EXHIBIT 99.1
EXECUTION COPY
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.
15
(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.
16
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.
Section 6.7. Continuance of Elections, Co-Payments and Maximum
Benefits
19
(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.
20
(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.
22
(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.
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(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
