Exhibit 99.4
TAX SEPARATION AGREEMENT
This TAX SEPARATION AGREEMENT is dated as of __ ____, 2002, by
and among X. X. Xxxxx ("Xxxxx"), a Pennsylvania corporation, SKF Foods Inc.
("Spinco"), a Delaware corporation, and Del Monte Foods Company ("Del Monte"), a
Delaware corporation.
WHEREAS, as of the date hereof, Heinz is the common parent of
an affiliated group of domestic corporations within the meaning of Section
1504(a) of the Code, and the members of the affiliated group have heretofore
joined in filing consolidated federal income Tax returns (the "Affiliated
Group");
WHEREAS, Heinz intends to distribute all of the outstanding
shares of stock of Spinco pro rata to the holders of Heinz common stock in a
transaction that qualifies under sections 355 and 368 of the Code;
WHEREAS, following the Distribution (as defined herein),
Spinco intends to merge with a subsidiary of Del Monte in a transaction that
qualifies under section 368 of the Code (the "Merger"); and
WHEREAS, as a result of the Distribution, the Parties desire
to enter into this Tax Separation Agreement to provide for certain Tax matters,
including the assignment of responsibility for the preparation and filing of Tax
Returns, the payment of and indemnification for Taxes (including Taxes with
respect to the Distribution and related transactions as contemplated in the
other Transaction Agreements), entitlement to refunds of Taxes, and the
prosecution and defense of any Tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the Parties hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General. Capitalized terms used in this Agreement
and not defined herein shall have the meanings that such terms have in the
Separation Agreement. As used in this Agreement, the following terms shall have
the following meanings:
"Affiliated Group" shall have the meaning specified in the
preamble hereof. "Agreement" shall mean this Tax Separation Agreement.
"Business Day" or "Business Days" shall mean a day which is
not a Saturday, Sunday or a day on which banks in New York City are
authorized or required by law to close.
"Closing of the Books Method" shall mean the apportionment of
items between portions of a taxable period based on a closing of the
books and records on the
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Distribution Date (as if the Distribution Date was the end of the
taxable period), provided that, any items not susceptible to such
apportionment shall be apportioned on the basis of elapsed days during
the relevant portion of the taxable period.
"Code" shall have the meaning specified in the Merger
Agreement.
"Consolidated Return" shall mean any Tax Return relating to
Income Taxes filed pursuant to Section 1502 of the Code, or any
comparable combined, consolidated, or unitary group Tax Return relating
to Income Taxes filed under state or local tax law which, in each case,
includes Heinz and at least one Subsidiary.
"Contribution" shall have the meaning specified in the Merger
Agreement.
"Del Monte" shall mean Del Monte Foods Company, a Delaware
corporation.
"Distribution" shall have the meaning specified in the Merger
Agreement.
"Distribution Date" shall mean the Business Day on which the
Distribution is effected.
"Final Determination" shall mean the final resolution of
liability for any Tax for any taxable period, including any related
interest or penalties, by or as a result of: (i) a final and
unappealable decision, judgment, decree or other order by any court of
competent jurisdiction; (ii) a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable
agreement under the laws of other jurisdictions which resolves the
entire Tax liability for any taxable period; or (iii) any allowance of
a refund or credit in respect of an overpayment of Tax, but only after
the expiration of all periods during which such refund may be recovered
by the jurisdiction imposing the Tax.
"Heinz" shall mean X. X. Xxxxx Company, a Pennsylvania
corporation.
"HMC" shall mean Heinz Management Company, a Delaware
corporation.
"Income Tax" shall mean any income, franchise or similar Taxes
imposed on (or measured by) net income or net profits and any
Pennsylvania Capital Stock--Franchise Tax levied by 72 P.S. 7602, as
amended, including any successor legislation.
"Indemnified Liability" shall mean any liability subject to
indemnification pursuant to Section 4.4.
"IRS" shall mean the Internal Revenue Service.
"Merger" shall mean the merger of a subsidiary of Del Monte
with and into Spinco pursuant to the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of June__, 2002, among Heinz, Spinco, Del Monte Foods
Company and Del Monte
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Corporation, a New York corporation and a wholly-owned direct
subsidiary of Del Monte.
"Opinion" shall mean the opinion delivered by Xxxxxxx Xxxxxxx
& Xxxxxxxx pursuant to section 8.2(c) of the Merger Agreement.
"Other Tax" shall mean any Tax other than an Income Tax.
"Party" shall mean any of Heinz, Spinco or Del Monte, as the
case maybe.
"Proceeding" shall mean any audit, examination or other
proceeding brought by a Taxing Authority with respect to Taxes.
"Prohibited Acts" shall have the meaning specified in Section
4.2.
"Refund" shall have the meaning specified in Section 2.2.
"Restricted Period" shall mean the two-year period commencing
on the Distribution Date.
"Ruling" shall mean the private letter ruling issued by the
IRS to Heinz dated _____ ___, 2002 and any supplemental rulings related
thereto.
"Separation Agreement" shall mean the agreement entered into
by Heinz and Spinco dated as of ______ ___, 2002.
"Spinco" shall mean SKF Foods Inc., a Delaware corporation.
"Spinco Business" shall have the meaning specified in the
Merger Agreement.
"Straddle Period" shall mean any taxable period commencing
prior to, and ending after, the Distribution Date.
"Subsidiary" shall have the meaning specified in the Merger
Agreement.
"Tax" or "Taxes" shall have the meaning specified in the
Merger Agreement.
"Taxing Authority" shall mean any governmental authority
(whether United States or non-United States, and including, any state,
municipality, political subdivision or governmental agency) responsible
for the imposition of any Tax.
"Tax Returns" shall mean all reports or returns (including
information returns and amended returns) required to be filed or that
may be filed for any period with any Taxing Authority in connection
with any Tax or Taxes (whether domestic or foreign).
SECTION 1.2. References; Interpretation. References in this
Agreement to any gender include references to all genders, and references to the
singular include references to the plural and vice versa. The words "include",
"includes" and "including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation". Unless the
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context otherwise requires, references in this Agreement to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections of,
and Exhibits and Schedules to, such Agreement. Unless the context otherwise
requires, the words "hereof", "hereby" and "herein" and words of similar meaning
when used in this Agreement refer to this Agreement in its entirety and not to
any particular Article, Section or provision of this Agreement.
ARTICLE II. ALLOCATION OF TAX LIABILITIES
SECTION 2.1. Indemnity. (a) Subject to Article IV, Heinz shall
indemnify Spinco from all liability for (i) Income Taxes of Spinco, any Spinco
Subsidiary, or relating to the Spinco Business for any taxable period ending on
or before the Distribution Date, (ii) Income Taxes of Spinco, any Spinco
Subsidiary, or relating to the Spinco Business for any Straddle Period, but only
to the extent attributable to the portion of the Straddle Period ending on or
before the Distribution Date, (iii) Income Taxes of the Affiliated Group for all
periods (not including Income Taxes of Spinco, any Spinco Subsidiary, or
relating to the Spinco Business, which are covered by clause (i) and (ii)
hereof), and (iv) Income Taxes resulting from the Contribution and Distribution
(except for any such Income Tax that is an Indemnifiable Liability under Section
4.4). Whenever it is necessary to apportion Taxes for a Straddle Period, such
apportionment shall be made in accordance with the Closing of the Books Method.
(b) Spinco shall indemnify Heinz from all liability for Other Taxes
(excluding any such Taxes covered by Section 4.5(g)) of Spinco, any Spinco
Subsidiary, or relating to the Spinco Business for any taxable period ending on
or before the Distribution Date that were not paid before the Distribution Date,
and from all liability for any Taxes of Spinco, any Spinco Subsidiary, or
relating to the Spinco Business for any taxable period ending after the
Distribution Date (except for Income Taxes for the portion of a Straddle Period
ending on or before the Distribution Date). Whenever it is necessary to
apportion Taxes for a Straddle Period, such apportionment shall be made in
accordance with the Closing of the Books Method.
SECTION 2.2. Refunds. (a) Subject to Section 3.5, if a Party receives a
refund, offset, credit, or other benefit (including interest received thereon)
(a "Refund") of Tax which the other Party would have been obligated to indemnify
had the Refund been a payment, then the Party receiving the Refund shall
promptly pay the amount of the Refund to the other Party, less reasonable costs
and expenses incurred in connection with such Refund, including any Taxes on
such Refund or interest thereon.
(b) Each Party shall, if reasonably requested by the other
Party, cause the relevant entity to file for and use its reasonable best efforts
to obtain and expedite the receipt of any refund to which such requesting Party
is entitled under this Section 2.2.
SECTION 2.3. Contests.
(a) In the case of an audit or other administrative or
judicial proceeding that relates to Taxes for which Heinz is responsible under
Section 2.1 hereof, Heinz shall have the sole right to control the conduct of
such audit or proceeding.
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(b) In the case of an audit or other administrative or
judicial proceeding that relates to Taxes for which Spinco is responsible under
Section 2.1 hereof, Spinco shall have the sole right to control the conduct of
such audit or proceeding.
(c) In the case of an audit or other administrative or
judicial proceeding that relates to a Straddle Period of Spinco, the Spinco
Subsidiaries, or the Spinco Business the parties shall use reasonable efforts to
cause such proceedings to be bifurcated between the period ending on the
Distribution Date and the period beginning after the Distribution Date. If the
parties are able to cause the audit to be so bifurcated, then Sections 2.3(a)
and (b) hereof shall govern the control of such proceedings. To the extent that
the parties are unable to cause such bifurcation, Heinz and Spinco shall jointly
control such proceedings.
(d) After the Distribution Date, each Party shall promptly
notify the other Party in writing upon receipt of written notice of the
commencement of any Tax audit or administrative or judicial proceeding or of any
demand or claim upon it, which, if determined adversely, would be grounds for
indemnification from such other Party pursuant to Section 2.1 or could
reasonably be expected to have an adverse tax effect on the other Party. Each
Party shall, on a timely basis, keep the other Party informed of all
developments in the audit and provide such other Party with copies of all
pleadings, briefs, orders, and other correspondence pertaining thereto.
SECTION 2.4. Treatment of Payments; After Tax Basis
(a) Heinz and Spinco agree to treat any indemnification
payments (other than payments of interest pursuant to Section 2.4(c)) pursuant
to this Agreement as either a capital contribution or a distribution, as the
case may be, between Heinz and Spinco occurring immediately prior to the
Distribution. If the receipt or accrual of any such payment (other than payments
of interest pursuant to Section 2.4(c)) results in taxable income to the
indemnified Party, such payment shall be increased so that, after the payment of
any Taxes with respect to the payment, the indemnified Party shall have realized
the same net amount it would have realized had the payment not resulted in
taxable income.
(b) To the extent that any liability for Taxes, that is
subject to indemnification under Section 2.1, gives rise to a deduction, credit
or other Tax benefit to the indemnified Party, the amount of any payment made
under Section 2.1 shall be decreased by taking into account any resulting
reduction in Taxes of the indemnified Party. If a reduction in Taxes of the
indemnified Party occurs in a taxable period following the period in which the
indemnification payment is made, the indemnified Party shall promptly repay the
indemnifying Party the amount of such reduction when actually realized.
(c) Payments made pursuant to this Agreement that are not made
within the period prescribed in this Agreement or, if no period is prescribed,
within thirty (30) days after demand for payment is made (the "Payment Period")
shall bear interest for the period from and including the date immediately
following the last date of the Payment Period through and including the date of
payment at a per annum rate equal to 6 percent. Such interest will be payable at
the same time as the payment to which it relates and shall be calculated on the
basis of a year of 365 days and the actual number of days for which due.
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SECTION 2.5. Agent. Subject to the other applicable provisions
of this Agreement, Spinco hereby irrevocably designates, and agrees to cause
each of its Subsidiaries to so designate, Heinz as its sole and exclusive agent
and attorney-in-fact to take such action (including execution of documents) as
Heinz, in its sole discretion, may deem appropriate in any and all matters
(including audits) relating to any Tax Return relating to Income Taxes for which
Heinz has an indemnification obligation under Section 2.1.
ARTICLE III. RETURNS AND TAXES ATTRIBUTABLE TO SPINCO
SECTION 3.1. Heinz's Responsibility for the Preparation of Tax
Returns and for the Payment of Taxes.
(a) Heinz shall prepare and file or cause to be prepared and
filed all Income Tax Returns of Spinco and any Spinco Subsidiary for all periods
ending on or before the Distribution Date. Without affecting the indemnification
obligations of Heinz under this Agreement, in the event that Heinz fails to
prepare and file or cause to be prepared and filed any Tax Return that it is
required to file pursuant to this clause, Spinco shall have the right, but not
the obligation, to prepare and file all such Tax Returns at Heinz's expense.
(b) With respect to Income Tax Returns that are to be prepared
and filed by Heinz pursuant to the preceding paragraph (including separate
returns of Spinco and any Spinco Subsidiary as included in a Consolidated
Return) Heinz shall provide a copy of such Tax Returns to Spinco no later than
thirty (30) days after the due date for filing of such Tax Returns.
(c) To the extent that Spinco, any Spinco Subsidiary or the
Business is included in any Consolidated Return for a taxable period that
includes the Distribution Date, Heinz shall include in such Consolidated Return
the results of Spinco, the Spinco Subsidiaries, and the Spinco Business on the
basis of the Closing of the Books Method. To the extent permitted by law or
administrative practice with respect to other Income Tax Returns, the taxable
period relating to Spinco, any Spinco Subsidiary and the Spinco Business shall
be treated as ending on the Distribution Date, and if the taxable period does
not, in fact, end on the Distribution Date, the Parties shall apportion all tax
items between the portions of the taxable period before and after the
Distribution Date on the Closing of the Books Method.
SECTION 3.2. Spinco's Responsibility for the Preparation of
Tax Returns and for the Payment of Taxes. Spinco shall prepare and file all Tax
Returns relating to Other Taxes of Spinco or any Spinco Subsidiary that have not
been filed before the Distribution Date. Spinco shall prepare and file or cause
to be prepared and filed all Tax Returns of Spinco or any Spinco Subsidiary for
periods commencing after the Distribution Date.
SECTION 3.3. Responsibility for the Preparation of Straddle
Period Income Tax Returns and for the Payment of Straddle Period Income Taxes.
(a) Spinco shall prepare and file or cause to be prepared and
filed all Income Tax Returns of Spinco or any Spinco Subsidiary for any Straddle
Period. All such Income Tax Returns that are to be prepared and filed by Spinco
pursuant to this paragraph shall be submitted to Heinz not later than thirty
(30) days prior to the due date for filing of such Tax Returns (or if
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such due date is within 45 days following the Distribution Date, as promptly as
practicable following the Distribution Date). Heinz shall have the right to
review such Tax Returns and to review all work papers and procedures used to
prepare any such Tax Return. If Heinz, within ten (10) business days after
delivery of any such Tax Return, notifies Spinco in writing that it objects to
any of the items in such Tax Return, Heinz and Spinco shall attempt in good
faith to resolve the dispute and, if they are unable to do so, the disputed
items shall be resolved (within a reasonable time, taking into account the
deadline for filing such Tax Return) by an internationally recognized
independent accounting firm chosen by both Heinz and Spinco. Upon resolution of
all such items, the relevant Straddle Period Tax Return shall be filed on that
basis. The costs, fees and expenses of such accounting firm shall be borne
equally by Heinz and Spinco.
(b) Heinz shall be liable for the Income Taxes shown on the
Income Tax Returns filed pursuant to Section 3.3(a) with respect to the portion
of the Straddle Period ending on the Distribution Date. Spinco shall be liable
for the portion of such Income Taxes with respect to the portion of the Straddle
Period beginning after the Distribution Date. The allocation of the Income Taxes
shall be apportioned between the periods in accordance with the Closing of the
Books Method. Heinz shall pay to Spinco the Income Taxes for which it is liable
by the due date for the payment of such Income Taxes.
SECTION 3.4. Manner of Preparation. All Income Tax Returns
filed on or after the Distribution Date shall be prepared in a manner that is
consistent with the Ruling and the Opinion, or any other rulings obtained from
other Taxing Authorities in connection with the Distribution (in the absence of
a Final Determination to the contrary) and shall be filed on a timely basis
(including pursuant to extensions) by the Party responsible for such filing
under this Agreement. In the absence of a Final Determination to the contrary, a
controlling change in law or circumstances, or accounting method changes
pursuant to applications that are approved by the Internal Revenue Service, all
Income Tax Returns of Spinco and its Subsidiaries for tax periods commencing
prior to the Distribution Date shall be prepared on a basis consistent with the
elections, accounting methods, conventions, assumptions and principles of
taxation used with respect to the Spinco Business for the most recent taxable
periods for which Tax Returns of the Affiliated Group have been filed.
SECTION 3.5. Carrybacks. To the extent permitted by law,
Spinco and its Subsidiaries shall elect to forego a carry back of any net
operating losses, capital losses or credits for any taxable period ending after
the Distribution Date to a taxable period, or portion thereof, ending on or
before the Distribution Date. If and to the extent that Spinco or any of its
Subsidiaries is not permitted by applicable law to forego such carryback and
requests in writing that Heinz obtain a refund with respect to such carryback,
then (a) Heinz, in its sole and absolute discretion, shall take all reasonable
measures to obtain a refund with respect to such carryback (including by filing
an amended Tax Return) and (b) to the extent that Heinz receives a refund of
Taxes (including interest received thereon) attributable to such carryback,
Heinz shall pay such refund to Spinco. Heinz shall be entitled to reduce the
amount of any such refund for its reasonable costs and expenses incurred in
connection with such refund, including any Taxes on receipt of such refund or
interest thereon.
SECTION 3.6. Retention of Records; Access.
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(a) Heinz and Spinco shall, and shall cause each of their
Subsidiaries to, retain adequate records, documents, accounting data and other
information (including computer data) necessary for the preparation and filing
of all Tax Returns required to be filed by Heinz or Spinco and for any
Proceeding relating to such Tax Returns or to any Taxes payable by Heinz or
Spinco.
(b) Heinz and Spinco shall, and shall cause each of their
Subsidiaries to, provide reasonable access to (i) all records, documents,
accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns required to be filed by Heinz or
Spinco and for any Proceeding relating to such Tax Returns or to any Taxes
payable by Heinz or Spinco and (ii) its personnel and premises, for the purpose
of the preparation, review or audit of such Tax Returns, or in connection with
any Proceeding, as reasonably requested by either Heinz or Spinco.
(c) The obligations set forth above in Sections 3.6(a) and
3.6(b) shall continue until the longer of (i) the time of a Final Determination
or (ii) expiration of all applicable statutes of limitations, to which the
records and information relate. For purposes of the preceding sentence, each
Party shall assume that no applicable statute of limitations has expired unless
such Party has received notification or otherwise has actual knowledge that such
statute of limitations has expired.
SECTION 3.7. Confidentiality; Ownership of Information;
Privileged Information. The provisions of Section 4.01 of the Separation
Agreement relating to confidentiality of information, ownership of information,
privileged information and related matters shall apply with equal force to any
records and information prepared and/or shared by and among the Parties in
carrying out the intent of this Agreement.
SECTION 3.8. Options. The Parties agree that with respect to
any Heinz Options adjusted pursuant to Section 7.1(b)(ii) of the Employee
Benefits Agreement, (i) Heinz shall be entitled to claim all deductions with
respect to employees who, immediately before the Contribution, were employed by
Heinz, and (ii) Spinco shall be entitled to claim deductions with respect to all
other employees (including employees of HMC). The Parties shall notify each
other of any withholding obligation arising as a result of the exercise of such
options. Each Party shall timely withhold (on its own behalf or on behalf of the
other Party, as the case maybe) any amounts required to be withheld with respect
to such exercise. The Parties shall use their reasonable best efforts, including
sharing information and filing powers of attorney, to effectuate the filing of
any information returns and any withholding obligations pursuant to this section
3.8.
ARTICLE IV. DISTRIBUTION AND RELATED TAX MATTERS
Notwithstanding anything herein to the contrary, the
provisions of this Article IV shall govern all matters among the parties hereto
related to an Indemnified Liability.
SECTION 4.1. Compliance with the Ruling. Spinco, Heinz and Del
Monte hereby confirm and agree to comply with any and all covenants, agreements
and representations in the Ruling applicable to Spinco and Heinz, respectively
(including but not limited, in the case
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of Spinco, to agreeing that Spinco will not cease the active conduct of its
trade or business within the meaning of Section 355(b) of the Code).
SECTION 4.2. Compliance with Representations. Spinco and Del
Monte hereby confirm all representations made in certificates of officers of
Spinco and Del Monte provided to Heinz's counsel pursuant to section 8.2(c) of
the Merger Agreement. Heinz hereby confirms all representations made in
certificates of officers of Heinz provided to Del Monte's counsel pursuant to
section 8.3(c) of the Merger Agreement.
SECTION 4.3. Opinion Requirement for Major Transactions
Undertaken by Spinco During the Restricted Period. Other than pursuant to the
transactions contemplated by the Merger Agreement (including the merger of
Spinco with an Affiliate of Del Monte), Spinco and Del Monte agree that during
the Restricted Period they will not (i) merge or consolidate Spinco with or into
any other corporation, (ii) liquidate or partially liquidate Spinco (within the
meaning of such terms as defined in Section 346 and Section 302, respectively,
of the Code), (iii) sell or transfer all or substantially all of Spinco's assets
(within the meaning of Rev. Proc. 77-37, 1977-2 C.B. 568) in a single
transaction or series of related transactions, or sell or transfer any portion
of Spinco's assets that would violate the "continuity of business enterprise"
requirement of Treas. Reg. Section 1.368-1(d), (iv) redeem or otherwise
repurchase any of Spinco's or Del Monte's capital stock other than pursuant to
open market stock repurchase programs meeting the requirements of section
4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696, or (v) enter into any
negotiations, agreements or arrangements with respect to transactions or events
(including any transactions described in Sections 4.3(i)-(iv) (and, for this
purpose, including any redemptions made pursuant to open market stock repurchase
programs), stock issuances, pursuant to the exercise of options or otherwise,
option grants, capital contributions or acquisitions, entering into any
partnership or joint venture arrangements, or a series of such transactions or
events, but excluding the Distribution) that may cause the Distribution to be
treated as part of a plan pursuant to which one or more persons acquire directly
or indirectly stock of Spinco representing a "50-percent or greater interest"
therein within the meaning of Section 355(d)(4) of the Code (collectively the
"Prohibited Acts"). Notwithstanding the foregoing, Spinco and Del Monte may take
any of the Prohibited Acts, subject to Section 4.4, if (x) Spinco and Del Monte
first obtain (at their expense) an opinion in form and substance reasonably
acceptable to Heinz of a nationally recognized law firm reasonably acceptable to
Heinz, which opinion may be based on usual and customary factual representations
or (y) at Spinco's or Del Monte's request, Heinz (at the expense of Spinco and
Del Monte) obtains a supplemental ruling from the Internal Revenue Service, that
such Prohibited Act or Acts, and any transaction related thereto, will not (a)
affect any of the conclusions set forth in the Ruling, including (i) the
qualification of the Contribution under Section 368 of the Code, (ii) the
qualification of the Distribution under Section 355 of the Code, and (iii) the
nonrecognition of gain to Heinz in the Contribution and the Distribution, (b)
cause the stock of Spinco distributed in the Distribution to fail to be treated
as qualified property pursuant to Section 355(e) of the Code, or (c) cause the
Merger not to qualify under Section 368 of the Code. Spinco and Del Monte may
also take any of the Prohibited Acts, subject to Section 4.4, with the consent
of Heinz in its sole and absolute discretion. During the Restricted Period,
Spinco shall provide all information reasonably requested by Heinz relating to
any transaction involving an acquisition (directly or indirectly) of Spinco
stock within the meaning of Section 355(e) of the Code.
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SECTION 4.4. Indemnification by Spinco. If Del Monte or Spinco
take any action or enter into any agreement to take any action, including any of
the Prohibited Acts as defined in Section 4.3 of this Agreement, or if there is
a breach by Del Monte or Spinco of Section 4.1 or Section 4.2 hereof, or if
there is any direct or indirect acquisition of Spinco stock, and as a result (i)
the Distribution shall fail to qualify under Section 355 of the Code, (ii) the
stock of Spinco distributed in the Distribution shall fail to be treated as
qualified property pursuant to Section 355(e) of the Code, (iii) the Debt
Security fails to constitute a "security," in whole or in part, of Spinco under
Section 354, 355 or 361 of the Code by reason of any actual or deemed
modification of any term, refinancing, actual or deemed exchange, assumption,
prepayment of principal thereof, or by reason of a breach by Del Monte or Spinco
of Section 4.2 hereof, (iv) the Contribution fails to qualify under Section 368
of the Code or Heinz recognizes any gain in connection with the Contribution, or
(v) the Merger fails to qualify as a reorganization under Section 368 of the
Code, then Del Monte and Spinco shall indemnify and hold harmless Heinz against
any and all Taxes imposed upon or incurred by Heinz (and any Taxes of Heinz
shareholders to the extent Heinz is liable with respect to such Taxes, whether
to a Taxing Authority, to a shareholder or to any other person) as a result,
unless such Taxes would, in any event, have been imposed upon or incurred by
Heinz without regard to such actions, breaches or events, as determined at such
time. Heinz shall be indemnified and held harmless under this Section 4.4
without regard to whether an opinion or supplemental ruling pertaining to the
action pursuant to Section 4.3 was obtained, and without regard to whether Heinz
gave its consent to such action pursuant to Section 4.3 or otherwise.
SECTION 4.5. Procedural Matters.
(a) Notice. If either Spinco or Heinz receives any written
notice of deficiency, claim or adjustment or any other written communication
from a Taxing Authority that may result in an Indemnified Liability, the Party
receiving such notice or communication shall promptly give written notice
thereof to the other Party, provided that any delay by Heinz in so notifying
Spinco shall not relieve Spinco of any liability to Heinz hereunder except to
the extent Spinco is materially and adversely prejudiced by such delay. Heinz
undertakes and agrees that from and after such time as Heinz obtains knowledge
that any representative of a Taxing Authority has begun to investigate or
inquire into the Distribution (whether or not such investigation or inquiry is a
formal or informal investigation or inquiry), Heinz shall (i) notify Spinco
thereof, provided that any delay by Heinz in so notifying Spinco shall not
relieve Spinco of any liability to Heinz hereunder except to the extent Spinco
is materially and adversely prejudiced by such delay, (ii) consult with Spinco
from time to time as to the conduct of such investigation or inquiry, (iii)
provide Spinco with copies of all correspondence between Heinz or its
representatives and such Taxing Authority or any representative thereof
pertaining to such investigation or inquiry and (iv) cooperate with Spinco to
permit a representative (reasonably satisfactory to Heinz) of Spinco to be
present at (but not participate in, except as otherwise provided in Section
4.5(c) below) all meetings with such Taxing Authority or any representative
thereof pertaining to such investigation or inquiry, provided, that any costs
relating to Spinco's representation at such meetings shall be borne by Spinco.
(b) Written Acknowledgment. Promptly upon receipt of notice as
provided in Section 4.5(a), Spinco shall confirm in writing to Heinz that the
liability asserted in the notice of deficiency, claim or adjustment or other
written communication would, if imposed upon or
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incurred by Heinz or its Subsidiaries, be an Indemnified Liability. If Spinco
believes in good faith that such liability may not be an Indemnified Liability,
Spinco shall set forth in writing to Heinz the grounds for such belief.
(c) Tax Proceedings Controlled by Spinco. Any Proceeding that
may result in an Indemnified Liability, which is acknowledged as such by Spinco
pursuant to the first sentence of Section 4.5(b), shall be conducted in
accordance with this Section 4.5(c).
(i) Promptly upon Spinco's written acknowledgment that the
asserted liability is an Indemnified Liability pursuant to Section
4.5(b), Spinco may assume and direct the defense or settlement of the
Proceeding, subject to the participation and consultation of Heinz,
provided that, if Spinco fails to prosecute the Proceeding in a
reasonably diligent manner, Heinz may (at Spinco's expense and subject
to the provisions in Section 4.5(d)) assume and direct the defense or
settlement of the Proceeding. If the Indemnified Liability is grouped
with other unrelated asserted liabilities or issues in the Proceeding,
Heinz and Spinco shall use their respective reasonable best efforts to
cause the Indemnified Liability to be the subject of a separate
Proceeding. If such severance is not possible, Spinco shall assume,
direct and be responsible only for the matters relating to the
Indemnified Liability and Heinz shall assume, direct and be responsible
for all other matters.
(ii) Upon request, during the course of the Proceeding, Spinco
shall from time to time furnish Heinz with evidence reasonably
satisfactory to Heinz of its ability to pay the full amount of the
Indemnified Liability. If at any time during such Proceeding, Heinz
reasonably determines, after due investigation, that Spinco may not be
able to pay the full amount of the Indemnified Liability, if required,
then Spinco shall be required to furnish a guarantee or performance
bond satisfactory to Heinz in an amount equal to the amount of the
Indemnified Liability asserted by the Taxing Authority. If Spinco fails
to furnish such guarantee or xxxx, Xxxxx may assume control of the
Proceedings in accordance with Section 4.5(d).
(iii) Spinco shall pay all expenses directly related to the
Indemnified Liability, including but not limited to reasonable fees for
attorneys, accountants, expert witnesses or other consultants retained
by it and, to the extent that any such expenses have been or are paid
by Heinz or any of its Subsidiaries, Spinco shall promptly reimburse
Heinz or such Subsidiary therefor.
(iv) Heinz shall, at Spinco's sole cost (including but not
limited to any reasonable out-of-pocket costs incurred by Heinz), take
such action as Spinco may reasonably request (including but not limited
to the execution of powers of attorney for one or more persons
designated by Spinco and the filing of a petition, complaint, amended
Tax Return or claim for refund) in contesting the Indemnified
Liability. Spinco shall, on a timely basis, keep Heinz informed of all
developments in the Proceeding and provide Heinz with copies of all
pleadings, briefs, orders, and other written papers pertaining thereto.
(v) Subject to satisfaction of the conditions herein set
forth, Spinco may direct Heinz to settle the Indemnified Liability on
such terms and for such amount as Spinco
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may direct. Heinz may condition such settlement on receipt, prior to
the settlement, from Spinco of the indemnity payment with respect to
the Indemnified Liability less any amounts to be paid directly by
Spinco to the Taxing Authority. Spinco may direct Heinz, at Spinco's
expense, to pay an asserted deficiency for the Indemnified Liability
out of funds provided by Spinco, and to file a claim for refund. Heinz
shall not pay (unless otherwise required by a proper notice of
assessment and after prompt notification to Spinco of Heinz's receipt
of notice and demand for payment) any portion of the Indemnified
Liability without the written consent of Spinco, which shall not be
unreasonably withheld.
(d) Tax Proceedings Controlled by Heinz. Should (i) Spinco not
provide Heinz with the confirmation contemplated by the first sentence of
Section 4.5(b) within thirty (30) days following receipt of notice provided in
Section 4.5(a) or (ii), following such confirmation, should Spinco fail within
thirty (30) days following request therefor to furnish to Heinz evidence of its
ability to pay the full amount of the Indemnified Liability, or (iii) should
Heinz reasonably believe after due investigation that Spinco may not be able to
pay the full amount of the Indemnified Liability, if required, and Spinco fails
to furnish a guarantee or performance bond satisfactory to Heinz in an amount
equal to the amount of the Indemnified Liability then being asserted by the
Taxing Authority, or (iv) should Spinco fail to prosecute the Proceeding in a
reasonably diligent manner, then Heinz may assume control of the Proceeding upon
the following terms: (1) Heinz will diligently defend against the claim of the
Taxing Authority, including the pursuit of the appeal of any adverse
determinations to the appropriate tribunal (unless advised in writing by
independent outside counsel at Spinco's sole cost in its reasonable judgment
that Heinz would not prevail upon any such appeal) and shall employ such
resources, including independent counsel, in conducting such defense as are
reasonably commensurate to the nature and magnitude of the claim; (2) Heinz will
consult with Spinco as to the conduct of all Proceedings, will provide Spinco
with copies of all protests, pleadings, briefs, filings, correspondence and
similar materials relative to the Proceedings and will arrange for a
representative of Spinco to be present at (but not to participate in) all
meetings with the relevant Taxing Authority and all hearings before any court;
and (3) Heinz will not settle, compromise or concede any claim that would result
in an Indemnified Liability without Spinco's consent, not to be unreasonably
withheld. Subject to the above, any such Proceeding shall be controlled and
directed exclusively by Heinz and any related expenses incurred by any Member of
the Heinz Group, including but not limited to, reasonable fees for attorneys,
accountants, expert witnesses or other consultants directly related to the
Indemnified Liability shall be reimbursed by Spinco, if Spinco admits or is
found to have incorrectly failed to acknowledge the asserted liability as an
Indemnified Liability as provided in Section 4.5(b); provided, however, that
Heinz will not be required to pursue the claim in the federal district court,
Court of Claims or any state court if as a prerequisite to such Court's
jurisdiction, it is required to pay the asserted liability unless the funds
necessary to invoke such jurisdiction are provided by Spinco at no cost to
Heinz.
(e) Time and Manner of Payment. Unless otherwise agreed in
writing, Spinco shall pay to Heinz the amount with respect to an Indemnified
Liability (less any amount paid directly by Spinco to the Taxing Authority or
made available to Heinz under Section 4.5(d)) at least two (2) Business Days
prior to the date payment of the Indemnified Liability is to be made to the
Taxing Authority. Such payment shall be paid by Spinco to Heinz by wire transfer
of immediately available funds to an account designated by Heinz by written
notice to Spinco prior
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to the due date of such payment. If Spinco delays making payment beyond the due
date hereunder, Spinco shall pay interest to Heinz on the amount unpaid at the
rate of the monthly average of the "prime rate" as published in the Wall Street
Journal for each day and the actual number of days for which any amount due
hereunder is unpaid; provided, however, that this provision for interest shall
not be construed to give Spinco the right to defer payment beyond the due date
hereunder.
(f) Refund of Amounts Paid by Spinco. Should Heinz or any
other member of the Affiliated Group receive a refund in respect of amounts paid
by Spinco to any Taxing Authority on Heinz's behalf or paid by Spinco to Heinz
for payment to a Taxing Authority with respect to an Indemnified Liability, or
should any such amounts that would otherwise be refundable to Heinz be applied
or credited by the Taxing Authority to obligations of Heinz unrelated to an
Indemnified Liability, then Heinz shall, promptly following receipt (or
notification of credit), remit such refund (including any statutory interest
that is included in such refund or credited amount) to Spinco.
(g) Transfer Taxes. Heinz shall bear any and all stamp, duty,
transfer, sales and use or similar Taxes incurred in connection with the
Contribution and Distribution.
(h) Cooperation. Subject to the provisions of Section 3.7,
Heinz and Spinco shall reasonably cooperate with one another in a timely manner
in any Proceeding involving any matter that may result in an Indemnified
Liability. Heinz and Spinco agree that such cooperation shall include, without
limitation, making available to the other Party, during normal business hours,
all books, records and information, officers and employees (without substantial
interruption of employment) necessary or useful in connection with any such
judicial or administrative Proceeding. The Party requesting or otherwise
entitled to any books, records, information, officers or employees pursuant to
this Section 4.5(h) shall bear all reasonable out-of-pocket costs and expenses
(except reimbursement of salaries, employee benefits and general overhead)
incurred in connection with providing such books, records, information, officers
or employees.
(i) Supplemental Rulings. Heinz shall provide Del Monte a copy
of and an opportunity to comment upon any supplemental ruling sought from the
Internal Revenue Service with respect to the Ruling and no supplemental ruling
request shall be made without Del Monte's consent if such supplemental ruling
would materially expand Spinco's indemnification obligations under Section 4.4.
ARTICLE V. MISCELLANEOUS
SECTION 5.1. Complete Agreement; Construction. This Agreement
shall constitute the entire agreement between the Parties with respect to the
subject matter hereof and shall supersede all previous negotiations, commitments
and writings with respect to such subject matter.
SECTION 5.2. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more such counterparts have
been signed by both Parties.
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SECTION 5.3. Survival of Agreements. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the Parties
contained in this Agreement shall survive the Distribution Date.
SECTION 5.4. Joint and Several Liability of Del Monte.
Following the Merger, Del Monte shall be joint and severally liable for any
liability or obligation of Spinco under this Agreement.
SECTION 5.5. Notices. All notices and other communications
hereunder shall be in writing and hand delivered or mailed by registered or
certified mail (return receipt requested) or sent by any means of electronic
message transmission with delivery confirmed (by voice or otherwise) to the
Parties at the following addresses (or at such other addresses for a Party as
shall be specified by like notice) and will be deemed given on the date on which
such notice is received:
To Heinz:
X. X. Xxxxx Company
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: General Counsel
Facsimile: (000) 000-0000
To Spinco:
SKF Foods Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
Attn: Secretary
Facsimile: (000) 000-0000
To Del Monte:
Del Monte Foods Company
One Market @ The Landmark
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Secretary
Facsimile: (000) 000-0000
SECTION 5.6. Waivers. The failure of any Party to require
strict performance by the other Party of any provision in this Agreement will
not waive or diminish that Party's right to demand strict performance thereafter
of that or any other provision hereof.
SECTION 5.7. Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by the Parties hereto.
15
SECTION 5.8. Assignment. This Agreement shall not be
assignable, in whole or in part, directly or indirectly, by any Party hereto
without the prior written consent of the other Party hereto, and any attempt to
assign any rights or obligations arising under this Agreement without such
consent shall be void.
SECTION 5.9. Successors and Assigns. The provisions to this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
the Parties and their respective successors and permitted assigns.
SECTION 5.10. Additional Members. Any new members of the
Affiliated Group shall automatically become a Party to this Agreement upon
becoming members.
SECTION 5.11. Third Party Beneficiaries. This Agreement is
solely for the benefit of the Parties hereto and should not be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, claim of action
or other right in excess of those existing without reference to this Agreement.
SECTION 5.12. Title and Headings. Titles and headings to
sections herein are inserted for the convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
SECTION 5.13. Exhibits. The Exhibits to this Agreement shall
be construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
SECTION 5.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ITS CONFLICTS OF LAW RULES.
SECTION 5.15. Consent to Jurisdiction. The Parties hereto
hereby agree that the appropriate forum and venue for any disputes between any
of the Parties hereto arising out of this Agreement shall be any state or
federal court sitting in New York, New York and each of the Parties hereto
hereby submits to the personal jurisdiction of any such court. The foregoing
shall not limit the rights of any Party to obtain execution of judgment in any
other jurisdiction.
SECTION 5.16. Severability. In the event any one or more of
the provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The Parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to
be duly executed as of the day and year first above written.
X. X. XXXXX COMPANY
By: ______________________
Name:
Title:
SKF FOODS INC.
By: ______________________
Name:
Title:
DEL MONTE FOODS COMPANY
By: ______________________
Name:
Title:
