Exhibit 99.3
EMPLOYEE BENEFITS AGREEMENT
DATED AS OF JUNE 12, 2002
BETWEEN
X.X. XXXXX COMPANY
AND
SKF FOODS INC.
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EMPLOYEE BENEFITS AGREEMENT, dated as of June 12, 2002, between
X.X. XXXXX COMPANY, a Pennsylvania corporation ("Heinz"), and SKF FOODS INC., a
Delaware corporation ("Spinco") (Heinz and Spinco, collectively, the "Parties"
and each a "Party").
WHEREAS, Heinz has decided to separate the Spinco Business from
Heinz, contribute the Spinco Business to Spinco (the "Contribution"), and
distribute all of the issued and outstanding shares of Spinco common stock (the
"Spinco Common Stock") on a pro rata basis (the "Distribution") to the holders
as of the Heinz Record Date of the outstanding common stock of Heinz, par value
$0.25 per share ("Heinz Common Stock");
WHEREAS, immediately following the Distribution, Del Monte
Corporation, a New York corporation and a wholly owned, direct subsidiary of Del
Monte ("Merger Sub"), will merge (the "Merger") with and into Spinco, pursuant
to the terms of the Agreement and Plan of Merger, dated as of June 12, 2002, by
and among Heinz, Spinco, Merger Sub and Del Monte (the "Merger Agreement");
WHEREAS, Heinz and Spinco have entered into a Separation
Agreement, dated June 12, 2002 (the "Separation Agreement"), and certain other
agreements that will govern certain matters relating to the Contribution and the
Distribution and the relationship of Heinz and Spinco and their respective
Subsidiaries following the Distribution; and
WHEREAS, pursuant to the Separation Agreement, Heinz and Spinco
have agreed to enter into this Agreement for the purpose of allocating current
and former employees and assets, liabilities, and responsibilities with respect
to employee compensation, benefit and other matters;
NOW, THEREFORE, in consideration of the mutual promises
contained herein and in the Separation Agreement, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions
For purposes of this Agreement, capitalized terms used herein
shall have the following respective meanings:
"Action" has the meaning given in the Merger Agreement.
"Affiliate" has the meaning given in the Separation Agreement.
"Aggregate Spread" means, in the case of a Heinz Option prior to
the Distribution Date, the difference between the exercise price per
share of Heinz Common Stock covered by such Heinz Option and the Heinz
Pre-Distribution Stock Price, multiplied by the number of shares of
Heinz Common Stock covered by such Heinz Option.
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"Agreement" means this Employee Benefits Agreement and all
exhibits, schedules, appendices and annexes hereto.
"ASO Contract" means an administrative services only contract,
related prior practice, or related understanding with a third-party
administrator that pertains to any Heinz Health and Welfare Plan or
Spinco Health and Welfare Plan.
"Close of the Distribution Date" means 11:59:59 P.M., Eastern
Standard Time or Eastern Daylight Time (whichever shall then be in
effect), on the Distribution Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and as the context requires, the Treasury regulations promulgated
thereunder.
"Conversion Awards" has the meaning given in Section 7.1(b)(ii)
of this Agreement.
"Converted Deferred Share Units" means the Deferred Share Units
(as defined in the Heinz Deferred Share Unit Plan) held by Spinco
Employees prior to the Close of the Distribution Date, which are, in
accordance with the terms of the Merger Agreement, converted into
deferred share units on Del Monte Common Stock as of the Effective Time.
"Del Monte Actuary" has the meaning given in Section 9.3(a) of
this Agreement.
"Del Monte Consent" has the meaning given in the Merger
Agreement.
"Del Monte Pension Trust" shall mean the trust or trusts, which
are exempt from taxation under Section 501(a) (1) of the Code,
established and maintained by Del Monte for the purpose of defined
benefit pension Plans that are qualified under Section 401(a) of the
Code.
"Del Monte Savings Trust" shall mean the trust or trusts, which
are exempt from taxation under Section 501(a) (1) of the Code,
established and maintained by Del Monte for the purpose of defined
contribution Plans that are qualified under Section 401(a) of the Code.
"Distribution" has the meaning given in the Separation
Agreement.
"Distribution Date" has the meaning given in the Separation
Agreement.
"Effective Time" has the meaning given in the Merger Agreement.
"ERISA" means the Employee Retirement Income Security Act, as
amended from time to time, and as the context requires, the Department
of Labor regulations promulgated thereunder.
"Exchange Ratio" has the meaning given in the Merger Agreement.
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"Foreign Plans" are those Plans of Heinz and any of its
Subsidiaries that provide benefits to Spinco Employees employed outside
the U.S. (including American Samoa, Canada and Ecuador), a list of which
is set forth on Schedule II attached hereto. For purposes of
clarification, the attached list does not include those programs that
are maintained as required under the governing laws of the applicable
jurisdiction.
"GAAP" has the meaning given in the Merger Agreement.
"Heinz" has the meaning given in the first recital to this
Agreement.
"Heinz Accountant" means PricewaterhouseCoopers (or such other
nationally recognized accounting firm as may be designated by Heinz).
"Heinz Actuary" means Buck Consultants (or such other
government-enrolled actuarial firm as may be designated by Heinz).
"Heinz Bonus Plans" are those Heinz Plans that were the
predecessors of the Spinco Bonus Plans, as set forth in Section 4.12(a)
of the Spinco Disclosure Letter to the Merger Agreement.
"Heinz Group" has the meaning given in the Merger Agreement.
"Heinz Executive Deferred Compensation Plan" means the Heinz
Executive Deferred Compensation Plan, and each election form executed in
accordance with such plan by any participating Spinco Employee.
"Heinz Health and Welfare Plans" are those Plans of Heinz that
were the predecessors of the Spinco Health and Welfare Plans (including
the Heinz Retiree Plans, but excluding the Heinz Executive Split Dollar
Life Insurance Plan and the Heinz Premier Life Insurance Plan), as set
forth in Section 4.12(a) of the Spinco Disclosure Letter to the Merger
Agreement.
"Heinz Incentive Plans" means (a) the Heinz 2000 Stock Option
Plan, (b) the Heinz 1996 Stock Option Plan, (c) the Heinz 1994 Stock
Option Plan, and (d) any other stock incentive plan of Heinz under which
any Spinco Employee holds Heinz Options.
"Heinz LTD Plans" shall mean those Plans of Heinz that were the
predecessors of the Spinco LTD Plans, as set forth in Section 4.12(a) of
the Spinco Disclosure Letter to the Merger Agreement.
"Heinz Option" has the meaning given in Section 7.1(a) of this
Agreement.
"Heinz Pension Plans" shall mean those Heinz Plans that were the
predecessors of the Spinco Pension Plans, a list of which is set forth
on Schedule I attached hereto.
"Heinz Pension Trust" shall mean the trust or trusts, which are
exempt from taxation under Section 501(a) (1) of the Code and
established and maintained under the Heinz Pension Plans.
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"Heinz Plan" means any Plan maintained or sponsored by Heinz or
any of its Subsidiaries or affiliates (or any of their respective
predecessors) at any time on or prior to the Distribution Date for the
benefit of any current or former employee of any such Person.
"Heinz Post-Distribution Stock Price" means the excess of the
Heinz Pre-Distribution Stock Price over the Spinco Post-Distribution
Stock Price.
"Heinz Pre-Distribution Stock Price" means the closing price per
share of Heinz Common Stock on the last full business day occurring
before the date on which the Heinz Common Stock begins to trade "ex
dividend".
"Heinz Record Date" has the meaning given in the Separation
Agreement.
"Heinz Retiree Plan" means that Heinz Plan that provides retiree
medical and other benefits to certain Spinco Employees (including the
benefits available to Spinco Employees who retire after age 55 with at
least ten years of service after age 45), that was the predecessor of
the Spinco Retiree Plan, as set forth as set forth in Section 4.12(a) of
the Spinco Disclosure Letter to the Merger Agreement.
"Heinz Savings Plans" shall mean the Heinz Retirement and
Savings Plan and the Heinz SAVER Plan.
"Heinz Savings Trust" shall mean the trust or trusts, which are
exempt from taxation under Section 501(a) (1) of the Code and
established and maintained under the Heinz Savings Plans.
"Heinz SERP" has the meaning given in Section 7.2(d) of this
Agreement.
"Xxxxx Xxxxxxxxx Plans" shall mean those Heinz Plans that were
the predecessors of the Spinco Severance Plans, as set forth as set
forth in Section 4.12(a) of the Spinco Disclosure Letter to the Merger
Agreement.
"Heinz Supplemental Plans" means (a) the Heinz Bonus Plans, (b)
the Heinz Excess Plan, (c) the Heinz Executive Deferred Compensation
Plan, (d) the Heinz Incentive Plans, (e) the Heinz LTD Plans, (f) the
Heinz Restricted Stock Bonus Plan, (g) the Xxxxx Xxxxxxxxx Plans, and
(h) the Heinz SERP.
"HMO" means a health maintenance organization that provides
benefits under the Heinz Health and Welfare Plans or the Spinco Health
and Welfare Plans, as applicable.
"HMO Agreements" means contracts, letter agreements, practices,
and understandings with HMOs that provide medical services under the
Heinz Health and Welfare Plans or the Spinco Health and Welfare Plans,
as applicable.
"Independent Actuary" has the meaning given in Section 9.3(a) of
this Agreement.
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"Individual Agreement" means an individual employment contract
or other similar agreement that specifically pertains to any Spinco
Employee, a list of which is set forth in Section 4.12(a) of the Spinco
Disclosure Letter to the Merger Agreement, and includes the employment
agreements provided for in Section 2.1(d) of this Agreement.
"Initial Asset Transfer" has the meaning given in Section 4.2(b)
of this Agreement.
"Initial Asset Transfer Date" means the date that is mutually
agreed upon by Heinz and Spinco (with a Del Monte Consent), which shall
occur as soon as reasonably practicable after the date the amount of the
Initial Asset Transfer is calculated (pursuant to Section 4.2(b) of this
Agreement), which date shall in no event be later than 120 days after
the end of the Transition Services Period.
"Liabilities" means any and all losses, claims, charges, debts,
demands, Actions, damages, obligations, payments, costs and expenses,
bonds, indemnities and similar obligations, covenants, controversies,
promises, omissions, guarantees, make whole agreements and similar
obligations, and other liabilities, including all contractual
obligations, whether absolute or contingent, inchoate or otherwise,
matured or unmatured, liquidated or unliquidated, accrued or unaccrued,
known or unknown, whenever arising, and including those arising under
any law, rule, regulation, Action, threatened or contemplated Action
(including the costs and expenses of demands, assessments, judgments,
settlements and compromises relating thereto and attorneys' fees and any
and all costs and expenses (including allocated costs of in-house
counsel and other personnel), whatsoever reasonably incurred in
investigating, preparing or defending against any such Actions or
threatened or contemplated Actions), order or consent decree of any
Governmental Authority or any award of any arbitrator or mediator of any
kind, and those arising under any contract, commitment or undertaking,
including those arising under this Agreement.
"Merger" has the meaning given in the second recital to this
Agreement.
"Merger Sub" has the meaning given in the second recital to this
Agreement.
"Non-parties" has the meaning given in Section 9.3(b)(ii) of
this Agreement.
"Participating Company" means any Person (other than an
individual) that is a participating employer in a Plan sponsored by
Heinz or any Subsidiary thereof.
"PBGC" means the Pension Benefit Guaranty Corporation. "PBGC
Interest Rate" means the interest rate for "Time Period 1" as provided by the
regulations promulgated by the PBGC for valuing annuities for terminating single
and multiemployer plans, as of the applicable date of determination pursuant to
Section 4.2(b) of this Agreement.
"Pension Liabilities" means all liabilities relating to or in
respect of Spinco Employees under each of the Heinz Pension Plans, which
liabilities shall be calculated by
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the Heinz Actuary in accordance with Section 414(l) of the Code as if
each such plan were to be terminated as of the Distribution Date (using
the methods and assumptions stipulated by Section 4044 of ERISA).
"Pension Plan Asset Transfer Amount" means, in the case of a
transfer of assets in respect of the Pension Liabilities under each
Heinz Pension Plan from the Heinz Pension Trust to the Del Monte Pension
Trust, the amount of assets necessary to be transferred from the Heinz
Pension Trust, determined in accordance with Section 414(l) of the Code,
equal to the sum of (x) the Pension Liabilities and (y) an amount of
excess assets, if any, held by the Heinz Pension Trust in respect of
each Heinz Pension Plan, that is in proportion to the Pension
Liabilities of each such Plan compared to the total amount of
liabilities for all participants in each such Plan.
"Person" has the meaning given in the Merger Agreement.
"Plan" means any material plan, policy, program, payroll
practice, on-going arrangement, contract, trust, insurance policy or
other agreement or funding vehicle, whether written or unwritten,
providing compensation or benefits to employees or former employees.
"Pre-Distribution Period" means the period beginning immediately
after the date of this Agreement and ending on the Close of the
Distribution Date.
"Reimbursement Amount" has the meaning given in Section 4.2(b)
of this Agreement.
"Savings Account Transfer Date" means the date on which the
account balances of the Spinco Employees who participate in the Spinco
Savings Plans shall be transferred to the Del Monte Savings Trust, which
date shall be mutually agreed upon by Heinz and Spinco (with a Del Monte
Consent) and shall in no event be later than 120 business days after the
end of the Transition Services Period.
"Separation Agreement" has the meaning given in the third
recital to this Agreement.
"SERP Participant" means each Spinco Employee who, as of the
date of this Agreement, participates in the Heinz SERP.
"Spinco" has the meaning specified in the preamble to this
Agreement.
"Spinco Bonus Plans" means the Plans established and maintained
by Spinco pursuant to Section 3.1 and Article VII of this Agreement that
correspond to the Heinz Bonus Plans; provided, however, that the Spinco
Bonus Plans shall not include certain additional retention incentives
that Heinz may provide to certain Spinco Employees under the Heinz Bonus
Plans on or prior to the Distribution Date.
"Spinco Business" shall mean Heinz's (i) dry and canned pet food
and pet snacks businesses in the U.S. and Canada, (ii) specialty pet
food businesses conducted under the
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"Nature's Recipe," "IVD", "TechniCal" and "MediCal" trademarks
worldwide, (iii) ambient tuna business in the U.S., (iv) other ambient
seafood products currently marketed by the StarKist Seafood business
unit in the U.S., (v) retail private label soup and retail private label
gravy businesses in the U.S., (vi) broth business conducted in the U.S.
under the trademark "College Inn" and (vii) infant feeding business in
the U.S., including pureed foods currently produced in the Pittsburgh
plant. For the purpose of this definition, (A) "in the U.S." or "in
Canada" shall mean all channels of distribution, except in the case of
clause (v), where it shall include only retail sales, in such country
and its territories and (B) "retail" shall refer to products sold as
packaged goods for consumption in the home, as opposed to prepared foods
sold for away-from-home consumption or consumption without further
preparation beyond reheating.
"Spinco Disclosure Letter" has the meaning given in the Merger
Agreement.
"Spinco Employee" means any individual who, as of the Close of
the Distribution Date, is listed on Schedule III in accordance with
Section 2.1(b) of this Agreement.
"Spinco Group" has the meaning given in the Separation
Agreement.
"Spinco Health and Welfare Plans" means the Plans established by
Spinco pursuant to Section 3.1 and Article VI of this Agreement that
correspond to the Heinz Health and Welfare Plans (including the Spinco
Retiree Plan).
"Spinco Liabilities" has the meaning given in Section 2.2(a) of
this Agreement.
"Spinco LTD Plans" means the Plans established and maintained by
Spinco pursuant to Section 3.1 and Article IV of this Agreement that
correspond to the Heinz LTD Plans.
"Spinco Plans" means the Spinco Pension Plans, the Spinco Health
and Welfare Plans, the Spinco Savings Plans, and the Spinco Supplemental
Plans.
"Spinco Pension Plans" means the Plans established and
maintained by Spinco pursuant to Section 3.1 and Article IV of this
Agreement that correspond to the Heinz Pension Plans.
"Spinco Post-Distribution Stock Price" means the value of one
share of Spinco Common Stock, which shall be equal to the product of (x)
the Exchange Ratio (calculated on the last full business day occurring
before the date on which the Heinz Common Stock begins to trade "ex
dividend") and (y) the closing price per share of Del Monte Common Stock
(as such term is defined in the Merger Agreement) on the last full
business day occurring before the date on which the Heinz Common Stock
begins to trade "ex dividend".
"Spinco Retiree Plan" means the Plan established and maintained
by Spinco pursuant to Section 3.1 and Article VII of this Agreement that
correspond to the Heinz Retiree Plans.
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"Spinco Savings Plans" means the Plans established and
maintained by Spinco that correspond to the Heinz Retirement and Savings
Plan and the Heinz SAVER Plan, as modified in accordance with Section
5.1(c) below.
"Spinco SERP" has the meaning given in Section 7.2(d) of this
Agreement.
"Spinco Severance Plans" means the Plans established and
maintained by Spinco pursuant to Section 3.1 and Article VII of this
Agreement that correspond to the Xxxxx Xxxxxxxxx Plans.
"Spinco Supplemental Plans" means the Plans established and
maintained by Spinco pursuant to Section 3.1 and Article VII of this
Agreement that correspond to the Heinz Supplemental Plans, which include
(a) the Spinco Bonus Plans, (b) the Spinco Excess Plan, (c) the Spinco
Executive Deferred Compensation Plan, (d) the Spinco LTD Plans, (e) the
Spinco Severance Plans, and (f) the Spinco Supplemental Executive
Retirement Plan.
"Subsidiary" shall mean, with respect to any Person, another
Person (i) of which 50% or more of the capital stock, voting securities,
other voting ownership or voting partnership interests having voting
power under ordinary circumstances to elect directors or similar members
of the governing body of such corporation or other entity (or, if there
are no such voting interests, 50% or more of the equity interests) are
owned or controlled, directly or indirectly, by such first Person or
(ii) of which such first Person is a general partner.
"Transaction Agreements" has the meaning given in the Separation
Agreement.
"Transition Services Agreement" means that certain Transition
Services Agreement, dated June 12, 2002 by and between Heinz and Spinco,
to be in effect following the Effective Time (as defined in the Merger
Agreement).
"Transition Services Period" means the Transition Services
Period set forth in the Transition Services Agreement, which shall be
the period of time commencing on the Close of the Distribution Date and
running at least through the first anniversary of the Effective Time,
which period may be extended through the second anniversary of the
Effective Time at the written request of Del Monte or Spinco, so long as
Spinco continues to maintain the Spinco Plans that Heinz is being asked
to administer on the same terms and conditions as the corresponding
Heinz Plans in effect immediately prior to the Close of the Distribution
Date.
"True-Up Amount" has the meaning provided for in Section 4.2(b)
of this Agreement.
"True-Up Date" means the date that is as soon as practicable
after the Initial Asset Transfer Date, after the Heinz Actuary has
calculated the final determination of the amounts to be transferred
pursuant to Section 4.2(b) of this Agreement (and after the Del Monte
Actuary has reviewed such calculation and any audit process provided for
in Section 9.3(a) of this Agreement has occurred), which date shall in
no event be later than
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180 days after the Initial Asset Transfer Date (unless such date is
extended as a result of an Independent Actuary's failure to finally
determine the amount of the True-Up Amount in which case such date shall
be as soon as reasonably practicable after receipt by the Heinz Actuary
and Del Monte Actuary of such final determination).
"U.S." means the United States of America.
ARTICLE II
EMPLOYEES; ASSUMPTION OF LIABILITIES
Section 2.1. Employees.
(a) General. Subject to Section 2.1(b) of this Agreement and
Section 7.6(d) of the Merger Agreement, effective as of the Close of the
Distribution Date, all Spinco Employees shall become employees of the Spinco
Group.
(b) Schedule of Spinco Employees. As of the date of this
Agreement, Heinz and Spinco shall have in good faith determined which
individuals who are employed by Heinz and any of its Subsidiaries shall become
Spinco Employees on no later than the Distribution Date. A list of all such
salaried employees shall be set forth on Schedule III attached hereto on the
date of execution of this Agreement, which list may be modified by Heinz as
reasonably required (but which schedule shall be in its final form on no later
than the fifth day prior to the Distribution Date), with all material changes to
be approved by Spinco, with a Del Monte Consent; provided, however, that for
this purpose, any change in personnel at the rank of "H+" (as such term is
defined under the Heinz compensation structure) or above shall be considered
material. In addition, the list on Schedule III shall be supplemented to include
all hourly employees as of the date on which the Effective Time occurs.
(c) Non-Termination of Employment. Except as otherwise expressly
provided herein, no provision of, or event arising under, this Agreement or any
of the other Transaction Agreements (including the occurrence of the
Contribution, the Distribution or the termination of Participating Company
status with respect to any Heinz Plan or Spinco Plan, as applicable) shall be
construed to create any right, or accelerate entitlement, to any compensation or
benefit whatsoever on the part of any Spinco Employee or other future, present,
or former employee of Heinz and any of its Subsidiaries or the Spinco Group
under any Heinz Plan or Spinco Plan or otherwise.
(d) Employment Agreements. As soon as practicable on or after
the execution of this Agreement, Spinco shall use its reasonable best efforts to
enter into an employment agreement (the form of which is attached as Appendix B
hereto) with each of the Spinco Employees listed on Schedule IV attached hereto,
which employment agreements shall become effective on the Close of the
Distribution Date.
Section 2.2. Assumption of Liabilities
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(a) By Spinco. On or prior to the Distribution Date, except as
otherwise provided for in this Agreement, Spinco will assume and agree
faithfully to perform and fulfill all the Liabilities described herein, in
accordance with their respective terms; and in addition Spinco shall be
responsible for all such Liabilities, regardless of when or where such
Liabilities arose or arise, or whether the facts on which they are based
occurred prior to, on or subsequent to the Distribution Date, regardless of
where or against whom such Liabilities are asserted or determined or whether
asserted or determined prior to the Distribution Date, and regardless of whether
arising from or alleged to arise from negligence, recklessness, violation of
law, fraud or misrepresentation by Heinz, Spinco or any of their respective
Subsidiaries, Representatives or Affiliates (collectively, the "Spinco
Liabilities"):
(i) All Liabilities relating to or in respect of Spinco
Employees and their dependents and beneficiaries, whether
relating to, arising out of or resulting from past, present
and/or future employment with Heinz, its Subsidiaries, and any
member of the Spinco Group (including Liabilities under Spinco
Plans);
(ii) All Liabilities under any Individual Agreements
relating to Spinco Employees; and
(iii) All other Liabilities relating to, arising out of,
or resulting from obligations, liabilities, and responsibilities
assumed or retained by Spinco or any of its Subsidiaries or by a
Spinco Plan pursuant to this Agreement or any other Transaction
Agreement.
(b) Effective as of the Close of the Distribution Date, Spinco
shall have assumed all such Liabilities described in this Agreement, unless
Heinz otherwise explicitly retains the Liability in writing.
ARTICLE III
U.S. SPINCO PLANS GENERALLY
Section 3.1. Establishment and Maintenance of Spinco Plans
Before the Close of the Distribution Date, Spinco shall have
adopted, or shall have caused to be adopted, the Spinco Plans and the Individual
Agreements. After the Close of the Distribution Date (except as otherwise
provided for herein), Spinco shall maintain all such Spinco Plans as may be
required to satisfy the obligations of Spinco and Del Monte as set forth herein
and in Section 7.6 of the Merger Agreement, respectively.
Section 3.2. Terms of Participation by Spinco Employees
With respect to Spinco Employees, except as otherwise provided
in this Agreement, the Spinco Plans shall (a) be in all respects the successors
in interest to, (b) recognize all rights and entitlements as of the Close of the
Distribution Date under, and (c) not provide benefits that duplicate benefits
provided by, the corresponding Heinz Plans for such Spinco Employees. Heinz and
Spinco shall agree on methods and procedures, including amending the respective
Plan documents, to prevent Spinco Employees from receiving duplicative benefits
from the Heinz Plans and the Spinco Plans. Spinco shall not permit any
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Spinco Plan to commence benefit payments to any Spinco Employee until it
receives notice from Heinz regarding the date on which payments under the
corresponding Heinz Plan shall cease. With respect to Spinco Employees, each
Spinco Plan shall provide that all service, all compensation, and all other
determinations which affect benefits that, as of the Close of the Distribution
Date, were recognized under the corresponding Heinz Plan (for periods
immediately before the Close of the Distribution Date) shall, as of immediately
after the Distribution Date, receive full recognition, credit, and validity and
be taken into account under such Spinco Plan to the same extent as if such items
occurred under such Spinco Plan, except to the extent that duplication of
benefits would result. All beneficiary designations made by Spinco Employees for
Heinz Plans shall be transferred to, and be in full force and effect under, the
corresponding Spinco Plans until such beneficiary designations are replaced or
revoked by the Spinco Employee who made the beneficiary designation.
Section 3.3. Spinco Participation in Heinz Plans.
(a) Subject to the terms and conditions of this Agreement, each
of Spinco and any of its Subsidiaries that is, as of the date of this Agreement,
a Participating Company in any of the Heinz Plans shall continue as such through
the Close of the Distribution Date, at which time such participation shall cease
pursuant to Section 3.3(b) of this Agreement. Effective as of any time before
the Distribution Date, Spinco and any of its Subsidiaries not described in the
preceding sentence may, to the extent reasonably necessary to effectuate the
provisions of this Agreement or any other Transaction Agreement, become a
Participating Company in any or all of the Heinz Plans. Through the Close of the
Distribution Date, Spinco shall perform with respect to its participation in the
Heinz Plans, and shall cause each of its Subsidiaries that is a Participating
Company in any Heinz Plan to perform, the duties of a Participating Company as
set forth in such Plans or any procedures adopted pursuant thereto.
(b) Effective as of the Close of the Distribution Date, Spinco
and each of its Subsidiaries, as applicable, shall cease to be a Participating
Company in the Heinz Plans on and after the Close of the Distribution Date.
Section 3.4. Restrictions on Plan Amendments
(a) During the Pre-Distribution Period, Heinz shall not adopt
any amendment, or allow any amendment to be adopted, to any of the Heinz Pension
Plans or Heinz Savings Plans, except for any amendment that (a) in the opinion
of counsel reasonably acceptable to both Heinz and Spinco (with a Del Monte
Consent), is required to continue to cause any such plan to meet the
requirements of Section 401(a) of the Code, (b) is required to effectuate any
provision in this Agreement, (c) is otherwise permitted under the terms of any
other Transaction Agreement or (d) is deemed by the Heinz Board of Directors to
be reasonably necessary in connection with the transactions contemplated by the
Merger Agreement; provided, however, that subject to the applicable provisions
of the Merger Agreement, Heinz may adopt any such amendment, or allow any such
amendment to be adopted, with the prior written consent of Spinco and any other
applicable party (i.e., a trustee), upon receipt of a Del Monte Consent.
(b) In addition to the foregoing, subject to the provisions of
this Agreement and the applicable provisions of the Merger Agreement, the Spinco
Plans shall be amended or
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modified to the same extent that the corresponding Heinz Plans are amended or
modified during the Pre-Distribution Period and the Transition Services Period,
to the extent applicable to the Spinco Plans, upon receipt of a Del Monte
Consent; and provided, further, that, except as otherwise required herein or in
the Merger Agreement, nothing shall preclude Spinco, at any time after the Close
of the Distribution Date, from amending, merging, modifying, terminating,
eliminating, reducing, or otherwise altering in any respect any Spinco Plan, any
benefit under any Plan or any trust, insurance policy or funding vehicle related
to any Spinco Plan in accordance with its terms.
ARTICLE IV
U.S. DEFINED BENEFIT PLANS
Section 4.1. Assumption of Pension Plan Liabilities
As of the Close of the Distribution Date, all Pension
Liabilities shall cease to be Liabilities of the Heinz Pension Plans and shall
be assumed in full and in all respects by the corresponding Spinco Pension
Plans; provided, however, that following the Close of the Distribution Date,
Heinz shall administer, or shall cause to be administered, the Spinco Pension
Plans through the end of the Transition Services Period, in accordance with and
pursuant to the applicable provisions of the Transition Services Agreement.
Section 4.2. Calculation and Transfer of Pension Plan Assets
(a) Calculation of Pension Plan Asset Allocation. After the
Close of the Distribution Date, the Heinz Actuary shall calculate and certify
the Pension Plan Asset Transfer Amount for each such Spinco Pension Plans as of
the Close of the Distribution Date. Such calculation and certification shall be
subject to the time periods and audit provisions set forth in Section 9.3(a) of
this Agreement.
(b) Transfer of Assets to Del Monte Pension Trusts.
(i) On the Initial Asset Transfer Date, Heinz will cause
to be transferred from the Heinz Pension Trust to the
corresponding Del Monte Pension Trust an initial amount of
assets (the "Initial Asset Transfer"). The amount of the Initial
Asset Transfer shall be equal to 90% of the Heinz Actuary's good
faith estimate of (A) the Pension Plan Asset Transfer Amount,
less (B) the aggregate amount of any actual benefit payments
made to or in respect of Spinco Employees (and any actual fees
and expenses paid by the Heinz Pension Trust in the ordinary
course in connection with the Spinco Employees) from and after
the Distribution Date under the Spinco Pension Plans through the
Initial Asset Transfer Date, plus (C) interest, compounded
monthly, from the Close of the Distribution Date through the
Initial Asset Transfer Date at the PBGC Interest Rate in effect
on the Initial Asset Transfer Date.
(ii) If after the transfer of the Initial Asset
Transfer, the Heinz Actuary determines (and the Del Monte
Actuary agrees) that additional assets are necessary to be
transferred in respect of any Spinco Pension Plan, on the
True-Up Date Heinz shall cause a second transfer to the Del
Monte Trust to be made in
14
cash of the "True-Up Amount". The True-Up Amount shall be equal
to the Pension Plan Asset Transfer Amount with respect to each
Spinco Pension Plan (as applicable), in the aggregate, less (A)
the Initial Asset Transfer, less (B) the aggregate amount of any
actual benefit payments made in respect of Spinco Employees (and
any actual fees and expenses paid by the Heinz Pension Trust in
the ordinary course in connection with the Spinco Employees)
from and after the Initial Asset Transfer Date by the applicable
Spinco Pension Plan through the True-Up Date, plus (C) interest,
compounded monthly, from the Initial Asset Transfer Date to the
True-Up Date at the PBGC Interest Rate in effect on the True-Up
Date.
(iii) If the Initial Asset Transfer exceeds the Pension
Plan Asset Transfer Amount, such excess (including interest
determined using the PBGC Interest Rate at the date it is
determined that such Initial Asset Transfer exceeds the Pension
Plan Asset Transfer Amount) (together, the "Reimbursement
Amount"), shall be transferred to the applicable Heinz Pension
Plan within thirty (30) days after such determination is made by
the Heinz Actuary (and agreed upon or otherwise confirmed in
accordance with the audit procedures set forth in Section 9.3 of
this Agreement).
(iv) All assets transferred in respect of the Pension
Plan Asset Transfer Amount shall be transferred from the Heinz
Pension Trusts to the applicable Del Monte Pension Trusts in
cash or in kind, as determined by Heinz in its good faith
discretion, subject to Del Monte satisfying its obligations
under Section 7.6(f) of the Merger Agreement; provided, however,
that any transfer of assets in-kind shall be made in
substantially the same proportions as the transferring Plan is
invested in such in-kind assets as of the applicable transfer
date.
ARTICLE V
U.S. DEFINED CONTRIBUTION PLANS
Section 5.1. Qualified Savings Plans
(a) Assumption of Liabilities and Transfer of Assets.
(i) Effective as of the Close of the Distribution Date:
(i) each of the Spinco Savings Plans shall assume and be solely
responsible for all Liabilities relating to or in respect of
Spinco Employees under the applicable Heinz Savings Plans and
(ii) each of the Spinco Savings Plans shall assume and be solely
responsible for all ongoing rights of or relating to Spinco
Employees for future participation (including the right to make
contributions through payroll deductions) in the applicable
Spinco Savings Plans; provided, however, that following the
Close of the Distribution Date, Heinz shall administer, or shall
cause to be administered, the Spinco Savings Plans through the
end of the Transition Services Period, in accordance with and
pursuant to the applicable provisions of the Transition Services
Agreement.
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(ii) On the Savings Account Balance Transfer Date, Heinz
shall cause the account balances (as of the close of the
business day immediately prior to the Savings Account Balance
Transfer Date) of the Spinco Employees under the applicable
Spinco Savings Plans held by the Heinz Savings Trust to be
transferred to the Del Monte Savings Trust, subject to Del Monte
satisfying its obligations under Section 7.6(g) of the Merger
Agreement. All assets related to the accounts of all Spinco
Employees shall be transferred from the Heinz Savings Trust to
the Del Monte Savings Trust in cash or in kind as determined by
Heinz in its good faith discretion; provided, however, that,
subject to Section 4.2(d) below, any transfer of assets in-kind
shall be made in substantially the same proportions as the
transferring Plan is invested in such in-kind assets as of the
Savings Account Balance Transfer Date.
(b) Non-Employer Stock Funds. Effective immediately after the
Distribution Date, a Del Monte Common Stock fund shall be added as an investment
option to each of the Heinz Savings Plans and each of the Spinco Savings Plans
shall provide for both a Heinz Common Stock fund and a Del Monte Common Stock
fund as investment options. The Del Monte Common Stock fund in the Heinz Savings
Plans and the Heinz Common Stock fund in the Spinco Savings Plans are each
referred to as a "Non-Employer Stock Fund" with respect to the applicable Plan.
Each Non-Employer Stock Fund shall be maintained under the respective Plan
through the Transition Services Period. The Heinz Savings Plans and the Spinco
Savings Plans shall each provide that, after the Distribution Date, no new
contributions may be invested in, and no amounts may be transferred from other
investment options to, the Non-Employer Stock Fund under the respective Plan but
shall permit contributions to be transferred from such Non-Employer Stock Funds
to the appropriate employer stock fund and to other available investment
options.
(c) Modifications to Spinco Savings Plans. On and after the
Effective Time, the Spinco Savings Plans shall have the same terms and
conditions (including investment options) as the Heinz Savings Plans, except
that Spinco may, in its discretion, cause all future employer matching
contributions to be made in cash instead of employer securities. Notwithstanding
the immediately preceding sentence, on and after the Effective Time, Spinco
shall also use its reasonable best efforts to cause the Spinco Savings Plans to
maintain a Del Monte Common Stock fund as an investment option into which Spinco
Employees may make new contributions at least through the end of the Transition
Services Period, subject to a Del Monte Consent.
(d) Miscellaneous Funds. In the event that Heinz, in its
reasonable and good faith discretion, determines that it is not feasible or
appropriate to transfer in-kind the assets of a particular investment fund from
the Heinz Savings Trust to the Del Monte Savings Trust, then the assets, as of
the Close of the Distribution Date (plus or minus earnings and/or losses
attributable to such amount from the Close of the Distribution Date to the date
the assets are actually transferred) shall be transferred in cash to the Del
Monte Savings Trust and Spinco shall, to the extent practicable, cause such cash
to be invested in its plan and trust in a manner and proportion that is
comparable to that in which it was invested in the Heinz Savings Plan or
otherwise at the direction of each affected participant.
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Section 5.2. Heinz Excess Plan. Immediately prior to the Close
of the Distribution Date, (i) Spinco shall establish a Spinco Excess Plan in
respect of the Heinz Excess Plan, pursuant to which, as of the Close of the
Distribution Date, Spinco shall assume all Liabilities of Heinz under the Heinz
Excess Plan in respect to any Spinco Employee who participates in the Heinz
Excess Plan and (ii) as of the Close of the Distribution Date, Heinz shall
transfer to Spinco, in cash, an amount equal to $600,000 in respect of the
accrued Liabilities of the Spinco Employees who participated in the Heinz Excess
Plan. Any Spinco Employee who participates in the Spinco Excess Plan shall, upon
termination of employment, be vested in all accrued benefits under such plan as
of the date of termination of employment to the same extent such employee is
vested in the employer contribution portion of his or her Spinco Savings Plan
account balance under the applicable Heinz Savings Plan in which such Spinco
Employee participates. After the Close of the Distribution Date through at least
the end of the Transition Services Period, Spinco shall continue to maintain the
Spinco Excess Plan and allow such Spinco Employees to participate therein;
provided, however, that, Heinz shall administer, or shall cause to be
administered, the Spinco Excess Plan, from the Close of the Distribution Date
through the Transition Services Agreement, all in accordance with and pursuant
to the applicable provisions of the Merger Agreement and the Transition Services
Agreement.
ARTICLE VI
U.S. HEALTH AND WELFARE PLANS
Section 6.1. Assumption of Health and Welfare Plan Liabilities
Effective as of the Close of the Distribution Date, except as
otherwise provided for in this Agreement, all Liabilities relating to or in
respect of Spinco Employees under the Heinz Health and Welfare Plans shall cease
to be Liabilities of Heinz or the Heinz Health and Welfare Plans and shall be
assumed by Spinco and the Spinco Health and Welfare Plans, and Spinco shall
maintain such plans as in effect immediately prior to the Close of the
Distribution Date in accordance with the terms of the Merger Agreement;
provided, however, that, except as otherwise provided in Section 6.5(b) of this
Agreement, Heinz shall administer, or shall cause to be administered, the Spinco
Health and Welfare Plans, from the Close of the Distribution Date through the
Transition Services Period, all in accordance with and pursuant to the
applicable provisions of the Merger Agreement and the Transition Services
Agreement.
Section 6.2. Vendor Contracts
(a) ASO Contracts, Group Insurance Policies, HMO Agreements and
Letters of Understanding.
(i) Heinz shall use its commercially reasonable best
efforts to cause any ASO Contract, Group Insurance Policy, HMO
Agreement or letter of understanding into which Heinz enters
after the date of this Agreement, but before the Close of the
Distribution Date, to allow Spinco and the other members of the
Spinco Group to participate in the terms and conditions thereof.
Nothing contained in this Section 6.2(a) shall preclude Heinz
from choosing to enter into ASO Contracts, Group Insurance
Policies, HMO Agreements or other letters of understandings and
arrangements with new or different vendors. In addition,
17
before the Distribution Date, Heinz shall use its commercially
reasonable best efforts to permit Spinco and the other members
of the Spinco Group to participate in the terms and conditions
of each ASO Contract, Group Insurance Policy, HMO Agreement or
letters of understanding and arrangements in existence as of the
date of this Agreement beginning immediately after the
Distribution Date through the end of the Transition Services
Period.
(ii) Heinz and Spinco shall cooperate to determine the
manner in which the Spinco Group's participation in the terms
and conditions of ASO Contracts, Group Insurance Policies, HMO
Agreements, or other letters of understanding and arrangements
as set forth above shall be effectuated.
(b) Effect of Change in Rates. Heinz and Spinco shall use their
commercially reasonable best efforts to cause each of the insurance companies,
HMOs, and third-party administrators providing services and benefits under the
Heinz Health and Welfare Plans and the Spinco Health and Welfare Plans to
maintain the premium and/or administrative rates based on the aggregate number
of participants in both the Heinz Health and Welfare Plans and the Spinco Health
and Welfare Plans, after the Close of the Distribution Date and through the end
of the Transition Services Period, separately rated or adjusted for the
demographics, experience or other relevant factors related to the covered
participants of the Heinz Group and Spinco Group, respectively. To the extent
they are not successful in such efforts, Heinz and Spinco shall each bear the
cost of the revised premium or administrative rates for health and welfare
benefits attributable to the individuals covered by their respective Plans.
Section 6.3. Postretirement Health and Welfare Benefits.
Effective as of the Close of the Distribution Date, (a) all
Liabilities relating to or in respect of any post-retirement health and welfare
benefits available to any Spinco Employee who is eligible, immediately prior to
the Close of the Distribution Date, to participate in the Heinz Retiree Plan,
shall cease to be Liabilities of the Heinz Retiree Plan and shall be assumed in
full and in all respects by Spinco Retiree Plan, and (b) thereafter Spinco shall
maintain the Spinco Retiree Plan on the same terms and conditions, with the same
rights and privileges, as in effect under the Heinz Retiree Plan prior to the
Distribution Date. In addition, following the Close of the Distribution Date,
Heinz shall administer, or shall cause to be administered, the Spinco Retiree
Plan through the end of the Transition Services Period, in accordance with and
pursuant to the applicable provisions of the Transition Services Agreement.
Section 6.4. COBRA and HIPAA
With respect to Spinco Employees and their qualified
beneficiaries for periods after the Close of the Distribution Date, Spinco shall
be responsible for the continuation coverage requirements for "group health
plans" under Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, and the portability requirements under the Health Insurance
Portability and Accountability Act of 1996.
Section 6.5. Vacation and Leave of Absence Programs
18
(a) Assumption of Liabilities and Administration of Programs.
Effective as of the Close of the Distribution Date, Spinco shall assume all
Liabilities for Spinco Employees related to any and all vacation, leaves of
absences and other related programs (including compliance with the Family and
Medical Leave Act) affecting Spinco Employees for periods on and after the Close
of the Distribution Date; provided, however, that except as otherwise provided
in Section 6.5(b) of this Agreement, on the Close of the Distribution Date
through the end of the Transition Services Period Heinz shall administer, or
shall cause to be administered, all such programs, in accordance with and
pursuant to the applicable provisions of the Transition Services Agreement.
Notwithstanding the foregoing, (i) with respect to any short-term disability
program maintained by Heinz in which Spinco Employees are entitled to
participate immediately prior to the Close of the Distribution Date, Spinco
shall maintain such program as in effect immediately prior to the Close of the
Distribution Date through the end of the Transition Services Period and (ii)
with respect to any vacation which the Spinco Employees have, as of the Close of
the Distribution Date, accrued and banked pursuant to the terms of the
applicable Heinz vacation plan or policy (which vacation has been accrued for on
the Estimated 2002 Financial Statements (as such term is defined in the
Separation Agreement), Spinco shall continue, after the Close of the
Distribution Date, to allow such Spinco Employees to use their banked vacation
in accordance with the terms of the Heinz vacation plan or policy as in effect
prior to the Close of the Distribution Date at least through the second
anniversary of the Effective Time.
(b) Long Term Disability Plan. Effective as of Close of the
Distribution Date through at least the first anniversary of the Distribution
Date, Spinco shall establish, maintain, and administer, and all Spinco Employees
shall be entitled to participate in, Spinco LTD Plans, which shall contain the
same terms and conditions as the Heinz LTD Plans as in effect immediately prior
to the Close of the Distribution Date (which terms shall include the same level
of benefits to be provided to, and require the same level of contributions to be
made by, the Spinco Employees eligible to participate in such a program),
consistent with the obligations required pursuant to Section 7.6 of the Merger
Agreement.
Section 6.6. Workers' Compensation Program
Effective as of Close of the Distribution Date, Spinco shall
assume all Liabilities for Spinco Employees related to any and all workers'
compensation matters under any law of any state, territory, or possession of the
U.S. (including American Samoa) or the District of Columbia and Spinco shall be
fully responsible for the administration of all such claims; provided, however,
that, following the Close of the Distribution Date, Spinco shall administer, or
shall cause to be administered, all such programs. If Spinco is unable to assume
any such Liability or the administration of any such claim because of the
operation of applicable state law, the terms of the applicable workers'
compensation insurance policy, or for any other reason, Spinco shall fully
indemnify Heinz for all such Liabilities, including the costs of any
administration that Spinco has not been able to assume.
19
Section 6.7. Continuance of Elections, Co-Payments and Maximum
Benefits
(a) Spinco shall cause the Spinco Health and Welfare Plans to
recognize and maintain all coverage and contribution elections made by Spinco
Employees under the Heinz Health and Welfare Plans in effect for the period
immediately prior to the Distribution Date and shall apply such elections under
the Spinco Health and Welfare Plans for the remainder of the period or periods
for which such elections are by their terms applicable.
(b) Spinco shall cause the Spinco Health and Welfare Plans to
recognize and give credit for (A) all amounts applied to deductibles,
out-of-pocket maximums, and other applicable benefit coverage limits with
respect to such expenses which have been incurred by Spinco Employees under the
Heinz Health and Welfare Plans for the remainder of the benefit limit year in
which the Distribution occurs, and (B) all benefits paid to Spinco Employees
under the Heinz Health and Welfare Plans, during and prior to the benefit limit
year in which the Distribution occurs, for purposes of determining when such
persons have reached their lifetime maximum benefits under the Spinco Health and
Welfare Plans.
(c) Spinco shall (A) provide coverage to Spinco Employees under
the Spinco Health and Welfare Plans without the need to undergo a physical
examination or otherwise provide evidence of insurability, and (B) recognize and
maintain all irrevocable assignments and elections made by Spinco Employees in
connection with their life insurance coverage under the Heinz Health and Welfare
Plans and any predecessor plans.
ARTICLE VII
U.S. SUPPLEMENTAL PLANS
Section 7.1. Heinz Incentive Plans
(a) Amendments to Heinz Incentive Plans. Heinz shall, effective
as of immediately prior to the Close of the Distribution Date amend the terms of
any Heinz Incentive Plan under which any Spinco Employee holds an option to
acquire Heinz Common Stock (a "Heinz Option") to include employment by Spinco or
any of its Affiliates after the Distribution Date for purposes of determining
the vesting and expiration of any such option and to take such other actions
necessary to effectuate the provisions of this Section 7.1; provided, however,
that in no event shall the vesting of the Heinz Options be accelerated upon the
occurrence of the Distribution or at the Effective Time.
(b) Adjustment of Heinz Options. Heinz Options shall be adjusted
as provided in this Section 7.1.
(i) Each Heinz Option held by any current or former
employee of the Heinz Group (other than any Spinco Employee)
after the Close of the Distribution Date (a "Retained Heinz
Option"), effective immediately after the Close of the
Distribution Date, shall remain outstanding with respect to
Heinz Common Stock and shall be adjusted to reflect the effect
of the Distribution on the Heinz Common Stock. The number of
shares covered by, and the option exercise price of, such
Retained Heinz Options shall be determined by applying the rules
set forth in paragraph (c) of this Section 7.1.
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(ii) Each Heinz Option held by a Spinco Employee that is
outstanding as of the Close of the Distribution Date, effective
immediately after the Close of the Distribution Date, shall be
converted into an option with respect to Spinco Common Stock (a
"Spinco Option"), and the remaining portion of such Heinz Option
shall remain outstanding with respect to Heinz Common Stock
(together with the Spinco Options, the "Conversion Awards"). The
number of shares covered by, and the option exercise price of,
such Conversion Awards shall be determined by applying the rules
set forth in paragraph (c) of this Section 7.1. To the extent
possible, no holder of a Conversion Award having any particular
terms shall be treated any differently from any other holder of
a Conversion Award having the same terms, and each Spinco Option
shall have the same terms and conditions as the corresponding
Heinz Option to which it relates (except as adjusted as provided
herein) and shall continue to be subject to the same terms and
conditions as the applicable Heinz Incentive Plans; provided,
however, that for purposes of the Spinco Options, all references
to "Heinz" therein shall, after the Close of the Distribution
Date, be deemed to be "Spinco" and all references to Heinz
Common Stock shall be deemed to be Spinco Common Stock. In
addition, Heinz and Spinco shall each take such actions as may
be necessary to effectuate the provisions of this Section 7.1.
(c) Calculation of Adjustment of Heinz Options.
(i) Retained Heinz Options. In accordance with GAAP, the
number of shares of Heinz Common Stock and the exercise price
per share of Heinz Common Stock covered by a Retained Heinz
Option shall be determined, as of the Close of the Distribution
Date, in accordance with the following formula:
(A) the number of shares of Heinz Common Stock
subject to the Retained Heinz Option shall be equal to the
product of (x) the number of shares of Heinz Common Stock
subject to the Heinz Option immediately prior to the Close of
the Distribution Date and (y) a fraction, the numerator of which
is equal to the Heinz Pre-Distribution Price and the denominator
of which is equal to the Heinz Post-Distribution Price; and
(B) the per share exercise price of each
Retained Heinz Option shall be equal to the product of (x) the
per share exercise price of the Heinz Option immediately prior
to the Close of the Distribution Date and (y) a fraction, the
numerator of which is equal to the Heinz Post-Distribution Price
and the denominator of which is equal to the Heinz
Pre-Distribution Price.
(C) The foregoing calculations shall ensure that
the Aggregate Spread on each Heinz Option shall be maintained
under each corresponding Retained Heinz Option and that the
ratio of the per share option exercise price of each Retained
Heinz Option to the Heinz Post-Distribution Price maintains the
ratio of the per share exercise price of each original Heinz
Option that is a Retained Heinz Option to the Heinz
Pre-Distribution Stock Price.
21
(ii) Conversion Awards. In accordance with GAAP, the
number of shares of Heinz Common Stock and Spinco Common Stock
subject to a Conversion Award and the exercise price per share
of Heinz Common Stock and Spinco Common Stock subject to a
Conversion Award shall be determined, as of the Close of the
Distribution Date, in accordance with the following conversion
formula:
(A) The Aggregate Spread on each Heinz Option
shall be maintained under each corresponding Conversion Award by
setting the option exercise prices of the Conversion Award with
respect to the shares of Heinz Common Stock and Spinco Common
Stock subject to such Conversion Award, respectively, to ensure
that the sum of the aggregate differences between (x) the Heinz
Post-Distribution Stock Price and the Heinz Option exercise
price and (y) the Spinco Post-Distribution Stock Price and
Spinco Option exercise price, equals the Aggregate Spread.
(B) In addition, each of (A) the ratio of the
per share option exercise price of that portion of the
Conversion Award that remains a Heinz Option to the Heinz
Post-Distribution Stock Price, and (B) the ratio of the per
share option exercise price of that portion of the Conversion
Award that is a Spinco Option to the Spinco Post-Distribution
Stock Price, shall be fixed in such a way that maintains the
ratio of the per share exercise price of each Heinz Option that
becomes a Conversion Award to the Heinz Pre-Distribution Stock
Price.
(C) The number of shares of Heinz Common Stock
subject to a Conversion Award shall remain the same as the
number of shares of Heinz Common Stock subject to the converted
Heinz Option as in effect prior to the Close of the Distribution
Date and the number of shares of Spinco Common Stock subject to
a Conversion Award shall be equal to the number of shares of
Heinz Common Stock subject to the converted Heinz Option as in
effect prior to the Close of the Distribution Date.
(d) Heinz Restricted Stock Bonus Plan. Effective as of the Close
of the Distribution Date, (i) all shares of Heinz Common Stock held by Spinco
Employees pursuant to the Heinz Restricted Stock Bonus Plan ("Restricted Stock")
shall be treated the same as all other outstanding shares of Heinz Common Stock
in the Distribution, in accordance with the provisions of the Separation
Agreement and (ii) the Heinz Board of Directors shall take all actions
reasonably necessary to ensure that, upon the later of (x) the Close of the
Distribution Date or (y) January 1, 2003, the Spinco Employees shall be fully
vested in their Restricted Stock. As of the Distribution Date, Spinco shall
assume all Liabilities in respect of the Restricted Stock and shall take such
actions as are reasonably necessary to establish a business arrangement which
corresponds to the arrangement Heinz currently maintains with Mellon Financial
Services in connection with the stock transfer services it provides with respect
to the Heinz Restricted Stock Bonus Plans; provided, however, that following the
Close of the Distribution Date, Heinz shall administer, or shall cause to be
administered, such arrangements with Mellon Financial Services through the end
of the Transition Services Period, in accordance with and pursuant to the
applicable provisions of the Transition Services Agreement.
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(e) Administrative Matters. Heinz and Spinco shall adopt such
procedures and information sharing practices necessary or appropriate to permit
the other to administer any incentive or stock option plan it maintains and
under which an employee of the other has an option (including, for example,
Spinco timely informing Heinz of any termination of employment that affects the
exercise period of a Conversion Award).
Section 7.2. Other Heinz Supplemental Plans
(a) Xxxxx Xxxxxxxxx Plans. As of the Close of the Distribution
Date, all Liabilities relating to or in respect of Spinco Employees under the
Xxxxx Xxxxxxxxx Plans shall cease to be Liabilities of the Xxxxx Xxxxxxxxx Plans
and shall be assumed in full and in all respects by the corresponding Spinco
Severance Plans. In addition, Spinco shall maintain the Spinco Severance Plans,
and shall provide cash payments and benefits to any Spinco Employee who is
terminated without "cause" prior to the second anniversary of the Effective Time
in accordance with the terms of Appendix A attached hereto. For this purpose,
"cause" shall have the meaning set forth in the Xxxxx Xxxxxxxxx Plan applicable
to the Spinco Employee if the termination of employment had occurred prior to
the Distribution Date.
(b) Heinz Bonus Plans.
(i) At the Effective Time, Heinz shall pay to each
Spinco Employee an amount, in cash, equal to the annual bonus
that has been earned by such employee on a monthly basis (based
on the achievement of previously established performance
criteria) under the Heinz Bonus Plan in which such employee
participates for the 2003 Heinz fiscal year.
(ii) From the Close of the Distribution Date through the
second anniversary of the Effective Time, Spinco shall maintain
the Spinco Bonus Plans and allow the Spinco Employees to
continue to participate in the Spinco Bonus Plans on the same
terms (including the same levels of bonus opportunity and
reasonable and comparable performance targets) as in effect
under the Heinz Bonus Plans immediately prior to the
Distribution Date; provided, however, that Spinco, through such
period, shall not terminate the Spinco Bonus Plans or amend such
Plans in any manner that would be reasonably likely to result in
the Spinco Employees having less of an opportunity to earn
bonuses under the Spinco Bonus Plans after the Distribution Date
than such Spinco Employees would have had under the Heinz Bonus
Plans applicable to such Spinco Employees immediately prior to
the Distribution Date.
(c) Heinz Executive Deferred Compensation Plan.
(i) As of the Close of the Distribution Date, Spinco
shall establish the Spinco Executive Deferred Compensation Plan
and shall maintain such Plan, and allow applicable Spinco
Employees to participate therein, after the Close of the
Distribution Date through at least the Transition Services
Period; provided, however, that on the Close of the Distribution
Date through the end of the Transition Services Period, Heinz
shall administer, or shall cause to be
23
administered, such plan, in accordance with and pursuant to the
applicable provisions of the Transition Services Agreement.
(ii) In addition, at the Close of the Distribution Date
(A) all Liabilities relating to or in respect of Spinco
Employees under the Heinz Executive Deferred Compensation Plan
shall cease to be Liabilities of the Heinz Executive Deferred
Compensation Plan and shall be assumed in full and in all
respects by the Spinco Executive Deferred Compensation Plan and
(B) Heinz shall transfer to Spinco, in cash, an amount equal to
$1,700,000 in respect of both (x) the accrued Liabilities of the
Spinco Employees who participated in the Heinz Executive
Deferred Compensation Plan prior to the Distribution Date and
(y) the amount of cash in respect of the value of the Converted
Deferred Share Units.
(d) Heinz Supplemental Executive Retirement Plan
(i) As of the Close of the Distribution Date, all
Liabilities related to Spinco Employees under the Heinz
Supplemental Executive Retirement Plan (the "Heinz SERP") shall
cease to be Liabilities of the Heinz SERP and shall be assumed
in full and in all respects by the corresponding Spinco
Supplemental Executive Retirement Plan (which shall be a mirror
Plan of the Heinz SERP) (the "Spinco SERP"). After the Close of
the Distribution Date, Spinco shall maintain the Spinco SERP for
so long as may be required to allow each SERP Participant who
remains employed with Spinco through age 55 to continue to
accrue benefits, and to vest in such benefits, under the Spinco
SERP; provided, however, that Heinz and Spinco shall cause the
Spinco SERP to provide that if any SERP Participant who has
achieved at least age 50 (with at least five (5) years of
service with, collectively, Heinz, its Subsidiaries, and the
Spinco Group) on or prior to the second anniversary of the
Effective Time is terminated without "cause" (within the meaning
of Section 7.2(a) of this Agreement) by Spinco, such SERP
Participant shall be vested in his or her Spinco SERP benefit
(as accrued through the date of termination of employment) on
the date of termination; and provided, further, that on the
Close of the Distribution Date through the end of the Transition
Services Period, Heinz shall administer, or shall cause to be
administered, all such programs, in accordance with and pursuant
to the applicable provisions of the Transition Services
Agreement.
(ii) At the Close of the Distribution Date, Heinz shall
transfer to Spinco, in cash, an amount equal to $1,643,000 in
respect of the accrued Liabilities of the SERP Participants.
ARTICLE VIII
FOREIGN PLANS
Section 8.1. Agreement Regarding Treatment of Foreign Plans
As soon as practicable after the date of this Agreement, Heinz
and Spinco shall, to the extent reasonably necessary, enter into an agreement
regarding the treatment of Foreign Plans
24
consistent with this Article VIII; provided, however, that the terms of any such
agreement shall be consistent with the terms and provisions set forth in this
Article VIII.
Section 8.2. Certain Terms
For purposes hereof, (i) "outside the U.S." means outside the 00
Xxxxxx Xxxxxx xxx xxx Xxxxxxxx xx Xxxxxxxx, (xx) "employed outside the U.S."
means compensated under a payroll which is administered outside the U.S. and
(iii) "legally permitted" means permitted under the laws of the country, the
labor union, works council, or collective agreement without adverse consequences
to Heinz, Spinco or Spinco Employees, as determined in good faith by Heinz,
including mandated waiting periods before which working conditions (including
benefits) cannot be changed, and upon receiving required agreement from
individual employees and/or Plan trustees, foundation boards and members, and
any other organizations having a recognized right to determine or affect
benefits and/or funding of the Plan.
Section 8.3. Foreign Plans.
(a) Plans Covering Spinco Employees. Effective as of the Close
of the Distribution Date or such later date as may be required by applicable
law, union, or works council agreement, any Foreign Plan that covers only Spinco
Employees employed outside the U.S. shall be the sole responsibility of the
Spinco Group and no member of the Heinz Group shall have any Liability with
respect to such a Plan.
(b) Heinz Plans Covering Employees of Both Heinz and Spinco.
(i) Termination of Participation. Effective as of the
Close of the Distribution Date, if legally permitted, or as soon
as possible thereafter, Spinco and each of its Subsidiaries, as
applicable, shall cease to be a Participating Company on and
after the Close of the Distribution Date in each Foreign Plan
maintained by any member of the Heinz Group.
(ii) Mirror Plans.
(A) As of the Close of the Distribution Date,
all Liabilities related to Spinco Employees employed outside the
U.S. who are eligible to participate in Foreign Plans shall
cease to be Liabilities of the Foreign Plans and shall be
assumed in full and in all respects by the applicable member of
the Spinco Group; provided, however, that with respect to
certain Foreign Plans under which Spinco Employees employed in
Canada participate, such Liabilities shall be assumed
immediately prior to the Distribution Date by that certain
unlimited liability company to be formed by Heinz under the laws
of Nova Scotia, Canada prior to the Distribution Date, in
accordance with the terms of the Separation Agreement.
(B) Effective immediately after the Distribution
Date, Spinco shall adopt, or cause to be adopted, Plans that
shall be substantially identical in all material respects to the
corresponding Foreign Plans as in effect immediately prior to
the Distribution Date, and Spinco shall maintain all such Plans
as may be
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required to satisfy the obligations of Spinco and Del Monte as
set forth herein and in Section 7.6 of the Merger Agreement,
respectively; provided that Spinco may satisfy this requirement
by extending equivalent coverage to such individuals under a
Plan of the Spinco Group which was in effect before the
Distribution Date.
(C) The continuation by Heinz or Spinco of
separate employment terms and conditions for employees
previously covered by the other entity's Plans shall not
continue beyond the time legally required.
Section 8.4. Severance Issues
If under applicable law, any Spinco Employee employed outside
the U.S. is deemed to have incurred a termination of employment as a result of
the Distribution or any other transaction contemplated by the Separation
Agreement or this Agreement, which entitles such individual to receive any
payment or benefit under any Foreign Plan, governmental plan or arrangement or
pursuant to any law or regulation, including severance benefits, notwithstanding
such individual's continued employment by the Spinco Group, then Spinco shall be
liable for any such payment or benefit and, notwithstanding any other provision
hereof, to the extent legally permitted, appropriate adjustments shall be made
to the treatment of such individual during such continued employment, including
not giving such individual credit for prior service and/or treating such
individual as having been newly hired immediately after such deemed termination,
for purposes of all applicable Foreign Plans.
ARTICLE IX
GENERAL
Section 9.1. Payment of and Accounting Treatment for Expenses
All expenses (and the accounting treatment related thereto)
through the Close of the Distribution Date regarding matters addressed herein
shall be handled and administered by Heinz and Spinco in accordance with past
Heinz accounting and financial practices and procedures pertaining to such
matters. For purposes of this Agreement, the accounting treatment of all such
expenses shall be as determined by the Heinz Accountants, subject to review by
Spinco and its accounting advisor in accordance with Section 9.3(b) of this
Agreement.
Section 9.2. Sharing of Participant Information
Heinz and Spinco shall share, Heinz shall cause each applicable
member of the Heinz Group to share, and Spinco shall cause each applicable
member of the Spinco Group to share, with each other and their respective agents
and vendors all participant information necessary for the efficient and accurate
administration of each of the Heinz Plans and the Spinco Plans following the
Distribution Date. Heinz and Spinco and their respective authorized agents
shall, subject to applicable laws on confidentiality, be given reasonable and
timely access to, and may make copies of, all information relating to the
subjects of this Agreement in the custody of the other party, to the extent
necessary for such administration.
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Section 9.3. Plan Audits
(a) Audit Rights with Respect to the Allocation or Transfer of
Heinz Pension Plan Assets. The final allocation of Heinz Pension Plan assets and
liabilities pursuant to this Agreement shall be determined by the Heinz Actuary,
subject to review by Del Monte's independent, government-enrolled actuary ("Del
Monte Actuary"), with any differences submitted to an Independent Actuary (as
hereinafter defined) for final determination. In accordance with the foregoing,
the Heinz Actuary shall provide its calculation and certification of the True-Up
Amount (or the Reimbursement Amount, as applicable), in a written report and
such other information as may be reasonably requested to Heinz, Spinco and the
Del Monte Actuary within forty-five (45) business days after the Initial Asset
Transfer Date. If, within thirty (30) business days following receipt of such
certification and information, the Del Monte Actuary delivers a notice in
writing to the Heinz Actuary that it disagrees with the amount of the True-Up
Amount (or Reimbursement Amount, as applicable) as calculated by the Heinz
Actuary, Heinz and Spinco shall cause each of the Heinz Actuary and Del Monte
Actuary to use their reasonable best efforts to come to an agreement upon the
correct amount of the True-Up Amount (or Reimbursement Amount, as applicable)
within thirty (30) days after the date of delivery by the Del Monte Actuary of
such notice. If in good faith the Heinz Actuary and the Del Monte Actuary are
unable to come to such an agreement, then a third actuary chosen by the Heinz
Actuary and the Del Monte Actuary shall be retained and its determination of the
amount of the True-Up Amount (or Reimbursement Amount, as applicable), shall be
binding upon the Parties (the "Independent Actuary"). Spinco and Heinz shall
each pay, or shall be responsible for the payment of the costs of, their own
actuary, and Spinco and Heinz shall each equally pay, or shall be responsible
for the payment of the costs of, the Independent Actuary in connection with its
audit of the determination. In the event that the Del Monte Actuary does not
deliver any such notice to the Heinz Actuary within forty-five (45) business
days after receipt of the aforementioned written report and other information
from the Heinz Actuary, then the Heinz Actuary's determinations shall be final
and binding on the Parties and shall not be subject to appeal by Spinco or the
Del Monte Actuary.
(b) Audit Rights With Respect to Information Provided.
(i) Each of Heinz and Spinco, and their duly authorized
representatives, shall have the right to conduct audits at any
time upon reasonable prior notice, at their own expense, with
respect to all information provided to it or to any Plan record
keeper or third party administrator by the other party that is
relevant to this Agreement, provided, that audits with respect
to the allocation or transfer of Heinz Pension Plan assets and
liabilities shall be subject only to Section 9.3(a). The
auditing party shall have the right to make copies of any
records at its expense, subject to the confidentiality
provisions set forth in the Separation Agreement, which are
incorporated by reference herein. The party being audited shall
provide the auditing party's representatives with reasonable
access during normal business hours to its operations, computer
systems and paper and electronic files, and provide work space
to its representatives. After any audit is completed, the party
being audited shall have the right to review a draft of the
audit findings and to comment on those findings in writing
within five business days after receiving such draft.
27
(ii) The auditing party's audit rights under this
Section 9.3(b) shall include the right to audit, or participate
in an audit facilitated by the party being audited, of any
subsidiaries and affiliates of the party being audited and of
any benefit providers and third parties with whom the party
being audited has a relationship, or agents of such party, to
the extent any such persons are affected by or addressed in this
Agreement (collectively, the "Non-parties"). The party being
audited shall, upon written request from the auditing party,
provide an individual (at the auditing party's expense) to
supervise any audit of any such benefit provider or third party.
The auditing party shall be responsible for supplying, at its
expense, additional personnel sufficient to complete the audit
in a reasonably timely manner.
(c) Audits Regarding Vendor Contracts. From immediately after
the Distribution Date through the end of the Transition Services Period, Heinz
and Spinco and their duly authorized representatives shall have the right to
conduct joint audits with respect to any vendor contracts that relate to both
the Heinz Health and Welfare Plans and the Spinco Health and Welfare Plans. The
scope of such audits shall encompass the review of all correspondence, account
records, claim forms, canceled drafts (unless retained by the bank), provider
bills, medical records submitted with claims, billing corrections, vendor's
internal corrections of previous errors and any other documents or instruments
relating to the services performed by the vendor under the applicable vendor
contracts. Heinz and Spinco shall agree on the performance standards, audit
methodology, auditing policy and quality measures and reporting requirements
relating to the audits described in this Section 9.3(c) and the manner in which
costs incurred in connection with such audits will be shared.
Section 9.4. Cooperation Regarding Requests for Internal Revenue
Service Rulings and United States Department of Labor Opinions; Tax Reporting
and Other Related Issues
(a) Spinco and Heinz shall cooperate on any issue relating to
the transactions contemplated by this Agreement for which Heinz or Spinco elects
to seek a determination letter or private letter ruling from the Internal
Revenue Service or an advisory opinion from the United States Department of
Labor. Spinco and Heinz shall also cooperate to share all such information
regarding any issue relating to the compensation of Spinco Employees as may be
required in order to satisfy any requirements related to federal, state and/or
local income tax reporting (including, for purposes of preparing a Form W-2 for
each such employee) and withholding, all in accordance with the terms of the Tax
Separation Agreement.
(b) Additionally, the Parties agree to treat any payments
(excluding the payment of any fees for Transition Services (as such term is
defined in the Transition Services Agreement as they relate to this Agreement)
or other related expenses) made between the Parties pursuant to this Agreement
as either a capital contribution or a distribution, as the case may be, between
the Parties occurring on or immediately prior to the Distribution.
Section 9.5. Collective Bargaining Agreements
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Spinco shall expressly assume all collective bargaining
agreements set forth in Section 4.13(a) of the Spinco Disclosure Letter to the
Merger Agreement and for each such collective bargaining agreement in effect as
of the Distribution Date, Spinco agrees to recognize the union which is a party
to each such collective bargaining agreement as the exclusive collective
bargaining representative for the Spinco Employees covered under the terms of
each such collective bargaining agreement. In addition, to the extent any
provision of this Agreement is contrary to the provisions of any applicable
collective bargaining agreement to which Heinz or any affiliate of Heinz is a
party, the terms of such collective bargaining agreement shall prevail. Should
any provisions of this Agreement be deemed to relate to a topic determined by an
appropriate authority to be a mandatory subject of collective bargaining, Heinz
and Spinco each acknowledge and agree that they may be obligated to bargain with
the union representing affected employees concerning those subjects. During the
Pre-Distribution Period, neither party will agree to a modification of any
applicable collective bargaining agreement without the consent of the other.
Section 9.6. Transition Services Agreement
Effective as of the Close of the Distribution Date, Heinz,
Spinco and Del Monte shall, to the extent reasonably necessary, enter into a
Transition Services Agreement, the terms of which shall be consistent with the
terms and provisions set forth in this Agreement.
Section 9.7. Effect If Distribution Does Not Occur
If the Distribution does not occur, then all actions and events
that are, under this Agreement, to be taken or occur effective as of the Close
of the Distribution Date, immediately after the Distribution Date, or otherwise
in connection with the Distribution, shall not be taken or occur except to the
extent otherwise specifically agreed in writing by Spinco and Heinz.
Section 9.8. Relationship of Parties; No Right to Continued
Employment
(a) Nothing in this Agreement shall be deemed or construed by
the parties or any third party as creating the relationship of principal and
agent, partnership or joint venture between the parties, it being understood and
agreed that no provision contained herein, and no act of the parties, shall be
deemed to create any relationship between the parties other than the
relationship set forth herein..
(b) Nothing contained in this Agreement shall confer on any
Spinco Employee any right to continued employment with Spinco or any member of
the Spinco Group, except as expressly provided in any collective bargaining
agreements or individual employment agreements to which Spinco is a party, under
which any Spinco Employee has any such rights.
Section 9.9. Entire Agreement; Survival
This Agreement (together with the other Transaction Agreements,
the exhibits and the Schedules and the other documents delivered pursuant
hereto) constitutes the entire agreement of each of the Parties hereto and
supersedes all prior and contemporaneous agreements and understandings, both
written and oral, between the Parties, or either of them, with respect to the
subject matter hereof. All exhibits and schedules attached to this Agreement
29
and the Schedules are expressly made a part of, and incorporated by reference
into, this Agreement. This Agreement shall survive the Distribution Date and the
end of the Transition Services Period. In the event of any conflict between this
Agreement and the Merger Agreement, the terms of the Merger Agreement shall
control.
Section 9.10. Notices
Any notice, demand, claim, or other communication under this
Agreement shall be in writing and shall be given in accordance with the
provisions for giving notice under the Separation Agreement.
Section 9.11. Interpretation
Words in the singular shall be held to include the plural and
vice versa and words of one gender shall be held to include the other genders as
the context requires. The terms "hereof," "herein," and "herewith" and words of
similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole (including all Exhibits hereto) and not to any particular
provision of this Agreement. The word "including" and words of similar import
when used in this Agreement shall mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified. The word "or"
shall not be exclusive. In addition, all references to "Spinco Employees", in
connection with any Plan, where appropriate shall be construed to refer to the
Spinco Employees and any beneficiaries thereof.
Section 9.12. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to the conflicts
of law principles thereof. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
IRREVOCABLY AND UNCONDITIONALLY (i) AGREES TO BE SUBJECT TO, AND HEREBY CONSENTS
AND SUBMITS TO, THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF
THE FEDERAL COURTS SITTING IN THE STATE OF NEW YORK, (ii) TO THE EXTENT SUCH
PARTY IS NOT OTHERWISE SUBJECT TO SERVICE OF PROCESS IN THE STATE OF NEW YORK,
HEREBY APPOINTS The Corporation Trust Company, AS SUCH PARTY'S AGENT IN THE
STATE OF NEW YORK FOR ACCEPTANCE OF LEGAL PROCESS AND (iii) AGREES THAT SERVICE
MADE ON ANY SUCH AGENT SET FORTH IN (ii) ABOVE SHALL HAVE THE SAME LEGAL FORCE
AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF NEW YORK.
Section 9.13. No Assignment
This Agreement may not be assigned by either party (except by
operation of law) without the written consent of the other, and shall bind and
inure to the benefit of the parties hereto (including, for the avoidance of
doubt, each member of the Heinz Group and the Spinco Group) and their respective
successors and permitted assignees. This Agreement may not be amended or
supplemented except by an agreement in writing signed by Heinz and Spinco. This
Agreement may be executed in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Employee
Benefits Agreement to be duly executed as of the day and year first above
written.
X. X. XXXXX COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Senior Vice President
SKF FOODS INC.
By: /s/ Xxxxxxxx X. Ring
-------------------------------
Name: Xxxxxxxx X. Ring
Title: Executive Vice President
[SCHEDULES]
