute a contribution, assignment, conveyance, transfer
or delivery of such Non-Assignable Asset unless and until such Consent is
obtained. After the Asset Contribution, B&W and B&W Opco shall continue to use
reasonable best efforts to obtain any necessary Consent. The cost of obtaining
any such Consent shall be borne solely by B&W and shall constitute an Excluded
Liability hereunder. During the period between the date of this Agreement and
the consummation of the contribution, assignment, conveyance, transfer or
delivery of such Non-Assignable Asset, B&W will operate such Non-Assignable
Assets pursuant to written instructions from B&W Opco and all benefits of, and
risks arising out of or related to, the ownership and operation of such
Non-Assignable Asset will be for the account of B&W
Opco, except as set forth in Section 5.01(b) or 5.02(b). At or as soon as
reasonably practicable after the date of this Agreement, B&W and B&W Opco will
enter into such agreements as may be reasonably required to carry out the intent
of the immediately preceding sentence in order to provide such further specific
assurances as B&W or B&W Opco may reasonably request.
SECTION 2.04. Working Capital Adjustment.
(a) As soon as reasonably practicable after the date of this Agreement
(but in no event later than 60 calendar days after the date of this Agreement),
B&W Opco will cause to be prepared and delivered to B&W an unaudited
consolidated balance sheet of B&W Opco and its Subsidiaries as of the date of
this Agreement, after giving effect to the Asset Contribution and the Assumption
of Liabilities but prior to giving effect to the B&W Opco Stock Contribution
(such time being referred to as the "Measurement Time"), together with a
statement of each component of Working Capital of B&W Opco as of the Measurement
Time (the "Working Capital Statement"). The Working Capital Statement will be
prepared in accordance with the same accounting principles, policies, practices
and procedures used to prepare the amounts set forth on Schedule 1.01(e), which
are the same accounting principles, policies, practices and procedures used to
prepare the B&W Audited Historical Financial Statements (as defined in the
Combination Agreement), except that inventory is valued on a FIFO basis (the
"B&W Accounting Policies"). B&W will have the right to audit the worksheets,
examine underlying records and review any work papers relating to the Working
Capital Statement.
(b) If B&W disagrees with the Working Capital Statement, B&W must,
within 20 business days after delivery of the Working Capital Statement to B&W,
notify B&W Opco in writing as to whether B&W accepts the Working Capital
Statement. If B&W notifies B&W Opco that it does not accept the Working Capital
Statement (the "Notice of Dispute"), B&W will set out each disputed item, the
amount in dispute and its reasons for such dispute in reasonable detail,
including any adjustments which, in B&W's opinion, should be made to the Working
Capital Statement in order to comply with the requirements of this Section 2.04.
After delivery of the Notice of Dispute, B&W may not introduce additional
disagreements with respect to any item in the Working Capital Statement. If a
Notice of Dispute is
received by B&W Opco in accordance with this Section 2.04(b), B&W and B&W Opco
will use all reasonable efforts to meet and resolve the objections of B&W to the
Working Capital Statement within 60 calendar days of B&W Opco's receipt of the
Notice of Dispute (the "Negotiation Period").
(c) If B&W and B&W Opco do not reach agreement prior to expiration of
the Negotiation Period, then B&W and B&W Opco will each deliver to the Atlanta
office of Ernst & Young LLP or such other accounting firm as the parties shall
jointly agree (the "Independent Firm") a written notice (a "Submission Notice")
specifying the nature and value of all items remaining in dispute within ten
calendar days following the expiration of the Negotiation Period. B&W and B&W
Opco will be deemed to have agreed with all items and amounts contained in the
Working Capital Statement other than the disputed items in each Submission
Notice.
(d) The Independent Firm will (i) make an examination of the Working
Capital Statement, (ii) inspect and examine each party's working papers, (iii)
schedule meetings at which each party may present supporting data and arguments
to substantiate its position and (iv) after giving each party an opportunity to
rebut the other party's data and arguments, decide all disputed items set forth
in each Submission Notice. B&W Opco and B&W will instruct, and will use their
reasonable best efforts to cause, the Independent Firm to determine and report
to B&W and B&W Opco in writing upon all disputed items included in the
Submission Notices within 90 calendar days following the delivery of such
Submission Notices to the Independent Firm in accordance with this Section 2.04,
and such report will be final, binding and conclusive on B&W and B&W Opco. The
Independent Firm's determination will be accompanied by a certificate of the
Independent Firm that it reached its decision in accordance with the provisions
of this Section 2.04. The Independent Firm will not have the authority to review
or make a determination with respect to any matter except the disputed items
included in each Submission Notice, it being understood that the Independent
Firm will not conduct its own independent audit or review, but rather will only
resolve specific differences between B&W and B&W Opco and make a determination
within the range of such differences as set forth in each Submission Notice. In
resolving such differences, the Independent Firm may not
assign a value to an item greater than the greatest value claimed by any party
or less than the smallest value for such item claimed by any party in the
Submission Notice. The fees and disbursements of the Independent Firm will be
allocated equally between B&W and B&W Opco. In acting under this Agreement, the
Independent Firm will be entitled to the privileges and immunities of
arbitrators. The Working Capital Statement will be deemed final, binding and
conclusive on the parties hereto for the purposes of this Section 2.04 upon the
earliest of (A) the failure of B&W to deliver a Notice of Dispute to B&W Opco
pursuant to Section 2.04(b) within 20 business days of B&W Opco's delivery of
the Working Capital Statement to B&W, (B) the resolution of all disputes by B&W
and B&W Opco in accordance with this Section 2.04, (C) the failure by B&W to
deliver a Submission Notice to the Independent Firm in accordance with Section
2.04(c) (provided B&W Opco has delivered a Submission Notice in accordance with
Section 2.04(c)) or (D) the resolution of all the disputed items set forth in
the Submission Notice by the Independent Firm. The Working Capital Statement, as
modified by all adjustments provided for in the Notice of Dispute, will be
deemed final, binding and conclusive on the parties hereto for the purpose of
this Section 2.04 upon failure of B&W Opco to deliver a Submission Notice to the
Independent Firm in accordance with Section 2.04(c) (provided B&W has delivered
a Submission Notice in accordance with Section 2.04(c)). B&W and B&W Opco will
each permit the other party, its agents and the Independent Firm reasonable
access during normal business hours, and on reasonable notice, to all relevant
books and records, computer files, premises and personnel involved in the
preparation of the underlying records and operating systems which generated the
information used in the preparation of the Working Capital Statement, the Notice
of Dispute and the Submission Notice and will permit them to take copies of such
accounts, documents and records at their own expense.
(e) Within five business days of the Working Capital Statement being
deemed final, if the Working Capital of B&W Opco as of the Measurement Time (as
finally determined) is less than the Minimum Required Working Capital Amount as
of the Measurement Time, B&W shall pay to B&W Opco an amount equal to (i) such
Minimum Required Working Capital Amount less such Working Capital plus (ii)
interest on such difference from the date of this Agreement to the date of such
payment at a rate per annum
equal to (A) three-month LIBOR (as reported in The Wall Street Journal
(Northeast edition) or, if not reported therein, in another authoritative source
acceptable to B&W and B&W Opco) on the date of this Agreement (or if no
quotation for three-month LIBOR is available for such date, on the next
preceding date for which such a quotation is available) plus (B) 1.5%.
SECTION 2.05. License of B&W Trademark. From the date of this Agreement
until the second anniversary of the date of this Agreement, B&W hereby grants to
B&W Opco and its Subsidiaries a non-exclusive, non-assignable, royalty-free
license to use the Xxxxx & Xxxxxxxxxx(R) trademark (the "B&W Trademark") on
purchase orders, product labels, packaging materials and all other Contributed
Assets on which the B&W Trademark appears as of the date of this Agreement ("B&W
Packaging"). During such period, Xxxxxxxx American will use the B&W Trademark in
the form and style in which it was used on the B&W Packaging as of the date of
this Agreement (whether alone or in combination with other trademarks) on B&W
Packaging, provided that any such products manufactured by B&W Opco are
manufactured, in all material respects, at the same quality standards maintained
by B&W prior to the Effective Time. Any B&W Packaging not used within the
aforesaid license period shall not thereafter be used by B&W Opco and will be
destroyed at B&W Opco's sole expense unless otherwise agreed to by B&W in
writing.
SECTION 2.06. Transition Support Services. (a) B&W and its affiliates
shall provide B&W Opco with the services described on Schedule 2.06(a) (the "B&W
Services") for the transitional period set forth on such Schedule(1); provided,
however, B&W and its affiliates shall not be obligated to perform any such B&W
Service if and to the extent that such B&W Service (i) has not historically been
provided by B&W in the ordinary course with respect to the B&W Business, or in a
volume substantially greater than that which has been historically provided to
the B&W Business by B&W or such affiliate, (ii) would require B&W to hire any
additional personnel or make any capital expenditures, (iii) is for any
operations of B&W Opco other than in respect of the B&W Business or (iv) would
breach any contract to which B&W is a party or violate any
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(1) Schedule to be prepared prior to Closing.
applicable law to which B&W is subject. B&W Opco will reimburse B&W for the B&W
Services at B&W's fully-allocated costs. During the period in which the B&W
Services are being provided, B&W Opco shall furnish B&W with such information
and other reasonable assistance as is necessary to enable B&W to perform the B&W
Services. Any such information shall be provided by B&W Opco at the same times
and in the same format as previously supplied to B&W by the B&W Business. B&W
Opco shall be responsible for assuring that such information is accurate and
complete. B&W's performance of any B&W Service may be suspended during any
period that B&W Opco fails to provide such information and assistance to the
extent such failure renders performance of such B&W Service by B&W unduly
burdensome. B&W shall not be liable to B&W Opco for any Indemnifiable Losses in
respect of providing any B&W Service absent gross negligence or wilful
misconduct.
(b) B&W Opco and its Subsidiaries shall provide B&W and its affiliates
with the services described on Schedule 2.06(b) (the "B&W Opco Services") for
the transitional period set forth on such Schedule(2); provided, however, B&W
Opco and its Subsidiaries shall not be obligated to perform any such B&W Opco
Service if and to the extent that such B&W Opco Service (i) has not been
historically provided to B&W in the ordinary course of the B&W Business, or in a
volume substantially greater than that which has been historically provided to
B&W and its affiliates prior to the date of this Agreement, (ii) would require
B&W Opco to hire any additional personnel or make any capital expenditures,
(iii) is for any operations of a person other than B&W or any of its affiliates
or (iv) would breach any contract to which B&W Opco is a party or violate any
applicable law to which B&W Opco is subject. B&W will reimburse B&W Opco for the
B&W Opco Services at B&W Opco's fully-allocated costs. During the period in
which the respective Services are being provided, B&W shall furnish B&W Opco
with such information and other reasonable assistance as is necessary to enable
B&W Opco to perform the B&W Opco Services. Any such information shall be
provided by B&W at the same times and in the same format as previously supplied.
B&W shall be responsible for assuring that such information is accurate and
complete. B&W Opco's performance of any B&W Opco Service may be suspended during
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(2) Schedule to be prepared prior to Closing.
any period that B&W fails to provide such information and assistance to the
extent such failure renders performance of such B&W Opco Service by B&W Opco
unduly burdensome. B&W Opco shall not be liable to B&W for any Indemnifiable
Losses in respect of providing any B&W Opco Service absent gross negligence or
wilful misconduct.
SECTION 2.07. Further Assurances. On and after the effectiveness of
this Agreement, B&W shall from time to time, at the request of B&W Opco and at
B&W's expense, execute and deliver, or cause to be executed and delivered, such
other instruments of conveyance and transfer and take such other actions as B&W
Opco may reasonably request, in order to more effectively consummate the
transactions contemplated hereby and to vest in B&W Opco title to the
Contributed Assets.
ARTICLE III
Assumption of Liabilities
SECTION 3.01. Assumption of Liabilities. Upon the effectiveness of this
Agreement, B&W Opco agrees to assume, satisfy, perform, pay and discharge each
of the Assumed Liabilities.
SECTION 3.02. Further Assurances. (a) On and after the effectiveness of
this Agreement, B&W Opco shall from time to time, at the request of B&W, take
such actions as B&W may reasonably request, in order to more effectively
consummate the transactions contemplated hereby, including the assumption of the
Assumed Liabilities by B&W Opco. The parties intend that any payment or accrual
by B&W Opco of any Assumed Liabilities shall be deductible by B&W Opco for all
Tax purposes to the extent provided by applicable law. If B&W Opco receives a
refund or credit or accrues an offset to Tax relating to Pre-Closing Tax
Periods, B&W Opco shall pay to B&W within 20 days of such receipt or accrual the
amount of such refund, credit or offset to Tax.
(b) B&W and B&W Opco shall cooperate in good faith, and shall cause
their respective officers, directors, affiliates, employees, agents, auditors
and representatives to cooperate in good faith, in all matters relating to
Taxes, including by maintaining and making available to each other all books and
records necessary in connection with Taxes.
ARTICLE IV
Employee Matters
SECTION 4.01. Transfer of Employment to B&W Opco. (a) Upon the
effectiveness of this Agreement, (i) B&W Opco shall assume and honor all terms
and conditions of employment (including under any applicable labor or collective
bargaining agreement) in respect of the Employees to the extent required to
accomplish the transfer of employment of the Employees to B&W Opco in connection
with the Asset Contribution and Assumption of Liabilities and (ii) B&W and B&W
Opco agree to take or cause to be taken such actions as are reasonably
practicable (including the assumption, if necessary, of Liabilities relating to
the employment of Employees) such that the employment of the Employees will
transfer to B&W Opco at such time (the "Employment Transfer Time"). B&W Opco
shall offer to employ and continue the employment of each Employee at the same
salary and wages payable by B&W and the Included Subsidiaries to such Employee
immediately prior to the Employment Transfer Time and shall maintain terms and
conditions of employment which replicate those provided by B&W and the Included
Subsidiaries immediately prior to the Employment Transfer Time as and to the
extent required by applicable Law or as a result of negotiation with applicable
unions.
(b) If any Employee requires a work permit or employment pass or other
approval for his or her employment to continue with B&W Opco following the
Employment Transfer Time, B&W Opco shall use its reasonable best efforts to
ensure that any necessary applications are promptly made and to secure the
necessary permit, pass or other approval.
(c) B&W and B&W Opco intend that (i) for purposes of any severance or
termination benefit plan, program, policy, agreement or arrangement of B&W or
any Included Subsidiary, the Transactions shall not constitute a severance of
employment of any Employee prior to or upon the consummation of the Transactions
and (ii) Employees will have continuous and uninterrupted employment immediately
before and immediately after the Employment Transfer Time. B&W Opco shall assume
all Liabilities in respect of claims made by any Employees for severance or
other termination benefits (including claims for wrongful dismissal, notice of
termination of employment or pay in lieu of notice) arising out of, relating to
or in
connection with B&W Opco's failure to offer employment to, or continue the
employment of, any Employee, or failure to offer or continue employment on terms
and conditions which would preclude any claims of constructive dismissal or
similar claims under any applicable Law or other failure to comply with the
terms of this Agreement, or where any such severance or termination benefits are
automatically required to be paid under applicable Law.
SECTION 4.02. Transfer of Benefit Plans. As of the Employment Transfer
Time, B&W Opco shall adopt as the successor plan sponsor, all B&W Benefit Plans
(and, as applicable, any related trusts) and shall assume all of B&W's rights
under such related trusts and all of B&W's Liabilities under the B&W Benefit
Plans (other than Excluded Liabilities), and B&W and B&W Opco shall take all
action reasonably required to effect such adoption and assumption as of the
Employment Transfer Time. Following such adoption and assumption, PLC and its
Subsidiaries shall have no further Liabilities of any kind or description under
the B&W Benefit Plans or their related trusts (except for Excluded Liabilities).
ARTICLE V
Indemnification
SECTION 5.01. Indemnification by B&W Opco and Xxxxxxxx American.
Subject to the provisions of this Article V, from and after the effectiveness of
the Asset Contribution and the Assumption of Liabilities, B&W Opco and Xxxxxxxx
American (but, in the case of Xxxxxxxx American, only with respect to clause (c)
below) shall jointly and severally indemnify, defend and hold harmless the B&W
Indemnitees from and against, and pay or reimburse the B&W Indemnitees for, all
Indemnifiable Losses, as incurred, to the extent:
(a) relating to or arising from the Contributed Assets or the
Assumed Liabilities (including the failure by B&W Opco to pay, perform
or otherwise discharge any of the Assumed Liabilities in accordance
with their terms), whether such Indemnifiable Losses relate to or arise
from events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after the Asset
Contribution and Assumption of Liabilities;
(b) relating to or arising from the Non-Assignable Assets,
whether such Indemnifiable Losses relate to or arise from events,
occurrences, actions, omissions, facts or circumstances occurring,
existing or asserted before, at or after the Asset Contribution and
Assumption of Liabilities; provided, however, that with respect to
Indemnifiable Losses relating to or arising from events, occurrences,
facts or circumstances relating to or arising from actions or omissions
by any B&W Indemnitee occurring after the Asset Contribution and
Assumption of Liabilities, B&W Opco shall not be liable to the extent
such Indemnifiable Losses directly relate to or arise from (i) actions
or omissions by any B&W Indemnitee that are in conflict with any
written instruction from B&W Opco with respect to such Non-Assignable
Asset or (ii) any action taken by B&W with respect to such
Non-Assignable Assets outside the ordinary course of business or that
is finally determined by a court of competent jurisdiction to result
from the gross negligence or wilful misconduct of B&W;
(c) relating to or arising from any untrue or allegedly untrue
statement of a material fact contained in, or incorporated by reference
to, any of the Filings or any omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, but in each case not with respect to statements made
therein or incorporated by reference therein based upon information
supplied in writing by B&W specifically for inclusion or incorporation
by reference therein; provided, however, that the indemnification
provided for in this clause (c) shall only apply to Third Party Claims;
or
(d) the aggregate MSA Liability Amount due and payable with
respect to any period prior to the date of this Agreement and paid by a
B&W Opco Indemnitee on or after such time is less than the Estimated
MSA Liability Amount, with any such payment or payments being made
promptly following the finalization of the various components thereof;
provided, however, that any reduction in such MSA Liability Amount
resulting from any Non-Participating
Manufacturer's adjustment shall not be considered for purposes of this
Section 5.01(d).
SECTION 5.02. Indemnification by B&W. Subject to the provisions of this
Article V, from and after the effectiveness of the Asset Contribution and the
Assumption of Liabilities, B&W shall indemnify, defend and hold harmless the B&W
Opco Indemnitees from and against, and pay or reimburse the B&W Opco Indemnitees
for, all Indemnifiable Losses, as incurred, to the extent:
(a) relating to or arising from the Excluded Assets or the
Excluded Liabilities (including the failure by B&W to pay, perform or
otherwise discharge any of the Excluded Liabilities in accordance with
their terms), whether such Indemnifiable Losses relate to or arise from
events, occurrences, actions, omissions, facts or circumstances
occurring, existing or asserted before, at or after the Asset
Contribution and Assumption of Liabilities (other than Indemnifiable
Losses that relate to or arise from the Non-Assignable Assets);
(b) relating to or arising from the Non-Assignable Assets with
respect to such Indemnifiable Losses relating to or arising from
events, occurrences, facts or circumstances relating to or arising from
actions or omissions by B&W occurring after the Asset Contribution and
Assumption of Liabilities that (i) are in conflict with any written
instruction from B&W Opco with respect to such Non-Assignable Asset or
(ii) are taken outside the ordinary course of business or are finally
determined by a court of competent jurisdiction to result from the
gross negligence or wilful misconduct of B&W;
(c) relating to or arising from any untrue statement of a
material fact contained in, or incorporated by reference to, any of the
Filings or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, but only with respect to statements made therein or
incorporated by reference therein based upon information supplied in
writing by B&W specifically for inclusion or incorporation by reference
therein; provided, however, that the
indemnification provided for in this clause (c) shall only apply to
Third Party Claims; or
(d) the aggregate MSA Liability Amount due and payable with
respect to any period prior to the date of this Agreement and paid by a
B&W Opco Indemnitee on or after the date of this Agreement is greater
than the Estimated MSA Liability Amount, with any such payment or
payments being made promptly following the finalization of the various
components thereof.
SECTION 5.03. Procedures Relating to Indemnification. (a) In order for
an Indemnitee to be entitled to any indemnification provided for under this
Agreement in respect of, arising out of or involving a claim made by any Person
who is not an Indemnitee against such Indemnitee (a "Third Party Claim"), such
Indemnitee must notify the party who may become obligated to provide
indemnification hereunder (the "Indemnifying Party") in writing, and in
reasonable detail, of the Third Party Claim reasonably promptly, and in any
event within 20 days after receipt by such Indemnitee of written notice of the
Third Party Claim; provided, however, that failure to give such notification
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually and materially prejudiced as a
result of such failure; provided, further, however, that no such notice shall
need to be given by any B&W Indemnitee with respect to Third Party Claims
arising as a result of any Action pending as of the date of this Agreement.
After any required notification (if applicable), the Indemnitee shall deliver to
the Indemnifying Party, promptly after the Indemnitee's receipt thereof, copies
of all notices and documents (including court papers) received by the Indemnitee
relating to the Third Party Claim.
(b) If a Third Party Claim is made against an Indemnitee, the
Indemnifying Party shall be entitled to participate in the defense thereof and,
if it so chooses, to assume the defense thereof (at the expense of the
Indemnifying Party) with counsel selected by the Indemnifying Party and
reasonably satisfactory to the Indemnitee; provided, however, that (i) the
Indemnifying Party shall not be entitled to assume such defense unless it first
acknowledges in writing its obligation hereunder to indemnify the Indemnitee
with respect to all material elements of such Third Party Claim and (ii) the
Indemnifying Party shall not be entitled to assume the defense of a Third Party
Claim if (but only to the extent that) the Indemnitee reasonably determines that
it has defenses, claims or positions that are unique, separate or distinct from
the defenses, claims or positions that might be available to other Persons
relating to such Third Party Claim (such as jurisdictional defenses). Except as
set forth below, should the Indemnifying Party so elect to assume the defense of
a Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee
for any legal expenses subsequently incurred by the Indemnitee in connection
with the defense thereof. If the Indemnifying Party assumes such defense, the
Indemnitee shall have the right to participate, at its own expense, in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party, it being understood that the
Indemnifying Party shall control such defense; provided, however, that an
Indemnitee may reassume control of any defense if the Indemnitee reasonably
believes that the Indemnifying Party does not have the financial capability to
fully indemnify the Indemnitee for the Indemnifiable Losses that may be incurred
by the Indemnitee as a result of the applicable Third Party Claim or if the
Indemnifying Party fails to diligently prosecute the defense of such Third Party
Claim within 20 calendar days after receipt of written notice of such failure to
prosecute by the Indemnitee. The Indemnifying Party shall be liable for the
reasonable fees and expenses of counsel
employed by the Indemnitee (i) for any period during which the Indemnifying
Party has not assumed the defense thereof, (ii) as a result of the retention of
control pursuant to the proviso to the first sentence of this Section 5.03(b) or
(iii) following the reassumption of control of any defense pursuant to the
proviso to the preceding sentence. Notwithstanding the foregoing, the
Indemnifying Party shall not be entitled to assume the defense of any Third
Party Claim if the Third Party Claim seeks an order, injunction or other
equitable relief or relief for other than money damages against the Indemnitee
which the Indemnitee reasonably determines cannot be separated from any related
claim for money damages. If such equitable or other relief portion of the Third
Party Claim can be so separated from that for money damages, the Indemnifying
Party shall be entitled to assume the defense of the portion relating to money
damages and, in such event, the Indemnifying Party shall continue to be liable
for the reasonable fees and expenses of counsel employed by the Indemnitee with
respect to the portion of the defense of such Third Party Claim that the
Indemnifying Party has not assumed. The indemnification required by Section 5.01
or 5.02, as the case may be, shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when invoices
are received or the Indemnifiable Loss is incurred. If the Indemnifying Party
chooses to defend or prosecute a Third Party Claim (i) all the parties hereto
reasonably necessary or appropriate for such defense or prosecution shall
cooperate in the defense or prosecution thereof, which cooperation shall include
the retention and (upon the Indemnifying Party's request) the provision to the
Indemnifying Party of records and information which are reasonably relevant to
such Third Party Claim, (ii) the Indemnifying Party shall keep the Indemnitee
reasonably informed of all significant developments in connection with the
defense or prosecution of such Third Party Claim and (iii) the Indemnitee shall
agree to any settlement, compromise or discharge of such Third Party Claim which
the Indemnifying Party may recommend (after representing to the Indemnitee that
such settlement is reasonably likely to be acceptable to the parties to the
Third Party Claim) and which by its terms obligates the Indemnifying Party to
pay the full amount of Liability of the Indemnitee in connection with such Third
Party Claim; provided, however, that, unless the Indemnitee in its sole
discretion otherwise consents in writing, the Indemnifying Party shall not
consent to entry of any Judgment or enter into any settlement (x) that provides
for injunctive or other nonmonetary relief affecting the Indemnitee or any of
its affiliates (other than the Indemnifying Party and its Subsidiaries) or their
respective properties or (y) that does not include as an unconditional term
thereof the giving by each claimant or plaintiff to such Indemnitee of a release
from all Liability with respect to such claim. If the Indemnifying Party shall
have assumed the defense of a Third Party Claim, the Indemnitee shall not admit
any Liability with respect to, or settle, compromise or discharge, such Third
Party Claim without the Indemnifying Party's prior written consent.
(c) In order for an Indemnitee to be entitled to any indemnification
provided for under this Agreement in respect of a claim that does not involve a
Third Party Claim, the Indemnitee shall deliver notice of such claim (in
reasonably sufficient detail to enable the Indemnifying
Party to evaluate such claim) with reasonable promptness to the Indemnifying
Party. The failure by any Indemnitee to give such notification shall not affect
the indemnification provided hereunder except to the extent that the
Indemnifying Party shall have been actually and materially prejudiced as a
result of such failure. If the Indemnifying Party has disputed its Liability
with respect to such claim the Indemnifying Party and the Indemnitee shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations, such dispute shall be resolved by litigation,
subject to the provisions of Section 6.09, in an appropriate court of competent
jurisdiction.
SECTION 5.04. Certain Limitations. (a) The amount of any Indemnifiable
Losses or other Liability for which indemnification is provided under this
Agreement shall be net of any amounts actually recovered by the Indemnitee from
third parties (including amounts actually recovered under insurance policies)
with respect to such Indemnifiable Losses. The Indemnitee shall use its
reasonable best efforts to seek to obtain recovery in respect of any
Indemnifiable Loss or such other Liability under any available insurance policy.
(b) Any indemnification payments made pursuant to this Agreement shall
be treated for all Tax purposes (i) as to the Indemnitee, as nontaxable
reimbursements or capital contributions, as the case may be, and (ii) as to the
Indemnifying Party, as deductible payments to the extent provided by applicable
law, unless, and then only to the extent, otherwise required by a Final
Determination. If an indemnification payment made pursuant to this Agreement is
treated as a taxable payment as a result of a Final Determination, such
indemnification payment shall be (i) reduced to take account of the present
value of any net Tax benefit actually realized by the Indemnitee in connection
with or otherwise arising from the incurrence of the applicable Indemnifiable
Loss and (ii) increased to take account of any net Tax cost incurred by the
Indemnitee as a result of the receipt of such indemnification payment (grossed
up for such increase).
SECTION 5.05. Limitation on Transfer of B&W Opco Assets. (a) B&W Opco
shall not consolidate with or merge with or into, or convey, transfer or lease,
in one transaction or a series of transactions, directly or indirectly, all or
substantially all its assets to, any
Person, unless the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of the United
States of America, any State thereof or the District of Columbia and the
Successor Company (if not B&W Opco) shall expressly assume all the obligations
of B&W Opco under this Agreement. Any such assumption shall be in writing and in
form and substance reasonably satisfactory to B&W. For purposes of this Section
5.05(a), the sale, lease, conveyance, assignment, transfer or other disposition
of all or substantially all of the properties and assets of one or more
Subsidiaries of B&W Opco, which properties and assets, if held by B&W Opco
instead of such Subsidiaries, would constitute all or substantially all of the
properties and assets of B&W Opco on a consolidated basis, shall be deemed to be
the transfer of all or substantially all of the properties and assets of B&W
Opco. Notwithstanding the foregoing, the obligations of B&W Opco under this
Agreement shall not be terminated as a result of any such assumption.
(b) B&W Opco shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, consummate any Asset Disposition unless B&W Opco or
such Subsidiary receives consideration at the time of such Asset Disposition
that has a fair market value at least equal to the fair market value (including
as to the value of all non-cash consideration) of the shares and assets subject
to such Asset Disposition. In the event that the value of the shares and assets
subject to such Asset Disposition exceeds $20,000,000, the fair market value of
such shares and assets shall be determined in good faith by the Board of
Directors of Xxxxxxxx American.
(c) B&W Opco shall not, and shall not permit any of its Subsidiaries,
directly or indirectly, to make a Restricted Payment if at the time B&W Opco or
such Subsidiary makes such Restricted Payment the Consolidated Net Worth
(adjusted to give effect to any such Restricted Payment) would be less than
$[ ](3).
----------
(3) To be equal to 75% of the Consolidated Net Worth of B&W Opco and
its Subsidiaries, after giving effect to the Transactions (including the merger
of RJR-T into B&W Opco and the SF Distribution), subject to reduction in the
event the Xxxxxxxx American Loan is repaid.
(d) The limitations set forth in this Section 5.05 shall terminate in
the event that Xxxxxxxx American has expressly assumed all of the obligations of
B&W Opco under this Agreement. Any such assumption shall be in writing and in
form and substance reasonably satisfactory to B&W. Notwithstanding the
foregoing, the obligations of B&W Opco under this Agreement (other than under
this Section 5.05) shall not be terminated as a result of any such assumption.
ARTICLE VI
Miscellaneous
SECTION 6.01. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to B&W or B&W Opco (prior to completion of the B&W Opco
Stock Contribution), to
000 Xxxxx 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to:
Cravath, Swaine & Xxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxxxx, Esq.
(b) if to Xxxxxxxx American or B&W Opco (after the completion
of the B&W Opco Stock Contribution), to
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxx Day
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
SECTION 6.02. Amendments; Waivers. (a) No provision of this Agreement
may be amended or waived unless such amendment or waiver is in writing and
signed, in the case of an amendment, by the parties hereto, or in the case of a
waiver, by the party against whom the waiver is to be effective.
(b) The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of such
rights nor shall any single or partial exercise by any party to this Agreement
of any of its rights under this Agreement preclude any other or further exercise
of such rights or any other rights under this Agreement. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law or otherwise.
SECTION 6.03. Interpretation. When a reference is made in this
Agreement to a Section, Subsection, Schedule or Exhibit, such reference shall be
to a Section or Subsection of, or a Schedule or an Exhibit to, this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein", "hereby" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The words "date hereof" shall refer to the date of this Agreement.
The term "or" is not exclusive. The word "extent" in the phrase "to the extent"
shall mean the
degree to which a subject or other thing extends, and such phrase shall not mean
simply "if". The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. Any agreement or instrument
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement or instrument as from time to time amended,
modified or supplemented. References to a Person are also to its permitted
successors and assigns. This Agreement, including the provisions of Article V,
shall not be strictly construed against any Indemnitee seeking to enforce any
indemnification rights under this Agreement.
SECTION 6.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect 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 determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the Transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 6.05. Counterparts; Effectiveness. This Agreement may be
executed in one or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties; provided,
however, that the rights and obligations of Xxxxxxxx American under this
Agreement shall not become effective until the completion of the B&W Opco Stock
Contribution. This Agreement and the obligations set forth herein shall remain
in effect following consummation of the Transactions and shall not terminate
unless and until each of the parties hereto has agreed to such termination in
writing.
SECTION 6.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the other Transaction Agreements constitute the entire agreement,
and supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter
hereof and thereof and, except for Article V, are not intended to confer upon
any Person other than the parties any rights or remedies.
SECTION 6.07. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 6.08. Assignment. Except as set forth in Section 5.05(a),
neither this Agreement nor any of the rights, interests or obligations under
this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise, by any of the parties without the prior written consent of the other
parties hereto, except that B&W may assign, in its sole discretion, any of or
all its rights, interests and obligations under this Agreement to [PLC] or any
of its Subsidiaries that agrees in writing to be bound by the provisions hereof
(provided that any such assignment shall not relieve B&W from its obligations
under this Agreement). Any purported assignment without such prior written
consent shall be void. Subject to the preceding sentences, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and assigns.
SECTION 6.09. Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in the Chancery Court of the State of Delaware, this being
in addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any Federal court located in the State of Delaware or
Chancery Court of the State of Delaware in the event any dispute arises out of
this Agreement or any Transaction, (b) agrees that it will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave from
any such court, (c) irrevocably and unconditionally waives (and agrees not to
plead or claim) any objection to the laying of venue of any action, suit or
proceeding
arising out of this Agreement or any Transaction, (d) agrees that it will not
bring any action relating to this Agreement or any Transaction in any court
other than any Federal court sitting in the State of Delaware or Chancery Court
of the State of Delaware (provided that this Section 6.09(d) shall not apply in
respect of any claim for indemnification in respect of any Third Party Claim
that is brought in any other court, in which case, such an action may be brought
in such other court) and (e) waives any right to trial by jury with respect to
any action related to or arising out of this Agreement or any Transaction.
SECTION 6.10. Confidentiality. (a) B&W agrees to maintain, and B&W
shall cause its directors, officers, employees and other representatives to
maintain, the confidentiality of all material non-public information obtained by
B&W from Xxxxxxxx American or any of its Subsidiaries or their respective
directors, officers, employees or agents in connection with this Agreement.
(b) Notwithstanding the foregoing, the confidentiality obligations of
Section 6.10(a) will not apply to information obtained other than in violation
of this Agreement:
(i) which B&W or any of its directors, officers, employees or
other representatives is required to disclose by judicial or
administrative process, or by other requirements of applicable law or
regulation or any governmental authority; provided, however, that,
where and to the extent practicable, B&W (A) will give B&W Opco and
Xxxxxxxx American reasonable notice of any such requirement and, to the
extent protective measures consistent with such requirement are
available, the opportunity to seek appropriate protective measures and
(B) will cooperate with B&W Opco and Xxxxxxxx American in attempting to
obtain such protective measures;
(ii) which becomes available to the public other than as a
result of a breach of Section 6.10(a); or
(iii) which has been provided to B&W or any of its officers,
employees or other representatives by a third party other than from
Xxxxxxxx American or any of its Subsidiaries or their respective
directors, officers, employees or agents whom B&W reasonably
believes obtained such information in breach of a contractual or
fiduciary obligation to B&W Opco.
(c) Notwithstanding anything herein to the contrary, any party to this
Agreement (and any employee, representative or other agent of such party) may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated by this Agreement
and all materials of any kind (including opinions or other tax analyses) that
are provided to it relating to such tax treatment and tax structure, except that
(i) this provision shall not permit disclosure until the earliest of (A) the
date of the public announcement of discussions relating to the transaction, (B)
the date of the public announcement of the transaction or (C) the date of the
execution of an agreement (with or without conditions) to enter into the
transaction, (ii) tax treatment and tax structure shall not include the identity
of any existing or future party (or any affiliate of such party) to this
Agreement and (iii) this provision shall not permit disclosure to the extent
that nondisclosure is necessary in order to comply with applicable securities
laws. Nothing in this Agreement shall in any way limit any party's ability to
consult any tax advisor (including a tax advisor independent from all other
entities involved in the transactions contemplated by this Agreement) regarding
the tax treatment or tax structure of the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Formation
Agreement as of the day and year first above written.
XXXXX & XXXXXXXXXX TOBACCO CORPORATION
By_________________________________________
Name:
Title:
B&W OPCO
By_________________________________________
Name:
Title:
XXXXXXXX AMERICAN INC.
By_________________________________________
Name:
Title:
EXHIBIT E
NON-COMPETITION AGREEMENT (this "Agreement"), dated as of /-/, 200[ ],
between XXXXXXXX AMERICAN INC., a North Carolina corporation ("Xxxxxxxx
American") and BRITISH AMERICAN TOBACCO P.L.C., a public limited company
organized under the laws of England and Wales ("BAT").
RECITALS:
X. Xxxxxxxx American, Xxxxx & Xxxxxxxxxx Tobacco Corporation, a
Delaware corporation and wholly-owned subsidiary of BAT ("B&W"), and X.X.
Xxxxxxxx Tobacco Holdings, Inc., a Delaware corporation ("RJR"), have entered
into a
Business Combination Agreement, dated as of October 27, 2003
("Combination Agreement"), pursuant to which each of B&W and RJR and certain of
their affiliates have agreed to engage in a series of transactions resulting in
the combination of RJR and the U.S. tobacco business of B&W.
B. As a condition to the consummation of the transactions contemplated
by the Combination Agreement, the parties hereto have agreed to enter into this
Agreement.
C. Capitalized terms used herein and not otherwise defined in this
Agreement shall have the meanings ascribed to such terms in the Combination
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement, the consummation of the
transactions contemplated by the Combination Agreement and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
"BAT Restricted Business" means the sale, distribution or other
transfer for sale of BAT Restricted Products in the BAT Restricted Territory,
but does not include (a) the continuation of any arrangements existing as of the
date of the Combination Agreement relating to the manufacture of BAT Restricted
Products for, and sale to, third parties who own or have rights to use the
intellectual property associated with the brand of BAT Restricted Products to be
manufactured as long as such products are not also sold, distributed or
otherwise transferred for sale by BAT or any of its Controlled Affiliates or (b)
the manufacture of BAT Restricted Products in the BAT Restricted
Territory by Xxxxxxxx American or any of its Controlled Affiliates on behalf of
BAT or any of its Controlled Affiliates as long as those products are not also
sold, distributed or otherwise transferred for sale in the BAT Restricted
Territory.
"BAT Restricted Period" means the period beginning on the date of this
Agreement and ending on the 10th anniversary of the date of this Agreement.
"BAT Restricted Products" means manufactured cigarettes, "roll your
own" cigarette tobacco, cigars, cigarillos and pipe tobacco.
"BAT Restricted Territory" means the United States.
"B&W Business" means the business acquired by Xxxxxxxx American from
B&W pursuant to the Combination Agreement.
"Control" means beneficial or record ownership of a majority of the
voting power of the equity securities having the right to vote generally for the
election or removal of directors, managers or members of a similar governing
body of the entity being Controlled or the right to appoint or remove a majority
of the members of such governing body. As used herein, "control" has the common
meaning associated with such term and, may include, but is not limited to, the
meaning assigned to the term "Control."
"Controlled Affiliate" means, with respect to any entity, any other
entity directly or indirectly Controlled by such person but, with respect to
BAT, does not include Xxxxxxxx American or any of its Controlled Affiliates.
"Manufacturing Intellectual Property" means all patents, patent
applications, inventions, trade secrets, proprietary processes, databases,
software, and formulae, and all other proprietary technical information,
know-how and processes, whether registered, patentable or unpatentable, in each
case to the extent such manufacturing intellectual property was available for
use in the B&W Business on or prior to the date of this Agreement. For the
avoidance of doubt, Manufacturing Intellectual Property shall not include
service marks and service xxxx applications, trademarks and trademark
applications, trade dress, logos and slogans.
"Xxxxxxxx American Restricted Business" means the sale, distribution or
other transfer for sale of Xxxxxxxx American Restricted Products in the Xxxxxxxx
American Restricted
- 2 -
Territory, but does not include (a) the sale, distribution or other transfer for
sale of Xxxxxxxx American Restricted Products at duty free shops in the United
States and United States military bases anywhere in the world, (b) the
manufacture of Xxxxxxxx American Restricted Products for, and sale to, third
parties who own or have rights to use the intellectual property associated with
the brand of Xxxxxxxx American Restricted Products to be manufactured as long as
such products are not also sold, distributed or otherwise transferred for sale
by Xxxxxxxx American or any of its Controlled Affiliates, or (c) the manufacture
of Xxxxxxxx American Restricted Products in the Xxxxxxxx American Restricted
Territory as long as those products are not also sold, distributed or otherwise
transferred for sale in the Xxxxxxxx American Restricted Territory.
"Xxxxxxxx American Restricted Period" means the period beginning on the
date of this Agreement and ending on the 5th anniversary of the date of this
Agreement.
"Xxxxxxxx American Restricted Products" means manufactured cigarettes
and "roll your own" cigarette tobacco, cigars, cigarillos and pipe tobacco.
"Xxxxxxxx American Restricted Territory" means any place in the world
outside of the United States.
"Santa Fe" means Santa Fe Natural Tobacco Company, Inc., a New Mexico
corporation and a wholly-owned subsidiary of Xxxxxxxx American.
"Santa Fe Brands" means the brands "American Spirit," "Natural American
Spirit" and any natural extension thereof.
"Santa Fe Restricted Territory" means any country other than the
countries listed on Exhibit A.
"United States" means the United States of America and its territories
and possessions.
2. BAT Noncompete.
(a) Except as provided in Section 2(b) or 2(c) of this Agreement,
during the BAT Restricted Period, BAT will not, and will cause its Controlled
Affiliates not to, directly or indirectly, engage in, carry on, own, lease,
manage, operate, control, share any revenues of or have any profit or other
equity interest in any business or entity engaged in the BAT Restricted
Business.
- 3 -
(b) Notwithstanding anything to the contrary in this Section 2, BAT and
any of its Controlled Affiliates may own beneficially or of record (i)
securities of Xxxxxxxx American, (ii) a non-Controlling interest in Skandinavisk
Tobakskampagni AS (Denmark), ITC Ltd. (India) and VST Industries Ltd. (India),
and (iii) no more than five percent of the issued and outstanding capital stock
or equity interests of an entity which has issued securities that are publicly
traded and which is engaged in the BAT Restricted Business.
(c) Notwithstanding anything to the contrary in this Section 2, BAT
will not be in violation of this Section 2 for any sale, distribution or other
transfer for sale of BAT Restricted Products in any jurisdiction if such BAT
Restricted Products (i) do not satisfy all applicable packaging and labeling
requirements in such jurisdiction or (ii) do satisfy all applicable packaging
and labeling requirements in such jurisdiction but are present in such
jurisdiction (A) by means and persons beyond the control of BAT and its
Controlled Affiliates and (B) contrary to representations of the known customers
of BAT and its Controlled Affiliates. In addition to the exceptions provided in
the preceding sentence or otherwise in this Section 2, BAT will not be in
violation of this Section 2 for sales, distribution or transfers for sale of BAT
Restricted Products in the BAT Restricted Territory that do not exceed in the
aggregate 2 billion individual cigarettes in any calendar year, including any
such sale, distribution or transfer for sale that is known or controllable by
BAT and its Controlled Affiliates.
(d) BAT acknowledges and agrees that the foregoing restrictions are
reasonable given the nature of the transactions contemplated by the Combination
Agreement.
3. Xxxxxxxx American Noncompete.
(a) Except as provided in Section 3(b) or 3(c) of this Agreement,
during the Xxxxxxxx American Restricted Period, Xxxxxxxx American will not, and
will cause its Controlled Affiliates not to, directly or indirectly, engage in,
carry on, own, lease, manage, operate, control, share any revenues of or have
any profit or other equity interest in any business or entity engaged in the
Xxxxxxxx American Restricted Business.
(b) Notwithstanding anything to the contrary in this Section 3, (i)
Xxxxxxxx American and any of its Controlled Affiliates may own beneficially or
of record no more than five percent of the issued and outstanding capital stock
or equity
- 4 -
interests of an entity which has issued securities that are publicly traded and
which is engaged in the Xxxxxxxx American Restricted Business, (ii) Xxxxxxxx
American will not be in violation of this Section 3 solely as a result of (A)
Xxxxxxxx American's relationship with X.X. Xxxxxxxx-Xxxxxxxx International Sarl,
a Swiss limited liability company ("JV"), (B) JV's business, or (C) if the JV
has been terminated, the manufacture, sale, marketing or distribution of a brand
listed on Exhibit C in any country listed on Exhibit B in which the JV was
distributing such brand prior to termination of the JV; provided, however, that,
for purposes of this clause (ii), Xxxxxxxx American and its Controlled
Affiliates will not contribute or license or otherwise transfer any additional
brands to the JV, except to the extent required by the agreements relating to
the JV (as in effect on the date hereof); and (iii) Santa Fe may sell,
distribute or otherwise transfer for sale Xxxxxxxx American Restricted Products
under the Santa Fe Brands in the countries listed on Exhibit A and, subject to
compliance with Section 6, may sell, distribute or otherwise transfer for sale
Xxxxxxxx American Restricted Products under the Santa Fe Brands in the Santa Fe
Restricted Territory.
(c) Notwithstanding anything to the contrary in this Section 3,
Xxxxxxxx American will not be in violation of this Section 3 for any sale,
distribution or other transfer for sale of Xxxxxxxx American Restricted Products
in any jurisdiction if such Xxxxxxxx American Restricted Products (i) do not
satisfy all applicable packaging and labeling requirements in such jurisdiction
or (ii) do satisfy all applicable packaging and labeling requirements in such
jurisdiction but are present in such jurisdiction (A) by means and persons
beyond the control of Xxxxxxxx American and its Controlled Affiliates and (B)
contrary to representations of the known customers of Xxxxxxxx American and its
Controlled Affiliates. In addition to the exceptions provided in the preceding
sentence or otherwise in this Section 3, Xxxxxxxx American will not be in
violation of this Section 3 for sales, distribution or transfers for sale of
Xxxxxxxx American Restricted Products in the Xxxxxxxx American Restricted
Territory that do not exceed in the aggregate 2 billion individual cigarettes in
any calendar year, including any such sale, distribution or transfer for sale
that is known or controllable by Xxxxxxxx American and its Controlled
Affiliates.
(d) Xxxxxxxx American acknowledges and agrees that the foregoing
restrictions are reasonable given the nature of the transactions contemplated by
the Combination Agreement.
- 5 -
4. BAT Nonsolicitation. Without the prior written consent of Xxxxxxxx American,
for a period of two years following the date of this Agreement, BAT will not,
and will cause its Controlled Affiliates not to, directly or indirectly, on
behalf of itself or any other person, recruit or otherwise solicit for
employment or employ any officer, or other employee of Xxxxxxxx American or any
of its Controlled Affiliates whose salary and bonus exceeded $200,000 in the
year prior to the date of such solicitation or employment (or, the proportionate
amount of $200,000 if, and to the extent that, any such officer or employee is
employed by Xxxxxxxx American or such Controlled Affiliate for only a portion of
the year), provided, that the foregoing provision shall not prevent BAT or any
of its Controlled Affiliates from hiring any such person who contacts BAT on his
or her own initiative without any direct or indirect solicitation from BAT or
any of its Controlled Affiliates, and provided further, that the foregoing
provision shall not prohibit (a) any advertisement or general solicitation (or
any hiring pursuant thereto) that is not specifically targeted at such persons
or (b) the solicitation or employment of any person who is not employed by
Xxxxxxxx American or any of its Controlled Affiliates on the date BAT or any of
its Controlled Affiliates first solicits him or her.
5. Xxxxxxxx American Nonsolicitation. Without the prior written consent of BAT,
for a period of two years following the date of this Agreement, Xxxxxxxx
American will not, and will cause its Controlled Affiliates not to, directly or
indirectly, on behalf of itself or any other person, recruit or otherwise
solicit for employment or employ any officer, or other employee of BAT or any of
its Controlled Affiliates whose salary and bonus exceeded $200,000 (or pounds
sterling equivalent) in the year prior to the date of such solicitation or
employment (or, the proportionate amount of $200,000 (or pounds sterling
equivalent) if, and to the extent that, any such officer or employee is employed
by BAT or such Controlled Affiliate for only a portion of the year), provided,
that the foregoing provision shall not prevent Xxxxxxxx American or any of its
Controlled Affiliates from hiring any such person who contacts Xxxxxxxx American
or any of its Controlled Affiliates on his or her own initiative without any
direct or indirect solicitation from Xxxxxxxx American or any of its Controlled
Affiliates, and provided further, that the foregoing provision shall not
prohibit (a) any advertisement or general solicitation (or any hiring pursuant
thereto) that is not specifically targeted at such persons or (b) the
solicitation or employment of any person who is not employed by BAT or any of
its Controlled Affiliates on the date
- 6 -
Xxxxxxxx American or any of its Controlled Affiliates first solicits him or her.
6. BAT Right of First Refusal. Prior to entering into any distribution agreement
with a third party for the distribution of Santa Fe Brands in any country in the
Santa Fe Restricted Territory, Xxxxxxxx American will cause Santa Fe to submit a
written proposal (the "Notice") to BAT identifying (i) the country as to which
Santa Fe wishes to enter into a distribution agreement, (ii) the products Santa
Fe wishes to distribute in such country, (iii) the distribution capability
required by Santa Fe for distribution in such country, and (iv) the material
terms and conditions of such proposed distribution agreement. Within 20 calendar
days after receiving the Notice, BAT will send to Xxxxxxxx American its written
response (a "Response") to such offer indicating either (A) acceptance of the
terms of such Notice or (B) rejection of the terms of such Notice. Failure to
deliver a Response within 20 calendar days of receiving the Notice shall
constitute the delivery of a Response rejecting the Notice. In the event the
Notice is rejected, Xxxxxxxx American or one of its Controlled Affiliates may
enter into a distribution agreement with a third party on terms and conditions
not materially more favorable to the third party than the terms and conditions
set forth in the Notice and neither BAT nor any of its Controlled Affiliates
will have any further rights under this Section 6(b) with respect to the
distribution of the products identified in the Notice in the country identified
in the Notice.
7. Xxxxxxxx American Right of First Refusal for B&W Sourcing in United States.
(a) [As long as B&W or its affiliates maintain a 25% ownership interest in
Xxxxxxxx American, Xxxxxxxx American to have a right of first refusal to
manufacture US-sourced cigarettes (with pricing and other terms not materially
less favorable than alternative US manufacturing sources.](1)
(b) Nothing in this Section 7 shall be deemed to permit B&W to
manufacture tobacco products in the United States if such activity would
otherwise be prohibited by Section 2.
8. Covenants Not to Xxx.
(a) BAT shall not, and shall cause its Controlled Affiliates not to,
threaten, bring, commence, prosecute or maintain any suit, action, filing, or
administrative proceeding, either at law or at equity, in any court,
administrative agency,
--------
(1) Parties to agree on exact language prior to Closing.
- 7 -
or elsewhere against Xxxxxxxx American or any of its Controlled Affiliates or
any of their respective divisions, customers, successors, assigns, or anyone
acting on their behalf (collectively, the "Xxxxxxxx American Parties"), on
account of, arising from, growing out of, related to, or in any way connected
with the use by the Xxxxxxxx American Parties of any Manufacturing Intellectual
Property.
(b) Xxxxxxxx American shall not, and shall cause its Controlled
Affiliates not to, threaten, bring, commence, prosecute or maintain any suit,
action, filing, or administrative proceeding, either at law or at equity, in any
court, administrative agency, or elsewhere against BAT or any of its Controlled
Affiliates or their respective divisions, customers, successors, assigns, or
anyone acting on their behalf (collectively, the "B&W Parties"), on account of,
arising from, growing out of, related to, or in any way connected with the use
by the B&W Parties of the Manufacturing Intellectual Property.
9. Term. This Agreement shall become effective on the date of this Agreement and
shall continue until:
(a) in the case of Section 2, to the end of the BAT Restricted Period;
(b) in the case of Section 3, to the end of the Xxxxxxxx American
Restricted Period;
(c) in the case of Sections 4 and 5, to the second anniversary of the
date of this Agreement;
(d) in the case of Section 6 until [insert agreed upon date][or][such
time as BAT and its Controlled Affiliates no longer beneficially own at least
[ ]% [insert agreed upon percentage] of the equity securities of Xxxxxxxx
American entitled to vote generally for the election of directors];(2)
(e) in the case of Section 7 until such time as BAT and its Controlled
Affiliates no longer beneficially own at least 25% of the equity securities of
Xxxxxxxx American entitled to vote generally for the election of directors; and
(f) in the case of Sections 1 and 8 through 17, indefinitely.
--------
(2) Parties to agree on language prior to Closing.
- 8 -
10. Extension of Restricted Period. In the event of a breach or violation by any
party of the restrictions set forth in this Agreement, the Restricted Period
shall be extended by the same amount of time which elapses from the commencement
of such breach or violation until such breach or violation has been cured.
11. General Provisions.
(a) Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) if to BAT, to:
British American Tobacco p.l.c.
Xxxxx Xxxxx
0 Xxxxxx Xxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Fax: 00 000 000 0000
Phone:
Attention: Company Secretary
with a copy to:
Cravath, Swaine & Xxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxxxx, Esq.
(ii) if to Xxxxxxxx American, to:
Xxxxxxxx American Inc.
[Address]
Fax:
Phone:
Attention:
- 9 -
with a copy to:
Xxxxx Day
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
12. Interpretation. When a reference is made in this Agreement to a Section,
Subsection or Exhibit, such reference shall be to a Section or Subsection of, or
an Exhibit to, this Agreement unless otherwise indicated. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof" and "herein" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
term "or" is not exclusive. The definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms. Any
agreement or instrument defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement or instrument as from
time to time amended, modified or supplemented. References to a person are also
to its permitted successors and assigns.
13. Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule or Law, or public policy, all
other provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the restrictions
contemplated hereby is not affected in any manner materially adverse to any
party.
14. Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
15. Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and
- 10 -
is not intended to confer upon any person other than the parties any rights or
remedies.
16. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
The parties hereto hereby declare that it is their intention that this Agreement
shall be regarded as made under the laws of the State of Delaware and that the
laws of said State shall be applied in interpreting its provisions in all cases
where legal interpretation shall be required.
17. Enforcement; Service of Process. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any Federal court located in the
State of Delaware or in the Court of Chancery of the State of Delaware, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto irrevocably and unconditionally
(a) consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or the Court of Chancery of the State of
Delaware in the event any dispute arises out of this Agreement, (b) agrees that
it will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, (c) irrevocably and unconditionally
waives (and agrees not to plead or claim) any objection to the laying of venue
of any action, suit or proceeding arising out of this Agreement or any
Transaction, (d) agrees that it will not bring any action relating to this
Agreement in any court other than any Federal court sitting in the State of
Delaware or the Court of Chancery of the State of Delaware, (e) waives any right
to trial by jury with respect to any action related to or arising out of this
Agreement, and (f) agrees that this Agreement involves at least $100,000 and has
been entered into by the parties hereto in express reliance upon 6 Del. C.
Section 2708.
18. Assignment. Neither this Agreement nor any of the rights or obligations
under this Agreement shall be assigned, in whole or in part, by operation of law
or otherwise, by any of the parties without the prior written consent of the
other parties hereto. Any purported assignment without such prior written
consent shall be void. Subject to the preceding sentences, this
- 11 -
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns.
- 12 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
XXXXXXXX AMERICAN INC.
By:
Name:___________________________________
Title:__________________________________
BRITISH AMERICAN TOBACCO P.L.C.
By:
Name:___________________________________
Title:__________________________________
- 13 -
EXHIBIT A
SANTA FE TERRITORIES
Australia
Austria
Germany
Japan
Netherlands
Switzerland
United Kingdom
United States
- 14 -
EXHIBIT B
JV TERRITORIES
Principality of Andorra
Kingdom of Belgium
Channel Islands of Jersey and Guernsey
Kingdom of Denmark
Republic of Estonia
Republic of Finland
French Republic
Federal Republic of Germany
Gibraltar
Hellenic Republic
Republic of Iceland
Ireland
Isle of Man
Italian Republic (including Sicily and Sardinia)
Japan
Republic of Latvia
Principality of Liechtenstein
Republic of Lithuania
Grand Duchy of Luxembourg
Principality of Monaco
Kingdom of the Netherlands
Kingdom of Norway
Portuguese Republic (including Madeira)
Republic of San Marino
Kingdom of Spain (including the Canary and Balearic Islands)
Kingdom of Sweden
Swiss Confederation
United Kingdom of Great Britain and Northern Ireland (including England,
Scotland, Wales, Northern Ireland, the Hebrides, Orkney, the Shetland
Islands, Isle of Wight, Anglesey, and the Isles of Scilly)
- 15 -
EXHIBIT C
CURRENT JV BRANDS
Xxxxxxxx
RJR
Action Pak
Austin
Gyro
XxXxx
Mondo
Redston
Ritual
Rockland
Sedona
Slide-O-Matic
Tribeca
Tukish Gold
Turkish Jade
Zuni
- 16 -
EXHIBIT F
GOVERNANCE AGREEMENT, dated as of /-/,
200[ ] (this "Agreement"), among BRITISH AMERICAN
TOBACCO p.l.c., a public limited company incorporated
under the laws of England and Wales ("BAT"), XXXXX &
XXXXXXXXXX TOBACCO CORPORATION, a Delaware
corporation ("B&W"), and XXXXXXXX AMERICAN INC., a
North Carolina corporation ("Xxxxxxxx American").
WHEREAS the respective Boards of Directors of BAT, B&W and
Xxxxxxxx American have approved the execution, delivery and performance of this
Agreement;
WHEREAS B&W and X.X. Xxxxxxxx Tobacco Holdings, Inc., a
Delaware corporation ("RJR"), entered into the
Business Combination Agreement
dated as of October 27, 2003 (the "Combination Agreement"), and each of B&W,
RJR, Xxxxxxxx American and certain of their affiliates will engage in the
Transactions (as defined in the Combination Agreement);
WHEREAS B&W will own approximately 42% of the outstanding
shares of common stock, par value $0.01 per share, of Xxxxxxxx American (the
"Common Stock") immediately following the completion of the Transactions; and
WHEREAS BAT, B&W and Xxxxxxxx American desire to establish in
this Agreement certain terms and conditions concerning the corporate governance
of Xxxxxxxx American, the acquisition and disposition of securities of Xxxxxxxx
American by BAT, B&W and their respective affiliates and other matters.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. As used in this Agreement, the
following terms shall have the following meanings:
1
An "affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
"Approval Termination Event" means (i) any wilful and
deliberate action, or failure to take action, by Xxxxxxxx American or the Board
of Directors that results in B&W failing to receive a material right provided
for in Section 2.04(a), (b) or (d) or (ii) any wilful and deliberate action, or
failure to take action, by Xxxxxxxx American or the Board of Directors relating
to Section 2.04(c) that materially increases the likelihood of an adverse tax
event or consequence to any Investor Party as a result of such action or failure
to take action.
"B&W" has the meaning set forth above.
"B&W Counteroffer" means an offer by any Investor Party to
acquire any and all of the outstanding Common Stock not beneficially owned by an
Investor Party at the time of the offer (or such lesser number or percentage of
shares of Common Stock (a) equal to (i) the percentage of Common Stock that is
subject to acquisition pursuant to a Third Party Offer giving rise to B&W's
ability to make such B&W Counteroffer (if the Board of Directors has approved,
consented to or recommended (other than a negative recommendation) such Third
Party Offer) less (ii) B&W's Percentage Interest at such time or (b) as may be
approved by a majority of the Other Directors). Unless otherwise approved by a
majority of the Other Directors prior to the acquisition of shares of Common
Stock pursuant to a B&W Counteroffer, any B&W Counteroffer structured as a
tender offer or other share purchase shall include a binding commitment (subject
to any mandatory legal restrictions and requirements) by the offering party to
acquire within one year of the closing of such tender offer or share purchase
any Common Stock that remains outstanding at the time of such closing for
consideration equal to or greater than the consideration paid in such tender
offer or share purchase for the same class of Common Stock less the percentage
of Common Stock, if any, that B&W was not required to acquire pursuant to clause
(a) above.
2
"B&W Opco" means [ ], a North Carolina corporation.
"B&W's Percentage Interest" means, as of any date of
determination, the percentage of Voting Power (determined on the basis of the
number of outstanding shares of Voting Stock, as set forth in the most recent
SEC filing of Xxxxxxxx American prior to such date that contained such
information) that is beneficially owned by the Investor Parties as of such date.
For purposes of determining whether and to what extent an Investor Party is
entitled to any right under this Agreement, Voting Stock acquired by any of them
in breach of this Agreement will be excluded from any calculation of B&W's
Percentage Interest.
"BAT" has the meaning set forth above.
"beneficial owner" and words of similar import have the
meaning assigned to such terms in Rule 13d-3 promulgated of the Exchange Act as
in effect on the date of this Agreement.
"Board" or "Board of Directors" means the Board of Directors
of Xxxxxxxx American, except where the context requires otherwise.
"Board Provisions" means Sections 2.01, 2.02, 2.03 and 2.06.
"Closing" has the meaning assigned to such term in the
Combination Agreement.
"Combination Agreement" has the meaning set forth above.
"Common Stock" has the meaning set forth above and, as the
context may require, any other common stock of Xxxxxxxx American that may be
issued from time to time.
"Core Committee" has the meaning assigned to such term in
Section 2.03(b).
"Corporate Governance and Nominating Committee" shall mean the
Corporate Governance and Nominating Committee of the Board of Directors or any
successor committee thereto.
3
"Deferral Period" has the meaning assigned to such term in
Section 3.06.
"Demand Registration" has the meaning assigned to such term in
Section 3.01(a).
"Director" means a member of the Board of Directors.
"Discriminatory Transaction" means any corporate action (other
than those taken pursuant to the express terms of this Agreement) that would (a)
impose material limitations on the legal rights of any Investor Party as a
holder of a class of Voting Stock, including any action that would impose
material restrictions without lawful exemption for the Investor Parties that are
based upon the size of security holding, nationality of a security holder, the
business in which a security holder is engaged or other considerations
applicable to any Investor Party and not to holders of the same class of Voting
Stock generally or (b) deny any material benefit to any Investor Party
proportionately as a holder of any class of Voting Stock that is made available
to other holders of that same class of Voting Stock generally.
"Equity Security" means (a) any Common Stock or other Voting
Stock, (b) any securities of Xxxxxxxx American convertible into or exchangeable
for Common Stock or other Voting Stock or (c) any options, rights or warrants
(or any similar securities) issued by Xxxxxxxx American to acquire Common Stock
or other Voting Stock.
"Exchange Act" means the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, as amended.
"GAAP" means U.S. generally accepted accounting principles, as
in effect at the time such term is relevant.
"Independent Director" means a Director of Xxxxxxxx American
who would be considered an "independent director" were he or she to serve on
either the Board of Directors of Xxxxxxxx American or the Board of Directors of
BAT, in each case under (a) (i) NYSE Rule 303A(2) as such rule may be amended,
supplemented or replaced from time to
4
time (whether by final rule or otherwise and without giving effect to any
permitted delays for compliance or exceptions for foreign issuers) or (ii) if
Xxxxxxxx American is not listed on the NYSE, any comparable rule or regulation
of the primary securities exchange or quotation system on which the Common Stock
is listed or quoted (whether by final rule or otherwise and without giving
effect to any permitted delays for compliance or exceptions for foreign issuers)
and (b) any other applicable law, rule or regulation mandating, or imposing as a
condition to any material benefit to Xxxxxxxx American or any of its
Subsidiaries, the independence of one or more members of the Board of Directors,
excluding, in each case, requirements that relate to "independence" only for
members of a particular Board committee or directors fulfilling a particular
function. In no event will any person be deemed an "Independent Director" who
is, or at any time during the previous three years was, a director, officer or
employee of Xxxxxxxx American, BAT or any of their respective subsidiaries. The
fact that a Person has been designated by B&W for nomination as an Investor
Director pursuant to this Agreement will not, by itself, disqualify that person
as an Independent Director if that person otherwise meets the criteria of an
Independent Director.
"Inspectors" has the meaning assigned to such term in Section
3.04(f).
"Investor Director" means a Director who is designated for
such position by B&W in accordance with Section 2.01.
"Investor Parties" means BAT and its Subsidiaries (other than,
if Xxxxxxxx American is a Subsidiary of BAT, Xxxxxxxx American and its
Subsidiaries).
"Management Director" means a Director who is also an
executive officer of Xxxxxxxx American.
"Nominee Calculation Date" has the meaning assigned to such
term in Section 2.01(d).
"NYSE" means the New York Stock Exchange, Inc.
5
"Other Director" means an Independent Director that is not an
Investor Director. In no event, however, will Xxxxxx X. Xxxxxxxxx be deemed to
be an Other Director.
"Person" means any individual, firm, corporation, partnership,
company, limited liability company, trust, joint venture, association,
governmental entity, unincorporated organization or other entity.
"Piggyback Registration" has the meaning assigned to such term
in Section 3.02.
"Prior Year Net Income" means, as of any date of
determination, Xxxxxxxx American's consolidated net income, prepared in
accordance with GAAP, for the fiscal year immediately preceding such date for
which financial statements have been made publicly available.
"Records" has the meaning assigned to such term in Section
3.04(f).
"Registrable Securities" means (a) all shares of Common Stock
issued to B&W pursuant to the Combination Agreement or purchased by any Investor
Party without breach of Article IV of this Agreement and held at any time by any
Investor Party and (b) any securities issued or issuable with respect to any
such shares of Common Stock by way of a stock dividend or other similar
distribution or stock split, or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise;
provided, however, that such securities shall cease to be Registrable Securities
when (i) a Registration Statement relating to such securities shall have been
declared effective by the SEC and such securities shall have been disposed of by
an Investor Party pursuant to such Registration Statement; (ii) such securities
have been disposed of by an Investor Party pursuant to Rule 144 promulgated
under the Securities Act or (iii) such securities may be disposed of within the
next three months without registration under the Securities Act by the
applicable Investor Party pursuant to Rule 144(k) promulgated under the
Securities Act in an orderly manner without materially adversely affecting the
price at which such securities can be sold, as reasonably determined by such
Investor Party.
6
"Registration Statement" has the meaning assigned to such term
in Section 3.01(a).
"Xxxxxxxx American" has the meaning set forth above.
"RJR" has the meaning set forth above.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933 and the
rules and regulations promulgated thereunder, as amended.
"Significant Transaction" means any sale, merger, acquisition
(including by way of tender offer or exchange offer), consolidation,
dissolution, recapitalization or other business combination involving Xxxxxxxx
American or any of its Subsidiaries pursuant to which more than 30% of the
Voting Power or the consolidated total assets of Xxxxxxxx American would be
acquired or received by any Person or 13D Group (other than Xxxxxxxx American or
its Subsidiaries).
"Standstill Percentage" means B&W's Percentage Interest
immediately following the Closing (assuming the conversion of all shares of RJR
common stock outstanding immediately prior to the Closing into the number of
shares of Common Stock issuable upon surrender of the related certificates).
"Standstill Period" means the period from the date of this
Agreement until the Standstill Termination Date.
"Standstill Termination Date" means the earliest to occur of:
(i) the date that is the tenth anniversary of the date of this Agreement or (ii)
the date on which a Significant Transaction is consummated or occurs.
A "Subsidiary" of any Person means another Person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such
7
voting interests, 50% or more of the equity interests of which) is owned
directly or indirectly by such first Person.
"Third Party Offer" means a bona fide written offer to enter
into a Significant Transaction by a Person other than an Investor Party or any
other Person acting on behalf of, or who is part of a 13D Group with, any
Investor Party, which offer is (a) reasonably capable of being completed, taking
into account all financial, legal, regulatory and other aspects of such offer
and (b) has not expired or been withdrawn.
"13D Group" means any group of Persons formed for the purpose
of acquiring, holding, voting or disposing of Voting Stock that would be
required under Section 13(d) of the Exchange Act, and the rules and regulations
thereunder (as in effect on, and based on legal interpretations thereof existing
on, the date hereof), to file a statement on Schedule 13D with the SEC as a
"person" within the meaning of Section 13(d)(3) of the Exchange Act if such
group beneficially owned Voting Stock representing more than 5% of any class of
Voting Stock then outstanding.
"Transaction Agreements" has the meaning assigned to such term
in the Combination Agreement.
"Unaffiliated Equity Holders" means holders of Equity
Securities other than any Investor Party.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as a principal in connection with a distribution of such
Registrable Securities and not as part of such dealer's market-making
activities.
"Voting Power" means the ability to vote or to control,
directly or indirectly, by proxy or otherwise, the vote of any Voting Stock at
the time such determination is made; provided, however, that a Person will not
be deemed to have Voting Power as a result of an agreement, arrangement or
understanding to vote such Voting Stock if such agreement, arrangement or
understanding (a) arises solely from a revocable proxy or consent given in
response to a public proxy or consent solicitation made pursuant to
8
the applicable rules and regulations under the Exchange Act and (b) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report).
"Voting Stock" means securities having the right to vote
generally in any election of Directors of Xxxxxxxx American.
ARTICLE II
Corporate Governance
SECTION 2.01. Composition of the Board of Directors. The
composition of the Board of Directors and manner of selecting members thereof
shall be as follows:
(a) The Board of Directors shall be composed of 13 Directors.
The number of such Directors may be increased only in accordance with Section
2.01(g).
(b) Immediately following the Closing, the Directors shall be
those individuals designated in accordance with Section 1.09 of the Combination
Agreement and Exhibit H thereto and shall be classified as set forth on such
Exhibit H.
(c) Except as otherwise provided herein, the Directors shall
be nominated as follows (it being understood that such nomination shall include
any nomination of any incumbent Director for reelection to the Board of
Directors):
(i) the Corporate Governance and Nominating Committee shall
nominate for election one Management Director, who shall be the Chief
Executive Officer or equivalent senior executive of Xxxxxxxx American;
(ii) B&W shall have the right to designate for nomination by
the Corporate Governance and Nominating Committee five Investor
Directors, at least three of whom shall be Independent Directors and
two of whom may be executive employees of any Investor Party, and each
of whom shall be nominated for election by the Corporate Governance and
Nominating Committee; and
9
(iii) the Corporate Governance and Nominating Committee shall
nominate for election the remaining Directors, each of whom shall be an
Independent Director; provided, however, that the Corporate Governance
and Nominating Committee may re-nominate Xxxxxx X. Xxxxxxxxx for
election to the Board of Directors without regard to whether he is an
Independent Director.
(d) Notwithstanding anything in Section 2.01(c) to the
contrary,
(i) if B&W's Percentage Interest, calculated as of the close
of business on the last NYSE trading day of the month prior to the
meeting in which the Corporate Governance and Nominating Committee
selects Director nominees (the "Nominee Calculation Date"), falls below
32% but remains at least 27%, the Directors shall be nominated as set
forth in Section 2.01(c) except B&W shall have the right to designate
for nomination four Investor Directors, at least two of whom shall be
Independent Directors and two of whom may be executive officers of any
Investor Party;
(ii) if B&W's Percentage Interest, calculated as of the
Nominee Calculation Date, falls below 27% but remains at least 22%, the
Directors shall be nominated as set forth in Section 2.01(c) except B&W
shall have the right to designate for nomination three Investor
Directors, at least two of whom shall be Independent Directors and one
of whom may be an executive officer of any Investor Party;
(iii) if B&W's Percentage Interest, calculated as of the
Nominee Calculation Date, falls below 22% but remains at least 15%, the
Directors shall be nominated as set forth in Section 2.01(c) except B&W
shall have the right to designate for nomination two Investor
Directors, at least one of whom shall be an Independent Director and
one of whom may be an executive officer of any Investor Party; and
(iv) if B&W's Percentage Interest, calculated as of the
Nominee Calculation Date, falls below 15%, B&W
10
shall no longer have the right to designate for nomination any Investor
Director.
(e) In connection with each meeting of the shareholders of
Xxxxxxxx American in which Directors shall be elected, B&W shall have the right
to designate for nomination a number of nominees for Director that together with
the persons designated for nomination by B&W who are Directors in the classes
not standing for election at such meeting equals the number of Investor
Directors that B&W is entitled to designate for nomination pursuant to this
Section 2.01 as of the date of such meeting. Xxxxxxxx American shall cause each
person designated for election in accordance with this Section 2.01 to be
included in management's slate of nominees for such meeting.
(f) B&W and the Board of Directors, respectively, shall have
the right to designate any replacement for a Director designated for nomination
or nominated, as the case may be, in accordance with this Section 2.01 by B&W or
the Board of Directors, respectively, upon the death, resignation, retirement,
disqualification or removal from office for other cause of such Director. Such
replacement for any Independent Director shall also be an Independent Director.
The Board of Directors shall elect each person so designated.
(g) Without limiting the generality of Section 2.01(c), in the
event that the number of Investor Directors on the Board of Directors differs
from the number that B&W has the right (and wishes) to designate pursuant to
this Section 2.01, (i) if the number of Investor Directors exceeds such number,
B&W shall promptly take all appropriate action to cause to resign that number of
Investor Directors as is required to make the remaining number of such Investor
Directors conform to this Section 2.01 or (ii) if the number of Investor
Directors otherwise is less than such number, the Board of Directors shall take
all necessary action to create sufficient vacancies on the Board of Directors to
permit B&W to designate the full number of Investor Directors that it is
entitled (and wishes) to designate pursuant to this Section 2.01 (such action to
include expanding the size of the Board of Directors, seeking the resignation of
Directors or, at the request of B&W, calling a special
11
meeting of the shareholders of Xxxxxxxx American for the purpose of removing
Directors to create such vacancies to the extent permitted by applicable law).
Upon the creation of any vacancy pursuant to the preceding sentence, B&W shall
designate the person to fill such vacancy in accordance with this Section 2.01,
and the Board of Directors shall elect each person so designated. In the event
that the number of Directors is increased pursuant to this Section 2.01(g), the
Board of Directors shall cause the number of Directors to be reduced at the
first available opportunity to comply with the number of Directors otherwise
specified by Section 2.01(a).
(h) Notwithstanding anything to the contrary in the foregoing,
in no event will (i) the number of Investor Directors divided by the total
number of Directors then comprising the Board exceed (ii) the number of Investor
Directors which B&W is then entitled to designate pursuant to Sections 2.01(c)
and (d) divided by 12, rounded up to the nearest whole number.
(i) In the event that the Corporate Governance and Nominating
Committee or the Board of Directors relies on Section 2.08 to exclude an
Investor Director nominee from management's slate of nominees (or otherwise take
adverse action with respect to any such Investor Director nominee, including
failing to recommend the election of such Investor Director nominee), the
Corporate Governance and Nominating Committee and the Board of Directors shall
afford B&W a reasonable opportunity to select a replacement Investor Director
nominee for inclusion, subject to Section 2.08, on management's slate of
nominees.
SECTION 2.02. Solicitation and Voting of Shares. (a) Xxxxxxxx
American shall use its reasonable best efforts to solicit from its shareholders
eligible to vote for the election of Directors proxies in favor of the nominees
selected in accordance with Section 2.01.
(b) In any election of Directors or any meeting of the
shareholders of Xxxxxxxx American called expressly for the removal of Directors,
so long as the Board of Directors will include after such meeting (assuming for
this calculation that management's entire slate of nominees is elected at such
meeting) the number of Investor
12
Directors contemplated by Section 2.01, each Investor Party shall attend in
person or by proxy for purposes of establishing a quorum and shall vote all
their shares of Voting Stock (i) in favor of any nominee or Director selected in
accordance with Section 2.01 and(ii) otherwise against the removal of any
Director designated in accordance with Section 2.01; provided, however, that the
Investor Parties will have no obligation under this sentence with respect to the
election of Directors at a meeting of Xxxxxxxx American shareholders where a
Person (other than Xxxxxxxx American, an Investor Party, a Person that is part
of a 13D Group with any Investor Party or any Person on the behalf of any of
them) has made a material effort to solicit proxies in favor of a different
slate of nominees for election to the Board at such meeting. In any other matter
submitted to a vote of the shareholders of Xxxxxxxx American, the Investor
Parties may vote any or all of their shares in their sole discretion; provided,
however, that in the event B&W shall have the right to approve a matter pursuant
to Section 2.04(b) or 2.04(c) and B&W has elected not to exercise such approval
right, the Investor Parties shall vote to approve such matter at any meeting of
shareholders held in connection therewith.
(c) Each Investor Party hereby appoints Xxxxxxxx American and
any designee of Xxxxxxxx American, each of them individually, its proxy and
attorney-in-fact, with full power of substitution and resubstitution (i) to vote
or act by written consent with respect to all of B&W's Voting Stock which it has
the right to vote pursuant to the first sentence of Section 2.02(b) or the
proviso to the second sentence of Section 2.02(b) and (ii) to sign its name (as
shareholder) to any consent, certificate or other document relating to Xxxxxxxx
American that the law of the State of North Carolina may permit or require in
connection with any matter referred to in clause (i). This proxy is given to
secure the performance of the duties of each Investor Party under this
Agreement, and its existence will not be deemed to relieve any Investor Party of
its obligations under Section 2.02(b). Each Investor Party affirms that this
proxy is coupled with an interest and is irrevocable until termination of this
Agreement pursuant to Section 6.11, whereupon such proxy and power of attorney
shall automatically terminate. Each Investor Party shall take such further
action and execute such other instruments
13
as may be necessary to effectuate the intent of this proxy. For Voting Stock as
to which any Investor Party is the beneficial but not the record owner, each
Investor Party will cause any record owner of such Voting Stock to xxxxx
Xxxxxxxx American a proxy to the same effect as that contained herein. Each
Investor Party represents that any proxy heretofore given in respect of such
Voting Stock is not irrevocable, and hereby revokes any and all such proxies.
This Section 2.02(c) shall not limit any Investor Party's right to vote pursuant
to the second sentence of Section 2.02(b) (other than pursuant to the proviso
thereof) and shall not operate to grant any proxy to any Person in connection
therewith.
(d) B&W agrees that it will take all action as a shareholder
of Xxxxxxxx American, or as is otherwise reasonably within its control, as
necessary to effect the provisions of this Agreement.
SECTION 2.03. Committees. (a) Subject to the general oversight
and authority of the Board of Directors under applicable law, the Board of
Directors shall establish, empower and maintain the committees of the Board of
Directors contemplated by this Section 2.03.
(b) The following committees shall be established, empowered
and maintained by the Board of Directors at all times during the term of this
Agreement: (i) an Audit Committee, (ii) a Corporate Governance and Nominating
Committee and (iii) a Compensation Committee (collectively, the "Core
Committees"). Each of the Audit Committee, the Nomination and Governance
Committee and the Compensation Committee shall consist solely of Independent
Directors. Investor Directors shall serve on each committee of the Board of
Directors, and the number of Investor Directors on a committee of the Board of
Directors shall be not less than (x) the number of Investor Directors at such
time divided by (y) the total number of Directors at such time multiplied by (z)
the number of Directors serving on such committee, rounded to the nearest whole
number, with B&W selecting the Investor Directors that will serve on each
committee of the Board, subject to the requirements set forth herein; provided,
however, that (i) each of the committees named in this Section 2.03(b) shall
have not less than five Directors on such committee
14
and (ii) so long as there are any Investor Directors serving on the Board of
Directors, at least one Investor Director shall serve on each committee of the
Board of Directors. Notwithstanding the foregoing, an Investor Director shall
not serve on any committee if such service would violate mandatory legal or
listing requirements (or law, rule or regulation requiring committee member
independence as a condition to a material benefit to Xxxxxxxx American or any of
its Subsidiaries) concerning the independence of directors; provided, however,
that Xxxxxxxx American shall take all reasonable efforts to avoid any such
disqualification.
(c) The Board of Directors may establish such other committees
as it deems necessary or desirable, provided that such committees are
established in compliance with the terms of this Agreement (including the
proportionality requirement set forth in Section 2.03(b)).
(d) The Board of Directors shall designate an Investor
Director or an Other Director to replace any disqualified Investor Director
member or Other Director member, respectively, of any committee. In the event
that any Investor Director or Other Director ceases to serve on any committee of
the Board of Directors and, after a reasonable time, no successor to such
Director is designated in accordance with the terms hereof to serve on such
committee, the number of members of such committee may be temporarily reduced if
such reduction does not (and no such reduction is intended to) result in a
change of the relative authorities and representation within such committee
among the Investor Directors (taken as a group) and the Other Directors (taken
as a group).
(e) In the event that the Board of Directors or any committee
thereof relies on Section 2.08 to exclude an Investor Director from serving on a
committee on which such Investor Director is qualified to serve, the Board of
Directors and any such committee shall permit B&W to designate another Investor
Director, subject to Section 2.08, to serve as a member of such committee.
SECTION 2.04. Approval Required for Certain Actions. (a) The
approval of a majority of the Investor Directors shall be required for the Board
of Directors to
15
approve or authorize, and for Xxxxxxxx American or any of its Subsidiaries to
do, any of the following (in addition to any other Board or shareholder approval
required by any law, rule or regulation or the constituent documents of Xxxxxxxx
American):
(i) if, at the time of such approval, authorization or action,
B&W's Percentage Interest has not fallen below 32%, issue any Equity
Securities, or any securities convertible into or exercisable for
Equity Securities, in any transaction or series of related transactions
if such issuance would require the approval of Xxxxxxxx American's
shareholders under NYSE Rule 312.03(c) as in effect of the date of this
Agreement (assuming the "20 percent" threshold set forth therein were,
instead, "5 percent" and disregarding the exceptions set forth
therein); or
(ii) if, at the time of such approval, authorization or
action, B&W's Percentage Interest has not fallen below 25%, repurchase
Common Stock pursuant to self-tender offers, stock repurchase programs,
open market transactions or otherwise; provided, however, that Xxxxxxxx
American and its Subsidiaries may (x) repurchase Common Stock from
employees or former employees pursuant to the terms and conditions of
Xxxxxxxx American's employee stock plans, (y) on or after the first
anniversary of the Closing, repurchase Common Stock if the dividends
declared (and, to the extent the payment date has occurred, paid) on
Common Stock during each of the preceding four fiscal quarters has
equaled or exceeded 18.75% of the Prior Year Net Income applicable at
the time that any such dividend was declared and (z) repurchase Common
Stock to comply with the requirements of Section 2.04(d).
(b) The approval of B&W, as shareholder, such approval, if
given, not to be unreasonably delayed, shall be required for Xxxxxxxx American
or any of its Subsidiaries to do or effect any of the following (in addition to
any other Board or shareholder approval required by any law, rule, regulation or
the constituent documents of Xxxxxxxx American):
16
(i) the entry by Xxxxxxxx American or any of its Subsidiaries
into any Discriminatory Transaction;
(ii) any sale, asset exchange, lease, exchange, mortgage,
pledge, transfer or other disposition (by merger or otherwise)
(collectively, a "disposition") by Xxxxxxxx American or any of its
Subsidiaries (in one transaction or a series of transactions) of any of
Xxxxxxxx American's intellectual property relating to the brands set
forth on Schedule 2.04, other than any disposition to a wholly-owned
Subsidiary of Xxxxxxxx American or any disposition that (A) occurs in
connection with creating or granting any liens to a third party that is
not an affiliate of Xxxxxxxx American in connection with a bona fide
financing, (B) arises as a matter of law or occurs pursuant to a court
order, (C) occurs as a result of the acquisition of all outstanding
Equity Securities by any Person (including by way of merger, tender or
exchange offer or any similar transaction) or all or virtually all of
the assets of Xxxxxxxx American and its Subsidiaries or (D) if B&W's
Percentage Interest has fallen below 32%, occurs as a result of the
acquisition of a majority of the Voting Power of all outstanding Voting
Stock by any Person (including by way of merger, tender or exchange
offer or similar transaction);
(iii) any amendment to the Articles of Incorporation or
By-Laws of Xxxxxxxx American or to the charter of any committee of the
Board of Directors, in each case which amendment would conflict in any
material respect with the provisions of this Agreement, or any
amendment or repeal of Section 2.03 or Section 2.04 of the By-Laws of
Xxxxxxxx American in effect as of the Closing; or
(iv) the adoption or implementation of any takeover defense
measures (including a rights plan) that would apply to the acquisition
of beneficial ownership of any Equity Securities by any Investor Party;
provided, however, that Xxxxxxxx American may enter into a Rights
Agreement in the form of Exhibit C to the Combination Agreement and may
enter into any replacement or extension thereof in the form of such
Exhibit C.
17
(c) The approval of B&W, as shareholder, such approval, if
given, not to be unreasonably delayed, shall be required for Xxxxxxxx American
or any of its Subsidiaries to do or effect any of the following prior to the
fifth anniversary of the date of this Agreement(in addition to any other Board
or shareholder approval required by any law, rule, regulation or the constituent
documents of Xxxxxxxx American):
(i) effect any transaction or take any action that is
reasonably likely to be inconsistent with the representations, facts or
assumptions set forth in the B&W Tax Ruling (as defined in the
Combination Agreement) or materially inconsistent with the
representations, facts or assumptions set forth in the materials
submitted to the Internal Revenue Service in seeking the B&W Tax
Ruling; provided, however, that for purposes of this Section
2.04(c)(i), if a representation, fact or assumption set forth in the
B&W Tax Ruling or the materials submitted to the Internal Revenue
Service in seeking the B&W Tax Ruling indicated that a party had no
plan or intention to effect a particular transaction or take a
particular action, effecting such transaction or taking such action
after the Closing (as defined in the Combination Agreement) will be
deemed to be inconsistent with such plan or intention representation,
fact or assumption; or
(ii) effect any other transaction or take any other action
that, in the opinion of Cravath, Swaine & Xxxxx LLP or other nationally
recognized B&W tax counsel, had such transaction or action been
effected at Closing, would more likely than not have prevented the
Asset Contribution and Assumption of Liabilities, on the one hand, or
the B&W Opco Stock Contribution and the Merger (as those terms are
defined in the Combination Agreement), on the other hand, from
qualifying as exchanges within the meaning of Section 351 of the
Internal Revenue Code of 1986, as amended.
In addition, B&W and Xxxxxxxx American shall cooperate in good faith, and shall
cause their respective officers, directors, affiliates, employees, agents,
auditors and representatives to cooperate in good faith, in all matters
18
relating to Taxes (as defined in the Combination Agreement), including by
maintaining and making available to each other all books and records necessary
in connection with Taxes.
(d) If, on or prior to June 30, 2005, Xxxxxxxx American issues
Common Stock upon exercise of any option, warrant or other security relating to
Common Stock or otherwise issues Common Stock (restricted or otherwise) to any
of its directors, officers, employees or consultants, then prior to or within a
reasonable period after such issuance (but in any event not later than the end
of such fiscal quarter in which such issuance occurs), Xxxxxxxx American will
repurchase a number of shares of outstanding Common Stock so that the number of
outstanding shares of Common Stock are not increased by such issuance; provided,
however, that (i) Xxxxxxxx American will not be required to repurchase such
shares, if, at the time of such issuance, B&W's Percentage Interest has fallen
below 25% and (ii) Xxxxxxxx American will not be required to repurchase the
first [ ](1) shares that are so issued.
SECTION 2.05. Financial Statements. As soon as reasonably
practicable following the end of each fiscal quarter and fiscal year, Xxxxxxxx
American shall furnish to B&W and BAT the consolidated financial statements of
Xxxxxxxx American (including providing draft statements as such statements
become available and, with respect to fiscal years, audit reports as such
reports become available). Each of Xxxxxxxx American, B&W and BAT shall use its
reasonable best efforts to assist the other party with respect to the timeliness
of filing, releasing or posting the other party's respective financial
disclosure documents. Xxxxxxxx American shall cooperate with and assist BAT and
B&W in the translation of Xxxxxxxx American's financial statements in order to
conform such financial statements to applicable international accounting
standards and shall otherwise provide BAT and B&W with access to information
necessary in connection with such financial statements.
----------
(1) Number to be equal to the number of Common Shares owned by B&W
immediately after Closing minus 42% of the aggregate outstanding Common Shares
immediately after Closing.
19
SECTION 2.06. Articles of Incorporation and By-Laws. The Board
of Directors of Xxxxxxxx American shall take or cause to be taken all lawful
action necessary to ensure at all times that Xxxxxxxx American's Articles of
Incorporation and By-Laws are not at any time inconsistent in any material
respect with the provisions of this Agreement.
SECTION 2.07. Interested Transactions. The approval by a
majority of the Other Directors shall be required (in addition to any other
Board or shareholder approval required by any law, rule or regulation) for
Xxxxxxxx American or any of its Subsidiaries to enter into or effect, or agree
to enter into or effect, any material contract or transaction between or
involving Xxxxxxxx American or any of its Subsidiaries, on the one hand, and any
Investor Party, on the other hand, the terms of which are not governed by a
pre-existing agreement to which Xxxxxxxx American or any of its Subsidiaries is
a party or a provision of Xxxxxxxx American's Articles of Incorporation or
By-Laws.
SECTION 2.08. Fiduciary Duties. Nothing in Section 2.01, 2.02,
2.03 or 2.06 shall be deemed to require the Board of Directors or any committee
or member thereof to take any action or refrain from taking any action, or
result in a breach of Sections 2.01, 2.02, 2.03 or 2.06 by reason of such action
or failure to act, if the Board of Directors, such committee or Director
determines in good faith (after consideration of specific written advice of
outside legal counsel, which advice will be provided to B&W) that refraining
from taking such action or failing to take such action, as the case may be,
would cause a violation of his or her fiduciary duties to shareholders,
including B&W and its affiliates, under applicable law. This Section 2.08 shall
not be interpreted to create any fiduciary obligation that would not exist in
the absence of this Section 2.08.
SECTION 2.09. Change in Law. In the event any law, rule or
regulation comes into force or effect (including by amendment) which conflicts
with the terms and
20
conditions of this Agreement, the parties shall negotiate in good faith to
revise the Agreement to achieve the parties' intention set forth herein.
SECTION 2.10. Changes in B&W's Percentage Interest
Attributable to Issuances of Common Stock. To the extent that any decrease in
B&W's Percentage Interest is attributable to issuances of Equity Securities by
Xxxxxxxx American (as opposed to dispositions of Equity Securities by any
Investor Party), such decrease will not be taken into account in determining
whether B&W's Percentage Interest has fallen below any of the thresholds for
B&W's Percentage Interest set forth in this Article II.
ARTICLE III
Registration Rights
SECTION 3.01. Registration. (a) At any time and from time to
time following the first anniversary of the date of this Agreement, Xxxxxxxx
American agrees that upon the written request of any Investor Party holding
Registrable Securities (a "Demand Registration"), it will as promptly as
reasonably practical prepare and file a registration statement (a "Registration
Statement") under the Securities Act as to the number of shares of Registrable
Securities specified in such request; provided, however, that (i) Xxxxxxxx
American shall not be obligated to effect more than two Demand Registrations in
any eighteen-month period, (ii) the Registrable Securities for which a Demand
Registration has been requested by any Investor Party holding Registrable
Securities shall have a value (based on the average closing price per share of
Common Stock for the ten trading days preceding the delivery of B&W's request
for such Demand Registration) of not less than $100,000,000 and (iii) Xxxxxxxx
American shall not be required to file a shelf Registration Statement pursuant
to Rule 415 of the Securities Act under this Section 3.01. Each such request for
a Demand Registration shall specify the number of shares of Registrable
Securities proposed to be offered for sale and shall also specify the intended
method of distribution thereof; provided, however, that the Investor Parties may
change such number if such change shall not materially adversely affect the
timing or success of the offering, so
21
long as such change does not result in less than $100,000,000 of Registrable
Securities being included in the Registration Statement.
(b) Xxxxxxxx American agrees to use its reasonable best
efforts (i) to cause any Registration Statement to be declared effective as
promptly as reasonably practicable after the filing thereof and (ii) to keep
such Registration Statement effective for a period of not less than 90 days, or,
if earlier, the period sufficient to complete the distribution of the
Registrable Securities. Xxxxxxxx American further agrees to supplement or make
amendments to the Registration Statement as may be necessary to keep such
Registration Statement effective for the period set forth in clause (ii) above,
including (A) to respond to the comments of the SEC, if any, (B) as may be
required by the registration form utilized by Xxxxxxxx American for such
Registration Statement or by the instructions applicable to such registration
form, (C) as may be required by the Securities Act or the rules and regulations
thereunder or (D) as may be reasonably requested in writing by B&W or any
Underwriter for B&W. Xxxxxxxx American agrees to furnish to B&W copies of any
such supplement or amendment prior to its being used or filed with the SEC. Upon
the expiration of the time period set forth in clause (ii) above, a Demand
Registration Statement shall count as a Demand Registration Statement for
purposes of determining when future Demand Registrations which can be requested
pursuant to this Section 3.01, except to the extent set forth in paragraph (e)
below.
(c) In the event an offering of shares of Registrable
Securities involves one or more Underwriters, B&W shall select the lead
Underwriter and any additional Underwriters in connection with the offering from
a list of nationally-recognized investment banks reasonably agreed to between
Xxxxxxxx American and B&W.
(d) Notwithstanding the foregoing provisions of this Section
3.01, B&W may not request a Demand Registration within the 90-day period after a
Registration Statement for Common Stock has been filed by Xxxxxxxx American (for
its own account or for any other security holders) with and declared effective
by the SEC, unless
22
such Registration Statement has been withdrawn; provided, however, the forgoing
limitation will not apply if an Investor Party holding Registrable Securities
was not given the opportunity, in accordance with Section 3.02, to include its
Registrable Securities in the Registration Statement described in this Section
3.01(d).
(e) Any Investor Party holding Registrable Securities included
in a Registration Statement shall be permitted to remove all or any part of the
Registrable Securities held by it from any Registration Statement at any time
prior to the effective date of the Registration Statement covering such
Registrable Securities; provided, however, that such Demand Registration shall
nonetheless count as a Demand Registration for purposes of determining when
future Demand Registrations can be requested pursuant to this Section 3.01,
unless B&W reimburses Xxxxxxxx American for all Registration Expenses incurred
by Xxxxxxxx American in connection with such withdrawn Demand Registration.
SECTION 3.02. Piggyback Registration. If Xxxxxxxx American
proposes to file a Registration Statement under the Securities Act with respect
to an offering of Common Stock for (a) Xxxxxxxx American's own account (other
than a Registration Statement on Form S-4 or S-8 (or any substitute form that
may be adopted by the SEC)) or (b) the account of any of its holders of Common
Stock pursuant to a demand registration requested by such holders, then Xxxxxxxx
American shall give written notice of such proposed filing to B&W as soon as
practicable (but in no event less than twenty days before the anticipated filing
date), and such notice shall offer any Investor Party holding Registrable
Securities the opportunity to register such number of shares of Registrable
Securities as B&W and its affiliates may request on the same terms and
conditions as Xxxxxxxx American's or such holder's Common Stock (a "Piggyback
Registration"). Xxxxxxxx American shall control the determination of the form of
any offering contemplated by this Section 3.02, including whether any such
offering shall be in the form of an underwritten offering and, if any such
offering is in the form of an underwritten offering, Xxxxxxxx American shall
select the lead Underwriter and any additional Underwriters in connection with
such offering.
23
SECTION 3.03. Reduction of Offering. Notwithstanding anything
contained herein, if the lead Underwriter of an underwritten offering described
in Section 3.01 or Section 3.02 delivers a written opinion to Xxxxxxxx American
that the number of shares of Common Stock (including all Registrable Securities)
that B&W, Xxxxxxxx American and any other Persons intend to include in any
Registration Statement is such that the success of any such offering would be
materially and adversely affected, including the price at which the securities
can be sold, then the number of shares of Common Stock to be included in the
Registration Statement for the account of B&W, Xxxxxxxx American and any other
Persons shall be reduced pro rata to the extent necessary to reduce the total
amount of securities to be included in any such Registration Statement to the
amount recommended by such lead Underwriter; provided, however, that (a)
priority in the case of a Demand Registration pursuant to Section 3.01 shall be
(i) first, the Registrable Securities requested to be included in the
Registration Statement for the account of the Investor Parties, allocated pro
rata among them in accordance with the number of Registrable Securities held by
each of them so that the total number of Registrable Securities to be included
in any such offering for the account of all such Persons will not exceed the
number recommended by such lead Underwriter, (ii) second, securities initially
proposed to be offered by Xxxxxxxx American for its own account and (iii) third,
pro rata among any other securities of Xxxxxxxx American requested to be
registered by the holders thereof pursuant to a contractual right of
registration so that the total number of registrable securities to be included
in any such offering for the account of all such Persons will not exceed the
number recommended by such lead Underwriter, (b) priority in the case of a
Piggyback Registration initiated by Xxxxxxxx American for its own account
pursuant to Section 3.02 shall be (i) first, securities initially proposed to be
offered by Xxxxxxxx American for its own account, (ii) second, the Registrable
Securities requested to be included in the Registration Statement for the
account of the Investor Parties, allocated pro rata among them in accordance
with the number of registrable securities held by each of them so that the total
number of Registrable Securities to be included in any such offering for the
account of all such Persons will not exceed the
24
number recommended by such lead Underwriter, and (iii) third, pro rata among any
other securities of Xxxxxxxx American requested to be registered pursuant to a
contractual right of registration and (c) priority with respect to inclusion of
securities in a Registration Statement initiated by Xxxxxxxx American for the
account of holders other than any Investor Party pursuant to demand registration
rights afforded such holders shall be (i) first, securities offered for the
account of such holders so that the total number of registrable securities to be
included in any such offering for the account of all such Persons will not
exceed the number recommended by such lead Underwriter, (ii) second, securities
offered by Xxxxxxxx American for its own account, (iii) third, the Registrable
Securities offered for the account of the Investor Parties and (iv) fourth, pro
rata among any other securities of Xxxxxxxx American requested to be registered
pursuant to a contractual right of registration. Until such time as B&W owns
less than 15% of the outstanding Common Stock of Xxxxxxxx American, Xxxxxxxx
American shall not enter into any contractual arrangements that would conflict
with the priorities set forth in the proviso to the preceding sentence.
SECTION 3.04. Registration Procedures. Subject to the
provisions of Section 3.01 hereof, in connection with the registration of the
sale of Registrable Securities hereunder, Xxxxxxxx American will as promptly as
reasonably practicable:
(a) furnish to B&W, if requested, prior to the filing of a
Registration Statement, copies of such Registration Statement as is
proposed to be filed, and thereafter such number of copies of such
Registration Statement, each amendment and supplement thereto (in each
case including all exhibits thereto and documents incorporated by
reference therein), the prospectus included in such Registration
Statement (including each preliminary prospectus), copies of any and
all transmittal letters or other correspondence with the SEC relating
to the Registration Statement and such other documents in such
quantities as B&W may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities;
25
(b) use its reasonable best efforts to register or qualify the
Registrable Securities under such other securities or blue sky laws of
such jurisdictions as B&W reasonably requests and do any and all other
acts and things as may be reasonably necessary or advisable to enable
B&W to consummate the disposition of the Registrable Securities in such
jurisdictions; provided, however, that Xxxxxxxx American will not be
required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3.04(b), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction;
(c) notify B&W, at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such
Registration Statement or amendment contains an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and
Xxxxxxxx American will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the
Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(d) use its reasonable best efforts to cause the Registrable
Securities covered by any Registration Statement to be registered with
or approved by such other governmental agencies or authorities as may
be necessary by virtue of the business and operations of Xxxxxxxx
American to enable B&W to consummate the disposition of the Registrable
Securities; provided, however, that Xxxxxxxx American will not be
required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
Section 3.04(d), (ii) subject
26
itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;
(e) enter into customary agreements (including an underwriting
agreement in customary form that is reasonably satisfactory to Xxxxxxxx
American) and use commercially reasonable efforts to take such other
actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities;
(f) make available for inspection by B&W, any Underwriter
participating in any disposition pursuant to such Registration
Statement, and any attorney for B&W and the Underwriter and any
accountant or other agent retained by B&W or any such Underwriter
(collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of Xxxxxxxx American
(collectively, the "Records") as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the officers, directors and employees of Xxxxxxxx American and its
Subsidiaries to supply all information reasonably requested by any such
Inspector in connection with such Registration Statement; provided,
however, that (i) Records and information obtained hereunder shall be
used by such Inspector only to exercise their due diligence
responsibility, (ii) Records or information that Xxxxxxxx American
determines, in good faith, to be confidential shall not be disclosed by
the Inspectors unless (x) the disclosure of such Records or information
is necessary to avoid or correct a material misstatement or omission in
the Registration Statement or (y) the release of such Records or
information is ordered pursuant to a subpoena or other order from a
court or governmental authority of competent jurisdiction and (iii)
Xxxxxxxx American may require, as a condition to the provision to any
Inspector of any Records, that such Inspector execute and deliver to
Xxxxxxxx American a written agreement, in form and substance reasonably
satisfactory to Xxxxxxxx American, pursuant to which such Inspector
agrees to the confidential treatment of such Records;
27
(g) use its reasonable best efforts to obtain and deliver to
the Underwriters and the Investor Parties a comfort letter from the
independent public accountants for Xxxxxxxx American in customary form
and covering such matters of the type customarily covered by comfort
letters as such Underwriters and the Investor Parties may reasonably
request;
(h) use its reasonable best efforts to obtain and deliver to
the Underwriters and the Investor Parties a 10b-5 statement and legal
opinions from Xxxxxxxx American's counsel in customary form and
covering such matters as customarily covered by 10b-5 statements and
legal opinions as such Underwriters and the Investor Parties may
reasonably request;
(i) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make generally
available to its security holders, within the required time period, an
earnings statement covering a period of twelve months, beginning with
the first fiscal quarter after the effective date of the Registration
Statement (as the term "effective date" is defined in Rule 158(c) under
the Securities Act), which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder or any successor provisions thereto; and
(j) use its reasonable best efforts to cause all Registrable
Securities to be listed or quoted on the NYSE and each other securities
exchange or automated quotation system on which similar securities
issued by Xxxxxxxx American are listed or quoted.
SECTION 3.05. Conditions to Offerings. The obligations of
Xxxxxxxx American to take the actions contemplated by Sections 3.01, 3.02 and
3.04 with respect to an offering of Registrable Securities shall be subject to
the following conditions:
(a) the Investor Parties shall conform to all applicable
requirements of the Securities Act and the Exchange Act with respect to
the offering and sale of securities;
28
(b) B&W shall advise each Underwriter through which any of the
Registrable Securities are offered that the Registrable Securities are
part of a distribution that is subject to the prospectus delivery
requirements of the Securities Act;
(c) Xxxxxxxx American may require B&W to furnish to Xxxxxxxx
American such information regarding B&W or the distribution of the
Registrable Securities as Xxxxxxxx American may from time to time
reasonably request in writing, in each case only as required by the
Securities Act or the rules and regulations thereunder or under state
securities or blue sky laws; and
(d) in any underwritten offering pursuant to Section 3.01 or
Section 3.02 hereof, any Investor Party including Registrable
Securities in a Registration Statement, together with Xxxxxxxx
American, shall enter into an underwriting agreement in customary form
with the Underwriter or Underwriters selected for such underwriting, as
well as such other documents customary in similar offerings, including,
custody agreements, powers of attorney and indemnification provisions
relating to information provided in writing by an Investor Party.
Any Investor Party holding Registrable Securities agrees that, upon receipt of
any notice from Xxxxxxxx American of the happening of any event of the kind
described in Section 3.04(c) hereof or a condition described in Section 3.06
hereof, B&W will forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering the sale of such shares of
Registrable Securities until B&W's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.04(c) hereof or notice from
Xxxxxxxx American of the termination of the Deferral Period and, if so directed
by Xxxxxxxx American, will promptly deliver to Xxxxxxxx American all copies
(other than any permanent file copies then in B&W's possession) of the most
recent prospectus covering such Registrable Securities that was current at the
time of receipt of such notice.
29
SECTION 3.06. Black-out Period. Xxxxxxxx American's
obligations pursuant to Sections 3.01 and 3.02 hereof shall be suspended if
compliance with such obligations would (a) violate applicable law or (b) require
Xxxxxxxx American to disclose a material financing, acquisition or other
corporate development, and the proper officers of Xxxxxxxx American have
determined, in the good faith exercise of their reasonable business judgment,
that such disclosure is not in the best interests of Xxxxxxxx American;
provided, however, that any such suspension shall not exceed 60 days and all
such suspensions shall not exceed 120 days in any twelve-month period (the
"Deferral Period"). Xxxxxxxx American shall promptly give B&W written notice of
any such suspension containing the approximate length of the anticipated delay,
and Xxxxxxxx American shall notify B&W upon the termination of the Deferral
Period.
SECTION 3.07. Registration Expenses. All fees and expenses
incident to Xxxxxxxx American's performance of or compliance with the
registration obligations of this Article III, including all fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel for any Underwriters in connection with blue sky
qualifications of the Registrable Securities), printing expenses, messenger and
delivery expenses of Xxxxxxxx American, any registration or filing fees payable
under any Federal or state securities or blue sky laws, the fees and expenses
incurred in connection with any listing or quoting of the securities to be
registered on any national securities exchange or automated quotation system,
fees and disbursements of counsel for Xxxxxxxx American and its independent
certified public accountants (including the expenses of any comfort letters
required by or incident to such performance) and the fees and expenses of other
Persons retained by Xxxxxxxx American, will be borne by Xxxxxxxx American. Any
Investor Party or any other Person registering Registrable Securities will bear
and pay any underwriting discounts and commissions applicable to securities
offered for its or its affiliates' account, transfer taxes and fees and expenses
of its counsel.
SECTION 3.08. Indemnification; Contribution. (a) In connection
with any registration of Registrable
30
Securities pursuant to Section 3.01 or 3.02 hereof, Xxxxxxxx American agrees to
indemnify, to the fullest extent permitted by law, B&W, its affiliates, their
directors, officers and shareholders and each Person who controls B&W (within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act) against any and all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees) caused by any untrue or alleged
untrue statement of material fact contained in any Registration Statement,
prospectus or preliminary prospectus contained therein, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading; provided,
however, that Xxxxxxxx American shall not be required to indemnify B&W, its
affiliates, their officers, directors, shareholders or controlling Persons for
any losses, claims, damages, liabilities or expenses resulting from any such
untrue statement or omission if such untrue statement or omission is made in
reliance on and in conformity with any information with respect to B&W or such
other parties furnished to Xxxxxxxx American in writing by B&W or such other
parties expressly for use therein. In connection with an underwritten offering,
Xxxxxxxx American will indemnify each Underwriter, the officers and directors of
such Underwriter, and each Person who controls such Underwriter (within the
meaning of either the Securities Act or the Exchange Act) to the same extent as
provided above with respect to the indemnification of B&W; provided, however,
that such Underwriter agrees to indemnify Xxxxxxxx American to the same extent
as provided below with respect to the indemnification of Xxxxxxxx American by
B&W. Notwithstanding the forgoing, with respect to any untrue statement or
omission of material fact made in any prospectus or preliminary prospectus, the
provisions of this Section 3.08 shall not inure to the benefit of any Investor
Party, any other holder of Registrable Securities or any Underwriter from whom
the Person asserting any such loss, claim, damages, liabilities or expenses
purchased the Registrable Securities to the extent that it shall be established
that (i) any such loss, claim, damages, liabilities or expenses of such Person
arises primarily from the fact that any Investor Party or any Underwriter sold
Registrable Securities to such a
31
Person, (ii) there was not sent or given a copy of the final prospectus (as
amended or supplemented) at or prior to the written confirmation of such sale
(provided Xxxxxxxx American shall have previously furnished a sufficient number
of copies thereof on a timely basis to the Investor Parties, any such holder and
each Underwriter, as the case may be, in accordance herewith) and (iii) the
final prospectus (as amended or supplemented) would have corrected any such
untrue statement or omission of a material fact.
(b) In connection with any Registration Statement, the
Investor Parties holding Registrable Securities, as the case may be, will
furnish to Xxxxxxxx American in writing such information and affidavits with
respect to the Investor Parties holding Registrable Securities, as the case may
be, as Xxxxxxxx American reasonably requests, including, but not limited to,
information relating to the Investor Parties, as the case may be, for use in
connection with any such Registration Statement, prospectus or preliminary
prospectus and agrees to indemnify Xxxxxxxx American, its directors, its
officers who sign the Registration Statement and each Person, if any, who
controls Xxxxxxxx American (within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as the
foregoing indemnity from Xxxxxxxx American to B&W, but only with respect to
information relating to B&W or such other holders of Registrable Securities, as
the case may be, furnished to Xxxxxxxx American in writing by B&W expressly for
use in the Registration Statement, the prospectus, any amendment or supplement
thereto, or any preliminary prospectus.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any Person in respect of which
indemnity may be sought pursuant to Section 3.08(a) or (b), such Person
(hereinafter called the indemnified party) shall promptly notify the Person
against whom such indemnity may be sought (hereinafter called the indemnifying
party) in writing and the indemnifying party, upon request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and shall pay the fees and disbursements of such
counsel
32
related to such proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and the indemnified party shall have been advised by counsel
that representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (in addition to any
local counsel) at any time for all such indemnified parties, and that all such
reasonable fees and expenses shall be reimbursed as they are incurred. In the
case of the retention of any such separate firm for the indemnified parties,
such firm shall be designated in writing by the indemnified parties. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for reasonable fees and expenses of counsel as
contemplated by the third sentence of this Section 3.08(c), the indemnifying
party agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into more
than 30 days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified party
in accordance with such request or reasonably objected in writing, on the basis
of the standards set forth herein, to the propriety of such reimbursement prior
to the date of such settlement. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement of any pending
or threatened proceeding in respect of which any
33
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) If the indemnification provided for in this Section 3.08
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to in
this Section 3.08, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 3.08(c), any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 3.08(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in this Section 3.08(d). No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
34
If indemnification is available under this Section 3.08, the
indemnifying party shall indemnify each indemnified party to the full extent
provided in Sections 3.08(a) and (b) without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 3.08(d).
SECTION 3.09. Rule 144. For so long as Xxxxxxxx American is
subject to the requirements of Section 13, 14 or 15(d) of the Securities Act,
Xxxxxxxx American agrees that it will file the reports required to be filed by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder and it will take such further action as B&W
reasonably may request, all to the extent required from time to time to enable
the Investor Parties to sell Registrable Securities within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of B&W, Xxxxxxxx American will deliver to
B&W a written statement as to whether it has complied with such requirements.
SECTION 3.10. Lockup. If and to the extent requested by the
managing Underwriters of an underwritten public offering of equity securities of
Xxxxxxxx American, Xxxxxxxx American and B&W agree not to effect, and to cause
their respective affiliates not to effect, except as part of such registration,
any offer, sale, pledge, transfer or other distribution or disposition or any
agreement with respect to the foregoing, of the issue being registered or of a
similar security of Xxxxxxxx American, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144, during the seven-day period prior to and during such period that the
lead Underwriter may reasonably request, no greater than 90 days, beginning on
the effective date of such registration.
SECTION 3.11. Termination of Registration Rights. The
registration rights contained in this
35
Article III shall terminate on the date on which all shares of Common Stock
subject to this Agreement cease to be Registrable Securities. Notwithstanding
the forgoing, the registration rights contained in this Article III shall
terminate in any event with respect to any Investor Party or any other holder of
Registrable Securities when any such holder no longer owns any Registrable
Securities. In addition, even if the registration rights contained in this
Article III are no longer in effect, in the event that an Investor Party intends
to dispose of a significant number of Common Shares and such disposition could
reasonably be expected to have an adverse impact on the trading price of shares
of Common Stock or otherwise have an adverse impact on the market for Common
Stock, Xxxxxxxx American and the Investor Parties shall cooperate in connection
with such disposition and shall take commercially reasonable efforts to mitigate
the adverse effects of any such disposition; provided, however, that nothing in
this sentence shall be deemed to restrict an Investor Party in connection with
the sale of any Common Stock (including the size or timing of such disposition).
ARTICLE IV
Limitations on Purchases of
Equity Securities and Other Actions
SECTION 4.01. Purchases of Equity Securities. Except for the
acquisition of shares of Common Stock pursuant to the Combination Agreement and
subject to the exceptions set forth in Section 4.03, during the Standstill
Period, the Investor Parties shall not, directly or indirectly, acquire, agree
to acquire or make a proposal to acquire beneficial ownership of any shares of
Equity Securities. Equity Securities acquired pursuant to this Article IV shall
be subject to all of the terms, covenants and conditions of this Agreement.
SECTION 4.02. Additional Limitations. Subject to the
exceptions set forth in Section 4.03, during the Standstill Period, the Investor
Parties shall not:
(a) seek, make or take any action to solicit, initiate or
encourage, any offer or proposal for, or any indication of interest in,
a merger, consolidation,
36
tender or exchange offer, sale or purchase of assets or securities or
other business combination or any dissolution, liquidation,
restructuring, recapitalization or similar transaction in each case
involving Xxxxxxxx American or any of its Subsidiaries or the
acquisition of any equity interest in, or a substantial portion of the
assets of, Xxxxxxxx American or any of its Subsidiaries;
(b) "solicit", or become a "participant" in any "solicitation"
of, any "proxy" (as such terms are defined in Regulation 14A under the
Exchange Act) from any holder of Voting Stock in connection with any
vote on any matter (whether or not relating to the election or removal
of Directors), or agree or announce its intention to vote with any
Person undertaking a "solicitation"; (c) form, join or in any way
participate in a 13D Group with respect to any Voting Stock (other than
a 13D Group composed of the Investor Parties);
(c) form, join or in any way participate in a 13D Group with
respect to any Voting Stock (other than a 13D Group composed of the
Investor Parties);
(d) grant any proxies with respect to any Voting Stock to any
Person (other than as recommended by the Board of Directors) or deposit
any Voting Stock in a voting trust or enter into any other arrangement
or agreement with respect to the voting thereof;
(e) seek, alone or in concert with other Persons, additional
representation on the Board of Directors or seek the removal of any
member of the Board that is not an Investor Director or a change in the
composition or size of the Board of Directors that is inconsistent with
this Agreement;
(f) enter into any arrangements, understandings or agreements
(whether written or oral) with, or advise, finance or assist any other
Persons in connection with any of the foregoing; or
(g) request, propose or otherwise seek any amendment or waiver
of the provisions of Article IV.
SECTION 4.03. Standstill Exceptions. Notwithstanding Sections
4.01 and 4.02:
37
(a) during the Standstill Period, the Investor Parties may
acquire beneficial ownership of additional Equity Securities if, after
giving effect to any such acquisition, B&W's Percentage Interest would
not exceed the Standstill Percentage less the percentage of Voting
Power (calculated as of the date of disposition) associated with any
Equity Securities disposed of by any Investor Party (other than to
another Investor Party) following the date of this Agreement;
(b) if, during the Standstill Period, Xxxxxxxx American
becomes the subject of a Third Party Offer, Xxxxxxxx American shall
promptly, and in any event within two business days, deliver written
notice to B&W to such effect, which notice shall to the extent known by
Xxxxxxxx American set forth the percentage of Voting Power or assets
that the third party is seeking to acquire pursuant to the Third Party
Offer, and the Investor Parties shall have the right to make a B&W
Counteroffer to the Board of Directors in response to such Third Party
Offer. If Xxxxxxxx American accepts any such B&W Counteroffer, the
Investor Parties may acquire Equity Securities in accordance with the
terms of such B&W Counteroffer. If Xxxxxxxx American rejects any such
B&W Counteroffer and enters into an agreement with a third party (other
than the Investor Parties) with respect to a Significant Transaction or
a third party (other than the Investor Parties) initiates a tender
offer or exchange offer that would constitute a Significant
Transaction, the Investor Parties may make and consummate a public
proposal constituting a B&W Counteroffer (including by way of a tender
offer or exchange offer). Notwithstanding the foregoing, an Investor
Party's right to make any B&W Counteroffer and to acquire additional
Equity Securities pursuant to this clause (b) is subject to the
condition that the Investor Directors recuse themselves from any and
all consideration by the Board of Directors or any committee thereof of
a Third Party Offer or a B&W Counteroffer; and
(c) during the Standstill Period, the Investor Parties shall
be permitted to make requests to the Board of Directors to amend or
waive any of the limitations set forth in Section 4.01 or 4.02, which
38
the Other Directors, acting by majority, may accept or reject in their
sole discretion; provided, however, that (i) any such request shall not
be publicly disclosed by the Investor Parties and (ii) any such request
shall be made in a manner that is not reasonably likely to require the
public disclosure of such request by Xxxxxxxx American.
ARTICLE V
Transfer of Common Stock
SECTION 5.01. Limitation on Transfer of Common Stock. (a)
During the term of this Agreement, any sale, transfer or other disposition of
shares of Common Stock by the Investor Parties shall be subject to the following
limitations:
(i) no shares of Common Stock may be sold, transferred or
otherwise disposed of, directly or indirectly, to any Person or 13D
Group, if, after giving effect to such sale, transfer or other
disposition such Person or 13D Group would, to B&W's knowledge,
beneficially own, or have the right to acquire, 7.5% or more of the
Voting Power of all Voting Stock, except in connection with a tender
offer or exchange offer for Common Stock (provided that the Board of
Directors has not recommended to its shareholders that such tender
offer or exchange offer be rejected); and
(ii) none of the Investor Parties will, in any six-month
period, sell, transfer or otherwise dispose of, directly or indirectly,
Common Stock representing in the aggregate more than 5% of the Voting
Power of all Voting Stock without first obtaining the consent of a
majority of the Other Directors, except in connection with a tender
offer or exchange offer for Common Stock (provided that the Board of
Directors has not recommended to its shareholders that such tender
offer or exchange offer be rejected).
(b) Notwithstanding any of the foregoing, B&W may at any time
transfer any or all of its shares of Common Stock to any Investor Party, and any
such transferee may
39
make similar transfers; provided, however, that (x) any such transferee shall
agree to be bound by the terms of this Agreement and (y) for purposes of
calculating any ownership threshold applicable to B&W and/or its affiliates
under this Agreement, all shares of Common Stock held by B&W and any permitted
transferee under this Section 5.01(b) shall be taken into account.
(c) Xxxxxxxx American may place appropriate legends on the
certificates representing Common Stock held by the Investor Parties setting
forth the restrictions referred to above and any restrictions appropriate for
compliance with U.S. federal securities laws. Xxxxxxxx American will promptly
issue replacement certificates to the Investor Parties, upon request, in order
to permit the Investor Parties to engage in sales, transfers and other
dispositions that are not restricted hereunder or under U.S. federal securities
laws. Purported transfers of shares of Common Stock that are not in compliance
with this Article V shall be void.
ARTICLE VI
Miscellaneous
SECTION 6.01. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given upon receipt by the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to BAT, to
Xxxxx Xxxxx
0 Xxxxxx Xxxxx
Xxxxxx XX0X 0XX Xxxxxx Xxxxxxx
Fax: 00 000 000 0000
Attention: General Counsel
with a copy to:
Cravath, Swaine & Xxxxx LLP
000 Xxxxxx Xxxxxx
00
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxxxx, Esq.
(b) if to B&W, to
000 Xxxxx 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to:
Cravath, Swaine & Xxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxx Xxxxxxxx, Esq.
(c) if to Xxxxxxxx American, to
000 Xxxxx Xxxx Xxxxxx
Xxxxxxx-Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: General Counsel
with a copy to:
Xxxxx Day
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Fax: 000-000-0000
Phone: 000-000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
41
SECTION 6.02. Amendments; Waivers. (a) No provision of this
Agreement may be amended or waived unless such amendment or waiver is in writing
and signed, in the case of an amendment, by the parties hereto, or in the case
of a waiver, by the party against whom the waiver is to be effective; provided,
however, that no such amendment or waiver by Xxxxxxxx American shall be
effective without the approval of a majority of the Other Directors (except for
amendments or waivers that are administrative in nature or that do not
materially adversely affect the rights of the Unaffiliated Equity Holders, which
amendments and waivers shall only require the approval of a majority of the
Directors).
(b) The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights nor shall any single or partial exercise by any party to this
Agreement of any of its rights under this Agreement preclude any other or
further exercise of such rights or any other rights under this Agreement. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law or otherwise.
SECTION 6.03. Interpretation. When a reference is made in this
Agreement to a Section, Subsection or Exhibit, such reference shall be to a
Section or Subsection of, or an Exhibit to, this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. The words "date hereof" shall
refer to the date of this Agreement. The term "or" is not exclusive. The word
"extent" in the phrase "to the extent" shall mean the degree to which a subject
or other thing extends, and such phrase shall not mean simply "if". The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms. Any agreement
42
or instrument defined or referred to herein or in any agreement or instrument
that is referred to herein means such agreement or instrument as from time to
time amended, modified or supplemented. References to a Person are also to its
permitted successors and assigns.
SECTION 6.04. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule or
Law, or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect 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 determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the Transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 6.05. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 6.06. Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the other Transaction Agreements constitute the entire
agreement, and supercede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof and are not intended to confer upon any Person other than the parties
any rights or remedies.
SECTION 6.07. Governing Law. Except to the extent specifically
required by the North Carolina Business Corporation Act, this Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. The parties declare that it is their
intention that this Agreement shall be regarded as made under the laws of the
43
State of Delaware and that the laws of the State of Delaware shall be applied in
interpreting its provisions in all cases where legal interpretation shall be
required, except to the extent the North Carolina Business Corporation Act is
specifically required by such act to govern the interpretation of this
Agreement.
SECTION 6.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the parties
without the prior written consent of the other parties hereto, except that B&W
may assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to BAT or any of its Subsidiaries that agrees
in writing to be bound by the provisions hereof. Any purported assignment
without such prior written consent shall be void. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 6.09. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal court
located in the State of Delaware or in the Chancery Court of the State of
Delaware, this being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties (a) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of
Delaware or Chancery Court of the State of Delaware in the event any dispute
arises out of this Agreement or any Transaction, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from any such court, (c) irrevocably and unconditionally waives (and
agrees not to plead or claim) any objection to the laying of venue of any
action, suit or proceeding arising out of this Agreement or any Transaction, (d)
agrees that it will not bring any action relating to this Agreement or any
Transaction in any court other than any Federal court
44
sitting in the State of Delaware or Chancery Court of the State of Delaware, (e)
waives any right to trial by jury with respect to any action related to or
arising out of this Agreement or any Transaction and (f) agrees that this
Agreement involves at least $100,000 and has been entered into by the parties in
express reliance upon 6 Del. C. Section 2708. Without limiting the agreement of
the parties set forth in this Section 6.11, in the event that any dispute
arising under this Agreement is subject to, or adjudicated by, the courts of the
State of North Carolina, the parties agree that any such dispute will be
adjudicated by the North Carolina Business Court (with any references in this
Section 6.09 to Delaware courts being deemed to be references to North Carolina
courts and any references in this Section 6.09 to the Chancery Court of the
State of Delaware being deemed to be references to the North Xxxxxxxx Business
Court).
SECTION 6.10. Effectiveness. This Agreement shall become
effective upon the execution of this Agreement.
SECTION 6.11. Termination.
(a) Automatic Termination. This Agreement shall automatically
terminate at such time that (i) B&W's Percentage Interest equals 100% or is less
than 15% or (ii) any Person or 13D Group (other than the Investor Parties or any
Person participating in a 13D Group with the Investor Parties) beneficially owns
or controls Voting Stock representing more than 50% of the Voting Power of all
Voting Stock.
(b) Termination by BAT and B&W. BAT and B&W shall be entitled
to terminate this Agreement in the event that (i) (A) Xxxxxxxx American, the
Board of Directors or any committee of the Board of Directors takes any action,
or fails to take appropriate action, which action, or failure to take action,
would have resulted in a material breach of any of the Board Provisions but for
the fiduciary duty exception set forth in Section 2.08 or (B) an Approval
Termination Event occurs or (ii) the number of Investor Directors serving on the
Board of Directors at any time is less than the number of Investor Directors to
which B&W is entitled at such time pursuant to Section 2.01 (provided
45
B&W has complied in all material respects and in good faith with the
requirements set forth in this Agreement regarding the nomination of, and voting
for, directors), in the case of clauses (i) and (ii) subject to notice from B&W
and the expiration of a 45-day period in which to cure such action or failure to
act (if such action or failure to act is capable of being cured).
(c) Termination of Obligations. BAT and B&W shall be entitled
to terminate Articles IV and V and Sections 2.01(g) and (h) and Sections 2.02(b)
and (c), but the remainder of this Agreement shall continue until otherwise
terminated pursuant to Section 6.11(a) or (b), in the event that the Board of
Directors or Xxxxxxxx American willfully and deliberately fails to take
appropriate action, which action, or failure to take action, results in a
material breach of the Board Provisions, subject to notice from B&W and the
expiration of a 45-day period in which to cure such breach or failure (if such
breach or failure is capable of being cured). Xxxxxxxx American shall be
entitled to terminate Article II (provided that Section 2.04(c) shall survive
until the fifth anniversary of the date of this Agreement and Sections
2.01(g)(i) and (h) and 2.02(b) and (c) shall survive until otherwise terminated
pursuant to Section 6.11(a)), but the remainder of this Agreement shall continue
until otherwise terminated pursuant to Section 6.11(a), in the event that BAT or
B&W willfully and deliberately takes any action, or fails to take appropriate
action, which action, or failure to take action, results in a material breach of
Section 4.01 hereof (subject to the exceptions set forth in Section 4.03),
subject to notice from Xxxxxxxx American and the expiration of a 45-day period
in which to cure such breach or failure (if such breach or failure is capable of
being cured).
(d) Survival. In the event that this Agreement shall
terminate, all provisions of this Agreement shall terminate and shall be void,
except (i) Article III shall survive any such termination until the Investor
Parties no longer hold Registrable Securities, (ii) Section 2.04(c) shall
survive until the fifth anniversary of the date of this Agreement and (iii)
Articles I and VI shall survive any such termination indefinitely. Nothing in
this Section 6.11 will be deemed to release any party from any liability for any
wilful and material breach of this
46
Agreement or to impair the right of any party to compel specific performance by
any other party of its obligations under this Agreement.
SECTION 6.12. Confidentiality. (a) Each of BAT and B&W agree
to maintain, and they shall cause each of their respective Subsidiaries,
directors, officers, employees and other representatives (including any Investor
Director) to maintain, the confidentiality of all material non-public
information obtained by the Investor Parties from Xxxxxxxx American or any of
its Subsidiaries or their respective directors, officers, employees or agents,
and not to use such information for any purpose other (i) than the evaluation
and protection of the investment by the Investor Parties in Xxxxxxxx American,
(ii) the exercise by the Investor Parties of any of their respective rights
under this Agreement and (iii) the exercise by the Investor Directors of their
fiduciary duties as Directors of Xxxxxxxx American.
(b) Notwithstanding the foregoing, the confidentiality
obligations of Section 6.12(a) will not apply to information obtained other than
in violation of this Agreement:
(i) which any of Investor Parties or any of their officers,
employees, representatives, consultants or advisors is required to
disclose by judicial or administrative process, or by other
requirements of applicable law or regulation or any governmental
authority; provided, however, that, where and to the extent
practicable, the disclosing party (A) gives the other party reasonable
notice of any such requirement and, to the extent protective measures
consistent with such requirement are available, the opportunity to seek
appropriate protective measures and (B) cooperates with such party in
attempting to obtain such protective measures;
(ii) which becomes available to the public other than as a
result of a breach of Section 6.12(a); or
(iii) which has been provided to any of the Investor Parties
or any of their officers, employees, representatives, consultants or
advisors by a third
47
party who obtained such information other than from any such Person or
other than as a result of a breach of Section 6.12(a).
(c) Notwithstanding anything herein to the contrary, any party
to this Agreement (and any employee, representative or other agent of such
party) may disclose to any and all Persons, without limitation of any kind, the
tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure, except that (i) this provision shall not permit disclosure until the
earliest of (A) the date of the public announcement of discussions relating to
the transaction, (B) the date of the public announcement of the transaction or
(C) the date of the execution of an agreement (with or without conditions) to
enter into the transaction, (ii) tax treatment and tax structure shall not
include the identity of any existing or future party (or any affiliate of such
party) to this Agreement and (iii) this provision shall not permit disclosure to
the extent that nondisclosure is necessary in order to comply with applicable
securities laws. Nothing in this Agreement shall in any way limit any party's
ability to consult any tax advisor (including a tax advisor independent from all
other entities involved in the transactions contemplated by this Agreement)
regarding the tax treatment or tax structure of the transactions contemplated by
this Agreement.
SECTION 6.13. Acknowledgment of Securities Laws. Each of BAT
and B&W hereby acknowledges that it is aware, and that it will advise its
representatives who are informed as to the material non-public information that
is the subject of Section 6.12, that the United States securities laws prohibit
any Person who has received from an issuer material, non-public information from
purchasing or selling securities of such issuer or from communication of such
information to any other Person under circumstances in which it is reasonably
foreseeable that such Person is likely to purchase or sell such securities.
48
IN WITNESS WHEREOF, the parties hereto have executed
this Governance Agreement as of the day and year first above
written.
BRITISH AMERICAN TOBACCO P.L.C.
By
----------------------------------
Name:
Title:
XXXXX & XXXXXXXXXX TOBACCO
CORPORATION
By
----------------------------------
Name:
Title:
XXXXXXXX AMERICAN INC.
By
----------------------------------
Name:
Title:
49
SCHEDULE 2.04 TO
THE GOVERNANCE AGREEMENT
International Brands
(a) Xxxxxxx
(b) Capri
(c) Carlton
(d) Kool
(e) Lucky Strike
(f) Pall Mall
(g) Viceroy
EXHIBIT H
THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF XXXXXXXX AMERICAN INC.
Directors
In the interim period prior to Closing, each of B&W and RJR shall have the right
to designate an equal number of directors to the Board of Directors of Xxxxxxxx
American Inc.
Immediately prior to the Effective Time, each of B&W and RJR shall cause those
directors it has designated to the Board of Directors of Xxxxxxxx American Inc.
to resign, effective immediately prior to the Effective Time (other than any
directors that will continue as directors pursuant to the provisions of the next
paragraph).
At the Effective Time, the Board of Directors of Xxxxxxxx American Inc. shall
comprise 13 directors: Xxxxxx X. Xxxxxxxxx, Xxxxx Xxxx, five directors
designated by B&W and six directors designated by RJR. Each director designated
by B&W and RJR shall satisfy the requirements set forth in the Governance
Agreement.
Officers
In the interim period prior to Closing, the Board of Directors of Xxxxxxxx
American Inc. shall select the officers of Xxxxxxxx American Inc. to serve until
the Effective Time, with such officers to resign or be removed from office,
effective as of the Effective Time (other than any officers that will continue
as the equivalent officers pursuant to the provisions of the next paragraph).
Immediately after the Effective Time, the Board of Directors of Xxxxxxxx
American Inc. will elect the executive officers of Xxxxxxxx American Inc.,
provided that (unless either is unable to serve) (a) Xxxxxx X. Xxxxxxxxx shall
be elected Executive Chairman of Xxxxxxxx American Inc. for a six-month term and
(b) Xxxxx Xxxx shall be elected Chief Executive Officer of Xxxxxxxx American
Inc. It is anticipated that, effective on the date that is six months after
the Effective Time, Xxxxxx X. Xxxxxxxxx shall become the non-executive Chairman
of Xxxxxxxx American Inc.
EXHIBIT J
[Letterhead of Xxxxxxxx American Inc.]
/-/, 200[ ]
Dividend Policy
Board of Directors
Xxxxx & Xxxxxxxxxx Tobacco Corporation
000 Xxxxx 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Dear Sirs:
In connection with the closing of the transactions under the
Business
Combination Agreement dated as of October 27, 2003 (the "Combination
Agreement"), between Xxxxx & Xxxxxxxxxx Tobacco Corporation and X.X. Tobacco
Holdings, Inc., you have asked us to confirm our position regarding future
dividend payments. It is our present intention, as executive officers of
Xxxxxxxx American Inc. ("Xxxxxxxx American"), to recommend to the Board of
Directors of Xxxxxxxx American that, with respect to any fiscal year, dividends
be paid to the shareholders of Xxxxxxxx American common stock in an aggregate
amount that is approximately 75% of Xxxxxxxx American's annual consolidated net
income.
Sincerely,
-----------------------
Executive Chairman
-----------------------
Chief Executive Officer
