As filed with the Securities and Exchange Commission on February 8, 2002
Registration No. 333-73830
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
THE J. M. SMUCKER COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<Table>
OHIO 2033 34-0538550
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</Table>
---------------------
STRAWBERRY LANE
ORRVILLE, OHIO 44667-0280
(330) 682-3000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
STEVEN J. ELLCESSOR, ESQ.
VICE PRESIDENT -- FINANCE AND ADMINISTRATION
THE J. M. SMUCKER COMPANY
STRAWBERRY LANE
ORRVILLE, OHIO 44667-0280
(330) 682-3000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------------
COPIES TO:
<Table>
WILLIAM P. RITCHIE, ESQ. DAVID P. PORTER, ESQ.
JONES, DAY, REAVIS & POGUE JONES, DAY, REAVIS & POGUE
77 WEST WACKER NORTH POINT
CHICAGO, ILLINOIS 60601 901 LAKESIDE AVENUE
(312) 782-3939 CLEVELAND, OHIO 44114-1190
(216) 586-3939
</Table>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable following the effective date of this registration statement and the
date on which all other conditions to the merger of The Procter & Gamble Ohio
Brands Company with and into The J. M. Smucker Company pursuant to the merger
agreement described in the enclosed document have been satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE INFORMATION IN THIS PROXY STATEMENT-PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY
STATEMENT-PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION , 2002
[SMUCKERS LOGO]
You are cordially invited to attend The J. M. Smucker Company's Special
Meeting of Shareholders at 11:00 a.m. Eastern Standard Time, on ,
, 2002, at The Arden Shisler Center for Education & Economic
Development, 1625 Wilson Road, Wooster, Ohio (adjacent to Fisher Auditorium on
the campus of the Ohio Agricultural Research and Development Center). A map
showing the location of The Arden Shisler Center for Education & Economic
Development is on the back cover. A notice of the special meeting and the proxy
statement follow.
At the meeting, you will be asked to approve a proposal to merge the Jif
peanut butter and Crisco shortening and oils businesses of The Procter & Gamble
Company into Smucker and to amend Smucker's articles in connection with the
merger. In the merger, shareholders of Smucker and shareholders of P&G will
receive new Smucker common shares. In certain events, shareholders of Smucker
may receive cash for some of their Smucker shares in the merger. In the merger,
Smucker expects to issue approximately 49,370,000 new Smucker common shares,
representing the combined business operations of Smucker and P&G's Jif and
Crisco businesses. After the merger, we expect that between 45 - 47.5% of the
new Smucker shares will be owned by current Smucker shareholders and between
52.5 - 55% of the new Smucker shares will be owned by P&G shareholders. The new
Smucker shares will have different voting rights than your existing Smucker
shares. For example, your new Smucker shares will entitle you to ten votes only
with respect to certain specified matters, such as mergers, sales of all, or
substantially all, of our assets, and amendments to our articles of
incorporation and regulations. With respect to all other matters, including the
election of directors, the new Smucker shares will be entitled to one vote per
share. All new Smucker common shares issued in the merger will be listed on The
New York Stock Exchange under our current symbol "SJM."
Your board of directors believes that the merger and the combination of
these three strong icon brands -- Smucker's, Jif and Crisco -- should enhance
shareholder value by creating a new and exciting company with a leading position
in three food categories, excellent earnings power, and a strong financial
position to pursue new product development and acquisition opportunities. Your
board of directors also believes that the merger should increase the liquidity
and trading volume of our common shares and expand our investor base. YOUR BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSED MERGER.
Your participation in this special meeting, either in person or by proxy, is
very important. If you are a record holder of common shares, you will find
enclosed a proxy card(s) with a return envelope. For more information concerning
voting by proxy, please see the section of this document beginning on page
entitled "Voting by Proxy." We encourage you to read this entire document
carefully. This document provides you with detailed information about the
special meeting, the terms of the merger, and the Jif and Crisco businesses. IN
PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE FOR A
DESCRIPTION OF SOME OF THE RISKS YOU SHOULD CONSIDER IN EVALUATING THE PROPOSED
MERGER. You may also obtain information about Smucker from publicly available
documents that we have filed with the Securities and Exchange Commission. See
"Where You Can Find More Information" beginning on page .
It is very important that your shares be represented and voted at the
special meeting, regardless of whether you plan to attend in person. PLEASE
COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD(S) AT YOUR EARLIEST
CONVENIENCE. We are very excited about the opportunities the proposed merger
brings, and we thank you for your consideration and continued support.
Sincerely,
/s/ Timothy P. Smucker
Chairman and
Co-Chief Executive Officer
/s/ Richard K. Smucker
President and
Co-Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NEW SMUCKER COMMON SHARES TO BE
ISSUED IN THE MERGER OR DETERMINED THAT THIS PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this proxy statement-prospectus is February , 2002,
and it is first being mailed to shareholders on or about February , 2002.
PRELIMINARY COPY
THE J. M. SMUCKER COMPANY
STRAWBERRY LANE
ORRVILLE, OHIO 44667-0280
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of The J. M. Smucker Company will be held
at 11:00 a.m., Eastern Standard Time, on , , 2002. The
purposes of the special meeting are for you to consider and vote upon:
- A proposal to approve the merger of a wholly owned subsidiary of Procter
& Gamble, which will hold the Jif and Crisco businesses, into Smucker
with Smucker as the surviving company, and to amend Smucker's articles in
connection with the merger, by adopting the merger agreement relating to
the merger; and
- To consider any other matter that may properly come before the meeting.
Please note that admission to the meeting will be by admission card only.
If you plan to attend the meeting, you may obtain an admission card as follows:
- If you are a record holder of common shares, please mark the appropriate
box on the enclosed proxy card(s) so that we can mail an admission card
to you in advance of the meeting.
- If you are not a record holder, but instead hold your common shares in
the name of your broker, bank or other nominee, write to our corporate
secretary to request an admission card and furnish proof of shareholder
status, such as a bank or brokerage firm account statement.
All shareholders WITH ADMISSION CARDS are cordially invited to attend the
special meeting, although only those shareholders of record at the close of
business on Friday, February 8, 2002, are entitled to notice of the special
meeting and to vote at the meeting or any adjournment or postponement of the
meeting.
Smucker shareholders who do not vote in favor of the merger and who
otherwise comply with the requirements of Ohio law will be entitled to
dissenters' rights. If you vote in favor of the merger, or if you submit a
signed proxy that does not indicate how you wish to vote your shares, you will
not have dissenters' rights. A summary of the applicable Ohio law provisions,
including the requirements a Smucker shareholder must follow in order to
exercise his or her dissenters' rights is contained in this document. A copy of
the applicable Ohio law provisions is attached as Annex E to this document.
STEVEN J. ELLCESSOR
Vice President -- Finance and
Administration,
Secretary, and General Counsel
PLEASE VOTE YOUR SHARES PROMPTLY. YOU CAN FIND INSTRUCTIONS FOR VOTING ON THE
ENCLOSED PROXY CARD(S).
---------------------
If you have questions, contact
Georgeson Shareholder Communications, Inc.
Call Toll-Free: (866) 841-8464
---------------------
Orrville, Ohio, February , 2002
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR SIGNED
AND DATED PROXY CARD(S) AT YOUR EARLIEST CONVENIENCE.
REFERENCES TO ADDITIONAL INFORMATION
This document incorporates important business and financial information
about Smucker from other documents that are not included in or delivered with
this document. This information is available to you without charge upon your
written or oral request. You can obtain the documents incorporated by reference
into this document by accessing the Securities and Exchange Commission's website
maintained at "www.sec.gov" or by requesting copies in writing or by telephone
from Smucker at the following address:
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667-0280
Attention: Investor Relations
(330) 682-3000
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY MARCH __, 2002 IN
ORDER TO RECEIVE THEM BEFORE OUR SPECIAL MEETING OF SHAREHOLDERS. WE WILL MAIL
THE DOCUMENTS YOU REQUEST BY FIRST CLASS MAIL, OR ANOTHER EQUALLY PROMPT MEANS,
BY THE NEXT BUSINESS DAY AFTER WE RECEIVE YOUR REQUEST.
See "Where You Can Find More Information" beginning on page .
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
----
Summary..................................................... 1
Questions and Answers About the Special Meeting........... 1
Smucker................................................... 5
The Procter & Gamble Ohio Brands Company.................. 5
The Merger................................................ 6
Merger Consideration...................................... 6
Amended Articles of Incorporation......................... 9
Board of Directors Recommendation to Shareholders......... 9
Fairness Opinion of William Blair & Company, L.L.C........ 9
Shareholders Agreement.................................... 10
Ancillary Agreements...................................... 10
Listing of New Smucker Common Shares...................... 10
Financial Summary........................................... 11
Market Price Data and Dividends........................... 11
Dividend Policy........................................... 11
Selected Historical Financial Data of Smucker............. 12
Selected Combined Historical Financial Data of the Jif and
Crisco Businesses...................................... 13
Selected Unaudited Condensed Combined Pro Forma Financial
Data of Smucker........................................ 14
Comparative Per Share Data................................ 14
Risk Factors................................................ 15
Special Note Regarding Forward-Looking Statements........... 18
The Merger.................................................. 19
Background of the Merger.................................. 19
Reasons for the Merger; Recommendation of the Smucker
Board.................................................. 22
Opinion of Smucker's Financial Advisor.................... 24
Stock Exchange Listing.................................... 32
Material United States Federal Income Tax Consequences of
the Merger............................................. 32
Consequences of the Merger................................ 33
Accounting Treatment...................................... 33
Regulatory Approvals...................................... 34
Dissenters' Rights........................................ 34
The Special Meeting......................................... 36
Purpose, Time and Place................................... 36
Record Date; Voting Information........................... 36
Voting by Proxy........................................... 37
Revocation of Proxies..................................... 38
Share Ownership of Management and Certain Shareholders.... 38
Solicitation of Proxies................................... 38
Business of Smucker......................................... 39
Overview and Products..................................... 39
Employees................................................. 41
Legal Proceedings......................................... 41
Properties................................................ 41
Management's Discussion and Analysis of Financial Condition
and Results of Operations of the Jif and Crisco Businesses
of the Procter & Gamble Company........................... 42
Combined Statements of Revenues, Direct Cost of Products
Sold, Direct Marketing Expenses and Direct Administrative
and Other Expenses........................................ 43
</Table>
<Table>
<Caption>
PAGE
----
The Merger Agreement........................................ 46
Summary of the Transactions............................... 46
General................................................... 46
Timing of Closing......................................... 46
Articles of Incorporation and Regulations of Smucker...... 46
Board of Directors and Officers of Smucker Following the
Completion of the Merger............................... 46
Merger Consideration; Conversion of Shares................ 46
Exchange Agent; Procedures for Exchange of Certificates;
Fractional Shares...................................... 48
Representations and Warranties............................ 48
Covenants................................................. 49
Conditions to the Completion of the Merger................ 53
Termination of the Merger Agreement....................... 55
Effect of Termination; Termination Fees................... 56
The Contribution Agreement.................................. 57
Summary of the Transactions............................... 57
General................................................... 57
Contribution and Transfer of the Jif and Crisco Businesses
and the Assumption of Liabilities...................... 57
Representations and Warranties............................ 59
Covenants................................................. 60
Indemnification and Arbitration........................... 60
The Shareholders Agreement.................................. 61
Agreement to Vote and Proxy............................... 61
Restrictions on Transfer.................................. 62
Standstill................................................ 62
Termination............................................... 62
Ancillary Agreements........................................ 63
Transitional Services Agreement........................... 63
Manufacturing Plant Separation Agreement.................. 63
Tax Sharing Agreement..................................... 65
Comparison of the Rights of Smucker Shareholders Before and
After the Merger.......................................... 66
Experts..................................................... 67
Legal Matters............................................... 67
Tax Matters................................................. 67
Submission of Future Shareholder Proposals.................. 67
Where You Can Find More Information......................... 68
Smucker SEC Filings......................................... 69
Index to Financial Statements............................... F-1
ANNEXES
Merger Agreement (as amended)............................... A-1
Contribution Agreement...................................... B-1
Shareholders Agreement...................................... C-1
William Blair Opinion....................................... D-1
Sections 1701.84 and 1701.85 of the Ohio Revised Code....... E-1
Amended Articles of Incorporation........................... 1-F
</Table>
ii
SUMMARY
This summary of the information contained in this document may not include
all the information that is important to you. To understand fully the proposed
merger of the Jif and Crisco businesses with Smucker, and for a more complete
description of the terms and conditions of the merger, you should read this
entire document and the documents to which we have referred you. See "Where You
can Find More Information" (page ). We have included page references
parenthetically to direct you to a more complete description of each topic
presented in this summary.
I. QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
GENERAL
Q: ON WHAT AM I BEING ASKED TO VOTE?
A: You are being asked to approve the merger of Procter & Gamble's Jif and
Crisco businesses with and into Smucker (page ).
Q: WHY AM I BEING ASKED TO VOTE?
A: Your vote is required under both Ohio corporate law and the rules of The New
York Stock Exchange.
- Ohio corporate law requires your approval of the merger through adoption
of the agreement and plan of merger, which also acts as approval of the
changes to our articles of incorporation that will result from the
merger.
- The rules of The New York Stock Exchange require your approval for the
issuance of shares in connection with the merger.
Your vote on the merger will fulfill both requirements.
Q: WHO IS ELIGIBLE TO VOTE?
A: You are eligible to vote your Smucker common shares at the special meeting
if you were a shareholder of record of those shares at the close of business
on February 8, 2002 (page ).
MERGER OF THE JIF AND CRISCO BUSINESSES WITH AND INTO SMUCKER
Q: WHY SHOULD I VOTE IN FAVOR OF THE MERGER OF THE JIF AND CRISCO BUSINESSES
WITH AND INTO SMUCKER?
A: The combination of these three icon brands, Smucker's, Jif and Crisco -- all
with leading market positions -- will create a new and exciting company with
a leading position in three food categories. Smucker believes that the
merger should enhance shareholder value by significantly increasing its
earnings power, strengthening its position in the minds of consumers, and
helping it to better serve its retail customers. Smucker also believes that
the combined company will be well-positioned to pursue new product
development and acquisition opportunities. See "The Merger -- Reasons for
the Merger; Recommendation of the Smucker Board" (page ).
Q: WHAT IS THE POSITION OF THE SMUCKER BOARD OF DIRECTORS REGARDING THE MERGER
OF THE JIF AND CRISCO BUSINESSES INTO SMUCKER?
A: Your board of directors has unanimously approved the merger and recommends
that you vote FOR the proposed merger (page ).
Q: WHAT WILL HAPPEN IN THE PROPOSED MERGER?
A: P&G will spin off its Jif and Crisco businesses to its shareholders, and
immediately thereafter those businesses will merge with and into Smucker.
Smucker will survive the merger as a stand-alone company and will hold and
conduct the combined business operations of Smucker's, Jif and Crisco.
Following the merger, we expect that P&G shareholders will hold between
52.5 - 55% of the outstanding new Smucker common shares (page ).
1
In addition, current Smucker shareholders will exchange Smucker shares they
currently own for a number of new Smucker common shares. These new shares
will have different voting rights than existing Smucker common shares.
Smucker's existing common shares have time phase voting rights, pursuant to
which each holder of a Smucker common share is generally entitled to ten
votes on each matter properly submitted to the shareholders for their
approval. If, though, there has been a change in beneficial ownership of a
Smucker common share during the prior four years, the current owner of that
share is entitled to only one vote with respect to that share until four
years pass without a change in beneficial ownership of that share. The new
Smucker common shares will entitle the holder to time phase voting rights
only with respect to certain specified matters, such as mergers, sales of
all, or substantially all, of Smucker's assets, and amendments to Smucker's
articles of incorporations and regulations. With respect to all other
matters, including the election of directors, the new Smucker common shares
will be entitled to one vote per share no matter how long the shares have
been beneficially owned.
Q: HOW MANY VOTES ARE NEEDED TO APPROVE THE MERGER?
A: The merger requires the approval of at least two-thirds of the voting power
of our common shares, giving effect to ten-vote shares. If you do not vote,
it will have the same effect as a vote against the merger.
Under our current time phase voting right provisions, each Smucker common
share will have ten votes on the merger proposal and each other matter to be
considered at the special meeting, if any, unless there has been a change in
beneficial ownership of that common share during the four years immediately
preceding February 8, 2002. In the event that there has been a change in
beneficial ownership of a share during those four years, the current owner
of that share will have only one vote with respect to that share (page ).
Our directors, executive officers, and several members of the Smucker family
have indicated that they intend to vote their Smucker common shares FOR the
merger. Several of these Smucker family members have also entered into an
agreement with P&G that requires them to vote for the merger and grants to
P&G a proxy to vote their shares in favor of the merger. As of February 8,
2002, Smucker's directors, executive officers, and Smucker family members
that entered into the voting agreement with P&G were entitled to vote
approximately 6,095,175 Smucker common shares, or approximately 25% of the
outstanding Smucker common shares, representing in the aggregate,
approximately 54% of the voting power of the outstanding Smucker common
shares, based on Smucker's current best estimate of the voting power of
these shareholders under Smucker's current time phase voting structure (page
).
Q: IF THE MERGER IS APPROVED, WHAT ARE THE SIGNIFICANT CONDITIONS TO ITS
COMPLETION?
A: If the merger is approved, its completion is subject to the satisfaction of
a number of conditions, including P&G's receipt of certain tax rulings from
the Internal Revenue Service and Smucker shareholders' receipt of at least
45% of the new Smucker common shares to be issued in the merger (page ).
Q: WHAT WILL SMUCKER SHAREHOLDERS RECEIVE IN THE MERGER IF IT IS APPROVED?
A: In the merger, current Smucker common shares will be converted into new
Smucker common shares. Smucker will hold and conduct the combined business
operations of Smucker, Jif and Crisco.
If P&G receives all of its requested tax rulings, we expect that Smucker
shareholders will receive approximately 0.96 new Smucker common shares
following the merger for each Smucker common share held as of the record
date for the distribution.
If P&G does not obtain all of the requested tax rulings, all Smucker
shareholders will receive a cash payment in an amount necessary to satisfy
P&G that those tax rulings are not required, and the number of new Smucker
common shares they receive in the merger will be decreased ratably to
reflect the amount of cash received. Although we will not have a final
determination until just prior to closing, we expect that the cash amount to
be paid to Smucker shareholders will not exceed $2.05 per share even if P&G
does not obtain any of the requested tax rulings. In that situation, we
would expect
2
that Smucker shareholders would receive approximately 0.87 new Smucker
common shares following the merger for each current Smucker common share
held as of the record date for the distribution (page ).
No fractional new Smucker common shares will be issued to Smucker
shareholders in the merger. Smucker shareholders that would otherwise be
entitled to a fraction of a new Smucker common share will receive a cash
payment in lieu of issuance of that fractional share. Following the merger,
we expect that between 45 - 47.5% of the outstanding Smucker common shares
will be held by current Smucker shareholders.
Q: WHY WILL I RECEIVE LESS THAN ONE WHOLE NEW SMUCKER COMMON SHARE FOR EACH OF
MY CURRENT SMUCKER COMMON SHARES?
A: Immediately after the completion of the merger, the percentage of Smucker
common shares to be held by Smucker shareholders and P&G shareholders will
be based upon the agreement of the parties as set forth in the merger
agreement, which reflects economic and tax considerations. This agreement,
which calls for each P&G shareholder to receive one new Smucker common share
for every 50 P&G common shares, will result in an exchange of one Smucker
common share held as of the record date for the distribution into less than
one new Smucker common share. Although you will receive less than one new
Smucker common share for each of your existing shares, the new shares that
you will receive will reflect the value of Smucker after the merger. With
the addition of Jif and Crisco, Smucker will have significantly greater
assets, revenues, and earnings on a pro forma basis. Management believes
that this will result in a value for Smucker, and, therefore for your
shares, that will be greater after the merger than before the announcement
of the merger.
Q: HOW WILL MY RIGHTS AS A SMUCKER SHAREHOLDER DIFFER AFTER THE MERGER?
A: After the merger, your rights as a holder of new Smucker common shares will
be governed by the articles of incorporation attached to this document as
Annex F, rather than our current articles of incorporation. Under the time
phase voting provisions of our current articles, Smucker shareholders that
have held their shares for four years are entitled to ten votes for each of
those shares on all matters submitted to Smucker shareholders for approval.
The time phase voting provisions of the articles of incorporation that will
be in effect following the merger would limit the situations in which
eligible shareholders can exercise ten votes per share to certain specified
matters, such as mergers, change of control transactions, sales of all, or
substantially all, of our assets, and amendments to our articles and
regulations other than any amendment that increases the number of votes to
which holders of new Smucker common shares are entitled or expand the
matters to which time phase voting applies. With respect to all other
matters, including the election of directors, shares under the new articles
of incorporation will be entitled to one vote per share (page ).
Q: WHAT WILL P&G SHAREHOLDERS RECEIVE IN THE MERGER IF IT IS APPROVED?
A: As a result of the merger, P&G shareholders will receive one new Smucker
common share for every 50 P&G common shares that they held as of the record
date for the distribution of the Jif and Crisco businesses to P&G
shareholders. No fractional new Smucker common shares will be issued to P&G
shareholders in the merger. P&G shareholders that otherwise would be
entitled to a fraction of a new Smucker common share will receive a cash
payment in lieu of issuance of that fractional share (page ). Following
the merger, we expect that between 52.5 - 55% of the outstanding new Smucker
common shares will be held by P&G shareholders.
Q: ARE THERE RISKS ASSOCIATED WITH THE MERGER?
A: Yes. We may not achieve the expected benefits of the merger because of the
risks and uncertainties discussed in the section entitled "Risk Factors"
starting on page and the section entitled "Special Note Regarding
Forward-Looking Statements" starting on page . Those risks include risks
relating to the uncertainty that we will be able to integrate the Jif and
Crisco businesses successfully and uncertainties relating to the performance
of the businesses following the completion of the merger.
3
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: If the merger is approved, we expect to complete the merger as soon as
possible after the satisfaction of the conditions to the merger, including
P&G's receipt of its requested rulings from the IRS. We currently anticipate
that the merger will be completed during the first or second calendar
quarter of 2002 (page ).
Q: IF I DO NOT VOTE IN FAVOR OF THE MERGER, WILL I HAVE DISSENTERS' RIGHTS?
A: You will be entitled to statutory dissenters' rights if you do not vote in
favor of the merger and you follow the procedures described in this document
to assert your dissenters' rights (page ). If you vote in favor of the
merger, or submit a signed proxy that does not indicate how you wish to vote
your shares, you will not have dissenters' rights.
Q: WHAT ARE THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES TO ME RESULTING FROM
THE MERGER?
A: The conversion of your current Smucker common shares into new Smucker common
shares in the merger should be a tax-free event to you under the federal
income tax laws. In some circumstances, you may receive some cash in
addition to new Smucker common shares. In that case, the cash you receive
will generally be taxable. You will also receive cash in lieu of any
fractional shares issuable to you in the merger. You will generally
recognize a gain or loss due to the merger equal to the difference between
the amount of cash and the tax basis allocated to the fractional share (page
).
WE ENCOURAGE YOU TO CONSULT YOUR OWN TAX ADVISOR FOR A FULL UNDERSTANDING
OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
PROCEDURES
Q: WHAT SHOULD I DO NOW?
A: YOU SHOULD MAIL YOUR SIGNED AND DATED PROXY CARD(S) IN THE ENCLOSED ENVELOPE
AS SOON AS POSSIBLE SO THAT YOUR SHARES WILL BE REPRESENTED AND VOTED AT THE
SPECIAL MEETING. If you plan to attend the special meeting, please be sure
to obtain an admission card.
Q: DO I NEED TO SEND IN MY SHARE CERTIFICATES NOW?
A: Do NOT send in your share certificates now. Do NOT send in your share
certificate with your proxy card(s). If the merger is approved, we will send
you a letter describing how to exchange your share certificates after the
merger is completed.
Q: IF I AM NOT GOING TO ATTEND THE SPECIAL MEETING, SHOULD I RETURN MY PROXY
CARD(S)?
A. YES. Returning your proxy card(s) ensures that your shares will be
represented at the special meeting, even if you are unable to or do not
attend.
Q: CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD(S)?
A: Yes. If you are a record holder, you can change your vote by:
- sending a written notice to the corporate secretary of Smucker that is
received prior to the special meeting and states that you revoke your
proxy;
- signing a new proxy card(s) and returning it by mail to our transfer
agent so that it is received prior to the special meeting; or
- obtaining an admission card, attending the special meeting, and voting in
person.
If your shares are held in street name by your broker, you will need to
contact your broker to revoke your proxy.
Q: WHAT IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER?
A: Your broker will vote your shares with respect to the merger only if you
provide written instructions to your broker on how to vote, so it is
important that you provide your broker with instructions. If you
4
do not provide your broker with instructions, under the rules of The New
York Stock Exchange, your broker will not be authorized to vote with respect
to the merger. To ensure that your broker receives your instructions, we
suggest that you send them in the envelope enclosed with the instructions.
If you wish to vote in person at the meeting, and hold your shares in your
broker's name, you must contact your broker and request a document called a
"legal proxy." You must bring this legal proxy to the meeting in order to
vote in person.
Q: WHAT IF I DO NOT VOTE, ABSTAIN FROM VOTING, OR DO NOT INSTRUCT MY BROKER TO
VOTE MY SHARES?
A: If you do not vote, it will have the same effect as a vote against the
merger. Abstentions and broker non-votes will also have the effect of votes
against the merger.
If you sign your proxy card but do not indicate how you want to vote, your
shares will be voted for the merger. If your shares are voted for the
merger you will lose your right to exercise dissenters' rights.
Q: WHO CAN ANSWER MY QUESTIONS?
A: If you have any questions regarding the special meeting or need assistance
in voting your shares, please contact our proxy solicitor:
Georgeson Shareholder Communications, Inc.
111 Commerce Road
Carlstadt, New Jersey 07072-2586
Telephone: (866) 841-8464
or
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667-0280
Attn: Investor Relations
Telephone: (330) 682-3000
All other questions should be directed to:
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667-0280
Attn: Office of the Corporate Secretary
Telephone: (330) 682-3000
Q: WHERE CAN I FIND MORE INFORMATION ABOUT SMUCKER?
A: You can find more information about Smucker from various sources described
under "Where You Can Find More Information" starting on page .
II. ADDITIONAL INFORMATION
SMUCKER
Smucker, an Ohio corporation, manufactures and markets food products on a
worldwide basis. Smucker's principal products are fruit spreads, dessert
toppings, fruit and vegetable juices, juice beverages, natural peanut butter,
industrial fruit products such as bakery and yogurt fillings, syrups,
condiments, and gift packages.
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667-0280
(330) 682-3000
THE PROCTER & GAMBLE OHIO BRANDS COMPANY
The Procter & Gamble Ohio Brands Company is a wholly owned subsidiary of
The Procter & Gamble Company that will hold the Jif peanut butter and Crisco
shortening and oils businesses of P&G at
5
the time of the merger. We will refer to The Procter & Gamble Ohio Brands
Company as "P&G Ohio" throughout this document.
The Procter & Gamble Ohio Brands Company
c/o The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, Ohio 45201
(513) 983-1100
JIF AND CRISCO
The Jif peanut butter brand has been a leader in the stabilized peanut
butter category for over 20 years. The Jif brand had 34% of the stabilized
peanut butter sales in the United States in calendar year 2000. The Jif business
includes such products as Jif peanut butter in Regular, Reduced Fat and Simply
Jif varieties, and Jif Smooth Sensations in Apple Cinnamon, Chocolate Silk, and
Berry Blend varieties.
Crisco has been a leader in the shortening and cooking oils category for
over 50 years. Crisco products were introduced in 1911 and now include
shortening, sprays and cooking oils. The Crisco brand had 24% of the shortening,
cooking oils, and sprays sales in the United States in calendar year 2000.
The Jif and Crisco businesses together have approximately 350 employees and
have combined net revenues of approximately $615.3 million.
THE MERGER (PAGE )
In connection with the merger, P&G will transfer and contribute its Jif and
Crisco businesses to P&G Ohio pursuant to the terms of a contribution agreement.
See "The Contribution Agreement" beginning on page . Immediately prior to the
merger, P&G will spin off P&G Ohio by distributing all of the P&G Ohio common
shares to P&G shareholders on a pro rata basis. P&G Ohio will then be merged
with and into Smucker in accordance with the terms of a merger agreement. See
"The Merger Agreement" beginning on page . As noted below under "Merger
Consideration," P&G shareholders will receive one new Smucker common share for
every 50 P&G shares that they hold and Smucker shareholders will receive
approximately 0.96 new Smucker common shares for each Smucker common share they
hold. In certain circumstances, Smucker shareholders will receive a cash
payment, and the number of new Smucker common shares they receive in the merger
will be reduced ratably to reflect the amount of cash received.
After the merger, Smucker will operate the Jif and Crisco businesses under
their current brand names, and will also continue its current businesses and
retain its current brand names. Smucker will continue to use the name "The J. M.
Smucker Company" after the merger.
The new Smucker common shares will have time phase voting rights, but only
with respect to certain specified matters, such as mergers, sales of all, or
substantially all, of our assets, change of control transactions, and amendments
to our articles of incorporation and regulations. With respect to all other
matters, including the election of directors, the new Smucker common shares will
be entitled to one vote per share. All new Smucker common shares issued in the
merger will be listed on The New York Stock Exchange and will initially be
ten-vote shares for time phase voting purposes.
We encourage you to read the agreements that govern the merger, which are
attached as Annexes A and B to this document, because they set forth the terms
of the transfer of the Jif and Crisco businesses to P&G Ohio and the merger of
P&G Ohio into Smucker.
MERGER CONSIDERATION (PAGE )
SMUCKER SHAREHOLDERS
The number of new Smucker common shares you will receive and whether you
will receive a cash payment in the merger will depend on whether P&G obtains
certain tax rulings it has requested from the IRS. P&G's ruling request was
submitted to the IRS on November 19, 2001. The parties expect that the
6
earliest P&G would receive a response from the IRS would be three or four months
following the submission. Consequently, the IRS response may not be received
until after our special meeting.
- If P&G receives all of the tax rulings it has requested, Smucker
shareholders will receive in the aggregate approximately 47.5% of the new
Smucker common shares to be issued in the merger. In that case, we expect
that you will receive approximately 0.96 new Smucker common shares for
each Smucker common share that you hold as of the record date for the
special meeting and that you would not receive any cash payment other
than cash paid in lieu of issuing fractional shares.
- If P&G does not receive certain tax rulings it has requested and decides
to complete the merger anyway, Smucker shareholders could, under the
terms of the merger agreement, receive in the aggregate as few as 45% of
the new Smucker common shares to be issued in the merger. In that case,
we expect that you would receive approximately 0.87 new Smucker common
shares and between $1.40 to $2.05 in cash for each Smucker common share
that you hold as of the record date for the special meeting in addition
to the cash paid in lieu of issuing fractional shares, depending on the
average closing price of Smucker common shares prior to the closing of
the merger. This cash payment and any cash that you receive in lieu of
fractional shares will generally be taxable to you. See "Material United
States Federal Income Tax Consequences of the Merger" on page .
For example, if you own 1,000 Smucker common shares as of the record date
for the distribution we expect that you would receive the following:
<Table>
<Caption>
APPROXIMATE NUMBER OF NEW APPROXIMATE
SMUCKER COMMON SHARES AMOUNT OF CASH
------------------------- ---------------
All requested tax rulings received.... 960 -0-
No requested tax rulings received..... 870 $1,400 - 2,050*
</Table>
* Amount of cash will depend on the closing price for Smucker's common shares
for the five-day period ending two trading days prior to the effective date of
the merger.
If P&G receives some, but not all, of the tax rulings it has requested, the
number of new Smucker common shares you will receive and the amount of cash you
will receive will fall between the above examples.
The examples given above assume that the number of Smucker common shares
and P&G common shares outstanding on the closing of the merger remains the same
as were outstanding on November 30, 2001 and December 31, 2001, respectively.
The number of outstanding shares may, however, change prior to closing through
the exercise of stock options under the companies respective employee benefit
plans or stock repurchases made by P&G. For a more complete description of the
consideration to be received by Smucker shareholders, see "The Merger
Agreement -- Merger Consideration; Conversion of Shares."
P&G OHIO SHAREHOLDERS
In the merger, P&G shareholders holding shares of P&G Ohio will receive one
new Smucker common share for every 50 common shares of P&G that they held on the
record date for the distribution of shares of P&G Ohio to the holders of P&G
shares.
CONDITIONS TO THE COMPLETION OF THE MERGER (PAGE )
The merger will be completed if a number of conditions are met (or in the
case of the last three bulleted points, waived) including the following:
- we receive the required approval of our shareholders;
- no injunction or order would make completion of the merger unlawful;
- The New York Stock Exchange approves our listing of the new Smucker
common shares;
7
- the registration statement we have filed with the Securities and Exchange
Commission in connection with the issuance of the new Smucker common
shares in the merger becomes effective;
- all necessary governmental approvals are obtained;
- the representations and warranties of each party are true and correct in
all respects except where the failure to be true and correct would not
have a material adverse effect on the business of Smucker or the Jif and
Crisco businesses, as the case may be;
- the performance by each party in all material respects of all covenants
required to be performed by it under the merger agreement and related
transaction agreements; and
- the receipt by each of P&G and Smucker of a written opinion from its tax
advisor that the merger will be tax-free to its shareholders.
In addition, we do not have to complete the merger unless the following
conditions are met (each of which may be waived by us):
- our shareholders receive in the aggregate at least 45% of the new Smucker
common shares to be issued in the merger; and
- P&G transfers the Jif and Crisco businesses to P&G Ohio and completes the
spin-off of P&G Ohio to its shareholders.
Further, P&G does not have to complete the merger unless the following
conditions are met (each of which may be waived by P&G):
- P&G receives a letter ruling from the IRS with respect to certain
specified issues relating to the tax treatment of the transactions to P&G
and its shareholders; and
- the total amount of cash to be paid to Smucker shareholders in the
merger, if P&G does not obtain certain other rulings from the IRS
requested in its ruling request, does not exceed $50 million.
TERMINATION OF THE MERGER AGREEMENT (PAGE )
Smucker and P&G may agree to terminate the merger agreement at any time,
including after the special meeting of Smucker's shareholders. In addition,
either party may terminate the merger agreement if:
- the other party breaches its representations, warranties, covenants or
agreements under the merger agreement in a material respect and does not
or cannot cure the breach;
- a governmental order prohibits the merger;
- the parties do not complete the merger by June 30, 2002; or
- we do not receive the required approval of our shareholders.
In addition, Smucker may terminate the merger agreement if P&G breaches its
representations, warranties, covenants or agreements under the contribution
agreement in a material respect and does not or cannot cure the breach.
In addition, P&G may terminate the merger agreement if:
- our board of directors changes or fails to confirm its recommendation
that you vote in favor of the merger; or
- the value of the new Smucker common shares to be issued to P&G
shareholders in the merger (based on the trading price of our shares) is
less than $715 million in the aggregate. We currently expect that P&G
shareholders will receive $803,590,158 of new Smucker common shares in
the aggregate, based upon 49,370,000 new Smucker common shares expected
to be issued in the merger, P&G shareholders receiving 52.54% of those
shares, and a Smucker common share price
8
on February 6, 2002 of $30.98. P&G shareholders may receive more or less
than this amount based upon the results of P&G's requested tax rulings
from the IRS and fluctuations in our stock price. See "The Merger
Agreement -- Merger Consideration; Conversion of Shares" and "The Merger
Agreement -- Termination of the Merger Agreement" beginning on pages
and , respectively.
Termination Fees. We must pay P&G a fee of $20 million if P&G terminates
the merger agreement because our board of directors changes or fails to confirm
its recommendation that you vote for the merger. In addition, we must pay P&G a
fee of $10 million if P&G terminates the merger agreement because our
shareholders do not approve the merger and a competing transaction has been
publicly announced prior to the special meeting.
AMENDED ARTICLES OF INCORPORATION (PAGE )
If the merger is completed, the articles of incorporation of Smucker will
be in the form attached as Annex F to this document. Those articles differ from
our current articles in that holders of new Smucker common shares will have time
phase voting rights only with respect to the following specified matters
submitted to the shareholders:
- any matter that relates to or would result in the dissolution or
liquidation of Smucker;
- the amendment of the articles of incorporation or regulations of Smucker
other than any amendment that increases the number of votes to which
holders of new Smucker common shares are entitled or expand the matters
to which time phase voting applies;
- any proposal or other action to be taken by Smucker shareholders relating
to Smucker's shareholder rights plan or any successor plan;
- any matter relating to any benefit, stock option, compensation or other
similar plan;
- any matter that relates to or may result in a change in control of
Smucker including any merger, consolidation, majority share acquisition,
control share acquisition, sale or other disposition of all, or
substantially all, of Smucker's assets; or
- any matter relating to the issuance, redemption or repurchase of shares
of Smucker or any of its subsidiaries.
With respect to all other matters, including the election of directors, all
new Smucker common shares will be entitled to one vote per share under the new
articles of incorporation.
BOARD OF DIRECTORS RECOMMENDATION TO SHAREHOLDERS (PAGE )
Your board of directors has unanimously approved the merger and has
determined that the terms of the merger are fair to, and in the best interests
of, Smucker and its shareholders. Accordingly, your board of directors
unanimously recommends that you vote FOR the merger.
FAIRNESS OPINION OF WILLIAM BLAIR & COMPANY, L.L.C. (PAGE )
In deciding to approve the merger, your board of directors considered an
opinion from its financial advisor, William Blair & Company, L.L.C., as to the
fairness, from a financial point of view, to Smucker and the holders of Smucker
common shares of the consideration to be paid by Smucker to the holders of P&G
Ohio shares in the merger pursuant to the merger agreement. The opinion is
attached as Annex D to this document. We encourage you to read this opinion in
its entirety.
Pursuant to a letter agreement dated June 4, 2001, William Blair was paid a
fee of $400,000 for its role as financial advisor. In addition, under the terms
of the June 4, 2001 letter agreement, William Blair will receive an additional
fee of $1,600,000 contingent upon the closing of the merger. Smucker has also
agreed to reimburse William Blair for all of its out-of-pocket expenses
reasonably incurred by it in
9
connection with its services to Smucker under the letter agreement and will
indemnify William Blair against potential liabilities arising out of its
engagement.
SHAREHOLDERS AGREEMENT (PAGE )
In connection with the merger, several Smucker family members entered into
an agreement with P&G that requires them to vote for the merger and grants to
P&G a proxy to vote their shares:
- in favor of the adoption of the merger agreement and the issuance of new
Smucker common shares pursuant to the merger;
- against the approval of any action, agreement, or proposal that would
result in Smucker breaching the merger agreement or that would delay the
completion of the merger or that would prevent fulfillment of a condition
to any party's obligation to complete the merger; and
- against any action, agreement, or proposal made in opposition to or in
competition with the issuance of new Smucker common shares pursuant to
the merger and the completion of the merger, including any competing
transaction or superior proposal.
As of the record date for the special meeting, the shareholders that are a
party to the shareholders agreement are estimated by Smucker to hold
approximately 52% of the voting power of Smucker under our current time phase
voting structure.
ANCILLARY AGREEMENTS (PAGE )
In connection with the merger, Smucker and P&G entered into a transitional
services agreement and will enter into a manufacturing plant separation
agreement to aid in the transition of the Jif and Crisco businesses from P&G to
Smucker. Smucker and P&G will also enter into a tax sharing agreement relating
to the allocation of certain tax obligations.
LISTING OF NEW SMUCKER COMMON SHARES (PAGE )
The new Smucker common shares to be issued in the merger will be listed on
The New York Stock Exchange and will trade under our current symbol, "SJM."
10
FINANCIAL SUMMARY
MARKET PRICE DATA AND DIVIDENDS
Our common shares are currently traded, and will continue to be traded
after the merger, on The New York Stock Exchange under the symbol "SJM." The
following table sets forth the high and low sales prices of our common shares as
reported by The New York Stock Exchange Composite Tape for the periods
referenced below and also lists the dividends declared per Smucker common share
for the periods indicated.
<Table>
<Caption>
CLASS A CLASS B
COMMON COMMON COMMON
SHARES(1) SHARES(1) SHARES(1)
--------------- --------------- ---------------
YEAR ENDED APRIL 30, HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
-------------------- ------ ------ --------- ------ ------ --------- ------ ------ ---------
2000
First Quarter...................... $25.75 $20.06 $0.15 $22.50 $17.13 $0.15
Second Quarter..................... 24.19 19.50 0.15 21.31 16.25 0.15
Third Quarter...................... 21.38 17.00 0.15 17.88 15.13 0.15
Fourth Quarter..................... 18.50 15.00 0.16 16.00 12.50 0.16
2001
First Quarter...................... 19.50 15.75 0.16 19.06 13.25 0.16 -- -- --
Second Quarter..................... 19.31 17.88 19.25 17.63 $25.00 $18.13 $0.16
Third Quarter...................... 29.00 21.63 0.16
Fourth Quarter..................... 29.00 23.95 0.16
2002
First Quarter...................... 27.77 23.91 0.16
Second Quarter..................... 36.10 23.90 0.16
Third Quarter...................... 37.73 31.00 0.16
Fourth Quarter (through February 7,
2002)............................ 32.43 30.40 --
</Table>
- ---------------
(1) On August 29, 2000, during Smucker's 2001 second fiscal quarter, Smucker
began trading of its Class A and Class B common shares as a single class of
common shares.
The last reported sales prices of our common shares as reported by The New
York Stock Exchange Composite Tape on October 9, 2001 and February , 2002 were
$25.89 and $ , respectively. October 9, 2001 was the last full trading
day prior to the public announcement of the merger. February , 2002 was the
last full trading day prior to the printing of this document.
The Jif and Crisco businesses are P&G brands and do not trade separately
from P&G common shares.
DIVIDEND POLICY
Historically, Smucker has distributed between 40 - 50% of its earnings to
its shareholders in the form of dividends. Smucker currently expects to continue
this practice following the merger.
11
SELECTED HISTORICAL FINANCIAL DATA OF SMUCKER
The following table sets forth selected historical financial data of
Smucker as of and for each of the periods indicated. Smucker derived the
selected historical financial data for each of the periods presented from
Smucker's audited consolidated financial statements and unaudited quarterly
financial statements. This information is only a summary and you should read it
in conjunction with the historical consolidated financial statements, and the
related notes and "Management's Discussion and Analysis of the Financial
Condition and Results of Operations," contained in our annual report on Form
10-K and Quarterly Reports on Form 10-Q and other information that we have filed
with the Securities and Exchange Commission. See "Where You Can Find More
Information." This information should also be read in conjunction with the
unaudited condensed combined pro forma financial statements of Smucker, which
you can find beginning on page F-1.
<Table>
<Caption>
SIX MONTHS ENDED
OCTOBER 31, YEAR ENDED APRIL 30,
------------------- ----------------------------------------------------
2001 2000 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales........................ $342,636 $336,165 $651,242 $641,885 $612,662 $574,855 $534,723
Operating income(1).............. 30,008 27,626 54,637 41,235 58,975 57,064 53,204
Income before cumulative effect
of change in accounting
method(1)...................... $ 16,251 $ 15,767 $ 31,659 $ 26,357 $ 37,763 $ 36,348 $ 30,935
Cumulative effect of change in
accounting method(2)(3)........ -- (992) (992) -- -- (2,958) --
-------- -------- -------- -------- -------- -------- --------
Net income....................... $ 16,251 $ 14,775 $ 30,667 $ 26,357 $ 37,763 $ 33,390 $ 30,935
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets..................... $488,407 $462,111 $470,469 $466,054 $425,881 $399,690 $381,502
Long-term debt................... 135,000 135,000 135,000 75,000 -- -- --
Shareholders' equity............. 253,357 237,175 247,111 313,473 324,329 302,177 291,891
OTHER DATA:
EARNINGS PER COMMON SHARE:
Income before cumulative effect
of change in accounting
method(1)...................... $ 0.67 $ 0.59 $ 1.25 $ 0.92 $ 1.30 $ 1.25 $ 1.06
Cumulative effect of change in
accounting method(2)(3)........ -- (0.04) (0.04) -- -- (0.10) --
-------- -------- -------- -------- -------- -------- --------
Net income....................... $ 0.67 $ 0.55 $ 1.21 $ 0.92 $ 1.30 $ 1.15 $ 1.06
======== ======== ======== ======== ======== ======== ========
Income before cumulative effect
of change in accounting
method -- assuming
dilution(1).................... $ 0.66 $ 0.59 $ 1.23 $ 0.92 $ 1.29 $ 1.24 $ 1.06
Cumulative effect of change in
accounting method -- assuming
dilution(2)(3)................. -- (0.04) (0.04) -- -- (0.10) --
-------- -------- -------- -------- -------- -------- --------
Net income -- assuming
dilution....................... $ 0.66 $ 0.55 $ 1.19 $ 0.92 $ 1.29 $ 1.14 $ 1.06
======== ======== ======== ======== ======== ======== ========
Dividends declared per common
share.......................... $ 0.32 $ 0.32 $ 0.64 $ 0.61 $ 0.57 $ 0.53 $ 0.52
Book value per common share...... $ 10.37 $ 10.14
</Table>
- ---------------
(1) Includes, in the year ended April 30, 2001 and the six months ended October
31, 2000, a nonrecurring charge of $2,152 ($1,313 after tax) or $0.05 per
share relating to the sale of the former Mrs. Smith's real estate, and in
the year ended April 30, 2000, nonrecurring charges of $14,492 ($9,626 after
tax) or $0.34 per share relating to the impairment of certain long-lived
assets.
(2) Reflects, in the year ended April 30, 2001 and the six months ended October
31, 2000, the impact of adopting the provisions of the Securities and
Exchange Commission's Staff Accounting Bulletin No. 101, Revenue Recognition
in Financial Statements (SAB 101). Had SAB 101 been retroactively applied to
all periods presented, earnings per common share would have been $0.01 lower
in 1999.
(3) Reflects, in the year ended April 30, 1998, the cumulative effect of
adopting the provisions of the Emerging Issues Task Force of the Financial
Accounting Standards Board Issue No. 97-13, Accounting for Costs Incurred in
Connection with a Consulting Contract that Combines Business Process
Reengineering and Information Technology Transformation (EITF 97-13).
12
SELECTED COMBINED HISTORICAL FINANCIAL DATA OF THE JIF AND CRISCO BUSINESSES
The following table sets forth selected combined historical financial data
of the Jif and Crisco businesses for the periods indicated and represents the
Jif and Crisco businesses on a combined basis while under the management of P&G.
The selected combined historical financial data for each of the three years in
the period ended June 30, 2001 have been derived from the audited "Combined
Statements of Inventory and Property, Plant and Equipment -- Net," as of June
30, 2001 and the audited "Combined Statements of Revenues, Direct Cost of
Products Sold, Direct Marketing Expenses and Direct Administrative and Other
Expenses" for each of the three years in the period ended June 30, 2001 of the
Jif and Crisco businesses included elsewhere in this document. The selected
combined historical financial data for the six months ended December 31, 2001
and 2000 have been derived from the unaudited "Combined Statement of Inventory
and Property, Plant and Equipment -- Net," as of December 31, 2001 and the
unaudited "Combined Statements of Revenues, Direct Cost of Products Sold, Direct
Marketing Expenses and Direct Administrative and Other Expenses" for the six
months ended December 31, 2001 and 2000, of the Jif and Crisco businesses
included elsewhere in this document. CERTAIN INDIRECT COSTS OF THE JIF AND
CRISCO BUSINESSES HAVE NOT BEEN INCLUDED IN THE HISTORICAL "COMBINED STATEMENTS
OF REVENUES, DIRECT COST OF PRODUCTS SOLD, DIRECT MARKETING EXPENSES AND DIRECT
ADMINISTRATIVE AND OTHER EXPENSES" PREPARED BY P&G. THESE INDIRECT COSTS INCLUDE
SELLING COSTS AND CORPORATE OVERHEAD. The table below should be read in
conjunction with the Jif and Crisco businesses' historical financial statements
and related notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for the Jif and Crisco businesses included
elsewhere in this document. The table below should also be read in conjunction
with the unaudited condensed combined pro forma financial statements of Smucker,
which you can find beginning on page F-1.
<Table>
<Caption>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------- ----------------------------------------------------
2001(2) 2000(2) 2001 2000 1999 1998(2) 1997(2)
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
STATEMENT OF REVENUES,
DIRECT COST OF PRODUCTS
SOLD, DIRECT MARKETING
EXPENSES AND DIRECT
ADMINISTRATIVE AND OTHER
EXPENSES DATA:
Net revenues............... $331,200 $349,800 $615,300 $647,200 $653,600 $659,700 $678,700
Excess of net revenues over
direct cost of products
sold, direct marketing
expenses and direct
administrative and other
expenses................. 105,800 103,800 178,700 172,100 167,800 166,000 166,300
STATEMENT OF INVENTORY AND
PROPERTY, PLANT AND
EQUIPMENT -- NET DATA:
Inventory.................. 30,600 (1) 35,200 49,300 59,300(2) 49,200 33,900
Property, plant and
equipment -- net......... 92,200 (1) 89,800 93,700 (1) (1) (1)
</Table>
- ---------------
(1) The information is not available as it is not practical to retrieve such
information from P&G's consolidated accounting systems.
(2) This information has been derived from P&G's consolidated accounting systems
as of and for the periods indicated. This information is unaudited.
13
SELECTED UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA OF SMUCKER
WE ARE PROVIDING THE UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA
FOR ILLUSTRATIVE PURPOSES ONLY. THE COMPANIES MAY HAVE PERFORMED DIFFERENTLY HAD
THEY BEEN COMBINED DURING THE PERIODS PRESENTED. YOU SHOULD NOT RELY ON THE
UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL DATA AS BEING INDICATIVE OF THE
HISTORICAL RESULTS THAT WOULD HAVE BEEN ACHIEVED HAD THE COMPANIES BEEN COMBINED
DURING THE PERIODS PRESENTED OR OF THE FUTURE RESULTS THAT THE COMBINED COMPANY
WILL EXPERIENCE.
The selected unaudited condensed combined pro forma financial data give
effect to the merger of Smucker and the Jif and Crisco businesses of The Procter
& Gamble Company using the purchase method of accounting under which Smucker is
the acquiring enterprise. The pro forma statement of operating income excluding
indirect expenses of the Jif and Crisco businesses reflects the combination of
data from the "Statement of Consolidated Income" of Smucker for the year ended
April 30, 2001, and the "Condensed Statement of Consolidated Income" for the six
months ended October 31, 2001, with data from the "Combined Statement of
Revenues, Direct Cost of Products Sold, Direct Marketing Expenses and Direct
Administrative and Other Expenses" of the Jif and Crisco businesses for the year
ended June 30, 2001, and the six months ended December 31, 2001, respectively.
Indirect expenses represent selling and corporate overhead costs that are not
specifically identifiable to the individual businesses. The pro forma balance
sheet data reflect the combination of data from the "Condensed Consolidated
Balance Sheet" of Smucker as of October 31, 2001, with data from the "Combined
Statement of Inventory and Property, Plant and Equipment -- Net" of the Jif and
Crisco businesses as of December 31, 2001. The allocation of the purchase price
reflected in the selected unaudited condensed combined pro forma financial data
is preliminary. We urge you to read the selected unaudited condensed combined
pro forma financial data in connection with the unaudited condensed combined pro
forma financial statements and notes beginning on page F-1.
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED
OCTOBER 31, 2001 APRIL 30, 2001
------------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales................................................... $ 673,836 $1,266,542
Operating income excluding indirect expenses of the Jif and
Crisco businesses......................................... 133,893 229,878
BALANCE SHEET DATA:
Total assets................................................ $1,413,071
Long-term debt.............................................. 135,000
Shareholders equity......................................... 1,031,134
OTHER DATA:
Dividends per common share(1)............................... $ 0.32 $ 0.64
Book value per common share(2).............................. 20.88
</Table>
- ---------------
(1) Pro forma dividends per share assume the same per share dividends as
declared by Smucker in each of the respective periods.
(2) Assumes 49,370,000 common shares are issued and outstanding upon completion
of the merger, which assumes a 47.5% ownership interest of Smucker
shareholders.
COMPARATIVE PER SHARE DATA
The historical per share data of Smucker are included in the previous
sections on pages and , respectively. Historical and pro forma per share
data for the Jif and Crisco businesses have not been prepared as those
businesses are brands of P&G and not separate legal entities.
14
RISK FACTORS
In addition to the other information included in this document, including
the matters addressed in "Special Note Regarding Forward-Looking Statements"
starting on page , you should carefully consider the matters described below
in determining whether to vote in favor of the merger.
IF THE OPERATING RESULTS FOR THE JIF AND CRISCO BUSINESSES FOLLOWING THE MERGER
ARE POOR, WE MAY NOT ACHIEVE THE SIGNIFICANT INCREASES IN REVENUES AND NET
EARNINGS WE EXPECT TO ACHIEVE AS A RESULT OF THE MERGER.
Smucker has projected that it will derive a significant portion of its
revenues and net earnings from the operations of Jif and Crisco following the
merger. Therefore, any negative impact on those business operations after the
merger could materially impact Smucker's operating results. Some of the more
significant factors that could negatively impact the business operations of Jif
and Crisco, and therefore negatively impact the future combined operating
results of Smucker following the merger, include:
- increases in raw materials and packing costs for the Jif and Crisco
businesses, including the cost of peanuts, sugar, and crude edible oils;
- increases in advertising costs associated with the support of the Jif and
Crisco brands;
- increased competition;
- a decline in the vegetable oils market; and
- the level of training and experience of the employees of Jif and Crisco.
See "Special Note Regarding Forward-Looking Statements."
OUR FAILURE TO INTEGRATE THE JIF AND CRISCO BUSINESSES INTO OUR OPERATIONS
SUCCESSFULLY AND IN A TIMELY MANNER COULD REDUCE OUR PROFITABILITY.
We expect that the merger of Jif and Crisco will result in efficiencies,
business opportunities and new prospects for growth through product development
and acquisitions. Currently, however, we do not have information sufficient to
estimate cost savings or quantifiable efficiencies, if any, that could result
from the merger because our plans for integrating the Jif and Crisco businesses
into our operations are not complete and may change. In addition, it is possible
that we may never realize expected efficiencies, business opportunities and
growth prospects due to:
- increased competition that limits our ability to expand our business;
- faulty assumptions underlying our expectations; or
- deteriorating general industry and business conditions.
In addition, integrating operations will require significant efforts of
both Smucker and P&G personnel. These integration efforts may require
significant expenditures. It is also possible that personnel of the Jif and
Crisco businesses may choose to remain with P&G or seek other employment. Our
management may have its attention diverted while trying to integrate the Jif and
Crisco businesses into our operations. If these factors limit our ability to
integrate the operations of Jif and Crisco successfully or in a timely manner,
our expectations of future results of operations may not be met. See "Special
Note Regarding Forward-Looking Statements."
Although we will enter into a manufacturing plant separation agreement and
have entered into a transitional services agreement with P&G in connection with
our acquisition of Crisco's manufacturing facility, we may have difficulties in
operating that facility as a stand-alone facility given its co-location with
other P&G facilities and its current dependence on services from P&G. We cannot
assure you that we will be able to separate that facility fully from P&G or
acquire services necessary for its operations.
15
WE EXPECT TO INCUR A SIGNIFICANT ONE-TIME CHARGE RELATING TO OUR INTEGRATION
PLAN THAT COULD MATERIALLY AND ADVERSELY AFFECT THE PERIOD TO PERIOD RESULTS OF
OPERATION OF SMUCKER FOLLOWING THE MERGER.
We are developing a plan to integrate the operations of the Jif and Crisco
businesses with Smucker after the merger. We anticipate that Smucker will incur
a one-time charge to earnings of approximately $10 to $15 million in connection
with the integration. We will not be able to quantify the exact amount of this
charge or the period in which it will be incurred until after the merger is
completed. Some of the factors affecting the cost of the integration include the
timing of the closing of the merger, the training of new employees, and the
length of time during which transitional services are provided to Smucker by
P&G.
SALES OF NEW SMUCKER COMMON SHARES BY P&G SHAREHOLDERS MAY NEGATIVELY AFFECT OUR
STOCK PRICE AND IMPAIR OUR ABILITY TO RAISE CAPITAL THROUGH THE SALE OF EQUITY
SECURITIES.
As a result of the merger, P&G shareholders will receive up to 55% of the
new Smucker common shares outstanding immediately following the merger. Some of
these P&G shareholders are index funds tied to the Standard & Poor's 500 Index,
the Dow Jones Industrial Average or other stock indices, or are institutional
investors bound by various investing guidelines. Since Smucker will not be
included in these indices at the time of the merger or may not meet the
investing guidelines of some of these institutional investors, these index funds
and institutional investors may be required to sell the new Smucker common
shares that they receive in the merger. We are currently unable to predict
whether a sufficient number of buyers would be in the market to absorb these
potential sales. Consequently, our stock price may fall. This potential decline
in our stock price, if not reversed, could impair our ability to raise capital
through future sales of new Smucker common shares.
SMUCKER WILL BE PREVENTED FROM TAKING CERTAIN CORPORATE ACTIONS FOLLOWING THE
MERGER IN ORDER TO AVOID SIGNIFICANT TAX LIABILITIES.
Under applicable federal income tax rules, if Smucker does not refrain from
taking the corporate actions set forth below for two years following completion
of the merger, the spin-off of P&G's Jif and Crisco businesses could result in a
taxable event to P&G. If Smucker takes those actions and those actions result in
a taxable event to P&G, Smucker will be required to indemnify P&G for the amount
of the tax under the terms of a tax sharing agreement to be entered into by
Smucker and P&G. In order to avoid this potential liability, Smucker will agree
in the tax sharing agreement that it will not take the following corporate
actions for two years following the completion of the merger unless appropriate
approval is obtained as set forth in the tax sharing agreement:
- liquidate, merge, or consolidate with or into any other corporation;
- issue any of its capital stock (other than for ordinary-course
compensation purposes, if permitted by P&G's requested tax rulings);
- redeem, purchase, or otherwise reacquire its capital stock;
- change the voting rights of any of its stock;
- sell, exchange, distribute, or otherwise dispose of (other than in the
ordinary course of its business) all or a substantial part of the Jif and
Crisco businesses; or
- discontinue the operations of the Jif and Crisco businesses.
In addition, Smucker will agree in the tax sharing agreement that it will
not enter into any negotiations, agreements, or arrangements with respect to any
of the foregoing transactions during the two-year period following the merger
unless appropriate approval is obtained as set forth in the tax sharing
agreement.
For a more complete description of the tax sharing agreement, see
"Ancillary Agreements -- Tax Sharing Agreement" beginning on page .
16
THE VOTING POWER OF SMUCKER SHAREHOLDERS WILL BE DILUTED AS A RESULT OF THE
MERGER.
All new Smucker common shares to be issued in connection with the merger
initially will be ten-vote shares for time phase voting purposes. Consequently,
the voting power of current Smucker shareholders, especially those Smucker
shareholders who now hold ten-vote shares, will be diluted. Upon completion of
the merger, Smucker's articles of incorporation will allow only one vote per
share in the election of directors, among other matters. As a result of this
change from Smucker's current articles of incorporation, Smucker shareholders
holding ten-vote shares, including Smucker family members, will no longer be
able to exercise ten votes for each share they hold in the election of
directors. See, "Comparison of the Rights of Smucker Shareholders Before and
After the Merger" beginning on page .
17
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document, including information incorporated by reference into this
document, contains forward-looking statements, such as projected operating
results, that are subject to known and unknown risks and uncertainties that
could cause actual results to differ materially from any future results,
performance, or achievements expressed or implied by those forward-looking
statements.
You should understand that the following important factors and assumptions
could affect the future results of Smucker following the merger and could cause
actual results to differ materially from those expressed in the forward-looking
statements:
- the success of Smucker's marketing programs during the period in
question;
- competitive activity;
- the mix of products sold and level of marketing expenditures needed to
generate sales;
- an increase in costs of packaging materials, ingredients, or raw
materials, including fruit, peanuts, sugar, edible oils, soybeans, and
sweeteners;
- the ability of Smucker to maintain and/or improve sales and earnings
performance;
- foreign currency exchange and interest rate fluctuations;
- general economic and business conditions that adversely affect Smucker or
its suppliers, distributors or customers;
- the level of capital resources required for future acquisitions; and
- the successful integration of the Jif and Crisco businesses with
Smucker's businesses, processes, and systems.
Smucker does not undertake any obligation, other than as required by law,
to update or revise any forward-looking statements to reflect changes in
assumptions, the occurrence of unanticipated events, or changes in future
operating results over time. Smucker claims the protection of the safe harbor
for forward-looking statements contained in the Private Securities Litigation
Reform Act of 1995.
18
THE MERGER
The discussion in this document of the merger and the principal terms of
the merger agreement is subject to, and qualified in its entirety by reference
to, the merger agreement, a copy of which is attached to this document as Annex
A and is incorporated by reference into this document. References in this
document to "Smucker" or "P&G" include their respective subsidiaries unless
otherwise noted.
BACKGROUND OF THE MERGER
We have viewed the Jif peanut butter business for decades as an attractive
acquisition candidate and an excellent strategic fit with our preserves, jams,
jellies and other fruit spreads and products. Paul Smucker, our former chief
executive officer and the grandson of company founder Jerome Monroe Smucker,
first approached John Smale, then-chief executive officer of P&G, expressing an
interest in buying the Jif business as early as the mid-1970s.
Tim Smucker and Richard Smucker, our current co-CEO's and the sons of Paul
Smucker, have also expressed to P&G an ongoing interest in acquiring the Jif
brand during their tenure as our fourth-generation management. Tim Smucker, who
is Chairman as well as co-CEO, has made in the past few years informal inquiries
of P&G's Chairman, John Pepper, regarding P&G's interest in selling the Jif
business. Each time that it was approached, however, P&G indicated that the Jif
business was not for sale.
On April 25, 2001, P&G publicly announced that it was exploring strategic
alternatives with respect to its Jif and Crisco brands in furtherance of its
continuing efforts to divest non-core businesses. In that announcement, P&G
noted that it would consider various structures with respect to the Jif and
Crisco brands, including a sale, joint venture or a swap for other consumer
brands. In late April 2001, Merrill Lynch, P&G's financial advisor, informed
senior management of Smucker that P&G planned to conduct a controlled auction
process of the Jif and Crisco businesses.
Shortly after their discussions with Merrill Lynch, our management
discussed with members of our board of directors P&G's proposed sale of its Jif
and Crisco businesses. Our management relayed to the directors that it believed
both Jif and Crisco, two profitable businesses with strong consumer brands,
would be excellent strategic fits for us. Our directors indicated that they
supported exploring the acquisition of those businesses and agreed that
management should take preliminary steps in connection with that process. Our
management and its advisors then began to discuss and explore the acquisition of
Jif and Crisco. Our management continuously explores the possibility of
acquisitions and divestitures, and reviews its activities in this regard
periodically with our directors. Smucker did not consider any other transactions
that management considered to be comparable.
During the month of May, Smucker considered a number of financial advisors
to aid in the evaluation of the proposed transaction. Management chose William
Blair & Company, L.L.C. and Rhone Group Advisors LLC to act as its financial
advisors and our board confirmed those choices. William Blair was chosen based
on its expertise in mergers and acquisitions advisory services, its prior
relationship with us, including its recent role as our advisor in connection
with the recapitalization of our capital stock into one class in August of 2000
and in connection with the placement of debt securities in connection with that
transaction, and its strong knowledge of our existing businesses and markets.
Rhone was chosen based on its extensive expertise in mergers and acquisition
advisory services and knowledge of complex financial structures as well as its
extensive experience in the consumer goods industry. Rhone provided no
independent valuation analyses in connection with the proposed merger, but
merely provided assistance and advice to William Blair and Smucker with respect
to deal structure, William Blair's valuation analyses, and negotiation. Rhone
was not engaged to provide an opinion as to the fairness of the proposed
transaction and did not do so.
In early June 2001, we received a bid invitation package from Merrill Lynch
on behalf of P&G. That package included a bid invitation letter that outlined
the procedures and timeline for the auction process
19
and confidential information memoranda containing certain business information
related to the Jif and Crisco businesses.
In the next several weeks, William Blair and Rhone prepared, at
management's direction and with the assistance of members of management,
analyses relating to the valuation of the Jif and Crisco businesses, our current
operating and financial position, and the potential impact of the proposed
transaction on Smucker and our shareholders.
During the first three weeks of June 2001, our management and advisors had
a series of discussions and meetings relating to the proposed transaction. Those
discussions addressed the potential benefits to each of Smucker's and P&G's
shareholders that could result from the proposed transaction, the appropriate
valuation of the Jif and Crisco businesses, the most desirable structure for
such a transaction, financing alternatives, and the contents of our initial
proposal letter for the transaction. Informal discussions were held by
management with our directors during this same period to keep them apprised of
developments and to ensure that they supported continuing exploration of a
possible transaction with P&G.
On June 20, 2001, we submitted our initial non-binding proposal with
respect to the acquisition of the Jif and Crisco businesses. Our initial
proposal was structured as a transaction in which both the Jif and Crisco
businesses would be separated from P&G, spun off to P&G's shareholders, and
immediately merged into Smucker. Smucker would survive the merger as a
stand-alone entity that would hold the Jif and Crisco businesses as well as our
historic businesses. In the merger, shareholders of both P&G and Smucker would
receive shares of the combined company, with P&G shareholders holding 50.1% of
the combined company. This "spin and merge" form of transaction was designed to
be a transaction that would be tax-free to P&G and its shareholders. In order to
ensure the tax treatment sought under our proposal, we contemplated that a
definitive agreement with respect to tax matters would need to be entered into
by the parties. We also submitted alternative bids to acquire only the Jif
business in a similar spin and merge transaction and on a cash-only basis. We
did not submit a cash bid for both brands because the amount of debt that we
would have had to incur in order to do a cash transaction for both brands would
have been prohibitive.
During the week of July 16, 2001, our senior management and financial and
legal advisors met in Cincinnati, Ohio, to attend presentations conducted by P&G
management and to take tours of P&G's Jif and Crisco facilities. In addition,
our management and advisors conducted at this time a comprehensive due diligence
review of the Jif and Crisco businesses.
After the meetings in Cincinnati, Ohio, our management communicated with
Merrill Lynch and the management of P&G from time to time to discuss the
proposed transaction, the auction process, and to request additional information
and materials to assist in Smucker's due diligence review process.
On or about August 8, 2001, we received a package from Merrill Lynch
inviting final bids, which included draft documentation to be executed in
connection with the proposed transactions.
During the following three weeks, our management continued to hold
discussions with Merrill Lynch and P&G management concerning the proposed
transaction. The subject of these conversations included follow-up questions by
our management related to its due diligence review, the structure of the
proposed transaction, the legal and tax issues involved in the transaction, and
the nature of the assets to be acquired and liabilities to be assumed in the
transaction. Our management also updated our board of directors at meetings on
August 14, 2001, and August 30, 2001, on the status of the transaction process
and the proposed terms of our final bid for the Jif and Crisco brands. We
decided as a result of these discussions that we would bid for the two brands
together and would not submit a separate cash offer for Jif alone.
On September 5, 2001, following further internal discussions and analyses
and discussions with our financial and legal advisors, our management submitted
our second proposal to P&G. The proposal outlined our desire to acquire both the
Jif and Crisco businesses in the form of the proposed tax-free "spin and merge"
transaction detailed in our first proposal, with P&G shareholders holding 50.1%
of the combined company upon the completion of the transaction. Our proposal was
conditioned upon certain legal and financial issues being resolved between the
parties, including resolution of a number of issues in
20
the definitive documentation for the proposed transaction. Our proposal was also
subject to final review and approval by our board of directors, and receipt of
required shareholder and regulatory approvals.
On September 7, 2001, Smucker submitted to Merrill Lynch revised
documentation relating to the proposed transaction, including a revised merger
agreement, contribution agreement, and ancillary agreements.
On October 1, 2001, our board of directors met with our senior management
and our legal and financial advisors to discuss the status of the auction
process and the financial and legal implications of the proposed transaction.
Our management updated our board of directors on the central issues then
outstanding related to the proposed transaction, including resolving issues
related to Smucker's ability to provide certainty to P&G with respect to the
tax-free nature of the proposed transaction and finalizing a definitive tax
sharing agreement, the value of the consideration to be received by P&G and its
shareholders, and our ability to reach agreement with P&G on any other
outstanding legal and business issues. In addition to the matters set forth
above, management reviewed with our board of directors P&G's request that its
shareholders be guaranteed to receive a "floor price" for Smucker common shares
and the negotiations that then ensued with P&G with respect to whether such a
floor price was acceptable to Smucker and, if so, at what level. Our board of
directors questioned management concerning P&G's proposal and its implications
on negotiating definitive documentation relating to the proposed transaction,
including inquiries made with respect to the mechanics of P&G's proposed floor
price, the risks to Smucker and its shareholders associated with P&G's proposal
and the likelihood that the floor price could be achieved prior to the closing
of the proposed transaction. Our board then questioned management on the tax
implications of the proposed transaction and the modifications to our articles
of incorporation that would be required as a result of those implications. In
addition to the presentations by our management, our financial advisors
presented a preliminary valuation analysis of the proposed transaction and
discussed the implications of P&G's proposed floor price. After thorough
discussion concerning valuation, our board of directors concluded the meeting by
indicating that it was still interested in pursuing the proposed transaction
with P&G and directed our senior management to continue with the negotiation and
auction process.
Later that afternoon, our management and advisors were invited by P&G to
travel to its headquarters in Cincinnati, Ohio, to meet to negotiate the final
financial and legal terms and to finalize the definitive documentation for the
proposed transaction. Our management and advisors held these negotiations with
P&G and its financial and legal advisors in a series of meetings held in
Cincinnati on October 2 through October 6, 2001. Negotiations with respect to
the financial and legal terms of the transaction and finalization of the
transaction documents continued through October 9, 2001.
On October 8, 2001, our board of directors met to review with our
management and legal and financial advisors the status of the negotiations and
the proposed terms and conditions of the transaction. All of our directors were
present at the meeting in person or by conference telephone. Our management
reviewed the material terms and conditions of the transaction agreements, as
currently negotiated, and discussed with our board the differences between those
terms and conditions and those outlined at the October 1 meeting. In particular,
our management noted that P&G had requested and we had agreed to a proposal that
would allow P&G to terminate the proposed transaction if the aggregate market
value of the Smucker common shares to be received by P&G shareholders in the
transaction was less than $715 million. In addition, management noted that it
had agreed to an increase in the percentage of new Smucker common shares to be
held by P&G shareholders after the proposed transaction from 50.1% to between
52.5 - 55%. In addition to the mechanics of the exchange ratios that would
result in Smucker and P&G shareholders holding the desired percentage of the
combined company's shares after the transaction and the appropriate valuation
levels to be applied to the proposed transaction, management noted that
definitive documentation reflecting the terms of the transaction agreements, as
currently negotiated, would have to be finalized before a final agreement could
be executed by Smucker and P&G. In addition, Jones, Day, Reavis & Pogue, our
outside legal counsel, reviewed with our board the documentation to be executed
in connection with the proposed transaction and our board's legal duties. At the
conclusion of the meeting, William Blair reviewed its financial analyses of the
consideration to be paid by Smucker. It also
21
presented to the board of directors its opinion (later confirmed in writing
after the final details of the transaction were agreed to by Smucker and P&G) to
the effect that, subject to the matters described in its opinion, the
consideration to be paid by Smucker to the holders of P&G Ohio shares in the
merger, pursuant to the merger agreement was fair, from a financial point of
view, to Smucker and the holders of Smucker common shares. Our board of
directors carefully considered the benefits and risks to Smucker and its
shareholders of the proposed transaction and decided to continue the meeting the
following day.
During the afternoon of October 9, 2001, our board of directors resumed its
meeting by teleconference to review and discuss the final terms of the
transaction. Following a thorough discussion, our board of directors unanimously
determined that the transaction was in the best interests of the shareholders of
Smucker and unanimously resolved to recommend that our shareholders vote to
approve the merger. In addition, our board authorized management to finalize the
definitive documentation for the transaction to accurately reflect the
discussions and to execute the merger agreement and the contribution agreement.
Shortly after that time, the merger agreement was executed by all of the parties
with no material changes being made from those reviewed and approved by our
board of directors at the meeting of our board of directors on October 8, 2001
and continued on October 9, 2001. In addition, several members of the Smucker
family entered into a shareholders agreement with P&G that requires them to vote
their Smucker common shares in favor of the merger, the issuance of new Smucker
common shares pursuant to the merger and the adoption of the merger agreement,
and grants to P&G a proxy to vote their shares in favor of those matters. See
"The Shareholders Agreement" beginning on page of this document.
Prior to the opening of trading on The New York Stock Exchange on the
morning of October 10, 2001, Smucker and P&G issued a joint press release
announcing the approval of the transaction and the execution of the merger
agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF THE SMUCKER BOARD
OUR BOARD OF DIRECTORS BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO,
AND IN THE BEST INTERESTS OF, SMUCKER AND ITS SHAREHOLDERS, HAS UNANIMOUSLY
APPROVED THE MERGER, AND RECOMMENDS THAT SHAREHOLDERS OF SMUCKER VOTE FOR THE
MERGER.
In reaching its decision to approve the merger, the Smucker board of
directors consulted with its financial and legal advisors and considered a
variety of factors, including the following:
- the views of Smucker management regarding the proposed merger and the
expectation that, after realization of anticipated operating income
improvements, the merger would approximately double Smucker's revenues
and almost triple Smucker's projected net earnings (excluding one-time
costs associated with the merger) for fiscal 2003;
- the enhanced strategic and market position of the combined company beyond
that achievable by Smucker alone;
- the financial strength of the combined company and the increased
flexibility that this strength should provide, including a greater
ability to pursue new product developments and acquisition opportunities;
- the compatibility of Smucker's distribution channels and customers with
those of the Jif and Crisco businesses;
- the belief that the merger should increase the liquidity and trading
volume of Smucker common shares, expand Smucker's investor base, and
generate enhanced analyst coverage of the combined company;
- the expectation that the combined earnings power of the three brands --
Smucker's, Jif and Crisco -- will allow Smucker to continue its historic
strong dividend payment practice;
- the expectation that the compatibility of Smucker's and P&G's corporate
values, basic beliefs, and business ethics will facilitate a smooth
integration of the businesses;
22
- information concerning the business, assets, liabilities, capital
structure, financial performance and condition and prospects of Smucker
and the Jif and Crisco businesses;
- the structure of the merger as a tax-free reorganization for federal
income tax purposes; and
- the opinion of William Blair to the Smucker board of directors to the
effect that, on the date of its opinion and based upon and subject to the
various considerations set forth in its opinion, the consideration to be
paid by Smucker to the holders of P&G Ohio shares in the merger, pursuant
to the merger agreement was fair, from a financial point of view, to
Smucker and the holders of Smucker common shares.
The Smucker board of directors also considered certain countervailing
factors in its deliberations concerning the merger, including:
- the possibility that the increased revenues, earnings, and efficiencies
expected to result from the merger would fail to materialize;
- the challenges of integrating the Jif and Crisco businesses into Smucker,
given the size of those businesses, and the difficulty in separating the
operations of those businesses from P&G;
- the possible disruption of Smucker's business that might result from the
announcement of the merger and the diversion of management's attention
from the Smucker businesses because of the merger;
- the dilution of Smucker shareholders' voting power that would result from
the issuance of new Smucker common shares in the merger;
- the required payment by Smucker in certain circumstances of termination
fees under the merger agreement; and
- the possibility that the merger may not be consummated and the potential
adverse consequences if the merger is not completed.
The Smucker board of directors did not view the restrictions imposed on
Smucker's ability to take corporate actions under applicable federal income tax
laws and the terms of a tax sharing agreement to be entered into by Smucker and
P&G as significant limitations on the ability of Smucker to conduct its business
following the merger, and, therefore, did not give significant consideration to
those restrictions. For a description of some of the restrictions imposed on
Smucker's ability to take various corporate actions following the merger, see
"Risk Factors" beginning on page . In addition, the Smucker board of directors
did not place particular importance on the fact that any cash consideration
received by Smucker shareholders might be taxable given the limited amount of
cash consideration, if any, to be received by Smucker shareholders under the
terms of the merger. See "The Merger -- Material United States Federal Income
Tax Consequences of the Merger" beginning on page .
The foregoing discussion of the information and factors discussed by the
Smucker board of directors is not meant to be exhaustive but is believed to
include all material factors considered by it. The Smucker board of directors
did not quantify or attach any particular weight to the various factors that it
considered in reaching its determination that the terms of the merger are fair
to, and in the best interests of, Smucker and its shareholders. Rather, the
Smucker board of directors viewed its position and recommendation as being based
on the totality of the information presented to and considered by it. As a
result of its consideration of the foregoing and other relevant considerations,
the Smucker board of directors unanimously determined that the merger, including
the terms of the merger agreement and the other agreements relating to the
merger, are fair to, and in the best interests of, Smucker and its shareholders.
ACCORDINGLY, THE SMUCKER BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT ITS
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER BY ADOPTING THE MERGER
AGREEMENT RELATING TO THE MERGER.
23
OPINION OF SMUCKER'S FINANCIAL ADVISOR
Smucker retained William Blair & Company, L.L.C. to act as a financial
advisor in connection with a possible transaction with P&G. As part of its
engagement, Smucker asked William Blair to render a fairness opinion relating to
the merger. On October 8, 2001, William Blair delivered an oral opinion, later
confirmed in writing as of that date, to the Smucker board of directors that, as
of that date and based upon and subject to the assumptions and qualifications
stated in its opinion, the consideration to be paid by Smucker to the holders of
P&G Ohio shares in the merger, pursuant to the merger agreement was fair, from a
financial point of view, to Smucker and the current holders of Smucker common
shares.
THE FULL TEXT OF WILLIAM BLAIR'S WRITTEN OPINION IS ATTACHED AS ANNEX D TO
THIS DOCUMENT AND INCORPORATED BY REFERENCE. YOU ARE URGED TO READ THE ENTIRE
OPINION CAREFULLY TO LEARN ABOUT THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY WILLIAM
BLAIR IN RENDERING ITS OPINION. WILLIAM BLAIR'S OPINION RELATES ONLY TO THE
FAIRNESS, FROM A FINANCIAL POINT OF VIEW, TO SMUCKER AND THE CURRENT HOLDERS OF
SMUCKER COMMON SHARES OF THE CONSIDERATION TO BE PAID BY SMUCKER TO THE HOLDERS
OF P&G OHIO SHARES IN THE MERGER, PURSUANT TO THE MERGER AGREEMENT, DOES NOT
ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW THAT
SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE APPROVAL OF THE MERGER. THE
FOLLOWING SUMMARY OF WILLIAM BLAIR'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION. WILLIAM BLAIR'S OPINION WAS DIRECTED
TO THE SMUCKER BOARD OF DIRECTORS FOR ITS BENEFIT AND USE IN EVALUATING THE
FAIRNESS OF THE CONSIDERATION. WE URGE YOU TO READ THE OPINION CAREFULLY AND IN
ITS ENTIRETY.
In connection with its opinion, William Blair reviewed:
- drafts of the merger agreement, the contribution agreement, the
manufacturing plant separation agreement, the shareholders agreement, the
transitional services agreement and the tax sharing agreement;
- certain audited historical financial statements of Smucker for each of
the three years in the period ended April 30, 2001;
- audited statements of inventory, property, plant and equipment -- net as
of June 30, 2001 and June 30, 2000 and the audited statements of
revenues, direct cost of products sold, direct marketing expenses and
direct administrative and other expenses for each of the three years in
the period ended June 30, 2001 for the Jif and Crisco businesses;
- the unaudited financial statements of Smucker for the three months ended
July 31, 2001;
- certain internal business, operating and financial information of Smucker
and the Jif and Crisco businesses, prepared by the senior management of
Smucker and P&G, respectively;
- information regarding the strategic, financial and operational benefits
anticipated from the proposed merger and the prospects of Smucker (with
and without the proposed merger) prepared by the senior management of
Smucker;
- the pro forma impact of the proposed merger on the earnings per share of
Smucker based on certain financial information prepared by the senior
management of Smucker and P&G, respectively;
- information provided by Smucker's senior management regarding the amount
and timing of cost savings and related expenses and potential synergies
that the senior management of Smucker expects will result from the
proposed merger;
- publicly available financial terms of certain other business combinations
that William Blair deemed relevant;
24
- the financial position and operating results of Smucker and operating
results of the Jif and Crisco businesses compared with those of certain
other publicly traded companies William Blair deemed relevant;
- current and historical market prices and trading volumes of Smucker's
common shares;
- certain other publicly available information relating to Smucker, P&G and
the Jif and Crisco businesses; and
- such other materials and information as William Blair deemed relevant.
William Blair also held discussions with respective representatives and the
members of the respective senior management of Smucker, P&G and the Jif and
Crisco businesses to discuss the foregoing and the past and current business
operations, financial condition and future prospects of Smucker and the Jif and
Crisco businesses. William Blair also met with the Smucker board of directors
and Smucker's legal counsel to discuss the Jif and Crisco businesses, the merger
and other transactions contemplated by the transaction agreements, and the
results of its analysis and examination. William Blair also considered other
matters which it deemed relevant to its inquiry, and has taken into account the
accepted financial and investment banking procedures and considerations that it
deemed relevant or appropriate. The senior management of Smucker has advised
William Blair that Smucker was not considering any change of control transaction
and accordingly, William Blair did not evaluate the fairness, from a financial
point of view, to the holders of existing Smucker common shares of the merger
consideration in the context of a change of control of Smucker, such as a sale
to a single buyer or group of affiliated buyers.
In rendering its opinion, William Blair assumed and relied, without any
duty of independent verification, upon the accuracy and completeness of all the
information examined by or otherwise reviewed or discussed with William Blair
for purposes of its opinion, including the number of existing Smucker common
shares, P&G common shares and P&G Ohio common shares currently issued and
outstanding, or expected to be issued and outstanding. William Blair was advised
by the respective senior management of Smucker and P&G that their respective
business, operating and financial information, and the operational benefits
anticipated to result from the merger and the other information and data
provided to or otherwise reviewed by, discussed with, or examined by, William
Blair had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the senior management of Smucker or P&G, as
the case may be, as to the future financial performance of Smucker and the Jif
and Crisco businesses and the strategic implications anticipated to result from
the merger. In addition, William Blair assumed that the synergies expected to
result from the merger have been reasonably prepared to reflect the best
currently available estimates and judgment of the senior management of Smucker.
In that regard, William Blair assumed, with the consent of the Smucker board of
directors, that:
- on a stand-alone basis, Smucker and the Jif and Crisco businesses would
perform, and on a pro forma basis following the completion of the
proposed merger Smucker will perform, substantially in accordance with
such business, operating and financial information, giving effect to the
synergies expected to result from the merger; and
- all material assets and liabilities (contingent or otherwise) of the Jif
and Crisco businesses are as set forth in the Jif and Crisco businesses'
financial statements or other information made available to William
Blair.
William Blair expressed no opinion with respect to the business, operating,
and financial information provided by each of Smucker or P&G, respectively, or
the synergies expected to result from the merger, or the estimates and judgments
on which they were based.
With the consent of the Smucker board of directors, William Blair, in
rendering its opinion, also assumed:
- that the total number of new Smucker common shares that will be issued to
holders of existing Smucker common shares pursuant to the merger will be
at least equal to 45% of the total number
25
of new Smucker common shares issued and outstanding immediately following
the completion of the merger;
- that there are and will be no outstanding rights or options to acquire or
obligations to issue P&G Ohio common shares or any other security of P&G
Ohio other than pursuant to the spin-off of P&G Ohio to the shareholders
of P&G;
- that the merger and the other transactions contemplated by the merger
agreement (other than the receipt of the cash payment, if any, by Smucker
shareholders) will be non-taxable for United States federal and other
income tax purposes to the respective shareholders of Smucker, P&G and
P&G Ohio, that none of Smucker, P&G or P&G Ohio will recognize material
income, gain or loss for United States federal or other income tax
purposes as a result of the merger and the other transactions
contemplated by the merger agreement and the other transaction agreements
and that, following the consummation of the merger, no indemnification
payments with respect to any taxes or otherwise will be required to be
made by Smucker pursuant to those agreements; and
- that the merger and the other transactions contemplated by the merger
agreement and the other transaction agreements will be consummated on the
terms described in those agreements, without any waiver of any material
terms or conditions by P&G, P&G Ohio or Smucker, and that the executed
forms of those agreements will be in substantially the form of the last
drafts of such agreements provided to William Blair.
William Blair did not make or obtain an independent valuation or appraisal
of the assets, liabilities or solvency of Smucker, P&G Ohio or the Jif and
Crisco businesses. William Blair was not requested to solicit, and did not
solicit, any expressions of interest from any other parties with respect to the
sale of all or any part of Smucker or any other alternative transaction and
accordingly relied on its discussions with the senior management of Smucker with
respect to the availability and consequences of alternatives to the proposed
merger. William Blair was not requested to consider, and its opinion did not
address, any term of the merger, the merger agreement or related transaction
agreements other than the consideration to be paid by Smucker pursuant to the
merger. William Blair has relied as to all legal and tax matters on advice of
counsel and tax advisors to Smucker, respectively, and did not independently
verify the tax treatment of the merger and the other transactions contemplated
by the merger agreement or related transaction agreements. William Blair
expressed no view with respect to the tax treatment that will be required to be
applied to the merger and the other transactions contemplated by the merger
agreement and related transaction agreements.
William Blair did not express any opinion as to the price at which Smucker
common shares will trade at any future time or as to the effect of the merger on
the trading price of new Smucker common shares subsequent to the completion of
the merger. Those trading prices may be affected by a number of factors,
including but not limited to:
- dispositions of new Smucker common shares by shareholders within a short
period of time after the completion of the merger;
- changes in the prevailing interest rates and other factors which
generally influence the price of securities;
- adverse changes in the current capital markets;
- the occurrence of adverse changes in the financial condition, business,
assets, results of operations or prospects of Smucker or of the Jif and
Crisco businesses or in the markets they serve;
- any necessary actions by or restrictions of federal, state or other
governmental agencies or regulatory authorities; and
- timely completion of the merger and the other transactions contemplated
by the merger agreement and related transaction agreements on the terms
and conditions described in this document.
26
William Blair's opinion was based upon market, economic, financial and
other conditions as in effect on, and information made available to William
Blair as of, the date of such opinion. Although subsequent developments may
affect its opinion, William Blair does not have any obligation to update, revise
or reaffirm its opinion.
The following is a summary of the material financial analyses performed and
material factors considered by William Blair to arrive at its opinion. William
Blair performed certain procedures, including each of the financial analyses
described below, and reviewed with the Smucker board of directors the
assumptions upon which such analyses were based, as well as other factors.
Although the summary does not purport to describe all of the analyses performed
or factors considered by William Blair in this regard, it does set forth those
considered by William Blair to be material in arriving at its opinion.
Fiscal year end financial information used in the analyses performed by
William Blair set forth below for Smucker and the Jif and Crisco businesses are
based on fiscal years ending April 30 for Smucker and June 30 for Jif and
Crisco.
Analysis of Implied Jif and Crisco Merger Multiples. For purposes of
determining the transaction value of the merger, William Blair assumed that
25.92 million new Smucker common shares would be issued in the merger based on
the 50 to one exchange ratio and the 1,296 million P&G Ohio common shares senior
management of P&G expects to be outstanding immediately prior to the merger.
William Blair determined a transaction value of $731.0 million by dividing the
equity value of Smucker (calculated to be $660.3 million based on Smucker's
closing price on October 5, 2001 of $27.04 and the 24.42 million Smucker common
shares outstanding on such date) by the ownership ratio of 0.9033 (the quotient
of Smucker's shareholders implied post-merger ownership interest of 47.46% and
P&G Ohio's shareholders implied post-merger ownership interest of 52.54%).
William Blair reviewed the transaction value of $731.0 million proposed to be
paid in terms of market equity value as well as equity value plus book value of
total debt less cash and equivalents (together referred to as enterprise value)
as multiples of last twelve months (LTM) sales, earnings before interest, taxes,
depreciation and amortization (EBITDA), operating income (EBIT) and net income
for the Jif and Crisco businesses. The calculations resulted in multiples of the
implied equity value to Jif and Crisco net income of 11.7x based on LTM results.
The ratios of implied enterprise value to Jif and Crisco's LTM sales, LTM EBITDA
and LTM EBIT were 1.18x, 6.4x and 7.0x, respectively. For purposes of these
calculations, enterprise value and equity value for the Jif and Crisco
businesses were deemed by William Blair to be equivalent at $731.0 million based
on the absence of debt, cash and cash equivalents associated with Jif and Crisco
in the merger and as confirmed by the senior management of Smucker.
Comparable Company Analysis. William Blair reviewed and compared certain
financial information relating to Smucker and the Jif and Crisco businesses to
corresponding financial information, ratios and public market multiples for 27
publicly traded companies with operations in the food industry that William
Blair deemed relevant. The comparable companies selected by William Blair were:
- - Nestle S.A.
- - Kraft Foods Inc.
- - Sara Lee Corporation
- - H.J. Heinz Company
- - General Mills, Inc.
- - Conagra Foods, Inc.
- - Kellogg Company
- - Wm. Wrigley Jr. Company
- - Campbell Soup Company
- - Hershey Foods Corporation
- - Tyson Foods, Inc.
- - Tootsie Roll Industries, Inc.
- - Suiza Foods Corporation
- - Dole Food Company, Inc.
- - Dreyer's Grand Ice Cream, Inc.
- - American Italian Pasta Company
- - Fresh Del Monte Produce Inc.
- - The Hain Celestial Group, Inc.
- - The J. M. Smucker Company
- - Ralcorp Holdings, Inc.
- - Aurora Foods Inc.
- - Riviana Foods Inc.
- - J & J Snack Foods Corp.
- - Tasty Baking Company
- - Odwalla, Inc.
- - Seneca Foods Corporation
- - Suprema Specialties, Inc.
27
William Blair selected these companies because they are the publicly traded
companies that engage in businesses reasonably comparable to those of the Jif
and Crisco businesses.
Among the information William Blair considered were sales, EBITDA, EBIT,
net income, earnings per share, gross profit margins, EBITDA margins, EBIT
margins, net income margins, growth in sales and net income, and capital
structure. The operating results and margins and any corresponding derived
multiples or ratios for the Jif and Crisco businesses, Smucker and the
comparable companies were based on the most recent publicly available financial
information as publicly disclosed for each company and the closing share prices
as of October 5, 2001.
Information regarding the multiples implied by the terms of the merger
compared to the multiples from William Blair's analysis of selected comparable
publicly traded companies is set forth in the following table.
<Table>
<Caption>
COMPARABLE COMPANY
JIF/CRISCO MULTIPLE RANGE
IMPLIED -------------------------------
MERGER RELEVANT
MULTIPLE MULTIPLES RANGE MEDIAN MEAN
-------- ---------- -------- ------ ----
Enterprise value/LTM Sales..................... 1.18x 0.42x - 4.88x 1.11x 1.53x
Enterprise value/LTM EBITDA.................... 6.4x 4.3x - 20.2x 8.9x 10.2x
Enterprise value/LTM EBIT...................... 7.0x 7.1x - 37.0x 13.8x 15.5x
Equity value/LTM Net Income.................... 11.7x 7.3x - 37.0x 21.2x 21.9x
</Table>
None of the selected companies is identical to the Jif and Crisco
businesses. Accordingly, any analysis of the selected publicly traded companies
necessarily involved complex consideration and judgments concerning the
differences in financial and operating characteristics and other factors that
would necessarily affect the analysis of trading multiples of the selected
publicly traded companies.
Comparable Transactions Analysis. William Blair performed an analysis of
selected recent business combinations in the branded food industry, based on
publicly available information. In total, William Blair examined 35 transactions
that were chosen based on William Blair's judgment that they were generally
comparable, in whole or in part, to the proposed merger. The selected
transactions were not intended to be representative of the entire range of
possible transactions in the branded food industry. The 35 transactions examined
were (target/acquirer):
- - AquaPenn Spring Water Company, Inc./Groupe
Danone
- - Ben & Jerry's Homemade, Inc./Unilever NV
- - Bestfoods/Unilever NV
- - Celestial Seasonings, Inc./The Hain Food Group,
Inc.
- - Chock Full O'Nuts Corporation/Sara Lee
Corporation
- - Dean Foods Company (Birds Eye brand)/Agrilink
Foods, Inc.
- - Dean Foods Company/Suiza Foods Corporation
- - Gilardi Foods/ConAgra, L.P. Inc.
- - Goodmark Foods, Inc./ConAgra, Inc.
- - Grist Mill Co./International Home Foods, Inc.
- - International Home Products Inc./ConAgra, Inc.
- - Keebler Foods Company/Kellogg Company
- - Marigold Foods, Inc. and Crowley Foods, Inc./National Dairy Holdings, L.P.
- - Metz Baking Company/The Earthgrains Company
- - Michaels Foods, Inc./Investor Group, Inc.
- - Mother's Cake & Cookies/Parmalat SpA
- - Nabisco Holdings Corp./Philip Morris Companies
Inc.
- - Orangina (Pernod Ricard S.A.)/Cadbury Schweppes plc
- - The Pillsbury Company/General Mills, Inc.
- - President Baking Co./Keebler Foods Company
- - The Quaker Oats Company/PepsiCo, Inc.
- - Slim-Fast Foods Company/Unilever NV
- - Snapple Beverage Corp./Cadbury Schweppes plc
- - South Beach Beverage Co./PepsiCo, Inc.
- - Terranova Foods plc/Unigate plc
- - The Earthgrains Company/Sara Lee Corporation
- - The Turkey Store Company (Jerome Foods, Inc.)/Hormel Foods Corporation
- - Thorn Apple Valley, Inc./IBP, inc.
- - Tomkins plc (European Food Bus.)/Doughty Hanson & Co. Limited
- - Tropicana Products, Inc./PepsiCo, Inc.
- - UB Frozen and Chilled Foods/H.J. Heinz Company
- - Van Melle NV/Perfetti SpA
- - Vlasic Foods International Inc. (N. American business)/Hicks, Muse, Tate &
Furst Company
- - WLR Foods, Inc./Pilgrim's Pride Corporation
- - Worthington Foods, Inc./Kellogg Company
28
Although William Blair compared the multiples implied by these transactions
to the implied merger multiples for the Jif and Crisco businesses, none of the
selected transactions or associated companies is identical to the merger or the
Jif and Crisco businesses or Smucker. Accordingly, any analysis of the
comparable transactions necessarily involved complex considerations and
judgments concerning the differences in financial and operating characteristics,
parties involved and terms of their transactions and other factors that would
necessarily affect the merger value of the Jif and Crisco businesses versus the
merger values of the companies in the comparable transactions. William Blair
reviewed the consideration paid in such transactions in terms of the enterprise
value of such transactions as a multiple of sales, EBITDA and EBIT and the
equity value as a multiple of net income for the latest twelve months prior to
the announcement of such transactions. Information regarding the multiples
implied by the terms of the merger compared to the multiples from William
Blair's analyses of selected comparable transactions is set forth in the
following table:
<Table>
<Caption>
COMPARABLE TRANSACTIONS
JIF/CRISCO MULTIPLE RANGE
IMPLIED -------------------------------
MERGER RELEVANT
MULTIPLE MULTIPLES RANGE MEDIAN MEAN
-------- ---------- -------- ------ ----
Enterprise value/LTM Sales..................... 1.18x 0.35x - 3.76x 1.19x 1.46x
Enterprise value/LTM EBITDA.................... 6.4x 5.8x - 18.9x 11.7x 12.0x
Enterprise value/LTM EBIT...................... 7.0x 8.1x - 34.2x 17.5x 17.6x
Equity value/LTM Net Income.................... 11.7x 8.2x - 53.5x 28.9x 28.4x
</Table>
Discounted Cash Flow Analysis. William Blair performed a discounted cash
flow analysis of the Jif and Crisco businesses using financial information for
fiscal 2002 and financial projections for 2003 and 2004, provided by the
management of Smucker, both on a stand-alone basis and with synergies, for the
period commencing September 30, 2001 through June 30, 2005, excluding one-time
costs associated with the merger. In that analysis, William Blair assumed
terminal value multiples of 7.0x to 9.0x EBITDA in fiscal 2005 and discount
rates of 8.0% to 10.0%. The discounted cash flow analysis conducted by William
Blair produced implied equity values for the Jif and Crisco businesses as
follows:
<Table>
Equity value for the Jif and Crisco businesses
stand-alone............................................. $772 to $1,005 million
Equity value of the Jif and Crisco businesses with
synergies............................................... $903 to $1,172 million
</Table>
Relative Contribution Analysis. William Blair analyzed the relative
contribution of the Jif and Crisco businesses to the combined company for
various measures such as sales, EBITDA, EBIT and net income as well as the pro
forma ownership attained in the combined company. William Blair performed these
analyses using the financial information provided by the respective managements
of both Smucker and P&G for fiscal 2002, 2003 and 2004, respectively. William
Blair analyzed the relative contribution of the Jif and Crisco businesses on a
stand-alone basis as well as on a synergy basis. The purpose of this analysis
was to assess the fairness of the proposed merger consideration based on
estimated future operating and financial information by comparing the
contribution of Smucker and Jif and Crisco to the combined company to the
percentage ownership of the combined company that each company's shareholders
would hold upon completion of the merger. The following table presents the
contribution of the Jif and Crisco
29
businesses to the combined company based on that financial information,
excluding one-time costs associated with the merger:
<Table>
<Caption>
PRO FORMA COMBINED
CONTRIBUTION
-------------------------------
STAND-ALONE CASE SMUCKER JIF/CRISCO BUSINESSES
- ---------------- ------- ---------------------
Sales:
2002 Estimated........................................ 52.2% 47.8%
2003 Projected........................................ 53.3% 46.7%
2004 Projected........................................ 55.1% 44.9%
EBITDA:
2002 Estimated........................................ 44.3% 55.7%
2003 Projected........................................ 45.9% 54.1%
2004 Projected........................................ 46.5% 53.5%
EBIT:
2002 Estimated........................................ 36.6% 63.4%
2003 Projected........................................ 38.3% 61.7%
2004 Projected........................................ 39.3% 60.7%
Net Income:
2002 Estimated........................................ 34.4% 65.6%
2003 Projected........................................ 36.3% 63.7%
2004 Projected........................................ 37.6% 62.4%
Pro Forma Ownership of Combined Company................. 47.46% 52.54%
</Table>
<Table>
<Caption>
PRO FORMA COMBINED
CONTRIBUTION
-------------------------------
SYNERGY CASE SMUCKER JIF/CRISCO BUSINESSES
- ------------ ------- ---------------------
Sales:
2002 Estimated........................................ 52.2% 47.8%
2003 Projected........................................ 53.3% 46.7%
2004 Projected........................................ 55.1% 44.9%
EBITDA:
2002 Estimated........................................ 40.9% 59.1%
2003 Projected........................................ 42.4% 57.6%
2004 Projected........................................ 43.0% 57.0%
EBIT:
2002 Estimated........................................ 33.9% 66.1%
2003 Projected........................................ 35.4% 64.6%
2004 Projected........................................ 36.4% 63.6%
Net Income:
2002 Estimated........................................ 30.5% 69.5%
2003 Projected........................................ 32.0% 68.0%
2004 Projected........................................ 33.3% 66.7%
Pro Forma Ownership of Combined Company................. 47.46% 52.54%
</Table>
The above table sets forth the contribution levels suggested by the
selected financial performance benchmarks as compared to the pro forma ownership
of the holders of Smucker common shares after the merger of 47.46% of the
outstanding new Smucker common shares.
30
Pro Forma Merger Analysis. William Blair analyzed the pro forma impact on
Smucker earnings per share of the merger with the Jif and Crisco businesses. In
conducting its analysis, William Blair assumed:
- purchase accounting treatment with the amortizable intangible assets
created in the merger;
- estimates of cost savings and operating synergies resulting from the
merger, as provided by Smucker management;
- earnings estimates for Smucker and the Jif and Crisco businesses, as
provided by the senior management of Smucker and P&G, respectively; and
- pro forma diluted shares outstanding.
William Blair compared the earnings per share of Smucker common shares, on
a stand-alone basis, to the earnings per share of the common shares of the
combined company on a pro forma basis for Smucker's 2003 fiscal year. The
results of the pro forma merger analysis suggested that the merger would be
accretive to Smucker on an earnings per share basis in fiscal 2003, assuming
cost savings and operating synergies anticipated by Smucker management to result
from the merger were achieved and excluding one-time costs associated with the
merger. The results of the pro forma merger analysis are not necessarily
indicative of future operating results or financial position. The actual results
achieved by the company may vary from projected results and the variations may
be material.
General. The preparation of an opinion regarding fairness is a complex
analytic process involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of those methods to
the particular circumstances, and, therefore, such an opinion is not readily
susceptible to partial analysis or summary description. The preparation of a
fairness opinion does not involve a mathematical evaluation or weighing of the
results of the individual analyses performed, but requires William Blair to
exercise its professional judgment, based on its experience and expertise, in
considering a wide variety of analyses taken as a whole. Each of the analyses
conducted by William Blair was carried out in order to provide a different
perspective on the merger and add to the total mix of information available.
William Blair did not form a conclusion as to whether any individual analysis,
considered in isolation, supported or failed to support an opinion about the
fairness of the merger consideration. Rather, in reaching its conclusion,
William Blair considered the results of the analyses in light of each other and
ultimately reached its opinion based on the results of all analyses taken as a
whole. William Blair did not place particular reliance or weight on any
particular analysis, but instead concluded its analyses, taken as a whole,
supported its determination. Accordingly, notwithstanding the separate factors
summarized above, William Blair believes that its analyses must be considered as
a whole and that selecting portions of its analyses and the factors considered
by it, without considering all analyses and factors, may create an incomplete
view of the evaluation process underlying its opinion. No company or transaction
used in the above analyses as a comparison is exactly comparable to Smucker, the
Jif and Crisco businesses or the merger. In performing its analyses, William
Blair made numerous assumptions with respect to industry performance, business
and economic conditions and other matters. The analyses performed by William
Blair are not necessarily indicative of future actual values and future results,
which may be significantly more or less favorable than suggested by such
analyses.
William Blair is a nationally recognized firm and, as part of its
investment banking activities, is regularly engaged in the valuation of
businesses and their securities in connection with merger transactions and other
types of strategic combinations and acquisitions. William Blair acted as the
investment banker for Smucker's common share reclassification, repurchase and
associated financing in 2000 and received fees for those services. In addition,
in the ordinary course of its business, William Blair and its affiliates may
beneficially own or actively trade common shares and other securities of Smucker
as well as common shares and other securities of P&G for its own account and for
the accounts of its customers, and, accordingly, may at any time hold a long or
short position in these securities.
Smucker hired William Blair based on its qualifications and expertise in
providing financial advice to companies and its reputation as a nationally
recognized investment banking firm. Pursuant to a letter agreement dated June 4,
2001, William Blair was paid a fee of $400,000 for its role as financial
advisor. In
31
addition, under the terms of the June 4, 2001 letter agreement, William Blair
will receive an additional fee of $1,600,000 contingent upon the closing of the
merger. In addition, Smucker has agreed to reimburse William Blair for all of
its out-of-pocket expenses (including fees and expenses of its counsel)
reasonably incurred by it in connection with its services to Smucker under the
letter agreement. Smucker has also agreed to indemnify William Blair against
potential liabilities arising out of its engagement.
STOCK EXCHANGE LISTING
Following the merger, the new Smucker common shares will be listed on The
New York Stock Exchange and will trade under our current symbol "SJM."
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
GENERAL
The following general discussion summarizes the material United States
federal income tax consequences of the merger and is based on the Internal
Revenue Code of 1986, as amended, the regulations promulgated thereunder,
existing administrative interpretations and court decisions. No information is
provided in this summary with respect to the tax consequences, if any, of the
merger under applicable foreign, state, local and other tax laws. Future
legislation, regulations, administrative interpretations or court decisions
could significantly change such authorities either prospectively or
retroactively. We do not address all aspects of United States federal income
taxation that may be important to each Smucker shareholder in light of that
shareholder's particular circumstances or to shareholders subject to special
rules, such as those who are not citizens or residents of the United States,
foreign corporations, financial institutions, tax-exempt organizations,
insurance companies, dealers in securities or shareholders who acquired Smucker
common shares pursuant to the exercise of options or similar derivative
securities or otherwise as compensation. This discussion assumes that each
Smucker shareholder holds his or her shares of stock as capital assets within
the meaning of Section 1221 of the Internal Revenue Code.
The merger is conditioned on P&G's receipt of a letter ruling from the
Internal Revenue Service with respect to specified issues relating to the tax
treatment of the transactions related to the merger. See "The Merger
Agreement -- Conditions to the Completion of the Merger" beginning on page .
The letter ruling, while generally binding on the Internal Revenue Service, will
be based on certain factual representations and assumptions described in the
ruling and set forth in the ruling request. If any assumptions or
representations are incorrect or untrue in any material respect, the letter
ruling may be invalidated.
The merger is also conditioned on receipt by Smucker and P&G of opinions
from their tax advisor and tax counsel, respectively, that the merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code. An opinion of such advisor or
counsel is not binding on the Internal Revenue Service or the courts, and we
cannot assure you that the Internal Revenue Service will not challenge the tax
treatment of the merger.
A successful Internal Revenue Service challenge to the reorganization
status of the merger would result in Smucker shareholders recognizing taxable
gain or loss with respect to each current Smucker common share surrendered equal
to the difference between the shareholder's basis in that share and the fair
market value, as of the effective time of the merger, of the new Smucker common
shares received in the exchange. In this event, a shareholder's aggregate basis
in the new Smucker common shares received would equal its fair market value, and
the shareholder's holding period for that stock would begin the day after the
merger.
32
CONSEQUENCES OF THE MERGER
The following describes the tax consequences of the merger to Smucker
shareholders and Smucker, assuming that the merger constitutes a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code.
SMUCKER SHAREHOLDERS
- No gain or loss will be recognized by Smucker shareholders upon their
exchange of current Smucker common shares for new Smucker common shares
(except as described below with respect to cash received in addition to
new Smucker common shares, and cash received in lieu of fractional
shares).
- If cash is received, gain, if any, will be recognized by each Smucker
shareholder upon the exchange of his or her current Smucker common shares
for new Smucker common shares and cash in the merger. The amount of the
gain will be the lesser of (a) the amount, if any, by which the sum of
the cash and fair market value, as of the effective date, of new Smucker
common shares received with respect to each share of Smucker common stock
exceeds the shareholder's tax basis in each exchanged Smucker share and
(b) the amount of cash received. No loss will be recognized by the
shareholders of Smucker common shares upon the exchange of their current
Smucker common shares for new Smucker common shares and cash in the
merger.
- Each Smucker shareholder's tax basis in the new Smucker common shares he
or she receives in the merger (including any fractional share of new
Smucker common shares for which cash is received) will be the same as the
tax basis of the current Smucker common shares surrendered in exchange
therefor, decreased by the amount of cash received, and increased by the
amount of gain recognized.
- Each Smucker shareholder's holding period in the new Smucker common
shares that the shareholder receives in the merger will include the
period he or she held the current Smucker common shares surrendered in
exchange therefor.
- Each Smucker shareholder who receives cash in lieu of a fractional
Smucker common shares will be treated as having received such fractional
shares pursuant to the merger and then as having exchanged such
fractional share for cash in a redemption by Smucker. The amount of any
gain or loss will be equal to the difference between the amount of cash
and the tax basis allocated to the fractional share.
SMUCKER
The merger should not result in any material tax consequences to Smucker.
SMUCKER SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE
SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF
THE MERGER.
ACCOUNTING TREATMENT
The merger will be accounted for as a purchase business combination. For
accounting purposes, Smucker will be treated as the acquiring enterprise.
Smucker will establish a new accounting basis for the Jif and Crisco tangible
and specifically identifiable intangible assets and liabilities based upon their
estimated fair values at the date of the merger. Any excess of the purchase
price over the estimated fair values of the Jif and Crisco tangible and
specifically identifiable intangible assets and liabilities will be recorded as
goodwill. Goodwill will not be amortized but will be subject to impairment
testing. A final determination of the fair values has not been made. For
purposes of disclosing pro forma information in this document, however, Smucker
has made a preliminary determination of the purchase price allocation, based
upon current estimates and assumptions, which is subject to revision as
additional information becomes available.
33
REGULATORY APPROVALS
HSR ACT
Under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, Smucker and
P&G were required to give notification and furnish information to the Federal
Trade Commission and the Antitrust Division of the Department of Justice and to
wait the specified waiting period before they can complete the merger. Each of
Smucker and P&G filed the required notification and report forms with the
Federal Trade Commission and the Antitrust Division on October 25, 2001. Smucker
and P&G received early termination of the statutory waiting period under the HSR
Act on November 7, 2001. In addition to the foregoing, the merger is subject to
state antitrust laws and could be the subject of challenges by state attorneys
general under those laws, or by private parties under federal or state antitrust
laws.
FOREIGN REGULATORY FILINGS
Smucker is not aware of any foreign governmental approvals or actions that
may be required for completion of the merger. Nonetheless, in connection with
the merger, the laws of a number of foreign countries and jurisdictions in which
Smucker conducts its business may require the filing of information with, or the
obtaining of the approval or consent of, governmental authorities in those
countries and jurisdictions. The governments in those countries and
jurisdictions might attempt to impose additional conditions on Smucker's
operations conducted in those countries and jurisdictions as a result of the
merger. If those approvals or consents are found to be required, the parties
intend to make the appropriate filings and applications. In the event that a
filing or application is made for the requisite foreign approvals or consents,
we cannot assure you that those approvals or consents will be granted and, if
those approvals or consents are received, we cannot assure you as to when those
approvals or consents will be received.
DISSENTERS' RIGHTS
Smucker shareholders that so desire are entitled to relief as dissenting
shareholders under Ohio Revised Code Section 1701.85. A shareholder will be
entitled to this relief, however, only if the shareholder complies strictly with
all of the procedural and other requirements of Section 1701.85. The following
summary is not a complete statement of the method of compliance with Section
1701.85 and is qualified in its entirety by reference to the copy of Section
1701.85 and Section 1701.84 (which is referenced in Section 1701.85) attached to
this document as Annex E.
A shareholder who wishes to perfect rights as a dissenting shareholder in
the event the merger is approved:
- must have been a record holder of the Smucker common shares as to which
the shareholder seeks relief on February 8, 2002, the record date for the
special meeting;
- must not have voted the shareholder's current Smucker common shares in
favor of adoption of the merger agreement (holders who sign proxies that
do not indicate how the shares should be voted will be voted in favor of
adoption of the merger agreement and will not be eligible for dissenters'
rights); and
- must deliver to Smucker, not later than ten days after the special
meeting, a written demand for payment of the fair cash value of the
Smucker common shares as to which the shareholder seeks relief. The
written demand must state the shareholder's name, address, and number of
common shares as to which relief is sought, and the amount claimed as the
fair cash value of those shares.
A vote against the merger will not satisfy the requirement of a written
demand for payment. Any written demand for payment should be mailed or delivered
to:
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attention: Corporate Secretary
34
Because the written demand must be delivered to Smucker within the ten-day
period following the special meeting, it is recommended, although not required,
that a shareholder use certified or registered mail, return receipt requested,
to confirm that the shareholder has made a timely delivery.
If Smucker sends the dissenting shareholder, at the address specified in
the demand, a request for the certificate(s) representing the shareholder's
shares, the dissenting shareholder must deliver the certificate(s) to Smucker
within 15 days following the date the request was sent. Smucker may endorse the
certificate(s) with a legend to the effect that the shareholder has demanded
fair cash value of the shares represented by the certificate(s). Failure to
deliver the certificate(s) within 15 days of the request terminates the
shareholder's rights as a dissenting shareholder. Smucker must notify the
shareholder of its election to terminate the shareholder's rights as a
dissenting shareholder within 20 days after the lapse of the 15-day period.
Unless the dissenting shareholder and Smucker agree on the fair cash value
per Smucker common share, the shareholder must, within three months after the
service of the written demand by the shareholder, file a petition in the Court
of Common Pleas of Wayne County, Ohio. If the court finds that the shareholder
is entitled to be paid the fair cash value of current Smucker common shares, the
court may appoint one or more appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. Fair cash value:
- will be determined as of the day prior to the special meeting;
- will be the amount a willing seller and willing buyer would accept or pay
with neither being under compulsion to sell or buy;
- will not exceed the amount specified in the shareholder's written demand;
and
- will exclude any appreciation or depreciation in market value resulting
from the merger.
The court will make a finding as to the fair cash value of a current
Smucker common share and render judgment against Smucker for its payment with
interest at a rate and from a date the court considers equitable. The costs of
proceedings shall be assessed or apportioned as the court considers equitable.
The rights of any dissenting shareholder will terminate if:
- the dissenting shareholder has not complied with Section 1701.85, unless
Smucker, by its board of directors, waives the failure;
- Smucker abandons or is finally enjoined or prevented from completing the
merger, or the shareholders of Smucker rescind their approval of the
merger;
- the dissenting shareholder withdraws their written demand, with the
consent of Smucker acting through its board of directors; or
- Smucker and the dissenting shareholder have not agreed upon the fair cash
value per Smucker common share and neither has timely filed or joined in
a petition in an appropriate court for a determination of the fair cash
value of Smucker common shares.
35
THE SPECIAL MEETING
PURPOSE, TIME AND PLACE
The special meeting will be held at The Arden Shisler Center for Education
& Economic Development, 1625 Wilson Road, Wooster, Ohio (adjacent to Fisher
Auditorium on the campus of the Ohio Agricultural Research and Development
Center) on , 2002, at 11:00 a.m., Eastern Standard Time. The purposes of
the special meeting are for you to consider and vote upon a proposal to approve
the merger of P&G's Jif and Crisco businesses into Smucker by adopting the
merger agreement attached as Annex A to this document and to consider any other
matter that may properly come before the meeting. We currently expect that no
other matters will be considered at the special meeting.
The Smucker board of directors has unanimously approved the merger and has
adopted the merger agreement and recommends that you vote FOR the merger by
adopting the merger agreement.
RECORD DATE; VOTING INFORMATION
The Smucker board of directors has fixed the close of business on February
8, 2002 as the record date for determining the holders of Smucker common shares
entitled to notice of, and to vote at, the special meeting. Only holders of
record of Smucker common shares at the close of business on the record date will
be entitled to notice of, and to vote at, the special meeting.
As of the record date, 24,836,836 Smucker common shares were issued and
outstanding and entitled to vote at the special meeting. Smucker's current
amended articles of incorporation provide generally that each Smucker common
share may entitle the holder to ten votes on each matter to be considered at the
special meeting. If, though, there has been a change in beneficial ownership of
a Smucker common share during the four years immediately preceding the record
date, the current owner of that share will be entitled to only one vote with
respect to that share until four years pass without a change in beneficial
ownership of the share. Common shares that formerly were Class B common shares
prior to the combination of the Class A and Class B common shares on August 28,
2000, are an exception to these general voting provisions. Holders of these
formerly Class B common shares are currently entitled to one vote per share at
the special meeting until such shares are held for four years from the effective
date of the combination without a change in beneficial ownership.
As indicated above, the number of votes that holders of Smucker common
shares will be entitled to cast at the special meeting will depend on how long
they have owned the shares and whether their shares formerly were Class A or
Class B shares prior to the combination of the two classes on August 28, 2000.
Specifically:
- If you own former Class A common shares that were purchased prior to
February 8, 1998 you will be entitled to ten votes for each of those
shares. You will have only one vote per share, though, for former Class A
common shares purchased on or after February 8, 1998.
If your shares are registered with Smucker's transfer agent in your name,
the agent tracks how long you have held your shares and will ensure that
you receive the proper number of votes. If your shares are held in
"street name" (i.e., in the name of your bank, broker, or other nominee)
you will need to provide a written certification as set forth below.
- If you own former Class B common shares, you will be entitled to one vote
per share.
- If you own Smucker common shares purchased after August 28, 2000, you
will be entitled to one vote per share.
Smucker has developed procedures regarding the proof that will be required
for determinations of beneficial ownership. If you own Smucker common shares
that are held in street name and that you acquired before February 8, 1998, you
are requested to certify three things, in writing.
- the total number of shares that you beneficially own,
36
- of the shares beneficially owned by you, how many have been owned since
before February 8, 1998, and
- of those shares beneficially owned by you since before February 8, 1998,
how many were formerly Class A shares and how many were formerly Class B
shares.
If your shares are held in street name a certification form for you to
complete is enclosed with this document.
Your broker must receive the certification form from you by no later than
five business days prior to the special meeting. If it is not received by that
time, all shares held by the beneficial owner will be entitled to only one vote
per share.
Smucker's corporate secretary reserves the right, in his sole discretion,
to require such additional evidence as may be necessary to confirm that there
has been no change in beneficial ownership during the four years preceding the
record date.
Based on the information with respect to beneficial ownership Smucker
possesses on the date of this document, the holders of between and 11,740,988
Smucker common shares will be entitled to exercise ten votes per share at the
special meeting, and the holders of the remainder of the outstanding Smucker
common shares will be entitled to exercise one vote per share. The actual voting
power of each holder of Smucker common shares will be based on information
Smucker possesses at the time of the special meeting. If you are a record holder
of Smucker common shares on the record date, you may vote your Smucker common
shares in person at the special meeting or by proxy as described below under
"Voting by Proxy."
At the special meeting, the inspector of elections will tabulate the
results of shareholder voting. The presence in person or by proxy at the special
meeting of the holders of Smucker common shares entitled to exercise at least a
majority of the outstanding voting power of the Smucker common shares, giving
effect to ten-vote shares, will constitute a quorum for the special meeting.
Properly signed proxies that are marked "abstain" are known as "abstentions."
Properly signed proxies that are held in "street name" by brokers and not voted
on one or more of the items before the special meeting but are otherwise voted
on at least one item, are known as "broker non-votes." Abstentions and broker
non-votes will be counted for the purposes of determining whether a quorum has
been achieved at the special meeting. As there are no matters expected to be
voted on at the special meeting other than the merger, shares not voted by
brokers will in effect be absent and not available to count toward the quorum
requirements.
VOTING BY PROXY
The affirmative vote of the holders of two-thirds of the outstanding voting
power of Smucker common shares, giving effect to ten-vote shares, on the record
date is required to approve the merger. If you vote your Smucker common shares
by signing a proxy and returning it in time for the special meeting, your shares
will be voted as indicated on your card. If your proxy is properly executed but
does not contain voting instructions, your proxy will be voted FOR the merger.
If you do not vote, it will have the same effect as a vote against the proposal
to approve the merger. In addition, abstentions and broker non-votes will have
the same effect as votes against the merger. If other matters are properly
presented before the special meeting, the persons named in your proxy will have
authority to vote in accordance with their judgment on any other such matter,
including, without limitation, any proposal to adjourn or postpone the meeting
or otherwise concerning the conduct of the meeting. However, a proxy that has
been designated to vote against the merger will not be voted, either directly or
through a separate proposal, to adjourn the special meeting to solicit
additional votes. We do not currently expect that any matter other than as
described in this document will be brought before the special meeting.
If your broker holds your shares, you must either direct your broker on how
to vote your shares or obtain a proxy from your broker to vote at the special
meeting.
37
REVOCATION OF PROXIES
Without affecting any vote previously taken, if you are a record holder,
you may revoke your proxy in any of the following ways:
- sending a written notice to Smucker's corporate secretary that is
received prior to the special meeting and states that you are revoking
your proxy;
- signing a new, later-dated proxy card(s) that is received by Smucker's
proxy solicitor prior to the special meeting; or
- obtaining an admission card, attending the special meeting and voting in
person.
Simply attending the special meeting will not revoke your proxy. If you
instructed a broker to vote your shares, you must follow your broker's
directions for changing those instructions. If an adjournment occurs and no new
record date is set, it will have no effect on the ability of shareholders of
record as of the record date to exercise their voting rights or to revoke any
previously delivered proxies.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS
As of the record date, Smucker directors and executive officers as a group
owned and were entitled to vote approximately 15% of the outstanding Smucker
common shares. These shares represent approximately 30% of the outstanding
voting power of Smucker common shares, based on Smucker's current best estimate
of the voting power of these shareholders under Smucker's current time phase
voting requirements. All of the directors and executive officers of Smucker that
are entitled to vote at the Smucker special meeting have indicated that they
intend to vote their shares in favor of the merger.
In addition, pursuant to the terms of the voting agreement between several
Smucker family members and P&G, those Smucker shareholders that are parties to
the voting agreement have agreed in writing to vote their shares, and have
granted P&G a proxy to vote their shares, in favor of the merger and against any
competing or superior proposals or proposals that would hinder or delay the
completion of the merger. As of the record date Smucker estimates that these
shareholders hold approximately 52% of the voting power of the outstanding
Smucker common shares. For a more complete description of the voting agreement,
see "The Voting Agreement."
SOLICITATION OF PROXIES
This document is being furnished to you in connection with the Smucker
board of directors' solicitation of proxies from the holders of Smucker common
shares for use at the special meeting. In addition to solicitation by mail,
Smucker may solicit proxies in person, by telephone, telecopy, or e-mail. Also,
Smucker has engaged a professional proxy solicitation firm, Georgeson
Shareholder Communications, Inc., to assist it in soliciting proxies. Smucker
will pay to Georgeson Shareholder Communications, Inc. a fee of $25,000 plus
expenses for its services and will bear all costs of the proxy solicitation.
SHAREHOLDERS SHOULD NOT SEND SHARE CERTIFICATES WITH THEIR PROXY CARDS.
38
BUSINESS OF SMUCKER
Following the merger, Smucker will operate the Jif and Crisco businesses
under their current brand names, and will also continue its current businesses
and retain its current brand names. Smucker will continue to use the name "The
J. M. Smucker Company" after the merger.
OVERVIEW AND PRODUCTS
Smucker currently is a leading North American manufacturer and marketer of
fruit spreads, natural peanut butter, dessert toppings and health and natural
foods beverages. Through the merger we will also become a leading manufacturer
and marketer of stabilized peanut butter, oils, and shortening. For the fiscal
year ended April 30, 2001, Smucker had net sales of $651.2 million and earnings
before interest, taxes, depreciation and amortization (EBITDA) of $83.7 million,
excluding the impact of nonrecurring charges. For the fiscal year ended June 30,
2001, Jif and Crisco had combined net sales of $615.3 million and excess of net
revenues over direct costs of products sold, direct marketing expenses, and
direct administrative and other expenses of $178.7 million. Information
regarding pro forma earnings for the combined company are set forth in the
unaudited condensed combined pro forma financial statements included in this
document. We urge you to read those statements carefully for a more complete
understanding of the combined business operations of Smucker, Jif and Crisco.
In addition to the products mentioned in the preceding paragraph, we also
manufacture industrial fruit products such as bakery and yogurt fillings, fruit
and vegetable juices, juice beverages, syrups, condiments, and gift packages.
Our products are sold under numerous trademarks owned by Smucker, including
Smucker's, Dickinson's, Baking Healthy, Lost Acres, Mary Ellen, Adams, Laura
Scudder's, Goober, Simply Fruit, Magic Shell, Sundae Syrup, Smucker's Snackers,
Uncrustables, IXL, Double Fruit, Good Morning, The R.W. Knudsen Family, After
The Fall, Simply Nutritious, Recharge, Santa Cruz Organic, and Spritzer. We also
license the use of several other trademarks.
In the United States, these products are primarily sold through brokers to
food retailers, food wholesalers, club stores, mass merchandisers, military
commissaries, health and natural food stores, foodservice distributors and chain
operators, and to other food manufacturers. Smucker's distribution outside the
United States is principally in Canada, Australia, Brazil, Mexico, China and the
Pacific Rim, Europe, and the Middle East.
Through the merger, the Jif business will become part of Smucker. The Jif
brand has been a leader in the peanut butter category for over 20 years. In
2000, the Jif brand constituted over 34% of the dollar sales of stabilized
peanut butter in the United States. The Jif brand is marked by its distinct
product differentiation ("more fresh roasted peanut taste") and a consistent
advertising campaign ("Choosy Moms Choose Jif"). Jif's products include Jif
peanut butter in Regular, Reduced Fat and Simply Jif varieties and Jif Smooth
Sensations in Apple Cinnamon, Chocolate Silk, and Berry Blend varieties. Jif
peanut butter products are sold primarily in the United States through food
retailers, food wholesalers, club stores, and mass merchandisers.
Smucker also manufactures and markets natural peanut butter products under
the Smucker's, Adams, and Laura Scudder's trademarks and peanut butter and jelly
combination products under the Smucker's Goober trademark.
Through the merger, the Crisco business will become part of Smucker. Crisco
has been a leader in the shortening and cooking oils category for over 50 years.
In 2000, the Crisco brand constituted over 24% of the dollar sales of
shortening, cooking oils, and sprays in the United States. Crisco products were
introduced in 1911 and now include shortening, sprays, and cooking oils. Crisco
products are sold primarily in the United States to food retailers, food
wholesalers, club stores, and mass merchandisers. Crisco products are
distributed to the Canadian market as well. Crisco's oils business holds the
number one volume share position among branded competitors in the grocery and
drug channels, and the number one overall share with mass merchandisers. Crisco
has a portfolio of U.S. and foreign patents and pending applications relating to
processes and products. Smucker currently does not participate in the
shortening, cooking oils, or sprays categories.
39
STRATEGY AND COMPETITIVE STRENGTHS
Our strategic objectives are to develop and improve our leading positions
for our core products through superior quality, product differentiation and
innovation, and expansion of our product offerings. Our goals are to increase
market share in our product categories by:
- maintaining and leveraging the strength of our well-recognized brands;
- expanding our product offerings by developing innovative new products
that incorporate our core products and that complement our brand images;
and
- completing selective acquisitions of food businesses in our core
categories or of other leading North American retail food brands with
products that leverage our strong distribution network.
The key components of our short-term strategy will be to focus on
integration of the Jif and Crisco businesses, and on internal product
development to expand our product offerings and leverage our brand names and
distribution network. Smucker expects to integrate these business in an
efficient manner by transitioning and training employees for Smucker's combined
businesses and by capitalizing on our existing broker networks to distribute the
products of all three businesses. Following the merger, Smucker expects sales to
approximately double to $1.3 billion. For the first full year after integration,
Smucker projects net earnings before one-time costs associated with the merger
to be in the range of $95 to $105 million, approximately three times Smucker's
current levels.
We also expect to leverage Smucker's existing corporate infrastructure to
support the Jif and Crisco businesses, and capitalize on our business' existing
broker network for product distribution to better serve customers. We also plan
to support the Jif and Crisco brands by increasing marketing investment over
current levels. We may also use our strong balance sheet to finance strategic
acquisitions.
We believe our competitive strengths will include the following:
- STRONG DISTRIBUTION CHANNELS. All of our core products -- fruit spreads,
dessert toppings, peanut butter and peanut butter products, shortenings,
oils and fruit and juice beverages -- are typically sold to food
retailers, food wholesalers, club stores, mass merchandisers, military
commissaries, and health and natural foods stores. We focus on the sale
of branded food products with leadership positions to consumers through
mainstream U.S. Retail grocery outlets and the strength of our new Jif
and Crisco brands will give us a more focused presence with our customers
and help us serve them better.
- WELL-RECOGNIZED BRAND NAMES. Smucker's, Jif, and Crisco are some of the
most recognized brand names in the food industry, and are associated with
quality and American icon food products. The addition of Jif to our
family of products will enhance our ability to leverage our brand
leadership in fruit spread products.
- STRONG BRAND MANAGEMENT. We have a strong continuity of management
experience in successfully managing premier consumer food brands. Our
co-chief executive officers, Timothy P. Smucker and Richard K. Smucker,
are the fourth generation of Smucker family management since Smucker was
founded. Our general managers, Vincent C. Byrd, who is Vice President and
General Manager, Consumer Market, has over 25 years of experience, and
Steven T. Oakland, who will be Vice President and General Manager of the
Crisco brands, has nearly 20 years of experience, with Smucker, including
experience in managing premier branded food businesses.
- EXCELLENT BROKER NETWORK. We believe our food broker network is one of
the strongest in the industry. Addition of the Jif and Crisco products
will enable us to leverage our broker network on a much higher volume of
sales. We expect that this higher volume will increase our brokers' focus
on our products and better serve our food retailers and other
distribution channels.
40
EMPLOYEES
Following the merger, Smucker expects to employ approximately 2,700
full-time employees worldwide. Of those employees, approximately 760 current
Smucker employees located at six Smucker facilities are covered by union
contracts between Smucker and the teamsters union. These contracts vary in term
depending on the location. In addition, hourly employees of P&G's Crisco
facility are covered by a union contract. It is not known whether the union at
the Crisco location will continue to represent these employees after the merger.
Smucker believes its relations with its current employees are good.
LEGAL PROCEEDINGS
None of Smucker, Jif, or Crisco is a party to any pending legal proceeding
that would be considered material to Smucker.
PROPERTIES
Through the merger, Smucker will acquire properties located in Lexington,
Kentucky, and Cincinnati, Ohio. Following the merger, Smucker's manufacturing
and processing facilities will include those listed below. All of the properties
listed below are owned properties except for the West Fargo, North Dakota
location, which is leased. The corporate headquarters of Smucker will continue
to be located in Orrville, Ohio. Smucker believes that it has, and following the
merger will have, sufficient capacity at its facilities to sustain its current
operations and anticipated growth.
<Table>
DOMESTIC MANUFACTURING PRODUCTS PRODUCED
LOCATIONS
Orrville, Ohio Fruit spreads, toppings, industrial fruit products,
Smucker's Snackers
Salinas, California Fruit spreads, toppings, syrups
Memphis, Tennessee Fruit spreads, toppings
Ripon, Wisconsin Fruit spreads, toppings, condiments, industrial fruit
products
New Bethlehem, Pennsylvania Peanut butter and Goober
Chico, California Fruit and vegetable juices, beverages
Havre de Grace, Maryland Fruit and vegetable juices, beverages
West Fargo, North Dakota Frozen peanut butter and jelly sandwiches
Lexington, Kentucky Peanut butters, reduced-fat peanut spreads, and flavored
peanut spreads
Cincinnati, Ohio Shortening and cooking oils
RAW MATERIAL PROCESSING PRODUCTS PROCESSED
LOCATIONS
Watsonville, California Strawberries, oranges, peaches, apricots. Also, produces
industrial fruit products and frozen peanut butter and jelly
sandwiches
Woodburn, Oregon Strawberries, raspberries, blackberries, blueberries. Also
produces industrial fruit products
Grandview, Washington Grapes, cherries, strawberries, cranberries, apples,
boysenberries, blackberries, red raspberries, red currants,
and pears
Oxnard, California Strawberries
Lexington, Kentucky Peanuts
Cincinnati, Ohio Edible oils
INTERNATIONAL MANUFACTURING PRODUCTS PRODUCED
LOCATIONS
Ste-Marie, Quebec, Canada Fruit spreads, sweet spreads, industrial products
Kyabram, Victoria, Australia Fruit spreads, toppings, fruit pulps, fruit bars
Livingston, Scotland Industrial fruit products
Sao Jose do Rio Pardo, Brazil Industrial fruit products
</Table>
41
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF THE JIF AND CRISCO BUSINESSES
OF THE PROCTER & GAMBLE COMPANY
The following discussion and analysis of the Jif and Crisco businesses'
financial condition and results of operations should be read in conjunction with
the historical financial information included in their Combined Statements of
Inventory and Property, Plant and Equipment - Net as of June 30, 2001 and 2000
and the Combined Statements of Revenues, Direct Cost of Products Sold, Direct
Marketing Expenses and Direct Administrative and Other Expenses for each of the
three years in the period ended June 30, 2001 (the "Combined Statements"). The
Jif and Crisco businesses are P&G brands and accordingly, all of the information
presented below represents the operations of these businesses when managed by
P&G. Unless otherwise noted, years (2001, 2000, etc.) in this discussion refer
to Jif and Crisco's fiscal years ended June 30.
Jif is the world's leading producer of stabilized peanut butter with over
34% dollar share in the United States. The Jif brand is marked by its distinct
product differentiation and a consistent advertising campaign. Jif peanut butter
products are sold primarily in the United States through food retailers, food
wholesalers, club stores and mass merchandisers.
Crisco has been the leader in the shortening and cooking oils categories
for over 50 years. The oils business holds the number one volume share position
among branded competitors in food and drug channels, and the number one overall
share with mass merchandisers. Crisco has over 24% dollar share in the combined
oils, shortening and cooking spray market.
42
COMBINED STATEMENTS OF REVENUES,
DIRECT COST OF PRODUCTS SOLD, DIRECT MARKETING EXPENSES AND DIRECT
ADMINISTRATIVE AND OTHER EXPENSES
The following table sets forth the percentage of each line item in the
Combined Statements in relation to net revenues. The basis of presentation of
the Combined Statements is disclosed in Note 1 to the Combined Statements
included in this document.
<Table>
<Caption>
2001 2000 1999
---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
Net Revenues........................... $615,300 100.0% $647,200 100.0% $653,600 100.0%
Direct Cost of Products Sold........... 400,000 65.0 421,000 65.0 451,200 69.0
-------- ----- -------- ----- -------- -----
215,300 35.0 226,200 35.0 202,400 31.0
Direct Marketing Expenses.............. 22,700 3.7 39,700 6.2 20,600 3.2
Direct Administrative and Other
Expenses............................. 13,900 2.3 14,400 2.2 14,000 2.1
-------- ----- -------- ----- -------- -----
Excess of Net Revenues Over Direct
Cost of Products Sold, Direct
Marketing Expenses, and Direct
Administrative and Other Expenses.... $178,700 29.0 $172,100 26.6 $167,800 25.7
======== ===== ======== ===== ======== =====
</Table>
YEAR ENDED JUNE 30, 2001 COMPARED TO YEAR ENDED JUNE 30, 2000
NET REVENUES
Net revenues for the year ended June 30, 2001 of $615.3 million were 4.9%
lower than net revenues of $647.2 million for fiscal 2000. Net revenues of the
Jif business decreased $10.7 million due primarily to a decline in Jif Smooth
Sensations volume after its initial launch in 2000. Net revenues of the Crisco
business decreased $21.2 million due primarily to a 5.0% decline in overall
volume.
DIRECT COST OF PRODUCTS SOLD
Direct cost of products sold is driven primarily by material pricing (i.e.,
oils, peanuts and packaging costs). Direct costs of product sold for the year
ended June 30, 2001 of $400.0 million were 5.0% lower than direct costs of
product sold for fiscal 2000 and were flat as a percent of net revenue from 2000
to 2001. This constant margin is primarily due to various cost savings programs
which offset a significant increase in certain material costs. These cost
savings activities included the elimination of losses in the supply chain,
packaging material cost savings and improved manufacturing process reliability.
For Crisco, a decrease of $13.2 million is due primarily to packaging material
cost reductions.
DIRECT MARKETING EXPENSES
Direct marketing costs decreased by $14.8 and $2.2 million from fiscal 2000
to fiscal 2001 for Jif and Crisco, respectively. The Jif decrease is due
primarily to an increase in initiative spending in fiscal 2000 related to the
Smooth Sensations launch. The Crisco decrease is due to increased spending in
fiscal 2000 related to local and regional promotions and the development of the
Crisco.com web site.
EXCESS OF NET REVENUES OVER DIRECT COST OF PRODUCTS SOLD, DIRECT MARKETING
EXPENSES, AND DIRECT ADMINISTRATIVE AND OTHER EXPENSES ("EXCESS CONTRIBUTION")
Excess contribution increased 3.8% from $172.1 million in fiscal 2000 to
$178.7 million in fiscal 2001. This increase was due to a return to Jif's
historical levels of marketing spending and a strategic price increase during
fiscal 2001 offset by a 5.0% decrease in excess contribution of Crisco due
primarily to a decline in sales volume.
43
YEAR ENDED JUNE 30, 2000 COMPARED TO YEAR ENDED JUNE 30, 1999
NET REVENUES
Net revenues of $647.2 million in 2000 decreased less than 1.0% from net
revenues of $653.6 million in fiscal 1999. This decrease resulted from a decline
in Crisco's net revenues of $21.0 million, offset by an increase in Jif's net
revenues of $14.6 million. The decrease in net revenue of Crisco was a result of
a drop in crude edible oil prices and related oil list prices, consistent with
the brands' transparent pricing strategy, partially offset by a 5.0% increase in
overall sales volume in fiscal 2000. The increase in net revenues of Jif
resulted primarily from the June 1999 launch of Jif Smooth Sensations.
DIRECT COST OF PRODUCTS SOLD
Direct cost of products sold for the year ended June 30, 2000 of $421.0
million were $30.2 million lower than direct costs of product sold for fiscal
1999. This decrease resulted from a decrease of direct cost of products sold of
Crisco amounting to $36.9 million partially offset by the volume-related
increase in direct cost of products sold of Jif amounting to $6.7 million. The
decrease for Crisco resulted primarily from cost reduction in edible oils and
also from significant cost savings activities. These cost savings activities
include an improvement in manufacturing process reliability, reduction in
headcount, elimination of losses in the supply chain and packaging material cost
savings programs. From 1999 to 2000, direct cost of products sold as a percent
of net revenues for Jif declined from 67% to 66% driven primarily by a decline
in the cost of peanuts.
DIRECT MARKETING EXPENSES
Direct marketing expenses for the year ended June 30, 2000 of $39.7 million
were approximately $19.1 million higher than expenses in fiscal 1999 of $20.6
million. This increase is due to an increase of Jif direct marketing expenses of
$15.7 million and an increase of Crisco direct marketing expenses of $3.4
million. The Jif increase is due primarily to an increase in initiative spending
in fiscal 2000 related to the Smooth Sensations launch. The Crisco increase in
spending in 2000 is related to local and regional promotions and the development
of the Crisco.com web site.
EXCESS OF NET REVENUES OVER DIRECT COST OF PRODUCTS SOLD, DIRECT MARKETING,
AND DIRECT ADMINISTRATIVE AND OTHER EXPENSES ("EXCESS CONTRIBUTION")
Excess contribution increased 2.6% from $167.8 million in fiscal 1999 to
$172.1 million in fiscal 2000. This increase was due to an increase in Crisco's
sales volume in combination with a decrease in edible oils costs offset by a
decrease in Jif's excess contribution due primarily to increased spending
associated with the Jif Smooth Sensations launch.
SIX MONTHS ENDED DECEMBER 31, 2001 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2000
The following discussion and analysis of the Jif and Crisco businesses'
financial condition and results of operations should be read in conjunction with
the historical financial information included in their unaudited Combined
Statements of Inventory and Property, Plant and Equipment -- Net as of December
31, 2001 and the unaudited Combined Statements of Revenues, Direct Cost of
Products Sold, Direct Marketing Expenses and Direct Administrative and Other
Expenses for the six month periods ended December 31, 2001 and 2000.
44
<Table>
<Caption>
SIX MONTHS ENDED DECEMBER 31,
2001 2000
---------------- ----------------
(DOLLARS IN THOUSANDS)
Net Revenues............................................. $331,200 100.0% $349,800 100.0%
Direct Cost of Products Sold............................. 207,200 62.6 226,500 64.7
-------- ----- -------- -----
124,000 37.4 123,300 35.3
Direct Marketing Expenses................................ 12,900 3.9 12,500 3.6
Direct Administrative and Other Expenses................. 5,300 1.6 7,000 2.0
-------- ----- -------- -----
Excess of Net Revenues Over Direct
Cost of Products Sold, Direct
Marketing Expenses, and Direct
Administrative and Other Expenses...................... $105,800 31.9 $103,800 29.7
======== ===== ======== =====
</Table>
NET REVENUES
Net revenues for the six months ended December 31, 2001 of $331.2 million
were $18.6 million lower than net revenues of $349.8 million for the six months
ended December 31, 2000. This decrease was a result of a decline in Crisco
volume driven primarily by high competitive promotion activity.
DIRECT COST OF PRODUCTS SOLD
As a percent of net revenues, direct cost of products sold for the six
months ended December 31, 2001 of $207.2 million were 2.1% lower than direct
cost of products sold for the same period of the prior year. This decrease was
driven primarily by the effects of edible oil cost management activities and a
decline of Jif direct cost of products sold due primarily to cost savings
initiatives.
EXCESS OF NET REVENUES OVER DIRECT COST OF PRODUCTS SOLD, DIRECT MARKETING
EXPENSES, AND DIRECT ADMINISTRATIVE AND OTHER EXPENSES ("EXCESS CONTRIBUTION")
Excess contribution increased 1.9% from $103.8 million for the six months
ended December 31, 2000 to $105.8 million for the six months ended December 31,
2001. Both the Crisco and Jif businesses contributed to this increase in excess
contribution. The Crisco increase is due primarily to the effects of edible oil
cost management activities and the Jif increase is due primarily to cost savings
from programs initiated in the previous fiscal year.
45
THE MERGER AGREEMENT
SUMMARY OF THE TRANSACTIONS
In connection with the merger, P&G will contribute its Jif and Crisco
businesses to P&G Ohio pursuant to the terms of a contribution agreement. For a
summary of the terms and conditions of the contribution agreement, see "The
Contribution Agreement." After the contribution and immediately prior to the
merger, P&G will spin off P&G Ohio to the shareholders of P&G by distributing
all of the P&G Ohio common shares to P&G shareholders on a pro rata basis. P&G
Ohio will then be merged with and into Smucker in accordance with the terms of a
merger agreement, summarized below. Smucker will be the surviving corporation of
the merger.
GENERAL
The Smucker board of directors has unanimously approved the merger and the
merger agreement. This section of the document describes important provisions of
the merger agreement. This description is not a complete description of the
terms and conditions of the merger agreement and is qualified by reference to
the full text of the merger agreement, a copy of which is attached to this
document as Annex A and is incorporated by reference into this document. Smucker
urges you to read the merger agreement carefully and in its entirety.
TIMING OF CLOSING
The merger will be completed upon the filing of a certificate of merger
with the Secretary of State of the State of Ohio in accordance with Ohio law.
Smucker expects to file the certificate of merger as soon as practicable
following the satisfaction (or waiver, if permissible) of the conditions to the
closing of the merger. A summary of those conditions is set forth below in this
summary under the heading "Conditions to the Completion of the Merger." If the
conditions to the merger are met, Smucker and P&G currently expect that the
merger would be completed during the first or second calendar quarter of 2002.
ARTICLES OF INCORPORATION AND REGULATIONS OF SMUCKER
Following the completion of the merger, Smucker's articles of incorporation
will be in the form of the articles of incorporation attached to this document
as Annex F. For a more complete understanding of the differences between
Smucker's current articles of incorporation and the articles of incorporation of
Smucker following the merger, see "Comparison of the Rights of Smucker
Shareholders Before and After the Merger." Smucker's regulations will not change
as a result of the merger.
BOARD OF DIRECTORS AND OFFICERS OF SMUCKER FOLLOWING THE COMPLETION OF THE
MERGER
Smucker's current directors and officers will continue as the directors and
officers of Smucker following the completion of the merger and will hold office
until their respective successors are duly elected or appointed and qualified in
the manner provided by Smucker's articles of incorporation and regulations in
effect following the merger or as otherwise provided by law.
MERGER CONSIDERATION; CONVERSION OF SHARES
COMMON SHARES OF P&G OHIO
Each issued and outstanding share of P&G Ohio immediately prior to the
closing of the merger (other than P&G Ohio common shares owned by Smucker or any
direct or indirect wholly owned subsidiary of Smucker, except, in each case,
trust accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties, or as to which appraisal rights have been
perfected) will be converted into the right to receive one-fiftieth (1/50th) of
a new Smucker common share. Following the merger, all P&G Ohio common shares
will automatically be canceled and retired and will cease to exist.
46
COMMON SHARES OF SMUCKER
Each Smucker common share issued and outstanding immediately prior to the
closing of the merger will be converted into a number of new Smucker common
shares determined by dividing the number of new Smucker common shares to be
issued to P&G Ohio shareholders in the merger by the number of Smucker common
shares outstanding prior to the merger, and then multiplying that quotient by
0.9033. The above calculation assumes that P&G obtains all of the tax rulings
that it is requesting in connection with the merger.
If, however, P&G does not obtain one or more of those tax rulings, it has
the right to have fewer shares issued to the Smucker shareholders in the merger
in order to avoid the potential negative tax effects that could result from not
obtaining a particular ruling. The consideration to be paid to Smucker
shareholders would in that case be adjusted to reduce the number of new Smucker
common shares they would receive in the merger and by paying those shareholders
a cash payment. The cash payment will be determined based upon the number of
Smucker common shares that P&G believes are necessary to be redeemed to avoid
the potential negative tax effects that could result from not obtaining all of
the requested tax rulings. This cash payment to Smucker shareholders would be
paid on a pro rata basis and P&G would contribute working capital to P&G Ohio
equal to that payment. Currently, it is impossible to determine the exact number
of new Smucker shares to be issued to Smucker shareholders and what cash
payment, if any, they may receive because we cannot determine the number of
Smucker common shares and P&G Ohio common shares that will be outstanding on the
closing date and P&G's tax ruling requests are still pending. The determination
of the number of new Smucker shares and the amount of cash, if any, to be issued
to Smucker shareholders will be based on a formula, which is described below.
For a general description of the conversion of Smucker common shares and
examples of how that conversion might work, see "Summary -- Merger
Consideration" on page of this document.
Each Smucker common share issued and outstanding immediately prior to the
closing of the merger will be converted into the applicable percentage of a new
Smucker common share set forth below and, to the extent that one or more
supplemental tax rulings are not obtained, a cash amount as determined below.
- Applicable percentage. The applicable percentage is a fraction, the
numerator of which is the product obtained by multiplying (i) the
quotient obtained by dividing (A) the total number of new Smucker common
shares to be issued to P&G shareholders in the merger by (B) the sum of
(x) the product obtained by multiplying the total number of Smucker
common shares outstanding immediately prior to the closing of the merger
and 1.1070 and (y) the applicable number (described below), and (ii) the
difference obtained by subtracting the applicable number from the total
number of Smucker common shares outstanding immediately prior to the
effective time of the merger; and the denominator of which is the total
number of Smucker common shares outstanding immediately prior to the
effective time of the merger. The applicable percentage will be expressed
as a decimal and will be rounded to the fourth decimal place.
The applicable number is that number of Smucker common shares that P&G
determines in good faith and in its sole discretion is required to be
effectively redeemed by Smucker in order to, together with the
corresponding adjustment to the applicable percentage set forth above,
avoid the negative tax effects of failing to obtain certain tax rulings
by providing that the holders of P&G Ohio common shares, as a group, and
the holders of Smucker common shares, as a group, receive the same
relative proportion of Smucker common shares to be issued in the merger,
that they would have received if these tax rulings had been obtained. If
P&G obtains all of the tax rulings that it is requesting in connection
with the merger, the applicable number will be zero.
- Cash amount. The cash amount is the quotient obtained by dividing (i)
the product obtained by multiplying (A) the applicable number by (B) a
cash price equal to the average closing price for Smucker common shares
on The New York Stock Exchange for the five trading days ending two
trading days prior to the closing of the merger by (ii) the total number
of Smucker common shares
47
outstanding immediately prior to the closing of the merger. If P&G
obtains all tax rulings that it requests in connection with the merger,
the cash amount will be zero.
EXCHANGE AGENT; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
Prior to the completion of the merger, P&G will appoint a bank or trust
company reasonably acceptable to Smucker to act as the exchange agent for the
merger. Following the merger, Smucker will deposit with the exchange agent
certificates representing new Smucker common shares to be issued to both Smucker
and P&G shareholders. The exchange agent will then make the following
distributions:
- certificates representing new Smucker common shares converted in
accordance with the merger agreement;
- the amount of dividends or other distributions, if any, with a record
date on or after the closing date of the merger that became payable on
the new Smucker common shares since such date; and
- the cash payments, if any, to be paid to Smucker shareholders based on
the results of P&G's requested tax rulings from the IRS.
All P&G Ohio common shares and Smucker common shares outstanding prior to
the closing of the merger will be converted into new Smucker common shares. No
interest will be paid on any funds to be received in the merger.
In lieu of any fractional new Smucker common shares, each P&G Ohio
shareholder or Smucker shareholder who would otherwise have been entitled to a
fraction of a new Smucker common share will receive a cash payment in lieu of
that fractional share.
Holders of current Smucker common shares that fail to perfect their
dissenters' rights in accordance with applicable Ohio law will have their
current Smucker common shares exchanged in accordance with the procedures
described above. For a discussion of the applicable provisions of Ohio law
governing dissenters' rights, see the section of this document entitled "The
Merger -- Dissenters' Rights."
REPRESENTATIONS AND WARRANTIES
Smucker and P&G have made certain customary representations and warranties
in the merger agreement. Some of the most significant of these include, with
respect to each company:
- that it is duly organized, validly existing and in good standing and has
the requisite corporate power and authority to own, lease and operate and
to carry on its businesses and that its businesses (in the case of P&G,
the Jif and Crisco businesses) are duly qualified or licensed;
- that it has the full corporate power and authority to execute and deliver
the merger agreement and related transaction agreements, that the
execution, delivery and performance of the agreements have been properly
authorized, and that, when executed and delivered by the other party,
will be valid and binding obligations;
- subject to some exceptions, the absence of violations or conflicts of its
charter documents or applicable laws, the absence of any governmental
consent or approval and the absence of violations, breaches, or
encumbrances on its assets or agreements (in the case of P&G, the Jif and
Crisco businesses) upon the execution and delivery of the merger
agreement and related transaction agreements;
- its capitalization; and
- the absence of untrue statements or omissions in this document with
respect to the information supplied by it.
48
In addition, Smucker made additional representations to P&G. The most
significant of these additional representations include:
- the timely filing of all registration statements, prospectuses, forms,
reports, and documents and related exhibits required to be filed by it
under the Securities Act or the Exchange Act since December 31, 1998 and
the absence in any such reports or documents of material misstatements or
omissions as of the time of filing;
- the absence of undisclosed liabilities from those set forth on Smucker's
consolidated balance sheet as of April 30, 2001, included in its Form
10-K for the fiscal year ended April 30, 2001;
- the absence of events outside of the ordinary course of its business or
where not material since April 30, 2001;
- the absence of material litigation not otherwise disclosed in its Form
10-K for the fiscal year ended April 30, 2001 or any developments in
pending or threatened litigation that has had or could reasonably be
expected to have a material adverse effect on Smucker;
- the vote required to approve the merger agreement and related
transactions agreements and the transactions contemplated by those
agreement and the recommendation of the board of directors with respect
to the merger;
- the title to properties and assets and the absence of encumbrances on
those properties and assets;
- compliance with applicable laws and possession of permits required for
its operations;
- the existence of insurance coverage in accordance with normal industry
practice for companies engaged in Smucker's business;
- the ownership or right to use its intellectual property;
- the provision to P&G of access to certain employee benefit materials,
agreements, plans and policies and the administration of Smucker's
compensation and benefit plans in accordance with applicable laws;
- the absence of facts which would furnish a substantial basis for or would
reasonably be expected to cause Smucker to recall, withdraw or suspend
its products from the market by the U.S. Food and Drug Administration or
other governmental entity, or to change its marketing classification of
those products, and that none of its products has been recalled at any
time during the past year and there have been no proceedings during the
past year seeking to recall, suspend or seize any of its products;
- that the execution and delivery of the merger agreement and the other
transaction agreements and the consummation of the transactions
contemplated by those agreements will not trigger Smucker's shareholders
rights plan; and
- the absence of actions taken by it or actions failed to be taken by it or
any facts or circumstances of which Smucker is aware that would prevent
the merger from constituting a tax-free reorganization.
The representations and warranties made by each of Smucker and P&G in the
merger agreement will not survive the closing of the merger.
COVENANTS
CONDUCT OF THE JIF AND CRISCO BUSINESSES
Prior to the closing of the merger, P&G has agreed to:
- conduct the Jif and Crisco businesses in all material respects only
according to the ordinary and usual course of business consistent with
past practice;
49
- use its reasonable best efforts to keep available the services of its
employees to be transferred to Smucker in the merger;
- use its reasonable best efforts to maintain satisfactory relationships
with third parties having significant business relationships with the Jif
and Crisco businesses in the ordinary course;
- manage inventory levels consistent with past practice; and
- use its reasonable best efforts to cause the merger to qualify as a
tax-free reorganization and not take any action that could prevent the
merger from so qualifying.
In addition, except as otherwise provided in the merger agreement or with
the prior written consent of Smucker, P&G has agreed to refrain from taking the
following actions (subject to some exceptions for actions taken in the ordinary
course of business or subject to certain negotiated dollar threshold limits):
- the sale, pledge, disposal of, grant, transfer, lease, license,
guarantee, encumbrance, or authorization of those actions with respect to
the Jif and Crisco assets;
- acquiring any interest in the Jif and Crisco assets or incurring any debt
if Smucker would be required to assume that debt upon the completion of
the merger;
- entering into media buy commitments for the Jif and Crisco businesses
through March 2002 in excess of the budgeted amounts previously disclosed
to Smucker;
- except as may be required by law, taking any action that is intended or
may reasonably be expected to result in any of its representations or
warranties set forth in the merger agreement being or becoming untrue in
any material respect at any time prior to the closing of the merger or
any conditions in the merger agreement not being satisfied or in a
violation of any provision of the merger agreement;
- at any time after the record date set for the P&G Ohio spin off and prior
to the closing of the merger, the issuance of any shares of its capital
stock (other than in connection with the exercise of currently
outstanding stock options for P&G common shares) or redeeming or
otherwise acquiring or reclassifying, combining, splitting or subdividing
any shares of its capital stock; and
- agreeing, in writing or otherwise, to take any of the above actions.
CONDUCT OF THE SMUCKER BUSINESS
Prior to the closing, Smucker has agreed to:
- conduct its operations in all material respects according to the ordinary
and usual course of business consistent with past practice; and
- use its reasonable best efforts to cause the merger to qualify as a
tax-free reorganization and not take any actions that could prevent the
merger from so qualifying.
In addition, except as otherwise provided in the merger agreement or with
the prior written consent of P&G, Smucker has agreed to refrain from taking the
following actions (subject to some exceptions for actions taken in the ordinary
course of business or subject to certain negotiated dollar threshold limits)
prior to the closing:
- amending or otherwise changing its articles of incorporation or
regulations;
- the sale, pledge, disposal of, grant, transfer, lease, license,
guarantee, encumbrance or authorization of those actions of, any of its
properties or assets;
- declaring or paying any dividends (other than regular quarterly cash
dividends at a rate not in excess of $0.64 per share per year);
- entering into any agreement with respect to the voting of its capital
stock;
50
- issuing any shares of its capital stock (other than in connection with
the exercise of currently outstanding stock options for Smucker common
shares) or redeeming or otherwise acquiring or reclassifying, combining,
splitting or subdividing any shares of its capital stock;
- acquiring assets or incurring debt;
- except as required by law, taking any action that is intended or may
reasonably be expected to result in any of its representations and
warranties set forth in the merger agreement being or becoming untrue in
any material respect at any time prior to the closing of the merger, or
any conditions in the merger agreement not being satisfied or in a
violation of any provision of the merger agreement; and
- agreeing, in writing or otherwise, to take any of the above actions.
NO SHOPPING
Under the terms of the merger agreement, subject to some exceptions,
Smucker has agreed to:
- refrain from, and cause its affiliates and representatives to refrain
from, directly or indirectly soliciting, initiating, or encouraging any
inquiries or proposals from, discussing or negotiating with, or providing
any non-public information to any person (other than P&G and its
representatives) relating to any competing transaction; and
- promptly advise P&G in writing of the receipt of any inquiries or
proposals relating to a competing transaction, including the identity of
the person submitting that inquiry or proposal and the terms of the
inquiry or proposal.
A competing transaction is:
- any merger, consolidation, share exchange, business combination, or other
similar transaction or series of transactions involving Smucker;
- any sale, lease, exchange, transfer or other disposition (including by
way of merger, consolidation, or share exchange), in a single transaction
or a series of related transactions, of any assets that represent more
than 20% of the book value of Smucker's assets;
- any acquisition by any person or group of persons, directly or
indirectly, of beneficial ownership of that number of Smucker common
shares which, when added to the number of Smucker common shares then
beneficially owned, directly or indirectly, by such person or group of
persons, is 10% or more of the then-outstanding Smucker common shares; or
- any other transaction or series of transactions that would hinder or
delay any of the transactions contemplated by the merger agreement.
NON-COMPETITION
For a period of two years after the closing of the merger, P&G may not,
without Smucker's prior written consent, engage in the manufacturing, packaging,
distributing and marketing within the United States and Canada of the following:
- peanut butter and peanut butter based spreads for human consumption
and/or;
- shortening and/or oil products for human consumption.
Notwithstanding the limitations above, P&G is not restricted from making
any acquisition of or investment in any business or person if the annual net
sales attributable to the competing portion of the acquired business constitutes
less than five percent of the total net sales of such business or person for the
most recently ended fiscal year. If, however, if the annual net sales
attributable to the competing business exceed $25 million for the most recently
ended fiscal year, P&G will sell or otherwise dispose of the
51
restricted businesses in a commercially reasonable manner after the completion
of the acquisition of such business or person.
In addition, these restrictions do not, in any event, apply to P&G's
continuation of its Culinary Sol business or any successor to that business or
to the production and sale by P&G or any successor of any products produced at
P&G's Olestra facility other than packaged goods and oils substantially similar
to the products produced by the Jif and Crisco businesses.
STANDSTILL
For a period of three years after the date of the merger agreement, except
as requested in writing by Smucker, P&G will not propose or publicly announce or
otherwise disclose an intent to propose:
- any form of business combination, acquisition, or other transaction
relating to Smucker;
- any form of restructuring, recapitalization, or similar transaction with
respect to Smucker;
- any demand, request or proposal to amend, waive, or terminate the
standstill provisions;
- to acquire or offer, propose or agree to acquire, by purchase or
otherwise, any Smucker common shares or any options or other rights to
acquire Smucker common shares;
- to make, or in any way participate in, any solicitation of proxies with
respect to any Smucker common shares or any options or other rights to
acquire Smucker common shares (including by the execution of action by
written consent), become a participant in any election contest with
respect to Smucker, seek to influence any person with respect to any such
Smucker common shares or options or other rights, or demand a copy of the
list of Smucker shareholders or other books and records of Smucker;
- to participate in or encourage the formation of any partnership,
syndicate, or other group which owns or seeks or offers to acquire
beneficial ownership of any such Smucker common shares or any options or
other rights to acquire Smucker common shares or which seeks to affect
control of the other party or has the purpose of circumventing any
provision in this section;
- to otherwise act, alone or in concert with others (including by providing
financing for another person), to seek or to offer to control or
influence, in any manner, Smucker management, board of directors, or
Smucker's policies; or
- to make any proposal or other communication designed to compel another
party to make a public announcement in respect of any matter referred to
above.
ACCESS TO INFORMATION; CONFIDENTIALITY
Under the terms of the merger agreement, subject to some exceptions as
described in the merger agreement and subject to the requirements of antitrust
laws, Smucker and P&G have agreed to allow their designated officers, attorneys,
accountants, and other representatives access at reasonable times and upon
reasonable notice to the personnel, records, files, and other information
relating to the business and affairs of the Jif and Crisco businesses and
Smucker, as the case may be, including inspection of their respective properties
in order to facilitate a timely and efficient transition of the operations of
the Jif and Crisco businesses.
Smucker and P&G have agreed to maintain the confidentiality of certain
technical and business information relating to the Jif and Crisco businesses for
a period of three years after the closing of the merger.
COOPERATION IN TAX MATTERS
Under the terms of the merger agreement, following the closing of the
merger, neither Smucker nor its affiliates will take any action, cause any
action to be taken, fail to take any action, or fail to cause any
52
action to be taken, which action or failure to act could cause the merger to
fail to qualify as a reorganization under Section 368(a) of the Internal Revenue
Code or cause gain or loss to be recognized by P&G or the P&G shareholders in
the spin-off. In addition, Smucker and P&G have agreed to cooperate in the
preparation of tax returns and the submissions necessary to obtain a letter
ruling from the IRS relating to the tax effect of the transactions contemplated
by the merger agreement.
TRANSFERRING EMPLOYEES AND RESTRICTIONS ON SOLICITATION AND HIRING
In connection with the merger, Smucker agreed to offer continued
employment, effective from the closing of the merger, to the employees to be
transferred from the Jif and Crisco businesses to Smucker, as soon as reasonably
practicable after the date of the merger agreement. In addition, Smucker agreed
that the terms and conditions of the employment for these employees would be,
with certain specified exceptions, the same in all material respects to the
terms and conditions as in effect immediately prior to the closing of the
merger.
In addition, Smucker agreed to cause the terms and conditions of employment
of these employees not to be changed in a manner that is unfavorable to those
employees for a one-year period after the effective time of the merger.
In addition, Smucker and P&G agreed to use reasonable best efforts to cause
these employees to maintain their employment in the Jif and Crisco businesses.
P&G and P&G Ohio also have agreed to cooperate with Smucker to facilitate the
transition of these employees from the employee benefit plans, programs and
arrangements of P&G and its affiliates to the employee benefit plans, programs
and arrangements of Smucker and its affiliates.
Subject to some exceptions, Smucker also agreed to cause to be extended to
each of these employees full credit for the entire period of continuous service
preceding the closing of the merger rendered to P&G and P&G Ohio as if that
service had occurred with Smucker, for purposes of eligibility to participate
and vesting under any of Smucker's and its affiliates benefit plans, pension,
retirement and/or profit sharing plans, insurance and vacation and for purposes
of determining severance for any Jif or Crisco employee terminated after the
closing of the merger and levels of benefits under any Smucker pension or profit
sharing plan.
In addition to the agreements reached between Smucker and P&G described
above, both parties have agreed to refrain from hiring, soliciting or otherwise
inducing or entering into any form of consulting arrangement or agreement with
certain employees of Smucker, including those employees to be transferred to
Smucker from P&G under the terms of the merger agreement, or P&G for a two-year
period after the date of the merger agreement.
CONDITIONS TO THE COMPLETION OF THE MERGER
The completion of the merger is subject to a number of conditions,
including the following mutual conditions, which must be satisfied or waived:
- obtaining the required approval of the merger agreement by Smucker
shareholders at the special meeting;
- no preliminary or permanent injunction or other order will have been
issued that would make unlawful the consummation of the transactions
contemplated by the merger agreement or the other transaction agreements;
- new Smucker common shares to be issued in the merger have been authorized
for listing on The New York Stock Exchange, subject to notice of official
issuance; and
- all other authorizations of or filings with any governmental entity
required to complete the transactions contemplated by the merger
agreement and the other transaction agreements have been made or
obtained, except where the failure to obtain or make those consents,
authorizations, orders,
53
approvals or filings would not, individually or in the aggregate, have a
material adverse effect on the Jif and Crisco businesses or on Smucker.
In addition, Smucker's obligation to complete the merger is subject to
(unless waived by Smucker):
- all covenants of P&G under the merger agreement and the other transaction
agreements to be performed on or before the closing of the merger will
have been duly performed by P&G in all material respects;
- the representations and warranties of P&G in the merger agreement and of
P&G and The Procter & Gamble Manufacturing Company in the contribution
agreement will be true and correct except where the failure of the
representations and warranties to be true and correct in all material
respects would not in the aggregate have, a Jif/Crisco material adverse
effect (as described below), and Smucker will have received a certificate
of P&G, confirming the matters set forth in this paragraph and the bullet
immediately above;
A Jif/Crisco material adverse effect results from a material adverse effect
on the business, financial condition, operations or results of operations of the
Jif and Crisco businesses taken as a whole or the ability of P&G and P&G Ohio to
consummate the merger and to perform their obligations under the merger
agreement and the other transaction agreements or to consummate the transactions
contemplated by those agreements.
- Smucker will have received a written opinion from its tax advisor, dated
as of the closing date of the merger, to the effect that the merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code;
- the total number of new Smucker common shares that will be issued to
holders of Smucker common shares outstanding immediately prior to the
effective time of the merger will be at least equal to 45% of the new
Smucker common shares issued in the merger; and
- P&G and The Procter & Gamble Manufacturing Company will have performed
all obligations required to be performed by them under the contribution
agreement and the spin off of P&G Ohio from P&G will have been
consummated.
In addition, P&G's obligation to complete the merger is subject to (unless
waived by P&G):
- all covenants of Smucker under the merger agreement and the other
transaction agreements to be performed on or before the closing date of
the merger will have been duly performed by Smucker in all material
respects;
- the representations and warranties of Smucker will be true and correct
except where the failure of the representations and warranties to be true
and correct in all respects would not in the aggregate have a Smucker
material adverse effect (as described below), and P&G will have received
a certificate of Smucker confirming the matters set forth in this
paragraph and the bullet immediately above;
A Smucker material adverse effect results from a material adverse effect on
the business, financial condition, operations or results of operations of
Smucker and its subsidiaries taken as a whole or the ability of Smucker to
consummate the merger and to perform their obligations under the merger
agreement and the other transaction agreements or to consummate the transactions
contemplated by those agreements.
- P&G will have received a written opinion, dated as of the closing date of
the merger, from its tax counsel to the effect that the merger will be
treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code;
- P&G will have received a letter ruling from the Internal Revenue Service,
reasonably satisfactory to P&G to the effect that:
54
- no gain or loss will be recognized by (and no amount will be
includible in the income of) the P&G shareholders as a result of the
spin off of P&G Ohio from P&G pursuant to Section 355(a) of the
Internal Revenue Code;
- no gain will be recognized by P&G as a result of the spin-off of P&G
Ohio from P&G pursuant to Section 361(c)(1) of the Internal Revenue
Code;
- consummation of the merger will not adversely affect the rulings
described in the immediately preceding two bullets;
- for purposes of applying Section 355(e) of the Internal Revenue Code
to the spin-off of P&G Ohio from P&G, new Smucker shares will be
considered to have one vote per share for all periods after the
merger; and
- for purposes of determining whether the merger qualifies as a
reorganization under Section 368(a)(1)(A) of the Internal Revenue
Code, the merger will be respected as a separate transaction
occurring after the distribution of P&G Ohio in the spin-off;
provided that the condition described in this bullet will be deemed
satisfied if P&G has received written advice from the Internal
Revenue Service, reasonably satisfactory to P&G, to the same effect
and that written advice clearly indicates that the only reason the
Internal Revenue Service is not providing a favorable formal ruling
is because the request does not raise a significant issue within the
meaning of Section 3.01(29) of Rev. Proc. 2001-3 and that issuing a
formal ruling would violate the Revenue Procedure's prohibition
against "comfort rulings;" and
- the amount of cash to be paid to Smucker's shareholders in connection
with the merger if certain tax rulings requested by P&G are not received
will not be greater than $50 million. For a more complete description of
the payment of the cash amount, see "The Merger Agreement -- Merger
Consideration; Conversion of Shares -- Common Shares of Smucker."
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to the closing of
the merger:
- by the mutual written consent of Smucker and P&G;
- by either Smucker or P&G, if:
- any order by any governmental entity preventing or prohibiting
consummation of the transactions contemplated by the merger
agreement and the other transaction agreements will have become
final and nonappealable;
- the merger has not occurred prior to June 30, 2002, unless failure
of the merger to have occurred by that date is due to the failure of
the party seeking to terminate the merger agreement to perform or
observe in all material respects the covenants and agreements of
that party set forth in the merger agreement;
- Smucker shareholders fail to adopt the merger agreement at the
special meeting.
- by Smucker (provided that Smucker is not then in material breach of any
covenant, representation or warranty or other agreement contained in the
merger agreement), if there has been a breach by P&G of any of its
representations, warranties, covenants or agreements contained in the
merger agreement or of P&G and The Procter & Gamble Manufacturing Company
in the contribution agreement, or any of those representations and
warranties will have become untrue, in either case such that the
conditions related to Smucker's obligation to complete the merger with
respect to P&G's covenants and representations and warranties would be
incapable of being satisfied, and such breach or condition has not been
cured within 30 days following receipt by Smucker of notice of that
breach;
55
- by P&G, if:
- there has been a breach by Smucker of any of its representations,
warranties, covenants, or agreements contained in the merger
agreement, or any of those representations and warranties will have
become untrue, in either case, such that the conditions related to
P&G's obligation to complete the merger with respect to Smucker's
covenants and representations and warranties would be incapable of
being satisfied, and that breach or condition has not been cured
within 30 days following receipt by P&G of notice of that breach; or
if P&G's condition to complete the merger with respect to its
receipt of a letter ruling from the Internal Revenue Service is
incapable of being satisfied provided that P&G is not then in
material breach of any covenant, representation, or warranty or
other agreement contained in the merger agreement;
- the board of directors of Smucker has not recommended or has
modified its recommendation that Smucker shareholders adopt the
merger agreement or fails to confirm that recommendation within
seven business days of P&G's request; or
- on or prior to the effective date of the merger, the product of (i)
0.5254 times (ii) the aggregate number of new Smucker common shares
to be issued in the merger multiplied by (iii) the average closing
price of Smucker common shares on The New York Stock Exchange for
the preceding fifteen trading days ending two trading days prior to
the closing date of the merger is less than $715 million.
EFFECT OF TERMINATION; TERMINATION FEES
If P&G or Smucker terminates the merger agreement in accordance with the
provisions described above, the merger agreement will become void and there will
be no liability on the part of P&G or Smucker, except to the extent the
termination results from the material breach by P&G or Smucker of any of its
covenants or agreements set forth in the merger agreement.
If P&G terminates the merger agreement because the board of directors of
Smucker has not recommended or has modified its recommendation that Smucker
shareholders adopt the merger agreement or fails to confirm that recommendation
within seven business days of P&G's request, Smucker will pay to P&G a
termination fee of $20 million within one business day of the termination of the
merger agreement.
If P&G terminates the merger agreement because Smucker shareholders fail to
adopt the merger agreement at the special meeting and a competing transaction
has been publicly announced prior to the special meeting, Smucker will pay P&G a
termination fee of $10 million within one business day of the termination of the
merger agreement.
56
THE CONTRIBUTION AGREEMENT
SUMMARY OF THE TRANSACTIONS
In connection with the merger, P&G will contribute its Jif and Crisco
businesses to P&G Ohio pursuant to the terms of the contribution agreement
summarized below. After the contribution and immediately prior to the merger,
P&G will spin off P&G Ohio by distributing all of the P&G Ohio common shares to
P&G shareholders on a pro rata basis. P&G Ohio will then be merged with and into
Smucker in accordance with the terms of a merger agreement. For a summary of the
terms of the merger agreement, see "The Merger Agreement" beginning on page
.
GENERAL
The following is a summary of the important terms of the contribution
agreement and is qualified by reference to the complete text of the contribution
agreement, which is incorporated by reference and attached to this document as
Annex B. You should read the contribution agreement carefully and in its
entirety.
CONTRIBUTION AND TRANSFER OF THE JIF AND CRISCO BUSINESSES AND THE ASSUMPTION OF
LIABILITIES
Under the terms of the contribution agreement, on the closing date of the
merger but prior to the spin-off of P&G Ohio and prior to the filing of the
certificate of merger, P&G will convey, assign, transfer and deliver to P&G Ohio
all of P&G's right, title, and interest in the Jif and Crisco assets. P&G Ohio
will assume only certain specified liabilities and P&G will retain all
liabilities relating to the Jif and Crisco businesses not specifically assumed
in the contribution agreement.
The Jif and Crisco assets include:
- P&G's books, records and other documents, and any related copyrights
(including, without limitation, customer and supplier lists and files;
distribution lists; mailing lists; sales materials; operating,
production, and other manuals; plans; files; specifications; process
drawings; computer programs data and information; manufacturing and
quality control records and procedures; research and development files;
and advertising and promotional materials) used exclusively in the Jif
and Crisco businesses;
- the claims, interests, rights and benefits of P&G arising after the
closing date under the contracts which are exclusively related to the Jif
and Crisco businesses to be conveyed and transferred to P&G Ohio;
- certain specified equipment relating to the Jif and Crisco businesses;
- certain specified trademarks relating to the Jif and Crisco businesses,
including the Jif and Crisco trademarks;
- the goodwill exclusively related to the Jif and Crisco businesses;
- all right, title and interest in or to the improved and unimproved land
specified in the contribution agreement and all buildings, structures,
erections, improvements, appurtenances, and fixtures situated on or
forming part of that land;
- all maintenance supplies, spare parts, raw materials, inventory, finished
products, goods-in-process, and packaging supplies which are exclusively
used in connection with the Jif or Crisco businesses, or are of the
character of inventory identified on the balance sheet to the audited
statements of the Jif and Crisco businesses previously provided to
Smucker;
- all licenses, permits, approvals, variances, waivers or consents, to the
extent transferable without consent, issued by any governmental entity
exclusively related to the Jif or Crisco businesses;
57
- the domain names related to the Jif and Crisco businesses as specified in
the contribution agreement, as well as the look and feel of the
corresponding internet sites;
- certain specified patents plus any of P&G's non-patented formulations,
trade secrets, process knowledge, and technological and manufacturing
know-how, in each case, exclusively used in the Jif or Crisco businesses
as of the closing of the merger;
- to the extent that P&G does not obtain certain tax rulings that it is
requesting in connection with the merger and, as a result, a cash payment
is required to be made to Smucker shareholders pursuant to the terms of
the merger agreement, P&G will contribute additional working capital in a
form reasonably acceptable to Smucker in an aggregate amount equal to any
such required cash payment; and
- all assets exclusively related to the Jif and Crisco businesses of the
nature set forth on the audited statements of the Jif and Crisco
businesses previously provided to Smucker other than those assets
exclusively related to P&G's Culinary Sol business.
The Jif and Crisco assets being contributed and transferred to P&G Ohio do
not include P&G's Culinary Sol business except for a patent used in the Culinary
Sol business which will be contributed to P&G Ohio and licensed back to P&G.
After completion of the merger, P&G will continue to own and operate its
Culinary Sol business.
The liabilities assumed by P&G Ohio include the following:
- all liabilities arising out of or related to the ownership or operation
of the Jif and Crisco businesses after the closing of the merger;
- all liabilities for product liability and product warranty for products
of the Jif and Crisco businesses manufactured by or for P&G Ohio or
Smucker after the closing of the merger;
- the following environmental liabilities of the Jif and Crisco businesses:
- all of those environmental liabilities disclosed to P&G Ohio and
Smucker in the contribution agreement (Smucker is not currently
aware of any material environmental liabilities of the Jif and
Crisco business that will be assumed by Smucker upon the completion
of the merger);
- the initial $1 million of undisclosed environmental liabilities;
- 20% of undisclosed environmental liabilities in excess of $1 million
but less than $32.5 million;
- 100% of undisclosed environmental liabilities in excess of $32.5
million; and
- all environmental liabilities arising from actions occurring after
the closing of the merger.
- all liabilities for taxes arising out of or related to the operation of
the Jif and Crisco businesses after the closing of the merger, ownership
of the Jif and Crisco businesses after the closing of the merger, and the
assumption of the liabilities assumed by P&G Ohio pursuant to the
contribution agreement;
- all liabilities and obligations of P&G Ohio set forth in the agreements
entered into in connection with the merger;
- all liabilities of P&G arising after the merger pursuant to any contract
assumed by P&G Ohio pursuant to the contribution agreement;
- all liabilities after the closing of the merger for administration and
redemption of coupons of the Jif and Crisco businesses, except for
certain coupons distributed before the closing of the merger and redeemed
at P&G's coupon redemption center within 60 days after the closing of the
merger;
- all liabilities for returns of products of the Jif and Crisco businesses
shipped prior to the closing of the merger, but returned after the
closing, as well as for any products shipped after the closing of the
merger;
58
- all obligations related to the employees to be transferred to P&G Ohio
arising due to facts and circumstances occurring after the closing of the
merger;
- all out-of-pocket costs incurred by P&G arising out of the continued
performance of certain specified contracts of the Jif and Crisco
businesses not being assumed by P&G Ohio; and
- the liabilities and obligations of the Jif and Crisco businesses set
forth on the audited statements for the Jif and Crisco businesses
previously provided to P&G Ohio and Smucker, less payments thereon and
discharges thereof prior to the effective date of the merger.
P&G will retain all of the liabilities and obligations of the Jif and
Crisco businesses not expressly assumed by P&G Ohio in the contribution
agreement.
REPRESENTATIONS AND WARRANTIES
The contribution agreement contains representations and warranties by P&G.
Some of the most significant of these include:
- the organization and good standing of P&G with respect to the Jif and
Crisco businesses;
- the full corporate power and authority of P&G to execute and deliver the
contribution agreement and to consummate the transactions contemplated by
the agreement and the enforceability of the contribution agreement
against P&G;
- the good working condition of the equipment to be transferred and
conveyed to P&G Ohio, except where not material and on a "where is" and
"as is" basis;
- environmental matters;
- the absence of infringements of the trademarks to be transferred to P&G
Ohio and the absence of certain claims or actions with respect to
intellectual property;
- the absence of litigation with respect to the Jif and Crisco businesses;
- good title to, or valid leasehold interests in, the Jif and Crisco assets
to be contributed to P&G Ohio;
- the absence of violations of laws, rules or regulations, orders,
judgments or decrees, or the organizational documents of P&G;
- compliance with laws;
- the enforceability of contracts to be transferred and contributed to P&G
Ohio;
- certain regulatory and employee benefit matters related to the Jif and
Crisco businesses;
- the operation in the ordinary course and the absence of changes to the
Jif and Crisco businesses since June 30, 2001; and
- the merchantable quality, and the usable and salable nature of the
inventory to be transferred and conveyed to P&G Ohio.
Most of P&G's representations and warranties will survive the effective
date of the merger for a period of 18 months. However, P&G's representations and
warranties that relate to its authority and authorization to enter into the
contribution agreement, its organization and standing, and the absence of
violations of laws or breaches of its organizational documents, that will
survive indefinitely. In addition, P&G's representations and warranties made
with respect to environmental matters and its good title to and valid leasehold
interest in the Jif and Crisco assets to be contributed to P&G Ohio will survive
for five years from the closing of the merger.
59
COVENANTS
Each of P&G and P&G Ohio (and, after the merger, Smucker) have agreed to
take certain actions after signing the contribution agreement. Some of the most
significant of these include the following:
- for a period of three years after the closing of the merger, P&G and
Smucker will cooperate with each other with respect to third-party
litigation arising in connection with the Jif and Crisco businesses;
- the allocation of duties, expenses, and responsibilities with respect to
the assignment of intellectual property;
- except as specifically set forth in the contribution agreement, Smucker
will not operate the Jif and Crisco businesses utilizing, based on or
taking advantage of the name, reputation or corporate goodwill of P&G and
Smucker will cease use of packaging, advertising, sales and promotional
material bearing any of P&G's corporate names, product identification
numbers or consumer information telephone numbers beginning six months
after the effective date of the merger;
- that immediately prior to the closing of the merger, any employee that
will transfer from P&G to P&G Ohio pursuant to the terms of the merger
agreement will cease to be an employee of P&G and will automatically
become an employee of P&G Ohio;
- P&G will remain liable for redemption of and administrative costs related
to certain disclosed coupons that are distributed before, but redeemed at
P&G's coupon redemption center no later than 60 days after the effective
date of the merger; and
- Smucker will assume responsibility for all returns of products of the Jif
and Crisco businesses shipped prior to, but returned after, the closing
of the merger, as well as all products of the Jif and Crisco businesses
shipped after the effective date of the merger.
INDEMNIFICATION AND ARBITRATION
Each of P&G and P&G Ohio (and, after the merger, Smucker) has agreed to
defend, indemnify and hold the other harmless from and against all claims,
losses, liabilities, damages, costs, and expenses (including, without
limitation, reasonable fees and expenses of attorneys incurred in investigation
or defense of any third-party action, but excluding fees, costs and expenses of
attorneys, accountants, consultants and other experts and witnesses incurred in
the investigation or prosecution of any non-third-party action) arising out of
or related to any liabilities not assumed by P&G Ohio (and, after the merger,
Smucker) with respect to P&G and assumed by P&G Ohio (and, after the merger,
Smucker) with respect to P&G Ohio or a breach of a representation or warranty
(except with respect to P&G's representations and warranties related to
environmental matters, which are covered separately) or covenant of the other
set forth in the contribution agreement.
Each of P&G's and P&G Ohio's (and, after the merger, Smucker's) aggregate
liability arising out of or related to breaches of representations and
warranties is limited to the amount by which those liabilities exceed $20
million, and in no event will either party's aggregate liability exceed $120
million. In any event, P&G and P&G Ohio (and, after the merger, Smucker) may
only bring a claim or action for breaches of representations and warranties if
the amount of that claim or action exceeds $100,000. Environmental liabilities
are treated separately as described above.
Neither P&G nor P&G Ohio (and, after the merger, Smucker) will be permitted
to recover any consequential, indirect or punitive damages arising out of or
related to the contribution agreement. In addition, each of P&G and P&G Ohio has
agreed to submit their disputes relating to the merger and the related
transaction documents to arbitration.
60
THE SHAREHOLDERS AGREEMENT
The following is a summary of the material terms of the shareholders
agreement between P&G and those Smucker shareholders set forth below and is
qualified by reference to the complete text of the agreement, which is
incorporated by reference and attached to this document as Annex C. You should
read the shareholders agreement carefully and in its entirety.
The following sets forth a list of the Smucker shareholders that are a
party to the shareholders agreement with P&G, the capacity in which each
shareholder executed the shareholders agreement, and the position, if any, that
the shareholder holds with Smucker.
<Table>
<Caption>
NAME CAPACITY(IES) TITLE
---- ---------------------------------------- ----------------------------------
Timothy P. Smucker Individually Chairman and Co-Chief
Trustee, Reid S. Smucker Revocable Trust Executive Officer, and Director
Trustee, Sarah L. Smucker Revocable
Trust
Trustee, Protected Trust and Exempt
Trust
FBO Timothy P. Smucker
Trustee, Willard E. Smucker Trust FBO
Marcella S. Clark
Trustee, Willard E. Smucker Foundation
Jennifer C. Smucker Individually
Trustee, Timothy P. Smucker Trust FBO
John Enoch Smucker
Richard K. Smucker Individually President and Co-Chief
Trustee, Protected Trust and Exempt Executive Officer, and Director
Trust
FBO Julie E. Smucker
Trustee, Willard E. Smucker Foundation
Emily D. Smucker Individually
Custodian, Julie E. Smucker UGMA
Lorraine E. Smucker Trustee, Lorraine E. Smucker Personal
Trust
Susan S. Wagstaff Individually
Trustee, Protected Trust and Exempt
Trust
FBO Susan S. Wagstaff
Custodian, Kimberly A. Wagstaff UGMA
H. Reid Wagstaff Individually
Mrs. Marcella S. Clark Individually
</Table>
AGREEMENT TO VOTE AND PROXY
In connection with the merger, P&G and the Smucker shareholders set forth
above entered into a shareholders agreement. On February 8, 2002, these
shareholders beneficially owned in the aggregate 5,741,651 Smucker common
shares. These shares represented approximately 52% of the voting power of
Smucker common shares outstanding on February 8, 2002, based on Smucker's
current best estimate of the voting power of these shareholders under Smucker's
current time phase voting structure.
Under the terms of the shareholders agreement, these Smucker shareholders
agreed that, until the shareholders agreement is terminated, they would vote or
consent or cause to be voted, and grant P&G a proxy to vote, their shares:
- in favor of the issuance of new Smucker common shares pursuant to the
merger and the adoption of the merger agreement (including any amendment
to Smucker's governing documents that is necessary or desirable in order
to consummate the merger) and, to the extent that a vote is solicited in
connection with the voting agreement or the merger agreement, any other
action required or desirable in furtherance of the voting agreement or
the merger agreement;
61
- against approval of any action, agreement or proposal that would result
in a breach of any representation, warranty, covenant, or obligation of
Smucker in the merger agreement or that would delay or hinder the
consummation of the merger or that would preclude fulfillment of a
condition precedent under the merger agreement to Smucker's, P&G's or P&G
Ohio's obligation to consummate the merger; and
- against approval of any action, agreement, or proposal made in opposition
to or in competition with the issuance of new Smucker common shares
pursuant to the merger and the consummation of the merger, including,
without limitation, any competing transaction or superior proposal.
In addition, each of the Smucker shareholders granted to P&G a proxy to
vote that Smucker shareholder's shares in accordance with the foregoing.
RESTRICTIONS ON TRANSFER
Each Smucker shareholder that is a party to the voting agreement also
agreed that from the date of the voting agreement until its termination, the
shareholder will not, directly or indirectly:
- transfer any or all of his, her, or its Smucker common shares or any
interest in them, except pursuant to the terms of the merger agreement;
- grant any proxy or power of attorney, deposit any Smucker common shares
into a voting trust or enter into a voting agreement or arrangement with
respect to that shareholder's shares, except as provided in the voting
agreement; or
- take any other action that would make any representation or warranty of
the Smucker shareholder contained in the voting agreement untrue or
incorrect or have the effect of preventing or disabling that shareholder
from performing that shareholder's obligations under the voting
agreement.
In addition the voting agreement provides that, to the extent these Smucker
shareholders are already bound by an agreement requiring them to transfer their
shares to another person or entity, the shareholder will not effect that
transfer unless, prior to the transfer, the shareholder causes the transferee to
be bound by and to execute an agreement in the form of the voting agreement with
respect to the shares to be transferred.
Subject to certain exceptions for the receipt of certain restricted stock
awards and the receipt and exercise of Smucker stock options granted by Smucker
to employees, officers, and directors, the Smucker shareholders bound by the
shareholders agreement are also prohibited from purchasing or acquiring record
or beneficial ownership of any additional Smucker common shares (or warrants or
options to acquire Smucker common shares) for two years after the effective date
of the merger, or entering into any agreement or commitment to purchase Smucker
common shares or warrants or options to acquire Smucker common shares for the
same two-year period.
STANDSTILL
In addition, the Smucker shareholders that are a party to the shareholders
agreement agreed that they would not solicit, initiate, or encourage any
inquiries or proposals from, discuss or negotiate with, or provide any
non-public information to any person relating to any transaction regarding a
competing transaction. For a detailed description of a competing transaction,
see "The Merger Agreement -- No Shopping."
TERMINATION
The shareholders agreement, other than the restrictions on transfer set
forth above that last for two years from the date of the shareholders agreement,
will terminate upon the earlier to occur of:
- the completion of the merger; and
- the termination of the merger agreement in accordance with its terms.
62
ANCILLARY AGREEMENTS
In connection with the merger, Smucker and P&G have entered into or will
enter into additional agreements in order to aid in the transfer and transition
of the Jif and Crisco businesses from P&G to Smucker. These agreements include a
transitional services agreement and a manufacturing plant separation agreement.
Smucker and P&G will also enter into a tax sharing agreement
TRANSITIONAL SERVICES AGREEMENT
In connection with the merger, Smucker and P&G entered into a transitional
services agreement to provide for certain transitional services for the Jif and
Crisco businesses. Under the terms of the agreement, P&G agreed to provide to
Smucker the following services:
SHORT-TERM TRANSITIONAL SERVICES
For a period not to exceed six months following the merger, P&G has agreed
to provide Smucker with short-term transitional services that Smucker may only
terminate after the first three months that these services are provided. Smucker
has agreed to pay a fee related to some of these short-term transitional
services, including, among others, order placements, product shipments, purchase
orders and bills of ladings, accounts receivable, payments to buyers and
suppliers, new data management, consumer relation services, information
technology services, and sales support. Smucker will be provided some short-
term transitional services free of charge, including, among others,
informational meetings to discuss the products and P&G's marketing plans for the
brands, sending letters to P&G's customers notifying them of the merger of the
Jif and Crisco businesses into Smucker, and various other informational and
marketing meetings.
CRISCO LONG-TERM MANUFACTURING SERVICES
In addition to the short-term transitional services, P&G agreed to provide
Smucker with certain long-term manufacturing services related to the Crisco
manufacturing facility for a period of at least 30 months following the merger.
These services include providing Smucker with steam, access to P&G's conveying
facilities to move finished product cases to the warehouse located at P&G's
Ivorydale manufacturing site, the warehousing of finished products, nitrogen,
and use of P&G's rail scale for weighing Smucker's incoming rail cars. In
addition, P&G agreed to use commercially reasonable efforts to assign to Smucker
the existing hydrogen service contract between P&G and its supplier.
CRISCO TRANSITION MANUFACTURING SERVICES
In addition, P&G agreed to provide additional services pertaining to the
Crisco manufacturing plant on a transitional basis and to assist Smucker in
maintaining production while Smucker acquires the capacity to provide these
services independently. These services included power, sewer and water,
compressed air, and process control systems separation.
MANUFACTURING PLANT SEPARATION AGREEMENT
Smucker and P&G have agreed to enter into a manufacturing plant separation
agreement in order to separate certain physical components and services that
currently serve both the Crisco manufacturing facility and P&G's other
facilities and operations located at P&G's Ivorydale, Ohio facility.
SEPARATION
Under the terms of the agreement, P&G will agree to undertake certain
separation projects in order to effectuate the physical separation of the Crisco
manufacturing facility from P&G's other operations. In addition, P&G will agree
to provide the Crisco manufacturing facility with certain services. The services
to be provided are substantially similar to those currently available to and
used by the Crisco manufacturing facility. The parties' intention in making such
services available is to ensure that the Crisco manufacturing
63
facility can be operated in accordance with its operations as conducted on the
date of the manufacturing plant separation agreement.
In addition, P&G will agree to develop a master separation plan addressing,
timing, physical interfaces, compatibility, separation, standards and other
details to execute and implement each of the separation projects contemplated by
the agreement in order to minimize the impact and disruptions to Smucker's and
P&G's operations and processes. P&G will select its own individual contractors
to perform the separation project work at the Crisco manufacturing facility and
will use reasonable efforts to obtain standard commercial warranties from each
of those contractors with respect to the work to be done. Those warranties will
be assigned to Smucker. P&G, however, will not be obligated to perform any work
off of the site of the Crisco manufacturing facility or any work that may
interfere or can be expected to interfere with P&G's operation of its
businesses.
The parties will also agree to permit reasonable access and necessary
easements to the other to perform their obligations under the agreement and,
with respect to the easements, to allow the other to continue to operate its
respective plant.
SEPARATION COSTS
P&G will agree to bear the costs and expenses exclusively related to the
separation projects contemplated by the agreement. The costs and expenses of
P&G's separation projects will include the engineering, construction, and other
direct costs and expenses of the separation and certain other expenses, where
required.
INDEMNIFICATION
Smucker and P&G will defend, indemnify and hold the other harmless from and
against:
- all claims, losses, liabilities, damages, costs, and expenses arising out
of or related to a breach of their respective duties, obligations, or
representations or warranties under the agreement;
- certain claims, losses, liabilities, damages, costs, and expenses related
to personal injuries of their respective employees; and
- all costs and expenses incurred in connection with the successful
enforcement of any of their respective rights provided in this section.
Neither Smucker nor P&G may recover any consequential, indirect, or
punitive damages arising out of or related to the agreement. In addition,
neither party will be entitled to indemnification unless their liabilities
exceed $100,000, and in no event will their aggregate liability exceed $12
million. In addition, neither party can bring a claim unless that claim exceeds
$10,000.
TERM
The manufacturing plant separation agreement will commence upon the
completion of the merger and will remain in effect no longer than 18 months
after the completion of the merger, unless the term is extended by the parties.
TERMINATION
The manufacturing plant separation agreement may be terminated prior to the
end of the term by the consent of both Smucker and P&G. In addition the
agreement may be terminated by either Smucker or P&G (if they themselves are not
in default) upon written notice to the other upon:
- a breach by one party of any of its obligations under the agreement, and
the breach is not cured or started to cure within 30 business days after
receipt of notice of that default; or
64
- the filing by or against a party of a petition in bankruptcy, or any
appointment of a receiver for a party or any substantial part of its
assets, or any assignment for the benefit of a party's creditors, or upon
a party becoming insolvent.
TAX SHARING AGREEMENT
In order to allocate the responsibilities for taxes for P&G Ohio and
certain other tax matters, Smucker and P&G will enter into a tax sharing
agreement. Under the terms of the agreement, P&G will agree to be responsible
for and to indemnify and hold harmless Smucker from any liability for taxes of
P&G Ohio with respect to all taxable periods or portions of periods ending prior
to the spin-off of P&G Ohio and any taxes of P&G or any member of the P&G group
by reason of P&G Ohio being severally liable for those taxes pursuant to
Internal Revenue regulations. Smucker will agree to be responsible for and to
indemnify P&G for any taxes of P&G Ohio arising out of or resulting from any
transaction or event occurring after the spin-off of P&G Ohio that is not in the
ordinary course of business or specifically contemplated by the merger agreement
or resulting from any breach of any obligation or covenant of Smucker under the
terms of the tax sharing agreement; and except for some exceptions, any taxes of
P&G Ohio in respect of the time period prior to the closing resulting from the
completion of the merger. In addition, Smucker will agree to be responsible for
and to indemnify P&G for all taxes of Smucker and P&G Ohio with respect to the
period of time after the completion of the merger.
In addition to the allocation of liability for P&G Ohio taxes, P&G and
Smucker will agree on other matters with respect to other tax issues, including
refunds and tax benefits, the allocation of tax benefits, the preparation of tax
returns, the exchange of information, and tax contests.
In addition to the foregoing, P&G will agree to pay any and all liability
for any taxes resulting from any income or gain recognized by P&G as a result of
the spin off of P&G Ohio failing to qualify for tax-free treatment under certain
provisions of the Internal Revenue Code and Treasury regulations, and sales and
use, gross receipts, or other transfer taxes imposed on the transfers occurring
pursuant to the spin off of P&G Ohio. Smucker will agree to be liable for and to
indemnify P&G for certain actions taken by Smucker or actions failed to be taken
by Smucker that could jeopardize the tax-free nature of the spin-off of P&G Ohio
and for certain events occurring after the merger involving stock or assets of
Smucker that could cause the spin-off to be taxable to P&G.
65
COMPARISON OF THE RIGHTS OF SMUCKER
SHAREHOLDERS BEFORE AND AFTER THE MERGER
If the merger is completed, Smucker's articles of incorporation will be in
the form attached as Annex F to this document and incorporated by reference into
this document. Those articles differ from our current articles in that holders
of new Smucker common shares will have time phase voting rights only with
respect to specified matters submitted to Smucker shareholders.
Under the new articles of incorporation, except as set forth below, each
outstanding new Smucker common share will entitle the holder to one vote on each
matter properly submitted to the shareholders for their approval, including any
vote or consent for the election or removal of Smucker's directors.
Notwithstanding the foregoing, each outstanding new Smucker common share
will entitle the holder to ten votes on each of the following matters properly
submitted to the shareholders, to the extent those matters are required to be
submitted to the shareholders under the Ohio Revised Code, any provisions of the
new articles of incorporation, the regulations of Smucker, or stock exchange
rules, or are otherwise submitted or presented to Smucker's shareholders for
their approval:
- any matter that relates to or would result in the dissolution or
liquidation of Smucker, whether voluntary or involuntary, and whether
pursuant to Section 1701.86 or 1701.91 of the Ohio Revised Code or
otherwise;
- the adoption of any amendment of the new articles of incorporation, or
the regulations of Smucker, or the adoption of amended articles of
incorporation, other than the adoption of any amendment or amended
articles of incorporation that increases the number of votes to which
holders of Smucker common shares are entitled or expand the matters to
which this section applies;
- any proposal or other action to be taken by the shareholders of Smucker,
whether or not proposed by the shareholders of Smucker, and whether
proposed by authority of the board of directors of Smucker or otherwise,
relating to Smucker's rights agreement or any successor plan;
- any matter relating to any stock option plan, stock purchase plan,
executive compensation plan, or other similar plan, arrangement, or
agreement;
- adoption of any agreement or plan of or for the merger, consolidation, or
majority share acquisition of Smucker or any of its subsidiaries with or
into any other person, whether domestic or foreign, corporate, or
noncorporate, or the authorization of the lease, sale, exchange, transfer
or other disposition of all, or substantially all, of Smucker's assets;
- any matter submitted to Smucker's shareholders pursuant to Article Fifth
or Article Seventh of the new articles of incorporation, as they may be
further amended, or any issuance of shares of Smucker for which
shareholder approval is required by applicable stock exchange rules; and
- any matter relating to the issuance of Smucker shares, or the repurchase
of Smucker shares that Smucker's board of directors determines is
required or appropriate to be submitted to Smucker's shareholders under
the Ohio Revised Code or applicable stock exchange rules.
Each new Smucker common share issued in the merger will entitle the holder
to ten votes on each of the matters listed above. Upon a change of beneficial
ownership of that share, the new holder will be entitled to only one vote on the
matters listed above until that holder has held that share for four years
without a further change in beneficial ownership.
In addition, the new articles of incorporation will increase the authorized
number of shares from 73,000,000 to 156,000,000, the serial preferred shares
without par value from 3,000,000 to 6,000,000 and the common shares from
70,000,000 to 150,000,000. Smucker's board of directors would be permitted to
increase or decrease these amounts without shareholder approval, to the extent
permitted by Section 1701 of the Ohio Revised Code. Smucker has no current
intention to issue any additional shares above the amount needed for the merger.
66
The new articles of incorporation permit Smucker's board of directors to
set the voting rights of serial preferred shares. The new articles of
incorporation will also change the number of Series A Junior Participating
Preferred Shares from 700,000 to 1,500,000.
Other than the differences described above, the rights of new Smucker
shareholders will remain the same as the rights of current Smucker shareholders.
Smucker's regulations will not change as a result of the merger.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Smucker's
consolidated financial statements, incorporated by reference or included in its
Annual Report on Form 10-K for the year ended April 30, 2001, as set forth in
their reports, which are incorporated by reference in this document and in the
registration statement of which this document forms a part. Smucker's
consolidated financial statements are incorporated by reference in reliance on
Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
The combined statements of inventory and property, plant and equipment --
net as of June 30, 2001 and 2000 and the combined statements of revenues, direct
cost of products sold, direct marketing expenses and direct administrative and
other expenses of the Jif and Crisco businesses of The Procter & Gamble Company
for each of the three years in the period ended June 30, 2001 included in this
document have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
The validity of the new Smucker common shares offered hereby will be passed
upon for Smucker by Steven J. Ellcessor, Esq., Vice President -- Finance and
Administration, Secretary and General Counsel of Smucker. As of June 15, 2001,
Mr. Ellcessor beneficially owned 70,527 Smucker common shares, which included
restricted stock and/or shares covered by outstanding options of 46,668 shares.
Mr. Ellcessor disclaimed beneficial ownership of 604 shares.
TAX MATTERS
Certain matters regarding the U.S. federal income tax consequences of the
merger will be passed upon for Smucker by Ernst & Young LLP.
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS
All proposals submitted by shareholders who wish those proposals be
considered for inclusion in the proxy materials for the 2002 annual meeting of
Smucker shareholders must be received by Smucker by March 12, 2002. Shareholder
proposals not included in the proxy materials for the 2002 annual meeting of
Smucker shareholders must each comply with advance notice procedures set forth
in Smucker's regulations in order to be brought properly before that meeting. In
general, the shareholder must:
- be a shareholder of record at the time Smucker gives notice for the
annual meeting;
- be entitled to vote at the annual meeting; and
- have given timely notice in writing to Smucker's corporate secretary. To
be timely the shareholder notice must be received by Smucker's corporate
secretary by May 11, 2002.
In addition to the timing requirements, the advance notice provisions of
Smucker's regulations contain informational content requirements that also must
be met. In general, a shareholder notice to Smucker's
67
corporate secretary must set forth, as to each matter the shareholder proposes
to bring before the annual meeting, the following:
- a description of the business desired to be brought before the annual
meeting and the reasons for conducting that business at the annual
meeting;
- the shareholder's name and address, as they appear on Smucker's books;
- the class and number of shares beneficially owned by the shareholder; and
- any material interest the shareholder has in the business desired to be
brought before the annual meeting.
A copy of the regulation provisions governing these timing procedures and
content requirements may be obtained by writing to the corporate secretary of
Smucker.
Unless shareholder proposals meet the requirements set forth above, the
persons named in the proxies solicited on behalf of the Smucker board of
directors will have discretionary authority to vote on and may vote against any
such shareholder proposal.
WHERE YOU CAN FIND MORE INFORMATION
Smucker files annual, quarterly and current reports, proxy and registration
statements and other information with the SEC. You may read and copy any
reports, statements, or other information that Smucker files at the SEC's public
reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Smucker's public filings are
also available to the public from commercial document retrieval services and at
the Internet World Wide Web site maintained by the SEC at "www.sec.gov."
Reports, proxy statements and other information concerning Smucker also may be
inspected at the offices of The New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
Smucker has filed a registration statement on Form S-4 to register with the
SEC the new Smucker common shares to be issued in the merger. This document is a
part of that registration statement and constitutes a prospectus of Smucker and
a proxy statement of Smucker for purposes of the Smucker special meeting.
As allowed by SEC rules, this document omits certain information contained
in the registration statement or the exhibits to the registration statement. Any
statements contained in this document concerning the provisions of any other
document are not necessarily complete and, in each instance, reference is made
to the copy of such document filed as an exhibit to the registration statement
or otherwise filed with the SEC. Each statement is qualified in its entirety by
such reference.
The SEC allows Smucker to incorporate by reference information into this
document, which means that it can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this document, except for any
information superseded by information contained directly in this document. This
document incorporates by reference the documents set forth below that Smucker
has previously filed with the SEC. These documents contain important information
about Smucker.
68
SMUCKER SEC FILINGS
<Table>
<Caption>
(FILE NO. 1-05111) PERIOD
- ------------------ ---------------------------------------------
Annual Report on Form 10-K Year ended April 30, 2001 (filed on July 24,
2001)
Quarterly Reports on Form 10-Q Quarter ended July 31, 2001 (filed on
September 12, 2001); Quarter ended October
31, 2001 (filed on December 7, 2001)
Current Reports on Form 8-K Filed on October 12, 2001 and November 16,
2001
Proxy Statement describing Smucker common
shares, including any amendments or reports
filed for the purpose of updating
such description Dated July 14, 2000 (filed on July 11, 2000)
</Table>
Smucker also incorporates by reference additional documents that it may
file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 between the date of this document and the date of the
special meeting. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well as
registration statements and proxy statements.
Smucker has supplied all information contained or incorporated by reference
into this document relating to Smucker, and P&G has supplied all such
information relating to P&G and its respective affiliates and brands.
You can obtain a copy of any document incorporated by reference into this
document except for the exhibits to those documents from Smucker. You may also
obtain these documents from the SEC or through the SEC's Internet World Wide Web
site described above. Documents incorporated by reference are available from
Smucker without charge, excluding all exhibits unless specifically incorporated
by reference as an exhibit into this document. You may obtain documents
incorporated by reference into this document by requesting them in writing or by
telephone from Smucker at the following address:
The J. M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attention: Investor Relations
(330) 682-3000
If you would like to request documents, please do so by March , 2002 to
receive them before the Smucker special meeting. If you request any of these
documents from us we will mail them to you by first-class mail, or similar
means.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE INTO THIS DOCUMENT IN VOTING YOUR SHARES AT THE SMUCKER SPECIAL
MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS
DIFFERENT FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED
FEBRUARY , 2002. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THE
DOCUMENT IS ACCURATE AS OF ANY OTHER DATE, AND NEITHER THE MAILING OF THIS
DOCUMENT TO SMUCKER'S SHAREHOLDERS NOR THE ISSUANCE OF NEW SMUCKER COMMON SHARES
IN THE MERGER WILL CREATE ANY IMPLICATION TO THE CONTRARY.
69
INDEX TO FINANCIAL STATEMENTS
<Table>
THE J. M. SMUCKER COMPANY
Unaudited Condensed Combined Pro Forma Balance Sheet as
of October 31, 2001................................... F-3
Unaudited Condensed Combined Pro Forma Statement of
Operating Income Excluding Indirect Expenses of the
Jif and Crisco Businesses for the six months ended
October 31, 2001...................................... F-4
Unaudited Condensed Combined Pro Forma Statement of
Operating Income Excluding Indirect Expenses of the
Jif and Crisco Businesses for the year ended April 30,
2001.................................................. F-5
Notes to Unaudited Condensed Combined Pro Forma
Financial Statements.................................. F-6
JIF AND CRISCO BUSINESSES
Independent Auditors' Report........................... F-8
Combined Statements of Inventory and Property, Plant
and Equipment -- Net as of June 30, 2001 and 2000..... F-9
Combined Statements of Revenues, Direct Cost of
Products Sold, Direct Marketing Expenses and Direct
Administrative and Other Expenses for the years ended
June 30, 2001, 2000 and 1999.......................... F-10
Notes to the Statements................................ F-11
Combined Statement of Inventory and Property, Plant and
Equipment -- Net as of December 31, 2001
(unaudited)........................................... F-14
Combined Statements of Revenues, Direct Cost of
Products Sold, Direct Marketing Expenses and Direct
Administrative and Other Expenses for the six months
ended December 31, 2001 and 2000 (unaudited).......... F-15
Notes to the Statements (unaudited).................... F-16
</Table>
F-1
UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS
The following unaudited condensed combined pro forma financial statements
and related notes have been prepared to give effect to the merger. The merger is
being accounted for as a purchase business combination as defined by Financial
Accounting Standards No. 141, Business Combinations (SFAS 141). Smucker is the
accounting acquirer for the merger.
In accordance with Article 11 of Regulation S-X under the Securities Act,
the following unaudited condensed combined pro forma financial statements of
Smucker are presented as if the merger had been completed as of October 31, 2001
for the unaudited condensed combined pro forma balance sheet and on May 1, 2000
for the unaudited condensed combined pro forma statement of operating income
excluding indirect expenses of the Jif and Crisco businesses. The unaudited
condensed combined pro forma balance sheet combines the unaudited "Condensed
Consolidated Balance Sheet" of Smucker as of October 31, 2001 with the unaudited
"Combined Statement of Inventory and Property, Plant and Equipment -- Net," for
the Jif and Crisco businesses as of December 31, 2001. The unaudited condensed
combined pro forma statements of operating income excluding indirect expenses of
the Jif and Crisco businesses combine information from the "Statement of
Consolidated Income" of Smucker, for the year ended April 30, 2001 and the
unaudited "Condensed Statement of Consolidated Income" for the six-month period
ended October 31, 2001, with the "Combined Statements of Revenues, Direct Cost
of Products Sold, Direct Marketing Expenses and Direct Administrative and Other
Expenses" for the Jif and Crisco businesses, for the year ended June 30, 2001
and the unaudited "Combined Statement of Revenues, Direct Cost of Products Sold,
Direct Marketing Expenses and Direct Administrative and Other Expenses" for the
six-month period ended December 31, 2001, respectively.
The unaudited condensed combined pro forma financial statements should be
read in conjunction with the historical financial statements of Smucker which
are incorporated by reference into this document and with the "Combined
Statements of Inventory and Property, Plant and Equipment -- Net" and "Combined
Statements of Revenue, Direct Cost of Products Sold, Direct Marketing Expenses
and Direct Administrative and Other Expenses" for the Jif and Crisco businesses,
included in this document.
THE UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS ARE
PROVIDED FOR ILLUSTRATIVE PURPOSES ONLY, DO NOT INCLUDE THE INDIRECT EXPENSES OF
THE JIF AND CRISCO BUSINESSES, AND ARE NOT NECESSARILY INDICATIVE OF THE
OPERATING RESULTS OR FINANCIAL POSITION THAT WOULD HAVE OCCURRED IF THE MERGER
HAD BEEN CONSUMMATED AT THE BEGINNING OF THE PERIODS OR ON THE DATES INDICATED,
NOR ARE THEY NECESSARILY REFLECTIVE OF ANY FUTURE OPERATING RESULTS OR FINANCIAL
POSITION. The unaudited condensed combined pro forma financial statements do not
include any adjustments related to any potential cost savings or one-time
charges, including integration costs, which may result from the merger of the
Jif and Crisco businesses into Smucker. These unaudited condensed combined pro
forma financial statements reflect a preliminary allocation of purchase price
which is subject to change based on finalization of the fair value of the
tangible and intangible assets acquired and liabilities assumed as of the date
of closing. Smucker currently expects that the process of determining the fair
value of the tangible and intangible assets acquired (including independent
appraisals) and liabilities assumed will be completed within one year of the
date of closing.
F-2
THE J. M. SMUCKER COMPANY
UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
OCTOBER 31, 2001
<Table>
<Caption>
OCTOBER 31, 2001 DECEMBER 31, 2001
SMUCKER JIF/CRISCO ADJUSTMENTS PRO FORMA
---------------- ----------------- ----------- ----------
(IN THOUSANDS)
ASSETS
Current Assets
Cash and cash equivalents......... $ 33,218 $ 33,218
Trade receivables, less
allowances..................... 60,627 60,627
Inventories:
Finished products.............. 55,373 $ 19,100 $ 6,000(1) 80,473
Raw materials, containers and
supplies..................... 77,043 11,500 88,543
-------- -------- -------- ----------
132,416 30,600 6,000 169,016
Other current assets.............. 14,381 14,381
-------- -------- -------- ----------
Total Current Assets................ 240,642 30,600 6,000 277,242
Property, plant and
equipment -- net.................. 171,086 92,200 27,660(2) 290,946
Other noncurrent assets
Intangible assets................. 11,250 280,000(3) 328,583
37,333(4)
Goodwill.......................... 32,359 450,871(5) 483,230
Other assets...................... 33,070 33,070
-------- -------- ----------
Total Other Noncurrent Assets....... 76,679 768,204 844,883
-------- -------- -------- ----------
Total Assets........................ $488,407 $122,800 $801,864 $1,413,071
======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable.................. $ 34,111 $ 34,111
Other current liabilities......... 44,918 $ 10,000(6) 54,918
-------- -------- ----------
Total Current Liabilities........... 79,029 10,000 89,029
Noncurrent liabilities
Long-term debt.................... 135,000 135,000
Other noncurrent liabilities...... 21,021 136,887(7) 157,908
-------- -------- ----------
Total Noncurrent Liabilities........ 156,021 136,887 292,908
Shareholders' equity................ 253,357 777,777(8) 1,031,134
-------- -------- ----------
Total Liabilities and Shareholders
Equity............................ $488,407 $924,664 $1,413,071
======== ======== ==========
</Table>
F-3
THE J. M. SMUCKER COMPANY
UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATING INCOME
EXCLUDING INDIRECT EXPENSES OF THE JIF AND CRISCO BUSINESSES
SIX MONTHS ENDED OCTOBER 31, 2001
<Table>
<Caption>
SIX MONTHS ENDED
------------------------------------
OCTOBER 31, 2001 DECEMBER 31, 2001
SMUCKER JIF/CRISCO ADJUSTMENTS PRO FORMA
---------------- ----------------- ----------- ---------
(IN THOUSANDS)
Net sales............................. $342,636 $331,200 $ $673,836
Cost of products sold................. 229,636 207,200 1,320(9) 438,156
-------- -------- ------- --------
113,000 124,000 (1,320) 235,680
Selling, distribution, and
administrative expenses............. 82,992 18,200 1,244(10) 101,787
(649)(11)
-------- -------- ------- --------
Operating income excluding indirect
expenses of the Jif and Crisco
businesses.......................... $ 30,008 $105,800 $(1,915) $133,893
======== ======== ======= ========
</Table>
F-4
THE J. M. SMUCKER COMPANY
UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATING INCOME
EXCLUDING INDIRECT EXPENSES OF THE JIF AND CRISCO BUSINESSES
YEAR ENDED APRIL 30, 2001
<Table>
<Caption>
YEAR ENDED
------------------------------
APRIL 30, 2001 JUNE 30, 2001
SMUCKER JIF/CRISCO ADJUSTMENTS PRO FORMA
-------------- ------------- ----------- ----------
(IN THOUSANDS)
Net sales................................. $651,242 $615,300 $ $1,266,542
Cost of products sold..................... 438,480 400,000 2,640(9) 841,120
-------- -------- ------- ----------
212,762 215,300 (2,640) 425,422
Selling, distribution, and administrative
expenses................................ 155,973 36,600 2,488(10) 193,392
(1,669)(11)
Nonrecurring charge....................... 2,152 -- -- 2,152
-------- -------- ------- ----------
Operating income excluding indirect
expenses of the Jif and Crisco
businesses.............................. $ 54,637 $178,700 $(3,459) $ 229,878
======== ======== ======= ==========
</Table>
F-5
THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
PURCHASE PRICE
These unaudited condensed combined pro forma financial statements reflect a
preliminary allocation of purchase price which is subject to change based on
finalization of the fair values of the tangible and intangible assets acquired
and liabilities assumed as of the date of closing. The preliminary estimated
fair value of the Jif and Crisco assets assumed in the merger are as follows:
<Table>
Tangible assets at fair value............................... $ 156,460
Identifiable intangible assets.............................. 37,333
Identifiable intangible assets with indefinite lives........ 280,000
Excess of purchase price over the fair values of net assets
acquired.................................................. 450,871
Liabilities assumed......................................... (146,887)
---------
Total purchase price........................................ $ 777,777
=========
</Table>
The excess of the purchase price over the fair value of net assets acquired
has been classified as goodwill.
PRO FORMA ADJUSTMENTS
The following adjustments were made to the unaudited condensed combined pro
forma financial statements:
(1) Represents the preliminary adjustment to record Jif and Crisco
inventories at estimated fair values.
(2) Represents the preliminary adjustment to record Jif and Crisco
property, plant, and equipment at estimated fair values.
(3) Represents the preliminary adjustment to record intangible assets with
indefinite lives, primarily trademarks, at estimated fair values.
(4) Represents the preliminary adjustment to record amortizable intangible
assets at estimated fair values.
(5) Represents the preliminary adjustment to record the excess of purchase
price over the fair value of net assets acquired.
(6) Adjustment to accrue direct merger costs.
(7) Represents deferred income taxes at a tax rate of 39% resulting from
fair value adjustments made to the net assets acquired.
(8) Reflects the impact of issuing approximately 25.9 million Smucker
common shares at an average price of approximately $30 per share. The
price represents the average closing price of Smucker common shares
for the three days prior to and the three days subsequent to the
announcement of the merger. Smucker intends to account for the share
or share and cash exchange with the existing Smucker shareholders as
an equity transaction in the period that the exchange occurs.
(9) Represents the incremental depreciation expense resulting from the
preliminary adjustment to record Jif and Crisco property, plant,
equipment at estimated fair values using the straight-line method and
assuming an average estimated useful life of ten years.
F-6
THE J. M. SMUCKER COMPANY
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL
STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
(10) Represents the incremental amortization expense resulting from the
preliminary adjustment to record Jif and Crisco amortizable intangible
assets at estimated fair values utilizing the straight-line method and
assuming an average estimated useful life of 15 years.
(11) The expenses relate to the Culinary Sol business of Jif and Crisco
which will not be acquired by Smucker.
The combined Pro Forma Financial Statements do not include
non-recurring charges related to the integration of the Jif and Crisco
businesses with Smucker after the merger. It is anticipated that
Smucker will incur a one-time charge to earnings of approximately $10
to $15 million in connection with this integration. Integration
activities include, but are not limited to, information systems
configuration and implementation, training, initial reallocation of
inventory, and UPC label conversion.
In addition to the integration activities, it will be necessary to
undertake certain separation projects to effectuate the physical
separation of the Crisco manufacturing facility from P&G's other
operations. P&G will bear the costs and expenses exclusively related
to the separation projects. The costs and expenses of P&G's separation
projects will include the engineering, construction and other direct
costs and expenses of the separation.
In addition, P&G will continue to provide the Crisco manufacturing
facility with certain utilities and services. The cost of such
services are included in the historical financial information of the
Jif and Crisco businesses and, accordingly, although Smucker will
reimburse P&G for these services (approximately $15 to $20 million
annually) such reimbursement is not shown as a pro forma adjustment.
F-7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Management of
The Procter & Gamble Company:
We have audited the accompanying combined statements of inventory and
property, plant, and equipment -- net of the Crisco and Jif Businesses of The
Procter & Gamble Company ("Procter & Gamble") (the "Crisco and Jif Businesses")
as of June 30, 2001 and 2000 and the related combined statements of revenues,
direct cost of products sold, direct marketing expenses and direct
administrative and other expenses for each of the three years in the period
ended June 30, 2001 (collectively, the "Statements"). The Statements include the
accounts of the Crisco and Jif Businesses. These businesses are under common
ownership and common management. The Statements are the responsibility of
Procter & Gamble management. Our responsibility is to express an opinion on the
Statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the Statements referred to above. We believe that our audit
provides a reasonable basis for our opinion.
The operations covered by the Statements referred to above are part of
Procter & Gamble and have no separate legal status. As described in Note 1 to
the Statements, Basis of Presentation, the Statements referred to above have
been prepared from Procter & Gamble's consolidated financial records and
allocations of certain costs and expenses have been made. These allocations are
not necessarily indicative of the costs and expenses that would have been
incurred by the Crisco and Jif Businesses on a stand-alone basis. These
Statements are not intended to be a complete presentation of the financial
position and results of operations of the Crisco and Jif Businesses.
In our opinion, the Statements referred to above present fairly, in all
material respects, the combined inventory and property, plant and equipment -
net of the Crisco and Jif Businesses as of June 30, 2001 and 2000 and the
combined revenues, direct cost of products sold, direct marketing expenses and
direct administrative and other expenses for each of the three years in the
period ended June 30, 2001 in conformity with accounting principles generally
accepted in the United States of America.
/S/ DELOITTE & TOUCHE LLP
Cincinnati, Ohio
November 5, 2001
F-8
THE CRISCO & JIF BUSINESSES OF THE PROCTER & GAMBLE COMPANY
COMBINED STATEMENTS OF INVENTORY AND PROPERTY, PLANT AND EQUIPMENT -- NET
AS OF JUNE 30, 2001 AND 2000
<Table>
<Caption>
JUNE 30,
---------------------
2001 2000
--------- ---------
(IN THOUSANDS)
INVENTORY:
Materials and supplies.................................... $ 9,900 $ 15,400
Work in process........................................... 3,700 6,200
Finished goods............................................ 21,600 27,700
--------- ---------
TOTAL INVENTORY............................................. $ 35,200 $ 49,300
========= =========
PROPERTY, PLANT AND EQUIPMENT -- NET:
Land...................................................... $ 1,500 $ 1,500
Buildings................................................. 21,900 21,300
Machinery and equipment................................... 172,000 168,500
Construction work in progress............................. 2,900 9,500
--------- ---------
198,300 200,800
Accumulated depreciation.................................. (108,500) (107,100)
--------- ---------
TOTAL PROPERTY, PLANT AND EQUIPMENT -- NET.................. $ 89,800 $ 93,700
========= =========
</Table>
See accompanying notes to the Statements.
F-9
THE CRISCO & JIF BUSINESSES OF THE PROCTER & GAMBLE COMPANY
COMBINED STATEMENTS OF REVENUES, DIRECT COST OF PRODUCTS
SOLD, DIRECT MARKETING EXPENSES AND DIRECT ADMINISTRATIVE AND
OTHER EXPENSES FOR THE YEARS ENDED JUNE 30, 2001, 2000 AND 1999
<Table>
<Caption>
YEAR ENDED JUNE 30,
------------------------------
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)
REVENUES:
Revenues.................................................. $658,800 $691,900 $696,300
Less: Coupon expense and other pricing allowances......... 43,500 44,700 42,700
-------- -------- --------
Net revenues........................................ 615,300 647,200 653,600
DIRECT COST OF PRODUCTS SOLD................................ 400,000 421,000 451,200
-------- -------- --------
EXCESS OF NET REVENUES OVER
DIRECT COST OF PRODUCTS SOLD.............................. 215,300 226,200 202,400
DIRECT MARKETING EXPENSES................................... 22,700 39,700 20,600
DIRECT ADMINISTRATIVE AND OTHER EXPENSES.................... 13,900 14,400 14,000
-------- -------- --------
EXCESS OF NET REVENUES OVER
DIRECT COST OF PRODUCTS SOLD, DIRECT
MARKETING EXPENSES, AND DIRECT
ADMINISTRATIVE AND OTHER EXPENSES......................... $178,700 $172,100 $167,800
======== ======== ========
</Table>
See accompanying notes to the Statements.
F-10
THE CRISCO & JIF BUSINESSES OF THE PROCTER & GAMBLE COMPANY
NOTES TO THE STATEMENTS
1. BASIS OF PRESENTATION
On October 9, 2001, The Procter & Gamble Company ("Procter & Gamble")
entered into a definitive agreement to merge the Crisco ("Crisco") and Jif
("Jif") Businesses (the "Crisco and Jif Businesses") with the J. M. Smucker
Company in an all-stock transaction. Crisco produces shortening and oil products
that are manufactured at a Procter & Gamble plant located in Cincinnati, Ohio
("Ivorydale Plant") and Jif produces peanut butter products that are
manufactured at a Procter & Gamble plant located in Lexington, Kentucky
("Lexington Plant"). Procter & Gamble does not account for Crisco and Jif as
separate entities. Accordingly, the information included in the accompanying
combined statements of inventory and property, plant and equipment -- net as of
June 30, 2001 and 2000 and the related combined statements of revenues, direct
cost of products sold, direct marketing expenses and direct administrative and
other expenses for each of the three years in the period ended June 30, 2001
(collectively, the "Statements") has been derived from Procter & Gamble's
consolidated financial records.
With respect to Crisco, for purposes of these Statements, direct cost of
products sold is defined as the direct costs of the raw and packing materials
used to manufacture Crisco products, direct manufacturing expenses related to
the production of Crisco products incurred at the Ivorydale Plant, the effects
of hedging activities, plus delivery costs (including allocated warehousing
costs). Manufacturing expenses primarily include direct costs of manufacturing;
however, certain costs are based on allocations (including items such as
facilities management, information technology support, site human resources) as
the Ivorydale Plant is shared with other Procter & Gamble businesses. The costs
are allocated based on factors such as level of effort, headcount and square
footage.
With respect to Jif, for purposes of the Statements, direct cost of
products sold is defined as the direct costs of the raw and packing materials
used to manufacture Jif products, direct manufacturing expenses incurred at the
Lexington Plant, plus delivery costs (including allocated warehousing costs).
In addition, the Statements include allocations of certain Procter & Gamble
administrative and other expenses that are allocated to Crisco and Jif based on
the number of employees, including an estimate of actual time and effort spent.
Procter & Gamble management believes these allocations are reasonable; however,
these allocated costs may not necessarily be indicative of costs that would have
been incurred by Crisco and Jif on a stand-alone basis, since these allocated
costs are based on the structure of the plants' operations and related
activities, as managed and operated by Procter & Gamble.
The property, plant and equipment included in the Statements as described
in Note 2, Summary of Significant Accounting Policies, represent the assets used
in producing Crisco products at the Ivorydale Plant and the assets used in
producing Jif products at the Lexington Plant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY -- Inventories are valued at cost, which is not in excess of
current market price. Cost is primarily determined by the average cost or the
first-in, first-out method. Certain raw materials are valued using the last-in,
first-out ("LIFO") method. The combined replacement cost of Crisco and Jif LIFO
inventories exceeded carrying value by approximately $5.3 million and $6.4
million at June 30, 2001 and 2000, respectively. During each of the years in the
three year period ended June 30, 2001, certain raw material inventory quantities
were reduced. The effect of such liquidations was to decrease direct cost of
products sold by approximately $1.3 million for the year ended June 30, 2001 and
to increase direct cost of products sold by approximately $0.1 million and $0.1
million for the years ended June 30, 2000 and 1999, respectively.
PROPERTY, PLANT AND EQUIPMENT -- NET -- Property, plant and equipment
primarily represents Procter & Gamble's original cost basis of land, buildings
and machinery and equipment used to manufacture Crisco and Jif products, less
accumulated depreciation. Depreciation is computed using the straight-line
F-11
method over the estimated useful lives of the assets which range from 3 to 50
years. Procter & Gamble periodically evaluates any possible impairments of
long-lived assets in accordance with the Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of."
REVENUES -- Revenues represent gross revenues less sales deductions,
returns and allowances. Revenues from the sale of products are recognized when
risk and title passes to the customer, which generally occurs upon shipment of
the product.
COUPON EXPENSE AND OTHER PRICING ALLOWANCES -- Coupon expense represents
deductions from revenues for coupons related to products. Coupon expense is
based on expected redemption rates of issued coupons based on historical data.
Other pricing allowances represent deductions from revenues for incentive
discounts provided to customers other than normal sales discounts.
DIRECT COST OF PRODUCTS SOLD -- Direct cost of products sold is defined as
the direct costs of the raw and packing materials used to manufacture Crisco and
Jif products, direct manufacturing expenses related to the production of Crisco
products at the Ivorydale Plant and the production of Jif products at the
Lexington Plant, the effects of hedging activities, plus delivery costs
(including allocated warehousing costs). With respect to Crisco products,
manufacturing expenses primarily include direct costs of manufacturing; however,
certain costs are based on allocations (including items such as facilities
management, information technology support and site human resources) as the
Ivorydale Plant is shared with other Procter & Gamble businesses. The costs are
allocated based on factors such as level of effort, headcount and square
footage.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- Effective July 1, 2000,
Procter & Gamble adopted Financial Accounting Standard No. 133, "Accounting for
Derivative Instruments and Hedging Activities," ("FAS 133") as amended, which
requires that all derivative instruments be reported on the balance sheet at
fair value and establishes criteria for designation and effectiveness of hedging
relationships. The cumulative effect of adopting FAS 133 as of July 1, 2000 was
not material to the Statements.
Raw materials used by Procter & Gamble are subject to price volatility
caused by weather, supply conditions, political and economic variables and other
unpredictable factors. To manage the volatility related to forecasted inventory
purchases, Procter & Gamble uses futures and options with maturities generally
less than one year. These instruments are generally designated as cash flow
hedges. The mark-to-market gain or loss on qualifying hedges is included in
other comprehensive income to the extent effective, and reclassified into direct
cost of products sold in the period during which the hedged transaction affects
earnings. Qualifying cash flow hedges deferred in other comprehensive income as
of June 30, 2001 were not material. These amounts will be reclassified into
earnings as the underlying transactions are recognized, generally less than one
year. The mark-to-market gains or losses on non-qualifying, excluded and
ineffective portions of hedges are recognized in direct cost of products sold
immediately. No cash flow hedges were discontinued during the year ended June
30, 2001.
DIRECT MARKETING EXPENSES -- Direct marketing expenses represent
specifically identified promotional, advertising, and other marketing expenses
related to the Crisco and Jif Businesses.
DIRECT ADMINISTRATIVE AND OTHER EXPENSES -- Direct administrative and other
expenses relate to fully dedicated resources that support the operations of
Crisco and Jif. Certain expenses are specifically identifiable and others are
allocated to Crisco and Jif based on the number of employees, including an
estimate of actual time and effort spent. These direct expenses do not include
support organizations such as human resources, legal, and non-fully dedicated
resources including sales and transactional accounting. As such, the Statements
do not include any indirect selling, administrative, or research expenses.
USE OF ESTIMATES - The preparation of the Statements requires management to
make estimates and assumptions that affect the amounts reported in the
Statements and accompanying disclosures. Although these estimates are based on
management's best knowledge of current events and actions Procter & Gamble may
undertake in the future, actual results ultimately may differ from the
estimates.
F-12
3. MAJOR CUSTOMER
The Crisco and Jif Businesses have one customer (Wal-Mart and its
affiliates, "Wal-Mart") with net revenues exceeding 10% of total net revenues
with respect to both businesses. Net revenues from Wal-Mart as a percent of
total net revenues were approximately 19%, 17% and 14% for the years ended June
30, 2001, 2000 and 1999, respectively.
F-13
THE CRISCO & JIF BUSINESSES OF THE PROCTER & GAMBLE COMPANY
COMBINED STATEMENT OF INVENTORY AND PROPERTY, PLANT
AND EQUIPMENT -- NET AS OF DECEMBER 31, 2001 (UNAUDITED)
<Table>
<Caption>
DECEMBER 31, 2001
-----------------
(IN THOUSANDS)
INVENTORY:
Materials and supplies.................................... $ 7,700
Work in process........................................... 3,800
Finished goods............................................ 19,100
---------
TOTAL INVENTORY............................................. $ 30,600
=========
PROPERTY, PLANT AND EQUIPMENT -- NET:
Land...................................................... $ 1,500
Buildings................................................. 23,700
Machinery and equipment................................... 180,700
Construction work in progress............................. 1,700
---------
207,600
Accumulated depreciation.................................. (115,400)
---------
TOTAL PROPERTY, PLANT AND EQUIPMENT -- NET.................. $ 92,200
=========
</Table>
See accompanying notes to the Statements (unaudited).
F-14
THE CRISCO & JIF BUSINESSES OF THE PROCTER & GAMBLE COMPANY
COMBINED STATEMENTS OF REVENUES, DIRECT COST OF PRODUCTS
SOLD, DIRECT MARKETING EXPENSES AND DIRECT ADMINISTRATIVE AND
OTHER EXPENSES FOR THE SIX MONTHS ENDED
DECEMBER 31, 2001 AND 2000 (UNAUDITED)
<Table>
<Caption>
DECEMBER 31,
-------------------
2001 2000
-------- --------
(IN THOUSANDS)
REVENUES:
Revenues.................................................. $356,400 $372,700
Less: Coupon expense and other pricing allowances......... 25,200 22,900
-------- --------
Net revenues...................................... 331,200 349,800
DIRECT COST OF PRODUCTS SOLD................................ 207,200 226,500
-------- --------
EXCESS OF NET REVENUES OVER
DIRECT COST OF PRODUCTS SOLD.............................. 124,000 123,300
DIRECT MARKETING EXPENSES................................... 12,900 12,500
DIRECT ADMINISTRATIVE AND OTHER EXPENSES.................... 5,300 7,000
-------- --------
EXCESS OF NET REVENUES OVER
DIRECT COST OF PRODUCTS SOLD, DIRECT
MARKETING EXPENSES, AND DIRECT
ADMINISTRATIVE AND OTHER EXPENSES......................... $105,800 $103,800
======== ========
</Table>
See accompanying notes to the Statements (unaudited).
F-15
THE CRISCO & JIF BUSINESSES OF THE PROCTER & GAMBLE COMPANY
NOTES TO THE STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
On October 9, 2001, P&G entered into a definitive agreement to merge the
Jif and Crisco businesses with Smucker in an all-stock transaction. Crisco
produces shortening and oil products that are manufactured at a P&G plant
located in Cincinnati, Ohio ("Ivorydale Plant") and Jif produces peanut butter
products that are manufactured at a P&G plant located in Lexington, Kentucky
("Lexington Plant"). P&G does not account for Crisco and Jif as separate
entities. Accordingly, the information included in the accompanying combined
statements of inventory and property, plant and equipment -- net as of December
31, 2001 and the related combined statements of revenues, direct cost of
products sold, direct marketing expenses and direct administrative and other
expenses for the six months ended December 31, 2001 and 2000 (collectively, the
"Statements") has been derived from P&G's consolidated financial records.
With respect to Crisco, for purposes of these Statements, direct cost of
products sold is defined as the direct costs of the raw and packing materials
used to manufacture Crisco products, direct manufacturing expenses related to
the production of Crisco products incurred at the Ivorydale Plant, the effects
of hedging activities, plus delivery costs (including allocated warehousing
costs). Manufacturing expenses primarily include direct costs of manufacturing;
however, certain costs are based on allocations (including items such as
facilities management, information technology support, site human resources) as
the Ivorydale Plant is shared with other P&G businesses. The costs are allocated
based on factors such as level of effort, headcount and square footage.
With respect to Jif, for purposes of the Statements, direct cost of
products sold is defined as the direct costs of the raw and packing materials
used to manufacture Jif products, direct manufacturing expenses incurred at the
Lexington Plant, plus delivery costs (including allocated warehousing costs).
In addition, the Statements include allocations of certain P&G
administrative and other expenses that are allocated to Jif and Crisco based on
the number of employees, including an estimate of actual time and effort spent.
P&G management believes these allocations are reasonable; however, these
allocated costs may not necessarily be indicative of costs that would have been
incurred by Jif and Crisco on a stand-alone basis, since these allocated costs
are based on the structure of the plants' operations and related activities, as
managed and operated by P&G.
The property, plant and equipment included in the Statements as described
in Note 2, Summary of Significant Accounting Policies, represent the assets used
in producing Crisco products at the Ivorydale Plant and the assets used in
producing Jif products at P&G's Lexington Plant.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY -- Inventories are valued at cost, which is not in excess of
current market price. Cost is primarily determined by the average cost or the
first-in, first-out method. Certain raw materials are valued using the last-in,
first-out ("LIFO") method. The combined replacement cost of Jif and Crisco LIFO
inventories exceeded carrying value by approximately $4.7 million at December
31, 2001. During the six months ended December 31, 2001 and 2000, certain raw
material inventory quantities were reduced. The effect of such liquidations was
to increase direct cost of products sold by approximately $0.6 million for the
six months ended December 31, 2001 and to decrease cost of products sold by
approximately $0.5 million for the six months ended December 31, 2000,
respectively.
PROPERTY, PLANT AND EQUIPMENT -- NET -- Property, plant and equipment
primarily represents P&G's original cost basis of land, buildings and machinery
and equipment used to manufacture Jif and Crisco products, less accumulated
depreciation. The recorded balances have been updated from June 30, 2001, to
reflect continuing business operations. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets which range
from 3 to 50 years. P&G periodically evaluates any
F-16
possible impairments of long-lived assets in accordance with the Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
REVENUES -- Revenues represent gross revenues less sales deductions,
returns and allowances. Revenues from the sale of products are recognized when
risk and title passes to the customer, which generally occurs upon shipment of
the product.
COUPON EXPENSE AND OTHER PRICING ALLOWANCES -- Coupon expense represents
deductions from revenues for coupons related to products. Coupon expense is
based on expected redemption rates of issued coupons based on historical data.
Other pricing allowances represent deductions from revenues for incentive
discounts provided to customers other than normal sales discounts.
DIRECT COST OF PRODUCTS SOLD -- Direct cost of products sold is defined as
the direct costs of the raw and packing materials used to manufacture Jif and
Crisco products, direct manufacturing expenses related to the production of
Crisco products at the Ivorydale Plant and the production of Jif products at the
Lexington Plant, the effects of hedging activities related to the production of
Crisco products, plus delivery costs (including allocated warehousing costs).
With respect to Crisco products, manufacturing expenses primarily include direct
costs of manufacturing; however, certain costs are based on allocations
(including items such as facilities management, information technology support
and site human resources) as the Ivorydale Plant is shared with other P&G
businesses. The costs are allocated based on factors such as level of effort,
headcount and square footage.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES -- Effective July 1, 2000,
P&G adopted Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("FAS 133") as amended, which requires that
all derivative instruments be reported on the balance sheet at fair value and
establishes criteria for designation and effectiveness of hedging relationships.
The cumulative effect of adopting FAS 133 as of July 1, 2000 was not material to
the Statements.
Raw materials used by P&G are subject to price volatility caused by
weather, supply conditions, political and economic variables and other
unpredictable factors. To manage the volatility related to forecasted inventory
purchases, P&G uses futures and options with maturities generally less than one
year. These instruments are generally designated as cash flow hedges. The
mark-to-market gain or loss on qualifying hedges is included in other
comprehensive income to the extent effective, and reclassified into direct cost
of products sold in the period during which the hedged transaction affects
earnings. Qualifying cash flow hedges deferred in OCI as of December 31, 2001
and 2000 were not material. These amounts will be reclassified into earnings as
the underlying transactions are recognized, generally less than one year. The
mark-to-market gains or losses on non-qualifying, excluded and ineffective
portions of hedges are recognized in direct cost of products sold immediately.
No cash flow hedges were discontinued during the six months ended December 31,
2001 and 2000.
DIRECT MARKETING EXPENSES -- Direct marketing expenses represent
specifically identified promotional, advertising, and other marketing expenses
related to the Jif and Crisco businesses.
DIRECT ADMINISTRATIVE AND OTHER EXPENSES -- Direct administrative and other
expenses relate to fully dedicated resources that support the operations of Jif
and Crisco. Certain expenses are specifically identifiable and others are
allocated to Jif and Crisco based on the number of employees, including an
estimate of actual time and effort spent. These direct expenses do not include
support organizations such as human resources, legal, and non-fully dedicated
resources including sales and transactional accounting. As such, the Statements
do not include any indirect selling, administrative, or research expenses.
USE OF ESTIMATES - The preparation of the Statements requires management to
make estimates and assumptions that affect the amounts reported in the
Statements and accompanying disclosures. Although these estimates are based on
management's best knowledge of current events and actions P&G may undertake in
the future, actual results ultimately may differ from the estimates.
F-17
4. MAJOR CUSTOMER
The Jif and Crisco businesses have one customer (Wal-Mart and its
affiliates, "Wal-Mart") with net revenues exceeding 10% of total net revenues
with respect to both businesses. Net revenues from Wal-Mart as a percent of
total net revenues were approximately 23% and 20% for the six months ended
December 31, 2001 and 2000, respectively.
F-18
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE PROCTER & GAMBLE COMPANY,
THE PROCTER & GAMBLE OHIO BRANDS COMPANY
AND
THE J.M. SMUCKER COMPANY
DATED AS OF
OCTOBER 9, 2001
A-1
<Table>
ARTICLE I DEFINITIONS................................................. A-4
Section 1.01 Definitions................................................. A-4
ARTICLE II SPIN OFF AND MERGER......................................... A-9
Section 2.01 The Spin Off................................................ A-9
Section 2.02 The Merger.................................................. A-9
Section 2.03 Articles of Incorporation and Code of Regulations........... A-9
Section 2.04 Directors................................................... A-9
Section 2.05 Officers.................................................... A-10
ARTICLE III CONVERSION OF SHARES AND RELATED MATTERS.................... A-10
Section 3.01 Conversion of Capital Stock................................. A-10
Section 3.02 Exchange of Certificates.................................... A-11
Section 3.03 Appraisal Rights............................................ A-12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF P&G....................... A-12
Section 4.01 Due Organization, Good Standing and Corporate Power......... A-12
Section 4.02 Authorization and Validity of Agreement..................... A-13
Section 4.03 Consents and Approvals; No Violations....................... A-13
Section 4.04 Information to be Supplied.................................. A-13
Section 4.05 Capitalization of P&G and Newco............................. A-14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF JMS....................... A-14
Section 5.01 Due Organization, Good Standing and Corporate Power......... A-14
Section 5.02 Authorization and Validity of Agreement..................... A-15
Section 5.03 Capitalization.............................................. A-15
Section 5.04 Consents and Approvals; No Violations....................... A-15
Section 5.05 JMS SEC Filings; Financial Statements....................... A-16
Section 5.06 No Undisclosed Liabilities.................................. A-16
Section 5.07 Information to be Supplied.................................. A-16
Section 5.08 Absence of Certain Events................................... A-17
Section 5.09 Litigation.................................................. A-17
Section 5.10 Voting Requirements; Approval; Board Approval............... A-17
Section 5.11 Title to Properties; Encumbrances........................... A-17
Section 5.12 Compliance with Law......................................... A-17
Section 5.13 Insurance................................................... A-18
Section 5.14 Employees and Employee Benefits............................. A-18
Section 5.15 Regulatory Matters.......................................... A-18
Section 5.16 JMS Rights Agreement........................................ A-18
Section 5.17 Broker's or Finder's Fee.................................... A-19
Section 5.18 Tax Treatment............................................... A-19
Section 5.19 Intellectual Property....................................... A-19
ARTICLE VI COVENANTS................................................... A-19
Section 6.01 Conduct of Jif/Crisco Business Pending the Effective Time... A-19
Section 6.02 Conduct of JMS Pending the Effective Time................... A-20
Section 6.03 Efforts to Close; Antitrust Clearance....................... A-21
Section 6.04 Confidentiality............................................. A-22
Section 6.05 Cooperation in Litigation................................... A-23
</Table>
A-2
<Table>
Section 6.06 Cooperation in Tax Matters.................................. A-23
Section 6.07 Cooperation of Third Parties................................ A-24
Section 6.08 Additional Documents........................................ A-24
Section 6.09 Access...................................................... A-24
Section 6.10 Public Announcements........................................ A-24
Section 6.11 Transferring Employees...................................... A-24
Section 6.12 Restrictions on Solicitation and Hiring..................... A-26
Section 6.13 JMS Shareholder Meeting..................................... A-26
Preparation of Proxy Statement/Prospectus; Registration
Section 6.14 Statement................................................... A-27
Section 6.15 Board Recommendation........................................ A-28
Section 6.16 No Solicitation............................................. A-28
Section 6.17 Notification of Certain Matters............................. A-28
Section 6.18 NYSE Listing................................................ A-29
Section 6.19 Affiliates.................................................. A-29
Section 6.20 Ancillary Agreements........................................ A-29
Section 6.21 Consummation of the Spin Off................................ A-29
Section 6.22 Covenant Not to Compete..................................... A-29
Section 6.23 Standstill.................................................. A-29
Section 6.24 Interim Financial Information............................... A-30
Section 6.25 Indemnification............................................. A-30
Section 6.26 Title Policies.............................................. A-31
Section 6.27 Shareholder Agreement....................................... A-31
ARTICLE VII CONDITIONS TO THE MERGER.................................... A-31
Section 7.01 Conditions to the Merger.................................... A-31
Section 7.02 Conditions to the Obligation of JMS......................... A-31
Section 7.03 Conditions to the Obligation of P&G......................... A-32
ARTICLE VIII TERMINATION AND ABANDONMENT................................. A-33
Section 8.01 Termination................................................. A-33
Section 8.02 Effect of Termination....................................... A-34
ARTICLE IX MISCELLANEOUS............................................... A-34
Section 9.01 Nonsurvival of Representations, Warranties and Agreements... A-34
Section 9.02 Amendment and Modification.................................. A-34
Section 9.03 Waiver of Compliance........................................ A-34
Section 9.04 Notices..................................................... A-34
Section 9.05 Third Party Beneficiaries................................... A-35
Section 9.06 Successors and Assigns...................................... A-35
Section 9.07 Entire Agreement............................................ A-35
Section 9.08 Severability................................................ A-35
Section 9.09 Captions.................................................... A-36
Section 9.10 Counterparts................................................ A-36
Section 9.11 Governing Law............................................... A-36
Section 9.12 Expenses.................................................... A-36
Section 9.13 Specific Performance........................................ A-36
AMENDMENT NO. 1 TO THE AGREEMENT AND PLAN OF MERGER........................... A-38
</Table>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October 9,
2001, by and among The Procter & Gamble Company, an Ohio corporation ("P&G"),
The Procter & Gamble Ohio Brands Company, an Ohio corporation and a wholly-owned
subsidiary of P&G ("Newco"), and The J.M. Smucker Company, an Ohio corporation
("JMS").
WHEREAS, P&G directly and indirectly through its wholly-owned Subsidiaries
is engaged in the Jif/Crisco Business (capitalized terms used herein shall have
the meaning given to them in Article I unless otherwise defined herein);
WHEREAS, prior to the Effective Time on the Closing Date P&G shall, (i)
pursuant to the Contribution Agreement, transfer, or cause to be transferred,
substantially all of the assets, properties, rights and interests of P&G and its
Affiliates of the Jif/Crisco Business and certain of the liabilities of the
Jif/Crisco Business to Newco and (ii) distribute to all P&G Shareholders on the
Record Date, one share of Newco Common Stock for each share of P&G Common Stock
held by such holder on the Record Date (the "Spin Off");
WHEREAS, the boards of directors of P&G, Newco and JMS have each approved
and declared advisable the Merger of Newco with and into JMS immediately
following the Spin Off, upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the Ohio Corporation Law;
WHEREAS, for federal income tax purposes, it is intended that (i) the Spin
Off shall be tax-free to P&G and to the P&G Shareholders pursuant to Section 355
of the Code and (ii) the Merger shall qualify as a tax-free reorganization
within the meaning of Section 368 of the Code, and the parties intend, by
executing this Agreement, to adopt a plan of reorganization within the meaning
of Section 368 of the Code; and
WHEREAS, simultaneously with the execution of this Agreement, certain
shareholders of JMS have entered into the Shareholders Agreement.
NOW THEREFORE, in consideration of the foregoing premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. When used in this Agreement, the following terms
shall have the respective meanings specified therefore below (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined).
"Action" shall mean any dispute, controversy, claim, action, litigation,
suit, cause of action, arbitration, mediation, or any proceeding by or before
any mediator or Governmental Entity, or any investigation, subpoena, or demand
preliminary to any of the foregoing.
"Affiliate" shall mean, with respect to a Person, another Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the preamble.
"Ancillary Agreements" shall mean the Contribution Agreement, the
Shareholders Agreement and the other agreements and documents defined as
"Ancillary Agreements" in the Contribution Agreement.
"Antitrust Laws" shall mean the Sherman Act, as amended, the Clayton Act,
as amended, the HSR Act, the Federal Trade Commission Act, and all other Law and
Orders that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
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"Applicable Number" shall have the meaning set forth in Section 3.01(g).
"Applicable Percentage" shall have the meaning set forth in Section
3.01(e).
"Assertion" shall have the meaning set forth in Section 6.25(b).
"Authorization" shall mean any legally required consent, authorization,
approval, order, license, certificate or Permit of or from, or declaration or
filing with, any Governmental Entity, including, without limitation, any legally
required filing with any Governmental Entity and the subsequent expiration of
any legally required waiting period under any Antitrust Laws.
"Business Day" shall mean any day on which commercial banks in New York,
New York are open for business providing substantially all services offered by
such banks.
"Cash Amount" shall have the meaning set forth in Section 3.01(f).
"Certificate of Merger" shall have the meaning set forth in Section
2.02(c).
"Closing" shall have the meaning set forth in Section 2.02(b).
"Closing Date" shall have the meaning set forth in Section 2.02(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Competing Transaction" shall have the meaning set forth in Section
6.16(b).
"Contracts" shall mean any note, bond, mortgage, indenture, license,
franchise, permit, agreement, contract, lease, franchise agreement or other
instrument or legal obligation of any kind.
"Contribution Agreement" shall mean the Contribution Agreement in the form
of Exhibit A among Newco, P&G and The Procter & Gamble Manufacturing Company.
"Contributors" shall have the meaning set forth in the Contribution
Agreement. "Culinary Sol Business" shall mean the culinary education and retail
business for specialized cooking products as currently conducted by the
Contributors in Norwood, Ohio.
"Disclosing Party" shall have the meaning set forth in Section 6.04(b)(i).
"Dissenting Shares" shall have the meaning set forth in Section 3.03.
"Divestiture" shall have the meaning set forth in Section 6.03(e).
"Effective Time" shall have the meaning set forth in Section 2.02(c).
"Employees" shall mean:
(a) those employees of P&G and its Affiliates currently exclusively
employed to carry on the Jif/Crisco Business whose place of business is
located at the Jif/Crisco Real Property, and including all employees on
disability or other leave of absence; provided, however, that any such
Employee who is on disability or other leave of absence and who does not
return to work within one year from the Closing Date shall be deemed not to
have been an Employee, and
(b) those employees of P&G and its Affiliates currently employed
outside the Jif/Crisco Business, but who will become available to JMS and
its Affiliates for employment in the Jif/Crisco Business prior to the
Closing Date pursuant to P&G and its Affiliates' obligations under P&G and
its Affiliates' collective bargaining agreement covering the employees at
P&G's Ivorydale Facility.
"Encumbrances" shall mean all liens, security interests, pledges,
mortgages, deeds of trusts, charges, options, or other encumbrances.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ESOP" shall mean The Employee Stock Ownership Trust of The Procter &
Gamble Profit Sharing Trust and Employee Stock Ownership Plan.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 3.02(a).
"Exchange Fund" shall have the meaning set forth in Section 3.02(b).
"FDA" shall mean the United States Food and Drug Administration.
"GAAP" shall mean generally accepted accounting principles of the United
States of America, as in effect from time to time.
"Geography" shall mean the United States of America and Canada.
"Governmental Entity" shall mean any arbitrator, court, judicial,
legislative, administrative or regulatory agency, commission, department, board
or bureau or body or other governmental authority or instrumentality or any
person or entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, whether foreign,
Federal, state, provincial, local or other government.
"HSR Act" shall have the meaning set forth in Section 4.03.
"Information" shall have the meaning set forth in Section 6.04(a).
"IRS" means the United States Internal Revenue Service.
"Jif/Crisco Business" shall have the meaning assigned to such term in the
Contribution Agreement.
"Jif/Crisco Material Adverse Effect" shall mean a material adverse effect
on the business, financial condition, operations or results of operations of the
Jif/Crisco Business taken as a whole or the ability of P&G and Newco to
consummate the Merger and to perform their obligations under this Agreement and
the Ancillary Agreements or to consummate the Transactions.
"Jif/Crisco Real Property" shall mean all right, title and interest in or
to the improved and unimproved land related to the Jif/Crisco Business, and all
buildings, structures, erections, improvements, appurtenances, and fixtures
situated on or forming part of such land listed in Schedule 1.52 of the
Contribution Agreement.
"JMS" shall have the meaning set forth in the preamble.
"JMS Balance Sheet" shall have the meaning set forth in Section 5.06.
"JMS Board Recommendation" shall have the meaning set forth in Section
5.10(b).
"JMS Common Stock" shall have the meaning set forth in Section 5.03.
"JMS Compensation and Benefit Plans" shall have the meaning set forth in
Section 5.14(a).
"JMS Equity Interests" shall have the meaning set forth in Section 5.03.
"JMS Intellectual Property" shall have the meaning set forth in Section
5.19.
"JMS Material Adverse Effect" shall mean a material adverse effect on the
business, financial condition, operations or results of operations of JMS and
its Subsidiaries taken as a whole or the ability of JMS to consummate the Merger
and to perform their obligations under this Agreement and the Ancillary
Agreements or to consummate the Transactions.
"JMS Options" shall have the meaning set forth in Section 5.03.
"JMS Pension Plan" shall have the meaning set forth in Section 5.14(c).
"JMS Preferred Stock" shall have the meaning set forth in Section 5.03.
"JMS Right" shall have the meaning set forth in Section 5.03.
"JMS Rights Agreement" shall have the meaning set forth in Section 5.03.
A-6
"JMS SEC Filings" shall have the meaning set forth in Section 5.05(a).
"JMS Series A Preferred Stock" shall have the meaning set forth in Section
5.03.
"JMS Shareholder Approval" shall have the meaning set forth in Section
5.10(a).
"JMS Shareholders" shall mean the holders of JMS Common Stock.
"JMS Shareholder Meeting" shall have the meaning set forth in Section 6.13.
"Knowledge" shall mean, whether or not capitalized, in the case of an
entity, the actual knowledge after due inquiry of the officers of such entity as
of the date of the representation, warranty or statement.
"Law" shall mean any statute, law, ordinance, rule or regulation of any
Governmental Entity.
"Merger" shall have the meaning set forth in Section 2.02(a).
"Merger Registration Statement" shall have the meaning set forth in Section
4.04.
"Newco" shall have the meaning set forth in the preamble.
"Newco Common Stock" shall have the meaning set forth in Section 4.05(b).
"Newco Employee" shall have the meaning set forth in Section 6.11(a).
"Newco Equity Interests" shall have the meaning set forth in Section
4.05(b).
"Newco Shareholder" shall mean the holders of Newco Common Stock.
"NYSE" shall mean the New York Stock Exchange.
"Ohio Corporation Law" shall mean the General Corporation Law of the Ohio
Revised Code.
"Old Certificates" shall mean certificates representing shares of JMS
Common Stock.
"Old JMS Shares" shall have the meaning set forth in Section 3.01(e).
"Order" shall mean any order, judgment, decree, writ, permit or license of
any Governmental Entity.
"Permits" shall mean all permits, approvals, licenses, authorizations,
certificates, rights, exemptions and orders from Governmental Entities.
"Person" shall mean and include an association, an individual, a
partnership, a joint venture, joint stock company, a corporation, a trust, an
unincorporated organization, a limited liability company, a group, a government
or other department or agency thereof and any other entity.
"P&G" shall have the meaning set forth in the preamble.
"P&G Equity Interests" shall have the meaning assigned to such term in
Section 4.05(a).
"P&G Common Stock" shall have the meaning set forth in Section 4.05(a).
"P&G Options" shall have the meaning assigned to such term in Section
4.05(a).
"P&G Shareholders" shall mean the holders from time to time of the P&G
Common Stock.
"Proxy Statement/Prospectus" shall have the meaning assigned to such term
in Section 6.14(a)(i).
"Receiving Party" shall have the meaning set forth in Section 6.04(b).
"Record Date" shall mean the date with respect to which P&G Shareholders of
record on such date will receive Newco Common Stock in the Spin Off.
"Restricted Business" shall have meaning set forth in Section 6.22.
"Rule 145 Affiliates" shall have the meaning set forth in Section 6.19.
"SEC" shall mean the U.S. Securities and Exchange Commission.
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"Securities Act" shall mean the Securities Act of 1933, as amended.
"Settlement" shall have the meaning set forth in Section 6.03(e).
"Shareholders Agreement" shall mean the agreement in the form attached
hereto as Exhibit B, between P&G and the JMS Shareholders that are parties
thereto.
"Spin Off" shall have the meaning set forth in the recitals.
"Spin Off Stock Certificate" shall have the meaning set forth in Section
2.01.
"Standstill Period" shall have the meaning set forth in Section 6.23.
"Subsidiary" of any Person shall mean any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries.
"Superior Proposal" shall mean a written Competing Transaction that is for
more than 50% of the outstanding shares of JMS Common Stock or all or
substantially all of the assets of JMS and its Subsidiaries, which is, in the
reasonable opinion of the board of directors of JMS, reasonably certain of being
completed and more favorable to JMS and the JMS Shareholders than the
Transactions, and which is not subject to any financing or due diligence
condition; provided, however, that, without limiting the foregoing, a Competing
Transaction shall not constitute a Superior Proposal unless, in the written
opinion (with only customary qualifications) of JMS's independent financial
advisors, such Competing Transaction is more favorable from a financial point of
view to the JMS Shareholders than the Transactions, including any proposed
alterations to the terms of the Transactions submitted by P&G in response to
such Competing Transaction.
"Supplemental Rulings" shall have the meaning set forth in Section 6.06(c).
"Surviving Corporation" shall have the meaning set forth in Section
2.02(a).
"Surviving Corporation Common Stock" shall have the meaning set forth in
Section 3.01(a).
"Target" shall have meaning set forth in Section 6.22.
"Tax" shall mean any United States federal, foreign, national, state,
provincial, local or other jurisdictional income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, estimated,
alternative, or add on minimum, ad valorem, transfer or excise tax, or any other
tax, custom, duty, governmental fee or other like assessment or charge imposed
by any Governmental Entity, together with any interest or penalty imposed
thereon.
"Tax Return" shall mean a report, return or other information (including
any attached schedules or any amendments to such report, return or other
information) required to be supplied to or filed with a Governmental Entity with
respect to any Tax, including an information return, claim for refund, amended
return or declaration of estimated Tax.
"Termination Fee" shall have the meaning set forth in Section 8.02(b).
"Trading Day" shall mean any day on which there are sales of common stock
on the NYSE composite tape.
"Transactions" shall mean the transactions contemplated by this Agreement,
the Spin Off, the Merger and the Ancillary Agreements.
"Voting Securities" shall have the meaning set forth in Section 6.23.
A-8
ARTICLE II
SPIN OFF AND MERGER
SECTION 2.01 The Spin Off. Prior to the Effective Time, on the Closing
Date, P&G shall effect the Spin Off by executing the Contribution Agreement and
consummating the transactions contemplated thereby and delivering, or causing to
be delivered, to the Exchange Agent a certificate (the "Spin Off Stock
Certificate") representing that number of shares of Newco Common Stock that is
equal to the number of shares of P&G Common Stock that are outstanding as of the
Record Date (other than treasury shares). The Exchange Agent shall hold the
shares of Newco Common Stock represented by the Spin Off Stock Certificate for
the P&G Shareholders on the Record Date. Except as directed by P&G in its sole
discretion, the shares of Newco Common Stock represented by the Spin Off Stock
Certificate shall not be transferable and the Exchange Agent shall not deliver
any shares of Newco Common Stock represented by the Spin Off Stock Certificate
to any P&G Shareholder.
SECTION 2.02 The Merger.
(a) Upon the terms and subject to the conditions of this Agreement, Newco
will be merged (the "Merger") with and into JMS in accordance with the
provisions of the Ohio Corporation Law. Following the Merger, JMS will continue
as the surviving corporation (the "Surviving Corporation") and the separate
corporate existence of Newco will cease.
(b) Upon the terms and subject to the conditions set forth in this
Agreement, the consummation of the Spin Off and the Merger (the "Closing") will
take place at the offices of P&G, at 10:00 a.m., local time on the fifth
Business Day following satisfaction or waiver of the conditions set forth in
Article VII hereof (other than those conditions, including the Spin Off, that by
their nature or pursuant to the terms of this Agreement are to be satisfied at
the Closing, but subject to the satisfaction or, where permitted, the waiver of
those conditions), or at such other date, time or place as P&G and JMS may
agree. The date on which the Closing occurs is referred to as the "Closing
Date."
(c) The Merger will be consummated by the filing of a certificate of merger
(the "Certificate of Merger") with the Secretary of State of the State of Ohio
in accordance with Section 1701.78 of the Ohio Corporation Law. The time that
the Merger becomes effective in accordance with Section 1701.78 of the Ohio
Corporation Law is referred to in this Agreement as the "Effective Time."
(d) The Merger will have the effects set forth in the Ohio Corporation Law.
Without limiting the generality of the foregoing, as of the Effective Time, all
properties, rights, privileges, powers and franchises of Newco and JMS will vest
in the Surviving Corporation and all debts, liabilities and duties of Newco and
JMS will become debts, liabilities and duties of the Surviving Corporation.
SECTION 2.03 Articles of Incorporation and Code of Regulations. The
articles of incorporation and code of regulations of the Surviving Corporation
as of the Effective Time shall be in the form of the articles of incorporation
and code of regulations of JMS as in effect as of the date hereof and as further
amended so as to provide (a) that the provisions of paragraph (a) of Division II
of Article IV of the amended articles of incorporation apply only to the voting
of shares with respect to the matters set forth on Schedule 2.03 hereto, and (b)
that as to all other matters as to which holders of shares of Surviving
Corporation Common Stock are entitled to vote, each outstanding share of
Surviving Corporation Common Stock shall entitle the holder to one vote for such
share of Surviving Corporation Common Stock with respect to each such other
matter and (c) for such other amendments not affecting or related to the voting
power of shares of Surviving Corporation Common Stock, as P&G and JMS shall
mutually agree within ten Business Days of the date hereof.
SECTION 2.04 Directors. The directors of JMS at the Effective Time will be
the initial directors of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided by the certificate of incorporation and
bylaws of the Surviving Corporation or as otherwise provided by Law.
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SECTION 2.05 Officers. The officers of JMS at the Effective Time will be
the initial officers of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided by the certificate of incorporation and
bylaws of the Surviving Corporation or as otherwise provided by Law.
ARTICLE III
CONVERSION OF SHARES AND RELATED MATTERS
SECTION 3.01 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Newco, JMS or the holders of
the following securities:
(a) Each share of Newco Common Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Newco
Common Stock to be cancelled pursuant to Section 3.01(b) or as to which
appraisal rights are perfected in accordance with Section 3.05) shall be
converted, subject to Section 3.02(e), into the right to receive
one-fiftieth (1/50th) of a share of the common stock of the Surviving
Corporation, without par value ("Surviving Corporation Common Stock").
Following the Effective Time, all shares of Newco Common Stock shall no
longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist.
(b) Each share of Newco Common Stock owned by JMS or any direct or
indirect wholly-owned Subsidiary of JMS (other than, in each case, trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) immediately prior to the Effective
Time shall be cancelled and extinguished without any conversion thereof and
no payment shall be made with respect thereto.
(c) Intentionally Omitted.
(d) Each share of JMS Common Stock issued and outstanding immediately
prior to the Effective Time will, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into (i) that number
of shares of Surviving Corporation Common Stock equal to the Applicable
Percentage of a share of Surviving Corporation Common Stock and (ii) to the
extent that one or more of the Supplemental Rulings are not obtained in
whole or in part, the Cash Amount. Each JMS Option shall remain outstanding
and the terms of each such JMS Option shall be correspondingly adjusted to
reflect the conversion of the JMS Common Stock.
(e) The "Applicable Percentage" shall mean a fraction, the numerator
of which is the product obtained by multiplying (1) the quotient obtained
by dividing (i) the total number of shares of Surviving Corporation Common
Stock to be issued upon the conversion of the Newco Common Stock pursuant
to Section 3.01(a) by (ii) the sum of (xx) the product obtained by
multiplying the total number of shares of JMS Common Stock outstanding
immediately prior to the Effective Time (the "Old JMS Shares") and 1.1070
and (yy) the Applicable Number, and (2) the difference obtained by
subtracting the Applicable Number from the Old JMS Shares; and the
denominator of which is the Old JMS Shares. For illustrative purposes, the
Applicable Percentage is set forth as a formula on Schedule 3.01(e) hereto.
The Applicable Percentage shall be expressed as a decimal and shall be
rounded to the fourth decimal place. To the extent all of the Supplemental
Rulings are obtained in whole, the Applicable Number shall be zero.
(f) The "Cash Amount" shall mean, to the extent that one or more of
the Supplemental Rulings are not obtained in whole or in part, the quotient
obtained by dividing (i) the product obtained by multiplying (x) the
Applicable Number by (y) a cash price equal to the average closing price
for the JMS Common Stock on the NYSE for the five Trading Days ending two
Trading Days prior to the Effective Time by (ii) the Old JMS Shares.
(g) The "Applicable Number" shall mean, to the extent that one or more
of the Supplemental Rulings are not obtained in whole or in part, that
number of shares of JMS Common Stock that P&G determines in good faith and
in its sole discretion is required to be effectively redeemed by JMS
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through the Cash Amount in (f) above in order to, together with the
corresponding formulaic adjustment to the Applicable Percentage in (e)
above, reverse the potential tax effects of failing to obtain any of the
Supplemental Rulings in whole or in part (i.e. by providing that the
holders of shares of Newco Common Stock, as a group, and the holders of Old
JMS Shares, as a group, receive the same relative proportion of the
Surviving Corporation Common Stock to be issued in the Merger that they
would have received if the Supplemental Rulings had been obtained). For
avoidance of doubt, the parties intend that the Applicable Number be set so
as to reverse one half of the potential tax effects of failing to obtain
any of the Supplemental Rulings and that the balance of such effects are to
be reversed through the formulaic adjustment of the Applicable Percentage
in (e) above.
SECTION 3.02 Exchange of Certificates.
(a) Prior to the Closing, P&G shall appoint a bank or trust company
reasonably acceptable to JMS as exchange agent (the "Exchange Agent") for the
purpose of holding the Spin Off Stock Certificate on behalf of the P&G
Shareholders on the Record Date and for exchanging the Spin Off Stock
Certificate and the Old Certificates for certificates representing that number
of shares of Surviving Corporation Common Stock that are to be issued pursuant
to Section 3.01 hereof and cash for payment of the Cash Amount. The costs and
expenses of the Exchange Agents shall be borne by Newco.
(b) As soon as practicable, but in any event no later than 5 Business Days
following the Effective Time, JMS shall deposit with the Exchange Agent as
nominee for the benefit of the holders of Newco Common Stock and JMS Common
Stock, certificates representing the shares of Surviving Corporation Common
Stock (such shares of Surviving Corporation Common Stock, together with cash for
payment of the Cash Amount and any dividends or distributions with respect
thereto being hereinafter referred to as the "Exchange Fund") to be issued
pursuant to Sections 3.01(a) and 3.01(d).
(c) The Exchange Agent shall, as soon as practicable, but in any event no
later than 10 days following the Effective Time, distribute to each holder of
shares of Newco Common Stock immediately prior to the Effective Time (other than
holders of shares of Newco Common Stock that are cancelled pursuant to Section
3.01(b)) and each holder of shares of JMS Common Stock immediately prior to the
Effective Time (i) certificates representing the whole number of shares of
Surviving Corporation Common Stock into which the shares of Newco Common Stock
or JMS Common Stock, as the case may be, held by such Person have been converted
in accordance with Section 3.01(a) and Section 3.01(d), (ii) the amount of
dividends or other distributions, if any, with a record date on or after the
Effective Time which theretofore became payable with respect to such shares of
Surviving Corporation Common Stock and (iii) the Cash Amount, in each case which
such holder has the right to receive pursuant to the provisions of this Article
III, and the Spin Off Stock Certificate and the Old Certificates shall forthwith
be cancelled. In no event shall the holder of any shares of Newco Common Stock
or JMS Common Stock be entitled to receive interest on any funds to be received
in the Merger. From and after the Effective Time, the interest of the holders of
the Newco Common Stock immediately prior to the Merger in the Spin Off Stock
Certificate and the interest of the holders of shares of JMS Common Stock
immediately prior to the merger in the Old Certificates shall be limited to the
right to receive only (i) the whole number of shares of Surviving Corporation
Common Stock into which the shares of Newco Common Stock or JMS Common Stock
held by such Person have been converted in accordance with Sections 3.01(a) and
3.01(d), (ii) the amount of dividends or other distributions, if any, with a
record date on or after the Effective Time which theretofore became payable with
respect to such shares of Surviving Corporation Common Stock, (iii) the Cash
Amount and (iv) the cash amount payable in lieu of fractional shares of
Surviving Corporation Common Stock in accordance with Section 3.02(e).
(d) All shares of Surviving Corporation Common Stock issued upon conversion
of shares of Newco Common Stock or JMS Common Stock in accordance with the terms
hereof (including the Cash Amount paid pursuant to Section 3.02(e)) shall be
deemed to have been issued at the Effective Time in full satisfaction of all
rights pertaining to such shares of Newco Common Stock or JMS Common Stock.
(e) In lieu of any such fractional shares of Surviving Corporation Common
Stock, each holder of shares of Newco Common Stock or JMS Common Stock who would
otherwise have been entitled to a
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fraction of a share of Surviving Corporation Common Stock in exchange for such
shares of Newco Common Stock or JMS Common Stock (after taking into account all
shares of Newco Common Stock or JMS Common Stock held by such holder immediately
prior to the Effective Time) shall receive from the Exchange Agent, as
applicable, a cash payment in lieu of such fractional share of Surviving
Corporation Common Stock. The cash payment will be the amount whereby the
Exchange Agent shall receive a number of whole shares that represent the
fractional shares, sells such shares and distributes the proceeds to the holder
of the Newco Common Stock and JMS Common Stock who would otherwise have been
entitled to a fraction of a share of Surviving Corporation Common Stock (such
amount not to exceed the value of one share of Surviving Corporation Common
Stock).
(f) JMS shall be entitled to deduct and withhold from the shares of
Surviving Corporation Common Stock any dividends and distributions thereon and
cash in lieu of fractional shares of Surviving Corporation Common Stock
otherwise payable hereunder to any holder of shares of Newco Common Stock such
amounts as it is required to deduct and withhold with respect to making of such
payment under any provisions of Federal, state, local or foreign income tax Law.
To the extent that JMS so withholds those amounts, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Newco Common Stock in respect of which such deduction and
withholding was made by JMS.
SECTION 3.03 Appraisal Rights. Holders of JMS Common Stock that are issued
and outstanding immediately prior to the Effective Time and that are held by a
holder who has not voted those shares in favor of the adoption of this
Agreement, who shall have delivered a written demand for appraisal of those
shares in accordance with the Ohio Corporation Law and who, as of the Effective
Time, shall not have effectively withdrawn or lost this right to appraisal (the
"Dissenting Shares") shall be entitled to those rights (but only those rights)
as are granted by Section 1701.85 of the Ohio Corporation Law. Each holder of
Dissenting Shares who becomes entitled to payment for those Dissenting Shares
pursuant to Section 1701.85 of the Ohio Corporation Law shall receive payment
from the Surviving Corporation in accordance with the Ohio Corporation Law;
provided, however, that (i) if any holder of Dissenting Shares shall have failed
to establish their entitlement to appraisal rights as provided in Section
1701.85 of the Ohio Corporation Law, (ii) if any holder of Dissenting Shares
shall have effectively withdrawn the holder's demand for appraisal of the
holder's shares or lost the holder's right to appraisal and payment for the
holder's shares under Section 1701.85 of the Ohio Corporation Law or (iii) if
neither any holder of Dissenting Shares nor the Surviving Corporation shall have
filed a petition demanding a determination of the value of all Dissenting Shares
within the time provided in Section 1701.85 of the Ohio Corporation Law, the
holder shall forfeit the right to appraisal of those Dissenting Shares and each
Dissenting Share shall be exchanged pursuant to Section 3.01 of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF P&G
P&G hereby represents and warrants to JMS as follows:
SECTION 4.01 Due Organization, Good Standing and Corporate Power. Each of
P&G and Newco is a corporation duly organized, validly existing and in good
standing under the laws of the state of Ohio. P&G and its Subsidiaries have all
requisite corporate power and authority to own, lease and operate their
properties that will be contributed to Newco pursuant to the Contribution
Agreement and to carry on the Jif/Crisco Business as now being conducted. Each
of P&G and its Subsidiaries is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the property owned, leased or
operated by the Jif/Crisco Business that will be contributed to Newco pursuant
to the Contribution Agreement or the nature of the Jif/Crisco Business conducted
by it makes such qualification necessary, except in such jurisdictions where the
failure to be so qualified or licensed and in good standing would not have or
reasonably be expected to have, individually or in the aggregate, a Jif/Crisco
Material Adverse Effect.
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SECTION 4.02 Authorization and Validity of Agreement. Each of P&G and
Newco has full corporate power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party, to perform its
obligations hereunder or thereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement and the Ancillary
Agreements by each of P&G and Newco and the consummation by each of them of the
Transactions, have been duly authorized and unanimously approved by their
respective boards of directors and by P&G as the sole shareholder of Newco and
no other corporate action on the part of P&G or Newco is necessary to authorize
the execution, delivery and performance of this Agreement and the Ancillary
Agreements or the consummation of the Transactions. This Agreement and the
Ancillary Agreements have been duly executed and delivered by each of P&G and
Newco, as applicable, and, to the extent it is a party thereto, each is a valid
and binding obligation of each of P&G and Newco enforceable against each of P&G
and Newco, in accordance with their terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Law affecting the enforcement of
creditors' rights generally and by general equitable principles.
SECTION 4.03 Consents and Approvals; No Violations. Assuming (a) the
filings required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended (the "HSR Act"), are made and the waiting periods thereunder (if
applicable) have been terminated or expired, (b) the applicable requirements of
the Securities Act and the Exchange Act are met, (c) the requirements under any
applicable state securities or blue sky laws are met, (d) the requirements of
the NYSE in respect of the listing of the shares of Surviving Corporation Common
Stock to be issued hereunder are met, and (e) the filing of the Certificate of
Merger and other appropriate merger documents, if any, as required by the Ohio
Corporation Law, are made, the execution and delivery of this Agreement and the
Ancillary Agreements by P&G and Newco, as applicable, and the consummation by
P&G and Newco of the Transactions do not and will not: (i) violate or conflict
with any provision of their respective articles of incorporation or code of
regulations, (ii) violate or conflict with any Law or Order of any Governmental
Entity applicable to P&G or Newco or by which any of their respective properties
or assets that will be contributed to Newco pursuant to the Contribution
Agreement may be bound; (iii) require any filing with, or Permit, consent or
approval of, or the giving of any notice to, any Governmental Entity; or (iv)
result in a violation or breach of, conflict with, constitute (with or without
due notice or lapse of time or both) a default under, or give rise to any right
of termination, cancellation or acceleration, or result in the creation of any
Encumbrance upon any of the properties or assets of P&G and its Subsidiaries
that will be contributed to Newco pursuant to the Contribution Agreement or give
rise to any obligation, right of termination, cancellation, acceleration or
increase of any obligation or a loss of a material benefit under, any of the
terms, conditions or provisions of any Contract to which P&G or Newco is a party
that will be contributed to Newco pursuant to the Contribution Agreement, or by
which Newco or the properties or assets that will be contributed to Newco
pursuant to the Contribution Agreement may be bound, excluding in the case of
clauses (i) through (iv) above, conflicts, violations, breaches, defaults,
rights of payment and reimbursement, terminations, modifications, accelerations
and creations and impositions of Encumbrances which would not have or reasonably
be expected to have, individually or in the aggregate, a Jif/Crisco Material
Adverse Effect.
SECTION 4.04 Information to be Supplied. The information supplied or to be
supplied by P&G for inclusion in the Proxy Statement/Prospectus registration
statement on Form S-4 to be filed with the SEC or incorporated by reference by
JMS in connection with the issuance of JMS Common Stock in the Merger (as
amended and supplemented from time to time, the "Merger Registration Statement")
will not, on the date of its filing or, in the case of the Merger Registration
Statement, at the time it becomes effective under the Securities Act, or on the
dates the Proxy Statement/Prospectus is mailed to the JMS Shareholders and the
P&G Shareholders and at the time of the JMS Shareholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
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SECTION 4.05 Capitalization of P&G and Newco.
(a) The authorized capital stock of P&G consists solely of 5,800 million
shares of capital stock, without par value, of which 600 million are classified
and designated as Series A Preferred Stock and 200 million are classified as
Series B Preferred Stock and of which 5,000 million shares are classified and
designated as common shares ("P&G Common Stock"). As of August 31, 2001, there
were 53,751,192 shares of Series A Preferred Stock, 36,464,839 shares of Series
B Preferred Stock and 1,296,878,428 shares of P&G Common Stock issued and
outstanding and 103,404,387 shares of P&G Common Stock were reserved for
issuance upon the exercise of outstanding options (the "P&G Options") for P&G
Common Stock. All issued and outstanding shares of P&G Common Stock have been
duly authorized and validly issued and are fully paid and non-assessable. As of
the date of this Agreement and except for shares issuable pursuant to the P&G
Options and shares issuable upon conversion of the Series A Preferred Stock and
the Series B Preferred Stock, there are no outstanding options, warrants,
rights, calls, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent or
otherwise, relating to P&G Common Stock or any capital stock equivalent or other
nominal interest in P&G or any of its Subsidiaries which relate to P&G ("P&G
Equity Interests") pursuant to which P&G or any of its Subsidiaries is or may
become obligated to issue shares of its capital stock or other equity interests
or any securities convertible into or exchangeable for, or evidencing the right
to subscribe for any P&G Equity Interests. Except as set forth on Schedule
4.05(a), there are no agreements, commitments or contracts to which P&G is a
party relating to the issuance, sale, transfer or voting of any equity
securities or other securities of P&G.
(b) At the Closing, there will be a number of common shares, without par
value, of Newco ("Newco Common Stock") issued and outstanding equal to the
number of shares of P&G Common Stock outstanding. At the Closing, all issued and
outstanding shares of Newco Common Stock will have been duly authorized and
validly issued and fully paid and non-assessable. At the Closing, and except for
(i) shares issuable pursuant to this Agreement and the Ancillary Agreements,
there will be no outstanding options, warrants, rights, calls, subscriptions,
claims of any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to Newco
Common Stock or any capital stock equivalent or other nominal interest in Newco
which relate to Newco ("Newco Equity Interests") pursuant to which Newco is or
may become obligated to issue shares of its capital stock or other equity
interests or any securities convertible into or exchangeable for, or evidencing
the right to subscribe for any Newco Equity Interests. At the Closing, there
will be no outstanding obligations of Newco to repurchase, redeem or otherwise
acquire any outstanding securities of Newco Equity Interests. Except pursuant to
this Agreement and the Ancillary Agreements, at the Closing, there will be no
agreements, commitments or contracts relating to the issuance, sale, transfer or
voting of any equity securities or other securities of Newco.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF JMS
JMS hereby represents and warrants to P&G as follows:
SECTION 5.01 Due Organization, Good Standing and Corporate Power.
(a) JMS is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted.
(b) Each of JMS' Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation (except as would not have a JMS Material Adverse Effect), and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
(c) Each of JMS and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the
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business conducted by it makes such qualification necessary, except in such
jurisdictions where the failure to be so qualified or licensed and in good
standing would not have or reasonably be expected to have, individually or in
the aggregate, a JMS Material Adverse Effect.
SECTION 5.02 Authorization and Validity of Agreement. JMS has full
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a party, to perform its obligations
hereunder or thereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement and the Ancillary Agreements by JMS,
and the consummation by JMS of the Transactions, have been duly authorized and
unanimously approved by its board of directors and, except for the JMS
Shareholder Approval, no other corporate action on the part of JMS is necessary
to authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements or the consummation of the Transactions. This Agreement and
the Ancillary Agreements have been duly executed and delivered by JMS and to the
extent that it is a party thereto each is a valid and binding obligation of JMS
enforceable against JMS in accordance with their terms, except to the extent
that its enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar Law affecting the enforcement of
creditors' rights generally and by general equitable principles.
SECTION 5.03 Capitalization. The authorized capital stock of JMS consists
of 70,000,000 shares of common stock, no par value (the "JMS Common Stock") and
3,000,000 shares of serial preferred stock, no par value ("JMS Preferred Stock")
of which 700,000 shares have been designated as "Series A Junior Participating
Preferred Shares" (hereinafter referred to as "JMS Series A Preferred Stock").
As of October 9, 2001, there were 24,404,754 shares of JMS Common Stock issued
and outstanding, 2,287,877 shares were reserved for issuance upon the exercise
of outstanding options (the "JMS Options") for JMS Common Stock, and between
such date and the date hereof, JMS has not issued shares of JMS Common Stock
other than pursuant to the exercise of such options to purchase shares of JMS
Common Stock. All issued and outstanding shares of JMS Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable. One
right to purchase one-hundredth of a share of JMS Series A Preferred Stock
(each, a "JMS Right"), issued pursuant to the Amended and Restated Rights
Agreement dated as of August 28, 2000 between JMS and Computershare Investor
Services, LLC (the "JMS Rights Agreement"), is associated with and attached to
each outstanding share of JMS Common Stock. As of the date of this Agreement,
and except for shares of JMS Common Stock issuable pursuant to the JMS Rights
Agreement and the JMS Options, there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to JMS Common Stock or any capital stock
equivalent or other nominal interest in JMS or any of its Subsidiaries which
relate to JMS (collectively, "JMS Equity Interests") pursuant to which JMS or
any of its Subsidiaries is or may become obligated to issue shares of its
capital stock or other equity interests or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any JMS Equity
Interests. There are no outstanding obligations of JMS to repurchase, redeem or
otherwise acquire any outstanding securities of JMS Equity Interests.
SECTION 5.04 Consents and Approvals; No Violations. Assuming (a) the
filings required under the HSR Act are made and the waiting periods thereunder
(if applicable) have been terminated or expired, (b) the applicable requirements
of the Securities Act and the Exchange Act are met, (c) the requirements under
any applicable state securities or blue sky laws are met, (d) the requirements
of the NYSE in respect of the listing of the shares of JMS Common Stock to be
issued hereunder are met, (e) the filing of the Certificate of Merger and other
appropriate merger documents, if any, as required by the Ohio Corporation Law,
are made, and (f) the JMS Shareholder Approval is obtained, the execution and
delivery of this Agreement and the Ancillary Agreements by JMS and the
consummation by JMS of the Transactions do not and will not: (i) violate or
conflict with any provision of its articles of incorporation or code regulations
or the comparable governing documents of JMS or any of JMS's Subsidiaries; (ii)
violate or conflict with any Law or Order of any Governmental Entity applicable
to JMS or any of JMS's Subsidiaries or by which any of their respective
properties or assets may be bound; (iii) require any filing with, or Permit,
consent or approval of, or the giving of any notice to, any Governmental Entity;
or (iv) result in a violation or breach of, conflict with, constitute (with or
without
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due notice or lapse of time or both) a default under, or give rise to any right
of termination, cancellation or acceleration, or result in the creation of any
Encumbrance upon any of the properties or assets of JMS or any of its
Subsidiaries under, or give rise to any obligation, right of termination,
cancellation, acceleration or increase of any obligation or a loss of a material
benefit under, any of the terms, conditions or provisions of any Contract to
which JMS or any of JMS's Subsidiaries is a party, or by which JMS or any of
JMS's Subsidiaries or by which any of their respective properties or assets may
be bound, excluding from the foregoing clauses, conflicts, violations, breaches,
defaults, rights of payment and reimbursement, terminations, modifications,
accelerations and creations and impositions of Encumbrances which would not have
or reasonably be expected to have, individually or in the aggregate, a JMS
Material Adverse Effect.
SECTION 5.05 JMS SEC Filings; Financial Statements.
(a) JMS has timely filed, or will after the date of this Agreement, timely
file, all registration statements, prospectuses, forms, reports and documents
and related exhibits required to be filed by it under the Securities Act or the
Exchange Act, as the case may be, since December 31, 1998 (collectively,
including all SEC filings filed after the date of this Agreement and prior to
the Closing, the "JMS SEC Filings"). The JMS SEC Filings (i) were prepared or
will after the date of this Agreement be prepared in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and (ii) did not at the time they were filed and will not when
filed after the date of this Agreement contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. No Subsidiary of JMS
is subject to the periodic reporting requirements of the Exchange Act.
(b) Each of the consolidated financial statements of JMS (including, in
each case, any notes thereto) contained in the JMS SEC Filings was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto and except with
respect to unaudited statements as permitted by Form 10-Q under the Exchange Act
and to normal and recurring adjustment) and each presented fairly in all
material respects the consolidated financial position of JMS and its
consolidated Subsidiaries as of the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring
adjustments, which are not material). The books and records of JMS and its
Subsidiaries have been, and are being, maintained in accordance with GAAP and
any other applicable legal and accounting requirements.
SECTION 5.06 No Undisclosed Liabilities. Except as and to the extent set
forth on the consolidated balance sheet of JMS as of April 30, 2001 included in
JMS's Form 10-K for the year ended April 30, 2001 (the "JMS Balance Sheet"),
including the notes thereto, neither JMS nor any of its Subsidiaries have any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
the notes thereto prepared in accordance with GAAP, except for liabilities or
obligations incurred since April 30, 2001 in the ordinary course of business
that would not have or reasonably be expected to have, individually or in the
aggregate, a JMS Material Adverse Effect.
SECTION 5.07 Information to be Supplied. The Merger Registration Statement
and the other documents required to be filed by JMS with the SEC in connection
with the Transactions will comply as to form, in all material respects, with the
requirements of the Exchange Act and the Securities Act, as the case may be, and
will not, on the date of their filing or, in the case of the Merger Registration
Statement, at the time it becomes effective under the Securities Act, or on the
dates the Proxy Statement/Prospectus is mailed to the JMS Shareholders and the
P&G Shareholders and at the time of the JMS Shareholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that JMS makes no representation or warranty with respect to statements made or
incorporated by reference in the Merger Registration Statement based on
information supplied by P&G expressly for inclusion or incorporation by
reference therein.
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SECTION 5.08 Absence of Certain Events. Except as required or expressly
permitted by this Agreement, since April 30, 2001, JMS and its Subsidiaries have
operated their respective businesses only in the ordinary course of business and
there has not occurred any event, occurrence or condition which would have or
reasonably be expected to have, individually or in the aggregate, a JMS Material
Adverse Effect.
SECTION 5.09 Litigation. Except as disclosed in JMS's Form 10-K for the
year ended April 30, 2001, there are no investigations, actions, suits,
proceedings or claims pending against JMS or any of its Subsidiaries or, to the
Knowledge of JMS, threatened against JMS or any of its Subsidiaries (or any of
their respective properties, rights or franchises), at law or in equity, or
before or by any Governmental Entity or any arbitrator or arbitration tribunal,
that has had or would reasonably be expected to have, individually or in the
aggregate, a JMS Material Adverse Effect, and, to the Knowledge of JMS, no
development has occurred with respect to any pending or threatened Action that
has had or reasonably be expected to have, individually or in the aggregate, a
JMS Material Adverse Effect. Neither JMS nor any of its Subsidiaries are subject
to any Order that has had or would reasonably be expected to have, individually
or in the aggregate, a JMS Material Adverse Effect.
SECTION 5.10 Voting Requirements; Approval; Board Approval.
(a) The affirmative vote of the holders of at least two-thirds of votes
entitled to be cast by the holders of the outstanding shares of JMS Common Stock
is the only vote of any class or series of JMS's capital stock necessary to
approve this Agreement, the Ancillary Agreements, the Merger and the
Transactions (the "JMS Shareholder Approval").
(b) The board of directors of JMS has, at a meeting duly called and held,
by unanimous vote, (i) determined that the Merger is advisable and in the best
interest of JMS and the JMS Shareholders, (ii) approved this Agreement, the
Ancillary Agreements, the Merger and the Transactions and (iii) resolved to
recommend (the "JMS Board Recommendation") that the JMS Shareholders approve and
adopt this Agreement, the Ancillary Agreements, the Merger and the Transactions.
SECTION 5.11 Title to Properties; Encumbrances. Each of JMS and its
Subsidiaries has good, valid and marketable title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets except where the failure to have such good, valid and
marketable title would not have or reasonably be expected to have, individually
or in the aggregate, a JMS Material Adverse Effect, in each case subject to no
Encumbrances, except for (a) Encumbrances reflected in the JMS Balance Sheet,
(b) Encumbrances consisting of zoning or planning restrictions, easements,
permits and other restrictions or limitations on the use of real property or
irregularities in title thereto which do not materially detract from the value
of, or impair the use of, such property by JMS or any of its Subsidiaries, (c)
Encumbrances for current Taxes, assessments or governmental charges or levies on
property not yet due or which are being contested in good faith and for which
appropriate reserves in accordance with GAAP have been created and (d)
Encumbrances which would not have or reasonably be expected to have,
individually or in the aggregate, a JMS Material Adverse Effect.
SECTION 5.12 Compliance with Law.
(a) Each of JMS and its Subsidiaries is in compliance with all applicable
Law and Orders except where the failure to so comply would not have or
reasonably be expected to have, individually or in the aggregate, a JMS Material
Adverse Effect.
(b) Each of JMS and its Subsidiaries hold, to the extent legally required,
all Permits that are required for its operation as now conducted, except where
the failure to hold any such Permit would not have or reasonably be expected to
have, individually or in the aggregate, a JMS Material Adverse Effect, and there
has not occurred any default under any such Permit, except to the extent that
such default would not have or reasonably be expected to have, individually or
in the aggregate, a JMS Material Adverse Effect.
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SECTION 5.13 Insurance. JMS and its Subsidiaries maintain insurance
coverage with reputable insurers in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in business
similar to that of JMS.
SECTION 5.14 Employees and Employee Benefits.
(a) JMS has provided P&G access to (i) all bonus, vacation, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock and stock option,
incentive, severance or change-in-control plans or other similar contracts, (ii)
all employment contracts, (iii) all medical, dental, disability, health and life
insurance plans or other contracts, and (iv) all other employee benefit and
fringe benefit plans or other contracts, in the case of each of (i) through (iv)
maintained or contributed to by JMS or any of its Subsidiaries for the benefit
of any of their employees or the beneficiaries of any of the foregoing, or
pursuant to which JMS or any of its Subsidiaries may have any liability
(collectively, the "JMS Compensation and Benefit Plans") (but disregarding, for
purposes of scheduling and the first sentence of Section 5.14(b) hereof only,
any JMS Compensation and Benefit Plan that is not material).
(b) JMS has provided P&G access to true and correct copies of all JMS
Compensation and Benefit Plans, including all amendments thereto, and, with
respect to each of the JMS Compensation and Benefit Plans, as applicable, the
trust documents, determination, opinion and notification letters issued by the
IRS, most recent annual valuation reports, summary plan descriptions, employee
booklets, most recent nondiscrimination tests, most recent annual reports (Form
5500), COBRA forms and notices, correspondence or inquiries by the IRS, the
Department of Labor or the Pension Benefit Guaranty Corporation, written
contracts, including administrative service agreements, group annuity contracts
and group insurance contracts, and employee communications.
(c) Except as would not have or reasonably be expected to have,
individually or in the aggregate, a JMS Material Adverse Effect, each JMS
Compensation and Benefit Plan has been and is being administered in accordance
with the terms thereof and all applicable Law. Each JMS Compensation and Benefit
Plan which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) (each such plan, a "JMS Pension Plan") and is intended to be qualified
under Section 401(a) of the Code is so qualified and has received a favorable
determination letter from the IRS, and JMS is not aware of any circumstances
which could result in the revocation or denial of any such favorable
determination letter.
SECTION 5.15 Regulatory Matters.
(a) Except as would not have or reasonably be expected to have,
individually or in the aggregate, a JMS Material Adverse Effect, to the
Knowledge of JMS, there are no facts:
(i) which would furnish a substantial basis for the recall, withdrawal
or suspension of any products of JMS or its Subsidiaries by the FDA or any
other competent Governmental Entity;
(ii) which would otherwise reasonably be expected to cause JMS or its
Subsidiaries to withdraw, recall or suspend any products of JMS or its
Subsidiaries from the market or to change the marketing classification of
any products of JMS or its Subsidiaries or to terminate or suspend testing
of any products of JMS or its Subsidiaries.
(b) There are no:
(i) products which have been recalled by JMS or its Subsidiaries
(whether voluntarily or otherwise) at any time during the past year; and
(ii) proceedings (whether completed or pending) at any time during the
past year seeking the recall, suspension or seizure of any products of JMS
or its Subsidiaries.
SECTION 5.16 JMS Rights Agreement. None of the execution and delivery of
this Agreement, the Ancillary Agreements and the consummation of the
Transactions, will cause (i) the JMS Rights to become exercisable under the JMS
Rights Agreement, (ii) P&G or any of its Subsidiaries or, based on publicly
available information, shareholders to be deemed an "Acquiring Person" (as
defined in the JMS
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Rights Agreement), (iii) any "Triggering Event" (as defined in the JMS Rights
Agreement) or (iv) the "Share Acquisition Date" or the "Distribution Date" (each
as defined in the JMS Rights Agreement) to occur upon any such event. JMS has
made available to P&G a true and complete copy of the JMS Rights Agreement, as
amended to date.
SECTION 5.17 Broker's or Finder's Fee. Except for Rhone Group LLC and
William Blair & Co. LLC, no agent, broker, Person or firm acting on behalf of
JMS is, or will be, entitled to any investment banking or broker's or finder's
fee for which JMS or any of its Affiliates could have any liabilities in
connection with this Agreement or any of the Transactions.
SECTION 5.18 Tax Treatment. None of JMS or any of its Subsidiaries have
taken or have failed to take any action, or are aware of any facts or
circumstances, that would prevent the Merger from constituting a tax-free
reorganization within the meaning of Section 368(a) of the Code.
SECTION 5.19 Intellectual Property. JMS and its Subsidiaries own, or have
the right to use without infringing or violating the rights of any third
parties, except where such infringement or violation would not have, or
reasonably be expected to have, individually or in the aggregate, a JMS Material
Adverse Effect: (i) each trademark, trade name, brand name, service mark or
other trade designation used, owned or licensed by or to JMS or any of its
Subsidiaries, each patent, copyright and similar intellectual property owned or
licensed to or by JMS and each license, royalty, assignment or other similar
agreement and each registration and application relating to the foregoing that
is material to the conduct of the business of JMS and its Subsidiaries taken as
a whole; and (ii) each agreement relating to technology, know-how or processes
that JMS or its Subsidiaries is licensed or authorized to use, or which it
licenses or authorizes others to use, that is material to the conduct of the
business of JMS and its Subsidiaries taken as a whole (collectively, the "JMS
Intellectual Property"). No consent of third parties will be required for the
use of the JMS Intellectual Property after the Effective Time, except where the
failure to obtain such consent would not have or reasonably be expected to have,
individually or in the aggregate, a JMS Material Adverse Effect. No claim has
been asserted by any Person against JMS or any of its Subsidiaries regarding the
ownership of or the right to use any JMS Intellectual Property or challenging
the rights of JMS or any of its Subsidiaries with respect to any of the JMS
Intellectual Property which would have or reasonably be expected to have,
individually or in the aggregate, a JMS Material Adverse Effect.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Jif/Crisco Business Pending the Effective Time.
(a) P&G agrees that, between the date of this Agreement and the Effective
Time, P&G and each of its Subsidiaries shall conduct the Jif/Crisco Business in
all material respects only according to the ordinary and usual course of
business consistent with past practice, and shall use their reasonable best
efforts to keep available the services of its Employees, maintain satisfactory
relationships with licensors, suppliers, distributors, clients, joint venture
partners and others having significant business relationships with the
Jif/Crisco Business in the ordinary course, including, without limitation,
managing inventory levels consistent with past practice;
(b) P&G agrees that, between the date of this Agreement and the Effective
Time, P&G and each of its Subsidiaries shall use their reasonable best efforts
to (i) cause the Merger to qualify as a reorganization under the provisions of
Section 368(a) of the Code and (ii) not take, and prevent any Affiliate from
taking, any actions that could prevent the Merger from qualifying as a
reorganization under the provisions of Section 368(a) of the Code; and
(c) Without limiting the generality of the foregoing, and except as
otherwise provided in this Agreement, P&G shall not, without the prior written
consent of JMS (which consent in the case of
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clause (i) and (ii) below and in the case of clause (v) insofar as it relates to
clauses (i) and (ii), will not be unreasonably withheld or delayed), nor will it
permit any of its Subsidiaries to:
(i) sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the sale, pledge, disposition, grant,
transfer, lease, guarantee or encumbrance of, other than (x) in the
ordinary course of business and consistent with past practice and (y)
otherwise not in excess of $1,000,000 individually, any property or assets
of P&G or any of its Subsidiaries that will be assumed by Newco pursuant to
the Contribution Agreement;
(ii) (A) other than (x) in the ordinary course of business in a manner
consistent with past practice and (y) otherwise not in excess of $1,000,000
individually, acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
Person or any division thereof or any assets that will be assumed by Newco
pursuant to the Contribution Agreement; (B) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any Person if such liabilities will be assumed by Newco
pursuant to the Contribution Agreement, or (c) enter into media buy
commitments for the Jif/Crisco Business through March 2002 in excess of the
budget therefor disclosed to JMS prior to the date of this Agreement;
(iii) take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions set forth in
Article VII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable Law;
(iv) at any time after the Record Date and prior to the Closing issue
or authorize the issuance of any shares of its capital stock (other than in
connection with the exercise of currently outstanding stock options for P&G
Common Stock) or any other securities exercisable or exchangeable for or
convertible into shares of its capital stock, or repurchase, redeem,
purchase or otherwise acquire for value any shares of its capital stock or
any other securities exercisable or exchangeable for or convertible into
shares of capital stock or reclassify combine, split or subdivide, directly
or indirectly, any of its capital stock; or
(v) agree, in writing or otherwise, to take any of the foregoing
actions.
SECTION 6.02 Conduct of JMS Pending the Effective Time.
(a) Except as contemplated by this Agreement or any Ancillary Agreement,
JMS agrees that, between the date of this Agreement and the Effective Time, JMS
and each of its Subsidiaries shall conduct their respective operations in all
material respects only according to the ordinary and usual course of business
consistent with past practice.
(b) JMS agrees that, between the date of this Agreement and the Effective
Time, JMS and each of its Subsidiaries shall use their reasonable best efforts
to (i) cause the Merger to qualify as a reorganization under the provisions of
Section 368(a) of the Code and (ii) not take, and prevent any Affiliate from
taking, any actions that could prevent the Merger from qualifying as a
reorganization under the provisions of Section 368(a) of the Code.
(c) Without limiting the generality of the foregoing, and except as
otherwise provided in this Agreement, before the Effective Time, JMS shall not,
without the prior written consent of P&G (which consent will, in the case of
clause (ii) and (v) below and in the case of clause (vii) insofar as it relates
to clauses (ii) and (v), not be unreasonably withheld or delayed), nor will it
permit any of its Subsidiaries to:
(i) amend or otherwise change its certificate of incorporation or
bylaws of equivalent organization documents;
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(ii) sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the sale, pledge, disposition, grant,
transfer, lease, guarantee or encumbrance of, other than (x) in the
ordinary course of business and consistent with past practice, (y)
otherwise not in excess of $50,000,000 in the aggregate after the date of
this Agreement or (z) previously disclosed to P&G in writing, any property
or assets of JMS or any of its Subsidiaries;
(iii) declare, set aside, make or pay any dividends or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock (other than (i) regular quarterly cash
dividends at a rate not in excess of $0.60 per share of JMS Common Stock
declared and paid in the ordinary course and consistent with past practice
and (ii) dividends payable by a wholly-owned Subsidiary of JMS to JMS or
another wholly-owned Subsidiary), or enter any agreement with respect to
the voting of its capital stock, issue or authorize the issuance of any
shares of its capital stock (other than in connection with the exercise of
currently outstanding stock options for JMS Common Stock) or any other
securities exercisable or exchangeable for or convertible into shares of
its capital stock, or repurchase, redeem, purchase or otherwise acquire for
value any shares of its capital stock or any other securities exercisable
or exchangeable for or convertible into shares of its capital stock;
(iv) reclassify, combine, split or subdivide, directly or indirectly,
any of its capital stock;
(v) (A) other than (x) in the ordinary course of business in a manner
consistent with past practice, (y) otherwise not in excess of $50,000,000
in the aggregate after the date of this Agreement or (z) previously
disclosed to P&G in writing, acquire (including, without limitation, by
merger, consolidation, or acquisition of stock or assets) any interest in
any Person or any division thereof or any assets; or (B) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any Person for borrowed money, except for (1)
indebtedness for borrowed money incurred in the ordinary course of business
or in connection with transactions otherwise permitted by this Agreement or
any Ancillary Agreement, (2) indebtedness incurred to refinance any
existing indebtedness or (3) other indebtedness for borrowed money under
existing credit facilities;
(vi) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions set forth in
Article VII not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable Law; or
(vii) agree, in writing or otherwise, to take any of the foregoing
actions.
SECTION 6.03 Efforts to Close; Antitrust Clearance.
(a) P&G and JMS will use their reasonable best efforts to cause all of the
conditions, as specified in Article VII of this Agreement, to the obligations of
the other to consummate the Transactions to be met as soon as practicable after
the date of this Agreement.
(b) P&G and JMS will comply fully with all applicable notification,
reporting and other requirements. P&G and JMS, within ten (10) Business Days
after the date of this Agreement, will file the required notifications with the
appropriate Governmental Entities pursuant to and in compliance with the
respective Antitrust Laws. P&G and JMS will as soon as practicable file any
additional information reasonably requested by any Governmental Entity.
(c) P&G and JMS will each use its reasonable best efforts to obtain, as
soon as practicable, the Authorizations that may be or become necessary for the
performance of its obligations under this Agreement, the Ancillary Agreements
and the consummation of the Transactions and will cooperate fully with each
other in promptly seeking to obtain such Authorizations.
(d) In furtherance and not in limitation of the covenants of the parties
contained in this Section 6.03, each of P&G and JMS shall use its reasonable
best efforts to resolve such objections if any, as may be asserted with respect
to the transactions contemplated hereby under any Antitrust Law. In connection
with
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the foregoing, if any administrative or judicial action or proceeding, including
any proceeding by a private party, is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Antitrust Law, each of P&G and JMS shall cooperate in all
respects with each other and use its respective reasonable best efforts to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed or overturned, any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent, that is in effect and that prohibits,
prevents or restricts consummation of the transaction contemplated by this
Agreement, including, without limitation, vigorously defending in litigation on
the merits any claim asserted in any court by any party through a final and
nonappealable judgment.
(e) If any objections are asserted with respect to the transactions
contemplated hereby under any Antitrust Law or if any suit is instituted by any
Governmental Entity or any other Person challenging any of the transactions
contemplated hereby as violative of any Antitrust Law, each of P&G and JMS shall
use its reasonable best efforts to resolve such objections or challenge as such
Governmental Entity or other Person may have to such transactions contemplated
by this Agreement. In furtherance and not in limitation of the foregoing, each
of P&G and JMS (and to the extent required by any Governmental Entity, its
respective Subsidiaries and Affiliates over which it exercises control) shall be
required to pursue a resolution with any Governmental Entity and if acceptable
to any Governmental Entity, enter into a settlement, undertaking, consent
decree, stipulation or other agreement with such Governmental Entity regarding
antitrust matters in connection with the transactions contemplated by this
Agreement (each a "Settlement"). Notwithstanding anything else contained in this
Agreement, neither P&G nor JMS shall be required to enter into any Settlement
that requires P&G or JMS to sell or otherwise dispose of the Jif/Crisco Assets
(as defined in the Contribution Agreement) or any assets of JMS and its
Subsidiaries (any such action, a "Divestiture") if such Divestiture would have a
material adverse effect on the pro forma combined business of Newco (after the
Contribution) and JMS.
SECTION 6.04 Confidentiality.
(a) The parties acknowledge that in connection with the Transactions, the
parties have disclosed to each other technical and business information which
the parties consider proprietary and confidential. This information may include,
by way of example and without limitation, new products, commercial plans,
financial projections, technical or non-technical data, financial data,
know-how, formulae, processes, patterns, strategies, compilations, programs,
devices, methods, techniques, drawings, designs, sketches, photographs, plans,
specifications, samples, reports, pricing information, lists of actual or
potential customers and suppliers, studies, findings, inventions, ideas, and
trade secrets. Such information is herein referred to as the "Information." The
parties agree that, after the Effective Time, Information relating to the
Jif/Crisco Business shall be Information of the Surviving Corporation and P&G
shall be deemed to be the Receiving Party of such Information for purposes of
Section 6.04(b).
(b) Each party receiving Information (the "Receiving Party") recognizes and
acknowledges (i) that Information of the other party may be commercially
valuable proprietary products of such party, the design and development of which
may have involved the expenditure of substantial amounts of money and the use of
skilled development experts over a long period of time and which afford such
party a commercial advantage over its competitors; (ii) that the loss of this
competitive advantage due to unauthorized disclosure or use of Information of
such party may cause great injury and harm to such party; and (iii) that the
restrictions imposed upon the parties under this Section 6.04 are necessary to
protect the secrecy of Information and to prevent the occurrence of such injury
and harm. The parties agree that:
(i) disclosure of Information will be received and held in confidence
by the Receiving Party and that such Receiving Party will not, without the
prior written consent of the party from whom such Information was obtained
(the "Disclosing Party"), disclose, divulge or permit any unauthorized
person to obtain any Information disclosed by the Disclosing Party (whether
or not such Information is in written or tangible form);
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(ii) the Receiving Party will take such steps as may be reasonably
necessary to prevent the disclosure of Information to others; and
(iii) the Receiving Party will use the Information only in connection
with the Transactions unless otherwise authorized in writing by the
Disclosing Party.
(c) The commitments set forth above shall not extend to any portion of
Information:
(i) which is already known to the Receiving Party, or is information
generally available to the public; or
(ii) which, hereafter, through no act on the part of the Receiving
Party becomes generally available to the public; or
(iii) which corresponds in substance to a disclosure furnished to the
Receiving Party by any third party having a bona fide right to do so and
not having any confidential obligation, direct or indirect, to the
Disclosing Party with respect to the same; or
(iv) which is required to be disclosed by Law, provided that the
Receiving Party provides reasonable prior written notice of such required
disclosure to the Disclosing Party.
The commitments set forth in this Section 6.04 shall promptly and
automatically terminate in their entirety upon the lapse of a period of three
(3) years from the Closing Date.
SECTION 6.05 Cooperation in Litigation. For a period of three (3) years
after the Effective Time, P&G and JMS will, in the defense of any third-party
Action relating to the Jif/Crisco Business, make available during normal
business hours, but without unreasonably disrupting their respective businesses,
all personnel and records of the Jif/Crisco Business reasonably necessary to
permit the effective defense or investigation of such Action. If information
other than that pertaining to the Jif/Crisco Business is contained in such
records, P&G and JMS will either agree that such information may be omitted or
redacted by the producing party, or will enter into appropriate secrecy
commitments to protect such information.
SECTION 6.06 Cooperation in Tax Matters.
(a) Following the Effective Time, neither JMS nor its Affiliates (including
the Surviving Corporation) shall take any action, cause any action to be taken,
fail to take any action or fail to cause any action to be taken, which action or
failure to act could (i) cause the Merger to fail to qualify as a reorganization
under Section 368(a) of the Code, or (ii) cause (x) gain or loss to be
recognized by the P&G Shareholders in the Spin Off, or (y) gain or loss to be
recognized by P&G in the Spin Off.
(b) P&G and JMS will make available to each other during normal business
hours, but without unreasonably disrupting their respective businesses, all
personnel and records of the Jif/Crisco Business reasonably necessary in
connection with the filing of any Tax Return, amended return or claim for
refund; determining a liability for Taxes or a right to refund for Taxes; or in
conducting an audit or other proceeding in respect of Taxes.
(c) P&G and JMS will each use its reasonable best efforts to enable P&G to
prepare and submit, as promptly as practicable after the date hereof, such
submissions as are reasonably necessary to obtain the letter ruling referred to
in Section 7.03(d). P&G and JMS will cooperate in good faith with each other in
making such submissions, including by allowing each other to receive and comment
upon all such materials. The parties further agree that the parties will further
seek a letter ruling to the effect that (i) any Surviving Corporation Common
Stock acquired by employees or directors of Surviving Corporation after the
Merger in connection with the performance of services for Surviving Corporation
in a transaction to which Section 83 of the Code applies, including without
limitation pursuant to the exercise of stock options, whether granted before or
after the Merger, and that is not excessive by reference to the services
performed, will not be treated for purposes of Section 355(e) as acquired as
part of plan or series of related transactions that includes the Spin Off; (ii)
fractional shares of Surviving Corporation Common Stock sold by the Exchange
Agent pursuant to Section 3.02(e) will be treated for purposes of applying
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Section 355(e) as received by the Newco Shareholders and then disposed of in
transactions which qualify under Safe Harbor V of Reg. 1.355-7T(e) or which
otherwise are not treated for purposes of Section 355(e) as part of a plan or
series of related transactions that includes the Spin Off; and (iii) for
purposes of applying Section 355(e) all shares of Surviving Corporation Common
Stock received by the ESOP in the Merger which are unallocated shares, will be
taken into account in determining the percentage of Surviving Corporation Common
stock (as successor the Newco) described in Section 355(e)(3)(A)(ii) and (iii)
and the subsequent disposition by the ESOP of such stock will be treated as
pursuant to transactions that qualify under Safe Harbor V of Reg. 1.355-7T(e) or
which otherwise are not treated for purposes of Section 355(e) as part of a plan
or series of related transactions that includes the Spin Off. The rulings
described in clauses (i) through (iii) above are collectively referred to as
"Supplemental Rulings."
SECTION 6.07 Cooperation of Third Parties. Where the cooperation of third
parties such as insurers or trustees would be necessary in order for a party
hereto to completely fulfill its obligations under this Agreement and the
Ancillary Agreements, such party will use its reasonable best efforts to cause
such third parties to provide such cooperation.
SECTION 6.08 Additional Documents. From time to time after the Effective
Time, P&G and JMS will, and will cause their officers, attorneys, accountants
and other respective representatives and Affiliates to, execute and deliver,
without further consideration, such documents as any of them may reasonably
request, in such form as may be appropriate, if necessary or advisable in
connection with the consummation of the Transactions.
SECTION 6.09 Access. From the date hereof to the Effective Time, each of
P&G and JMS shall allow all designated officers, attorneys, accountants and
other representatives of P&G or JMS, as the case may be, access at reasonable
times upon reasonable notice and in a manner as will not adversely impact the
conduct of the business of either party or the Jif/Crisco Business to the
personnel, records files, correspondence, audits and properties, as well as to
all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of the Jif/Crisco
Business and JMS and its Subsidiaries, as the case may be, including inspection
of such properties; provided that no investigation pursuant to this Section 6.09
shall affect any representation or warranty given by any party hereunder, and
provided further that notwithstanding the provision of information or
investigation by any party, no party shall be deemed to make any representation
or warranty except as expressly set forth in this Agreement. Notwithstanding the
foregoing, no party shall be required to provide any information which it
reasonably believes it may not provide to the other party by reason of
applicable Law, which such party reasonably believes constitutes information
protected by attorney/client privilege, or which it is required to keep
confidential by reason of Contracts with third parties. The parties hereto will
make reasonable and appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply. Each of
P&G and JMS agrees that it will not, and will cause its respective
representatives not to, use any information obtained pursuant to this Section
6.09 for any purpose unrelated to the consummation of the Transactions All
information provided by a party to the other party hereunder shall be subject to
the confidentiality provisions of Section 6.04.
SECTION 6.10 Public Announcements. P&G and JMS will consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement and the Transactions and neither of
them shall issue any such press release or make any such public statement
without the prior approval of the other, except as may be required by Law or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 6.11 Transferring Employees.
(a) Continued Employment. JMS shall offer continued employment, effective
from the Closing, to the Employees, as soon as reasonably practicable after the
date of this Agreement upon the terms and conditions as set forth in this
Section 6.11. JMS will provide P&G with a copy of its offer of employment to the
Employees Following the Effective Time, any such person who accepts such offer
prior to the Effective Time (each, a "Newco Employee") shall continue in the
employment of the Surviving
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Corporation. Subject to paragraph (f) hereof, and clauses (i) and (iii) of this
sentence below, the terms and conditions of such continued employment shall be
the same in all material respects to the terms and conditions as in effect
immediately prior to the Effective Time, including but not limited to the
following:
(i) the same salary, shift premiums, and overtime pay as provided to
the Employee immediately prior to the Effective Time;
(ii) a pension, savings and/or other benefit plan which provides a 3%
aggregate increase for the Newco Employees over amounts currently
contributed by JMS to similar JMS plans, but otherwise the terms of such
plans shall be the same as the JMS pension, savings, and benefit plans in
effect on the Closing Date;
(iii) compensation plans and insurance plans which provide for (a)
short term disability coverage for all Newco Employees upon the terms set
forth in the JMS salaried short term disability plan as in effect on the
date hereof, (b) life insurance for each Newco Employee in an amount equal
to one years' salary, (c) vacation accrual as provided for under the JMS
vacation policy; provided, however, that no Newco Employee will be entitled
to a lower vacation accrual than he or she is entitled to under the P&G
plan as in effect on the date hereof, and (d) all other compensation and
insurance benefits which are provided to employees of JMS and its
Subsidiaries on the Closing Date.
Notwithstanding the foregoing, JMS acknowledges its obligations to comply with
Laws regarding any changes in benefits to which the Employees who are covered by
the collective bargaining agreement for the Ivorydale facility were entitled
prior to the Closing Date.
JMS agrees to cause the terms and conditions of employment of any Newco Employee
not to be changed in a manner that is unfavorable to such Newco Employee
(including but not limited to termination or layoff, other than termination for
cause and company wide terminations due to reductions in demand affecting the
business of the Surviving Corporation) for at least one year after the Effective
Time.
(b) Cessation of Participation in P&G Plans. As of the Effective Time,
neither the Surviving Corporation nor any Newco Employees shall continue to
participate in, be a member of or have any rights under any employee benefit
plan or arrangement of P&G or any of its Affiliates (except rights that
Surviving Corporation and Newco Employees may have under any such plan or
arrangement relating to participation therein prior to the Effective Time), and
P&G and the Surviving Corporation shall take, or cause to be taken, all such
action as may be necessary to effect the cessation of participation of the
Surviving Corporation and Newco Employees as of the Effective Time.
(c) Transition Incentive Payments. JMS may, in its discretion, cause the
Surviving Corporation to offer one or more non-exempt Newco Employees a
transition payment to facilitate the transition of non-exempt Newco Employees to
JMS.
(d) Employee Transition. P&G and JMS will use reasonable best efforts to
cause the Employees to maintain their employment in the Jif/Crisco Business. P&G
or any of its Affiliates will, however, have no liability nor make any
representation or warranty on the employment decisions of the Employees
whatsoever. JMS, P&G and Newco shall cooperate with each other in facilitating
the transition of Newco Employees from the plans, programs and arrangements of
P&G and its Affiliates to the plans, programs and arrangements of JMS and its
Affiliates, including but not limited to (i) meeting with the Employees at such
times as shall be agreed in advance by P&G and JMS and (ii) distributing to the
Employees such forms and other documents relating thereto as JMS shall
reasonably request. To the extent permitted by Law, P&G will make available to
JMS all information regarding the Employees in its possession as may be
reasonably requested to assist JMS in such transition. Where provisions in this
Agreement would require the cooperation of third parties such as insurers or
trustees, JMS and P&G agree to take reasonable best efforts to cause such third
parties to cooperate with JMS.
(e) Certain Employee Liabilities. JMS and P&G acknowledge that (i) P&G and
its Affiliates shall be responsible for all liabilities and obligations relating
to the Newco Employees and their dependents that arise or are incurred on or
before the day on which the Effective Time occurs, whether or not reported as
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of the Effective Time, and (ii) JMS and its Affiliates shall be responsible for
all liabilities and obligations relating to the Newco Employees and their
dependents that arise or are incurred after the day on which the Effective Time
occurs. For purposes of medical, dental, health and life insurance benefits, a
liability or obligation shall be deemed to have arisen or to have been incurred
upon the incurrence by a Newco Employee or dependent of a qualified expense for
which reimbursement or payment is sought. As soon as practicable following the
first anniversary of the Closing Date, P&G shall reimburse JMS for the costs and
expense incurred by JMS, if any, relating to any Newco Employee who is on
disability or other leave of absence and who is deemed not to have been an
Employee pursuant to this Agreement.
(f) Credit for Seniority. JMS will cause to be extended to each Newco
Employee full credit for the entire period of continuous service preceding the
Effective Time rendered to P&G and Newco as if such service had occurred with
JMS, for purposes of eligibility to participate and vesting under any of JMS's
and its Affiliates' benefit plans, pension, retirement and/or profit sharing
plans, insurance and vacation; provided, however, that this sentence shall not
apply to eligibility for equity-based compensation, and JMS shall, for this
purpose, be permitted to consider Newco Employees newly hired. JMS will further
cause to be extended full credit for service preceding the Effective Time
rendered to P&G and Newco by a Newco Employee (i) whose employment is terminated
by JMS at any time after the Effective Time for purposes of determining the
severance or other termination pay due to such terminated Newco Employee under
the applicable severance or termination plan or policy of JMS, if any, and (ii)
as to early retirement subsidies and the entitlement to higher levels of
benefits (such as matching combinations under a 401(k) plan, credits under a
cash balance plan and other similar benefits) in respect of service following
the Effective Time under any JMS pension and/or profit sharing plan, if any.
SECTION 6.12 Restrictions on Solicitation and Hiring.
(a) Notwithstanding any other provision of this Agreement or the
Confidentiality Agreement, and except as P&G and JMS agree otherwise in writing,
JMS agrees that it will not (and JMS will cause its Affiliates not to), for a
period of two (2) years from the date of this Agreement, hire, or enter into any
form of consulting arrangement or agreement with, any employee, other than Newco
Employees, employed by P&G in P&G's Food and Beverage business as of the
Effective Time, or any other employee of P&G whom JMS came into contact with as
a result of the Transactions, nor will JMS (and JMS will cause its Affiliates
not to) solicit (other than by means of general advertisement not directed to
such employees) or otherwise induce any such employees of P&G to enter into any
type of employment or consulting arrangement or agreement that would be
prohibited by this Section 6.12(a). JMS acknowledges that (i) this provision is
reasonable, (ii) P&G would not enter into this Agreement without JMS agreeing to
and complying with this Section 6.12(a), (iii) P&G would suffer irreparable harm
upon JMS's violation of this provision and (iv) P&G shall be entitled to obtain
a temporary restraining order and/or injunction upon JMS's breach of this
provision.
(b) Notwithstanding any other provision of this Agreement or the
Confidentiality Agreement, and except as P&G and JMS agree otherwise in writing,
P&G agrees that it will not (and P&G will cause its Affiliates not to), for a
period of two (2) years from the date of this Agreement, hire, or enter into any
form of consulting arrangement or agreement with, any employee employed by JMS
as of the Effective Time, nor will P&G (and P&G will cause its Affiliates not
to) solicit (other than by means of general advertisement not directed to such
employees) or otherwise induce any such employees of JMS to enter into any type
of employment or consulting arrangement or agreement that would be prohibited by
this Section 6.12(b). P&G acknowledges that (i) this provision is reasonable,
(ii) JMS would not enter into this Agreement without P&G agreeing to and
complying with this Section 6.12(b), (iii) JMS would suffer irreparable harm
upon P&G's violation of this provision and (iv) JMS shall be entitled to obtain
a temporary restraining order and/or injunction upon P&G's breach of this
provision.
Section 6.13 JMS Shareholder Meeting. JMS shall call and hold a meeting of
the JMS Shareholders (the "JMS Shareholder Meeting") as promptly as practicable
after the Merger Registration Statement shall have become effective for the
purpose of obtaining the JMS Shareholder Approval.
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Section 6.14 Preparation of Proxy Statement/Prospectus; Registration
Statement.
(a) As promptly as practicable after the execution of this Agreement, (i)
JMS shall prepare and file with the SEC the Proxy Statement/Prospectus relating
to the JMS Shareholder Meeting to be held in connection with the Merger (the
"Proxy Statement/Prospectus") and (ii) JMS shall prepare and file with the SEC
the Merger Registration Statement in which the Proxy Statement/Prospectus shall
be included as a prospectus, in connection with the registration under the
Securities Act of the shares of Surviving Corporation Common Stock to be issued
to the holders of Newco Common Stock pursuant to the Merger. Prior to filing the
Proxy Statement/Prospectus and the Merger Registration Statement with the SEC,
JMS will deliver to P&G for P&G's review and approval the Proxy
Statement/Prospectus and the Merger Registration Statement (which approval will
not be unreasonably withheld or delayed). JMS will use its reasonable best
efforts to cause the Merger Registration Statement to become effective as
promptly as practicable, and, prior to the effective date of the Merger
Registration Statement, JMS shall take all or any Action required under any
applicable federal or state securities laws in connection with the issuance of
shares of JMS Common Stock in the Merger. JMS shall furnish all information
concerning it and the holders of its capital stock as required in connection
with such actions and the preparation of the Merger Registration Statement and
the Proxy Statement/Prospectus. As promptly as practicable after the Merger
Registration Statement shall have become effective, JMS shall mail the Proxy
Statement/Prospectus to the JMS Shareholders and the P&G Shareholders. The Proxy
Statement/Prospectus shall include the JMS Board Recommendation.
(b) No amendment or supplement to the Proxy Statement/Prospectus or the
Merger Registration Statement will be made by JMS without the consent of P&G
(which consent shall not be unreasonably withheld or delayed). JMS will advise
P&G, promptly after it receives notice thereof, of the time which the Merger
Registration Statement has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Surviving Corporation Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement/Prospectus or the Merger Registration Statement
or comments thereon and responses thereon or requests by the SEC for additional
information.
(c) The information supplied by JMS for inclusion in the Merger
Registration Statement and the Proxy Statement/Prospectus shall not, at (i) the
time the Merger Registration Statement is declared effective, (ii) the time the
Proxy Statement/Prospectus (or any amendment thereof of supplement thereto) is
first mailed to the JMS Shareholders and the P&G Shareholders and (iii) the time
of the JMS Shareholder Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. If at any time prior to the
Effective Time, any event or circumstances relating to JMS or any of its
Subsidiaries, or their respective officers or directors, should be discovered by
JMS and such information should be set forth in the Merger Registration
Statement or the Proxy Statement/Prospectus, JMS shall promptly inform P&G. All
documents that JMS is responsible for filing with the SEC in connection with the
Transactions will comply as to form and substance in all material aspects with
the applicable requirements of the Securities Act and the rules and regulations
thereunder and the Exchange Act and the rules and regulations thereunder.
(d) P&G will provide JMS with the information concerning the Jif/Crisco
Business, including financial statements and other financial information, in the
form required to be included in the Merger Registration Statement and the Proxy
Statement/Prospectus (including by reason of any SEC comments thereto or
subsequent requests thereon). Such information shall not, at (i) the time the
Merger Registration Statement is declared effective, (ii) the time the Proxy
Statement/Prospectus (or any amendment thereof of supplement thereto) is first
mailed to the JMS Shareholders and the P&G Shareholders and (iii) the time of
the JMS Shareholder Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading. If at any time prior to the
Effective Time, any event or circumstance relating to P&G or any of its
Subsidiaries, or their respective officers or directors, should be discovered by
P&G and such information should be set forth in the Merger Registration
Statement or
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Proxy Statement/Prospectus, P&G shall promptly inform JMS. All documents that
P&G is responsible for filing with the SEC in connection with the Transactions
will comply as to form and substance in all material aspects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
SECTION 6.15 Board Recommendation. JMS's board of directors has made the
JMS Board Recommendation and shall, as promptly as practicable, cause JMS to
take all lawful action to solicit the JMS Shareholder Approval. Subject to
Section 6.16(d), neither the board of directors of JMS nor any committee thereof
shall withdraw or modify, or propose to withdraw or modify, in a manner adverse
to P&G, the JMS Board Recommendation, except as may be required by Law.
SECTION 6.16 No Solicitation.
(a) JMS shall immediately cease and cause to be terminated and shall not
continue any discussions or negotiations, if any, with any Person conducted
before the date of this Agreement with respect to any Competing Transaction and,
without limitation, shall promptly, following the execution of this Agreement,
request the return of all confidential information provided by JMS to all
Persons who have had such discussions or negotiations or who have entered into
confidentiality agreements with JMS pertaining to a Competing Transaction.
(b) JMS will not, and will cause its respective Affiliates and
representatives not to, directly or indirectly solicit, initiate, or encourage
any inquiries or proposals from, discuss or negotiate with, or provide any
non-public information to, any Person (other than P&G and its representatives)
relating to any transaction regarding (i) any merger, consolidation, share
exchange, business combination or other similar transaction or series of
transactions involving JMS, (ii) any sale, lease, exchange, transfer or other
disposition (including by way of merger, consolidation or share exchange), in a
single transaction or a series of related transactions, of any material portion
(which, for greater certainty, shall be deemed to be anything in excess of 20%
of book value) of the assets of JMS and its Subsidiaries, taken as a whole,
(iii) any tender offer, exchange offer or similar transaction or series of
related transactions made by any Person or group of Persons, directly or
indirectly, involving the acquisition or lock-up of, or any acquisition by any
Person or group of Persons, directly or indirectly, of beneficial ownership of,
or the formation of any group of Persons to acquire beneficial ownership of,
that number of shares of JMS Common Stock which, when added to the number of
shares of JMS Common Stock then beneficially owned, directly or indirectly, by
such Person or group of Persons, is 10% or more of the then outstanding shares
of JMS Common Stock, or (iv) any other substantially similar transaction or
series of related transactions that would hinder or delay the consummation of,
or otherwise defeat the purposes of, the Transactions (a "Competing
Transaction").
(c) JMS will promptly (and in any event within two calendar days) advise
P&G in writing of the receipt of any inquiries or proposals relating to a
Competing Transaction, including the identity of the Person submitting such
inquiry or proposal and the terms thereof.
(d) Nothing contained in this Section 6.16 will prevent the board of
directors of JMS from taking, and disclosing to the JMS Shareholders, a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
respect to any publicly announced unsolicited tender offer if, in its good faith
judgment based on the opinion of outside legal counsel, failure to so disclose
would be inconsistent with its obligations under applicable Law; provided,
however, that the board of directors of JMS will not recommend that the JMS
Shareholders tender their shares of JMS Common Stock in connection with any such
tender offer unless (i) such tender offer is determined to be a Superior
Proposal, (ii) after consultation with outside legal counsel, the board of
directors of JMS concludes that failure to do so would constitute a breach of
its fiduciary duties under applicable Law.
SECTION 6.17 Notification of Certain Matters. Each of P&G and JMS shall
give prompt written notice to the other of (i) any notice or other communication
from any Person alleging that the consent of such Person is or may be required
in connection with the Transactions, (ii) any Action commenced or threatened in
writing against, relating to or involving or otherwise affecting it or any of
its Subsidiaries that
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relate to the consummation of the Transactions, and (iii) any change that is
reasonably likely to have, individually or in the aggregate, a Jif/Crisco
Material Adverse Effect or reasonably likely to have, individually or in the
aggregate, a JMS Material Adverse Effect, as the case may be.
SECTION 6.18 NYSE Listing. JMS shall use its reasonable best efforts to
cause the shares of Surviving Corporation Common Stock to be issued in
connection with the Merger to be listed on the NYSE as of the Effective Time,
subject to official notice of issuance.
SECTION 6.19 Affiliates. At least ten days prior to the mailing of the
Proxy Statement/Prospectus, (i) P&G shall deliver to JMS a letter identifying
all persons who may be deemed to be Affiliates of Newco as of the date on which
P&G, as sole shareholder of Newco, approves and adopts the Merger (the "Rule 145
Affiliates") and (ii) P&G shall advise the persons identified in such letter of
the resale restrictions imposed by applicable securities law and shall use
reasonable best efforts to obtain from each person identified in such letter a
written agreement in customary form and substance.
SECTION 6.20 Ancillary Agreements. The parties hereto agree to execute,
deliver and perform their respective obligations under each of the Ancillary
Agreements at or prior to the Effective Time.
SECTION 6.21 Consummation of the Spin Off. P&G will use its reasonable
best efforts to consummate the Spin Off on the Closing Date.
SECTION 6.22 Covenant Not to Compete. For a period of 24 months after the
Closing Date, neither P&G nor any of its Affiliates shall, without the prior
consent of JMS, engage in the Geography in the manufacturing, packaging,
distributing and marketing of (i) peanut butter, peanut butter-based spreads for
human consumption and/or (ii) shortening and/or oil products for human
consumption (the "Restricted Business"), and provided, however, that the
foregoing shall not restrict P&G or its Affiliates from making any acquisition
of or investment in any business or Person (the "Target") if the annual net
sales attributable to the Restricted Business for the Target's most recent
fiscal year constitute less than 5% of the total net sales of the Target for
such year provided, further, that if such net sales of the Restricted Business
for the Target's most recent fiscal year exceed $25 million, P&G shall sell or
otherwise dispose of the Restricted Business in a commercially reasonable manner
after the consummation of the acquisition of the Target. The parties agree that
the covenants included in this Section 6.22 are, taken as a whole, reasonable in
their geographic and temporal coverage and no party shall raise any issue of
geographic or temporal reasonableness in any proceeding to enforce such
covenant. P&G acknowledges and agrees that in the event of a breach by P&G of
the provisions of this Section 6.22, monetary damages shall not constitute a
sufficient remedy. Consequently, in the event of any such breach, JMS may, in
addition to any other rights and remedies existing in its favor, apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief or other relief in order to enforce or prevent any violation
of the provisions hereof. Any purchaser or successor in interest to P&G's
Olestra facility or the Culinary Sol Business shall not be bound by this Section
6.22 and P&G shall accordingly be released from any obligations relating
thereto. Notwithstanding anything contained in this Section 6.22, the parties
agree that the following shall not be violations of the covenants contained in
this Section 6.22: (x) continuation of the Culinary Sol Business by P&G or any
successor thereto; and (y) production and sale by P&G or any successor thereto
of any products produced at P&G's Olestra facility other than packaged goods and
oils substantially similar to the products produced by the Jif/Crisco Business.
SECTION 6.23 Standstill. As of the date of this Agreement, except as
previously disclosed to JMS in writing, none of P&G or any of its Subsidiaries
beneficially owns any JMS Common Shares or any options or other rights to
acquire any such securities (collectively, "Voting Securities"). For a period of
three years from the date of this Agreement (the "Standstill Period"), except
within the terms of a specific written request from JMS, P&G will not, and will
cause its Subsidiaries not to, propose or publicly announce or otherwise
disclose an intent to propose (i) any form of business combination, acquisition
or other transaction relating to JMS, (ii) any form of restructuring,
recapitalization or similar transaction with respect to JMS, (iii) any demand,
request or proposal to amend, waive or terminate any provision of this Section
6.23, (iv) acquire, or offer, propose or agree to acquire, by purchase or
otherwise, any Voting Securities, (v) make, or in any way participate in, any
solicitation of proxies with respect to any such
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Voting Securities (including by the execution of action by written consent),
become a participant in any election contest with respect to JMS, seek to
influence any Person with respect to any such Voting Securities or demand a copy
of the list of JMS Shareholders or other books and records of JMS, (vi)
participate in or encourage the formation of any partnership, syndicate or other
group which owns or seeks or offers to acquire beneficial ownership of any such
Voting Securities or which seeks to affect control of the other party or has the
purpose of circumventing any provision of this Section 6.23, (vii) otherwise
act, alone or in concert with others (including by providing financing for
another Person), to seek or to offer to control or influence, in any manner,
JMS' management, board of directors, or policies, (viii) make any proposal or
other communication designed to compel another party to make a public
announcement thereof in respect of any matter referred to in this Section 6.23.
SECTION 6.24 Interim Financial Information. P&G shall, prior to the
Closing, provide to JMS within a reasonable period after it closes its books for
each monthly (or other) accounting period for the Jif/Crisco Business with
unaudited profit and loss statements for such period, together with statements
of inventory as of the end of such period. Such financial information shall be
in the same format and prepared on the same basis as the comparable portions of
the audited statements, except that such information may exclude footnotes and
are subject to normal audit adjustment.
SECTION 6.25 Indemnification.
(a) Subject to the terms and conditions of this Agreement, each of P&G and
JMS will indemnify and hold harmless the other from and against all claims,
losses, liabilities, damages, costs and expenses (including without limitation
reasonable fees and expenses of attorneys incurred in investigation or defense
of any third-party Action, but excluding fees, costs and expenses of attorneys,
accountants, consultants and other experts and witnesses incurred in the
investigation or prosecution of any non-third-party Action) arising out of or
related to a breach by such party of the representations and warranties made by
the indemnifying party in Sections 4.04 and 5.07, respectively.
(b) Promptly after receipt by the indemnified party of notice of any
third-party Action in respect of which indemnity may be sought against the
indemnifying party hereunder (for purposes of this Section 6.25, an
"Assertion"), the indemnified party will notify the indemnifying party in
writing of the Assertion, but the failure to so notify the indemnifying party
will not relieve the indemnifying party of any liability it may have to the
indemnified party, except to the extent the indemnifying party has suffered
actual prejudice thereby. The indemnifying party will be entitled to participate
in and, to the extent the indemnifying party elects by written notice to the
indemnified party within thirty (30) days after receipt by the indemnifying
party of notice of such Assertion, to assume the defense of such Assertion, at
the indemnifying party's own expense, with counsel chosen by it which will be
reasonably satisfactory to the indemnified party. With respect to any such
Assertion, the indemnified party will promptly provide the indemnifying party
with: (i) notice and copies of any documents served upon the indemnified party;
and (ii) all reasonable cooperation which the indemnifying party deems necessary
to defend such Assertion, including, without limitation, providing the
indemnifying party and its outside attorneys access to any potentially-relevant
documents, information, or individuals within the control of the indemnified
party, other than any privileged documents. If business information of the
indemnified party other than that pertaining to the Jif/Crisco Business is
contained in such documents or information, the indemnifying party and the
indemnified party will enter into appropriate secrecy commitments to protect
such documents or information. Notwithstanding that the indemnifying party may
have elected by written notice to assume the defense of any Assertion, the
indemnified party will have the right to participate in the investigation and
defense thereof, with separate counsel chosen by the indemnified party, but in
such event the fees and expenses of the indemnified party (above those which
would otherwise have been incurred) and such separate counsel will be paid by
the indemnified party.
(c) Notwithstanding anything in this Section 6.25 to the contrary: (i) the
indemnifying party will have no obligation with respect to any Assertion if, in
connection therewith, the indemnified party, without the written consent of the
indemnifying party, settles or compromises any Action or consents to the entry
of any judgment; and (ii) the indemnifying party will not, without the written
consent of the indemnified
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party with respect to any Assertion: (A) settle or compromise any Action or
consent to the entry of any judgment which does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the indemnified party
of a duly executed written release of the indemnified party from all liability
in respect of such Action, which release will be reasonably satisfactory in form
and substance to counsel for the indemnified party; or (B) settle or compromise
any Action in any manner that, in the reasonable judgment of the indemnified
party or its counsel, will materially adversely affect the indemnified party
other than as a result of money damages or other money payments.
(d) Upon the payment of any settlement or judgment pursuant to this Section
6.25 with respect to any Assertion, the indemnifying party will be subrogated to
all rights and remedies of the indemnified party against any third party in
respect of such the Assertion to the extent of the amount so paid by the
indemnifying party.
SECTION 6.26 Title Policies. P&G shall, if so requested by JMS and at JMS'
sole expense, cooperate with JMS in obtaining prior to the Closing title
insurance policies covering the Jif/Crisco Real Property in a customary form.
SECTION 6.27 Shareholder Agreement. JMS shall use its reasonable best
efforts to cause Mrs. H. Ray Clark to execute and deliver a shareholders
agreement, substantially in the form attached hereto as Exhibit B.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01 Conditions to the Merger. The respective obligation of P&G
and JMS to effect the Merger is subject to the satisfaction or waiver of the
following conditions:
(a) the JMS Shareholder Approval shall have been obtained at the JMS
Shareholder Meeting;
(b) no preliminary or permanent injunction or other order will have
been issued that would make unlawful the consummation of the Transactions;
(c) the Surviving Corporation Common Stock to be issued in the Merger
shall have been authorized for listing on the NYSE, subject to notice of
official issuance;
(d) the Merger Registration Statement shall have become effective in
accordance with the provision of the Securities Act, no stop order
suspending the effectiveness of the Merger Registration Statement shall
have been issued by the SEC and no proceedings for that purpose shall have
been initiated by the SEC and not concluded or withdrawn and all state
securities or blue sky authorizations necessary to carry out the
Transactions shall have been obtained and be in effect;
(e) all applicable waiting periods under the HSR Act will have
terminated or expired; and
(f) all other Authorizations of or filings with any Governmental
Entity required in connection with the consummation of the Transactions
will have been made or obtained, except where the failure to obtain or make
such consents, authorizations, orders, approvals or filings would not,
individually or in the aggregate, have a material adverse effect on the
Jif/Crisco Business and JMS, taken as a whole.
SECTION 7.02 Conditions to the Obligation of JMS. The obligation of JMS to
effect the Merger is subject to the satisfaction of each of the following
conditions (each of which is for the exclusive benefit of JMS and may be waived
by JMS):
(a) all covenants of P&G under this Agreement and the Ancillary
Agreements to be performed on or before the Closing shall have been duly
performed by P&G in all material respects;
(b) the representations and warranties of P&G in this Agreement and of
the Contributors in the Contribution Agreement (which for purposes of this
paragraph shall be read as though none of them
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contained any materiality or material adverse effect qualifications) shall
be true and correct in all respects as of the Closing with the same effect
as though made as of the Closing, except that any representation and
warranty made as of a date other than the date of this Agreement will
continue on the Closing Date to be true and correct in all respects as of
the specified date and except where the failure of the representations and
warranties to be true and correct in all respects would not in the
aggregate have, a Jif/Crisco Material Adverse Effect, and JMS shall have
received a certificate of P&G addressed to JMS and dated the Closing Date,
signed on behalf of P&G by an executive officer of P&G (on P&G's behalf and
without personal liability), confirming the matters set forth in Section
7.02(a) and this Section 7.02(b); and
(c) JMS will have received a written opinion, dated as of the Closing,
from Ernst & Young, tax advisor to JMS, to the effect that the Merger will
be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering the foregoing opinion,
counsel will be permitted to rely upon and assume the accuracy of
certificates executed by officers of Newco, P&G and JMS substantially in
compliance with IRS published advanced ruling guidelines, with customary
exceptions and modification thereto to enable such firms to deliver the
legal opinions;
(d) the total number of shares of Surviving Corporation Common Stock
that will be issued to holders of shares of JMS Common Stock outstanding
immediately prior to the Effective Time shall be at least equal to 45% of
the outstanding shares of Surviving Corporation Common Stock issued in the
Merger; and
(e) P&G and the Contributors shall have performed all obligations
required to be performed by them under the Contribution Agreement and the
Spin Off shall have been consummated.
SECTION 7.03 Conditions to the Obligation of P&G. The obligation of P&G to
effect the Merger is subject to the satisfaction of each of the following
conditions (each of which is for the exclusive benefit of P&G and may be waived
by P&G):
(a) all covenants of JMS under this Agreement and the Ancillary
Agreements to be performed on or before the Closing Date shall have been
duly performed by JMS in all material respects;
(b) the representations and warranties of JMS (which for purposes of
this paragraph shall be read as though none of them contained any
materiality or material adverse effect qualifications) shall be true and
correct in all respects as of the Closing Date with the same effect as
though made as of the Closing Date, except that any representation and
warranty made as of a date other than the date of this Agreement will
continue on the Closing Date to be true and correct in all respects as of
the specified date and except where the failure of the representations and
warranties to be true and correct in all respects would not in the
aggregate have a JMS Material Adverse Effect, and P&G shall have received a
certificate of JMS addressed to P&G and dated the Closing Date, signed on
behalf of JMS by an executive officer of JMS (on JMS's behalf and without
personal liability), confirming the matters set forth in Section 7.03(a)
and this Section 7.03(b);
(c) P&G will have received a written opinion, dated as of the Closing
Date, from Fried, Frank, Harris, Shriver & Jacobson, counsel to P&G, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In
rendering the foregoing opinion, counsel will be permitted to rely upon and
assume the accuracy of certificates executed by officers of Newco, P&G and
JMS substantially in compliance with IRS published advanced ruling
guidelines, with customary exceptions and modification thereto to enable
such firm to deliver the legal opinions;
(d) P&G shall have received a letter ruling from the IRS, reasonably
satisfactory to P&G to the effect that (i) no gain or loss will be
recognized by (and no amount will be includible in the income of) the P&G
Shareholders as a result of the Spin Off pursuant to Section 355(a) of the
Code, (ii) no gain will be recognized by P&G as a result of the Spin Off
pursuant to Section 361(c)(1), (iii) consummation of the Merger will not
adversely affect the rulings described in clauses (i) or (ii) above, (iv)
for purposes of applying Section 355(e) of the Code to the Spin Off, each
share of
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Surviving Corporation Common Stock will be considered to have one vote per
share for all periods after the Merger and (v) for purposes of determining
whether the Merger qualifies as a reorganization under Section 368(a)(1)(A)
of the Code, the Merger will be respected as a separate transaction
occurring after the Distribution; provided that the condition described in
this clause (v) shall be deemed satisfied if P&G has received written
advice from the IRS, reasonably satisfactory to P&G, to the same effect and
that written advice clearly indicates that the only reason the IRS is not
providing a favorable formal ruling is because the request does not raise a
significant issue within the meaning of Section 3.01(29) of Rev. Proc.
2001-3 and as such issuing a formal ruling would violate the Revenue
Procedure's prohibition against "comfort rulings;" and
(e) the Cash Amount to be paid in the Merger will not be greater than
$50,000,000.
ARTICLE VIII
TERMINATION AND ABANDONMENT
SECTION 8.01 Termination. Except as otherwise provided in this Section
8.01, this Agreement may be terminated at any time prior to the Effective Time,
whether before or after the JMS Shareholder Approval:
(a) by mutual written consent of P&G and JMS;
(b) by JMS (provided that JMS is not then in material breach of any
covenant, representation or warranty or other agreement contained herein),
if there has been a breach by P&G of any of its representations,
warranties, covenants or agreements contained in this Agreement or of the
Contributors in the Contribution Agreement, or any such representation and
warranty shall have become untrue, in either case such that Section 7.02(a)
or Section 7.02(b) would be incapable of being satisfied, and such breach
or condition has not been cured within thirty days following receipt by JMS
of notice of such breach;
(c) by P&G (provided that P&G is not then in material breach of any
covenant, representation or warranty or other agreement contained herein),
if (i) there has been a breach by JMS of any of its representations,
warranties, covenants or agreements contained in this Agreement, or any
such representation and warranty shall have become untrue, in either case
such that Section 7.03(a) or Section 7.03(b) would be incapable of being
satisfied, and such breach or condition has not been cured within thirty
days following receipt by P&G of notice of such breach or (ii) the
condition contained in Section 7.03(d) shall be incapable of being
satisfied;
(d) by either P&G or JMS if any Order by any Governmental Entity
preventing or prohibiting consummation of the Transactions shall have
become final and nonappealable;
(e) by either P&G or JMS if the Merger shall not have occurred prior
to June 30, 2002, unless the failure of the Merger to have occurred by such
date shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe in all material respects the covenants and
agreements of such party set forth herein;
(f) by either P&G or JMS if the JMS Shareholder Approval is not
obtained at the JMS Shareholder Meeting;
(g) by P&G if the board of directors of JMS shall not have recommended
or shall have modified the JMS Board Recommendation or failed to confirm
the JMS Board Recommendation within seven (7) Business Days of P&G's
request; or
(h) by P&G on or prior to the Closing Date if the product of (x)
0.5254, (y) the aggregate number of shares of Surviving Corporation Common
Stock to be issued in the Merger, and (z) the average closing price of JMS
Common Stock on the NYSE for the preceding fifteen Trading Days ending two
Trading Days prior to the Closing Date is less than $715,000,000.
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SECTION 8.02 Effect of Termination.
(a) In the event of termination of this Agreement by either P&G or JMS
pursuant to Section 8.01, this Agreement shall forthwith become void and
there shall be no liability under this Agreement on the part of P&G or JMS,
except to the extent that such termination results from the material breach
by a party of any of its covenants or agreements set forth in this
Agreement; provided however, that the provisions of Sections 6.04, 9.12 and
this Section 8.02 shall remain in full force and effect and shall survive
any termination of this Agreement.
(b) If P&G terminates this Agreement pursuant to Section 8.01(g), JMS
shall pay to P&G, within one Business Day following the delivery of notice
of such termination, a termination fee of $20 million (the "Termination
Fee") by wire transfer of immediately available funds.
(c) If P&G terminates this Agreement pursuant to Section 8.01(f) if a
Competing Transaction shall have been publicly announced prior to the JMS
Shareholders Meeting, JMS shall pay to P&G, within one (1) Business Day
following the delivery of notice of such termination, the amount of $10
million by wire transfer of immediately available funds.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any Ancillary Agreements shall survive the Merger; provided,
however, that the agreements contained in Article II, Article III and in
Sections 6.04, 6.05, 6.06, 6.07, 6.08, 6.11, 6.12, 6.20 and this Article IX that
by their terms apply or are to be performed in whole or part after the Effective
Time shall survive the Merger and that the representations and warranties of the
Contributors contained in the Contribution Agreement shall survive in accordance
with the terms of the Contribution Agreement.
SECTION 9.02 Amendment and Modification. Subject to applicable Law, this
Agreement and the Ancillary Agreements may be amended, modified, or supplemented
only by the written agreement by the parties hereto in any and all respects
before the Effective Time and at any time before or after the JMS Shareholder
Approval; provided, however that after the JMS Shareholder Approval is obtained
there shall not be any amendment that by Law requires further approval by the
shareholders of JMS without further approval of such shareholders.
SECTION 9.03 Waiver of Compliance. Except as otherwise provided in this
Agreement and the Ancillary Agreements, the failure by any Person to comply with
any obligation, covenant, agreement or condition under such agreements may be
waived by the Person entitled to the benefit thereof only by a written
instrument signed by the Person granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition will not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. The failure of any Person to enforce at any time
any of the provisions of such agreements will in no way be construed to be a
waiver of any such provision, nor in any way to affect the validity of such
agreements or any part thereof or the right of any Person thereafter to enforce
each and every such provision. No waiver of any breach of such provisions will
be held to be a waiver of any other or subsequent breach.
SECTION 9.04 Notices. All notices required or permitted pursuant to this
Agreement will be in writing and will be deemed to be properly given when
actually received by the Person entitled to receive
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the notice at the address stated below, or at such other address as a party may
provide by notice to the other:
If to P&G or Newco:
Mailing
The Procter & Gamble Company
P.O. Box 599
Cincinnati, OH 45201
Attention: Secretary
Delivery
The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, OH 45202
Attention: Secretary
If to JMS:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
With a copy to:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attention: General Counsel
SECTION 9.05 Third Party Beneficiaries. Notwithstanding anything contained
in this Agreement to the contrary, nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
SECTION 9.06 Successors and Assigns. This Agreement and the Ancillary
Agreements will be binding upon and will inure to the benefit of the signatories
hereto and their respective successors and permitted assigns. Neither P&G, Newco
nor JMS may assign this Agreement or any of the Ancillary Agreements, or any of
their rights or liabilities thereunder, without the prior written consent of the
other parties thereto, provided that P&G and Newco may so assign, in whole or in
part, to one or more of its wholly-owned Subsidiaries. Any such assignment will
not relieve the party making the assignment from any liability under such
agreements. Notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
on any person other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement; provided that the third parties referenced in Section 6.20 shall
be third-party beneficiaries of the agreement contained in such Section.
SECTION 9.07 Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement between the parties hereto with respect to the
subject matter thereof and will supersede all previous negotiations,
commitments, and writings with respect to such subject matter, including the
Confidentiality Agreement.
SECTION 9.08 Severability. The illegality or partial illegality of any or
all of this Agreement or any of the Ancillary Agreements, or any provision
thereof, will not affect the validity of the remainder of such agreements, or
any provision thereof, and the illegality or partial illegality of any such
agreements will not affect the validity of any such agreements in any
jurisdiction in which such determination of illegality or partial illegality has
not been made, except in either case to the extent such illegality or partial
illegality
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causes such agreements to no longer contain all of the material provisions
reasonably expected by the parties to be contained therein.
SECTION 9.09 Captions. The captions appearing in this Agreement and the
Ancillary Agreements are inserted only as a matter of convenience and as a
reference and in no way define, limit or describe the scope or intent of such
agreements or any of the provisions thereof.
SECTION 9.10 Counterparts. This Agreement and the Ancillary Agreements may
be executed in one or more counterparts, each of which will be deemed to be an
original, but all of which will constitute one agreement.
SECTION 9.11 Governing Law. This Agreement and the Ancillary Agreements
will be governed by and construed in accordance with the laws of Ohio, whether
common law or statutory, without reference to the choice of law provisions
thereof.
SECTION 9.12 Expenses. Except as otherwise expressly provided in this
Agreement or the Ancillary Agreements, whether or not the Transactions are
consummated, each of P&G and JMS will bear its own costs and expenses.
SECTION 9.13 Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Transactions, will cause irreparable injury to
the other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the day and year first above written.
THE PROCTER & GAMBLE COMPANY
By: /s/ GRETCHEN W. PRICE
------------------------------------
Name: Gretchen W. Price
Title: Vice President -- Treasurer
THE PROCTER & GAMBLE OHIO
BRANDS COMPANY
By: /s/ GRETCHEN W. PRICE
------------------------------------
Name: Gretchen W. Price
Title: Vice President -- Treasurer
THE J.M. SMUCKER COMPANY
By: /s/ TIMOTHY P. SMUCKER
------------------------------------
Name: Timothy P. Smucker
Title: Chairman & Co-CEO
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AMENDMENT NO. 1 TO THE
AGREEMENT AND PLAN OF MERGER
Amendment No. 1, dated as of November 30, 2001 (this "Amendment"), to the
Agreement and Plan of Merger, dated as of October 9, 2001 (the "Merger
Agreement"), by and among The Procter & Gamble Company, an Ohio corporation
("P&G"), The Procter & Gamble Ohio Brands Company, an Ohio corporation and a
wholly owned subsidiary of P&G ("Newco"), and The J. M. Smucker Company, an Ohio
corporation ("JMS").
WHEREAS, P&G, Newco and JMS wish to amend the Merger Agreement pursuant to
and in accordance with Section 9.02 of the Merger Agreement.
NOW THEREFORE, in consideration of the foregoing premise and of the mutual
agreements herein contained, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Section 2.03 of the Merger Agreement is hereby amended and restated in
its entirety as follows:
"Articles of Incorporation and Code of Regulations. The articles of
incorporation of the Surviving Corporation as of the Effective Time shall be in
the form of the articles of incorporation attached hereto as Schedule 2.03. The
regulations of the Surviving Corporation as of the Effective Time shall be in
the form of the regulations of JMS as in effect as of the date hereof."
2. Clause (iii) of Section 6.02(c) of the Merger Agreement is hereby
amended and restated in its entirety as follows:
"(iii) declare, set aside, make or pay any dividends or other distribution,
payable in cash, stock, property or otherwise, with respect to any
of its capital stock (other than (i) regular quarterly cash
dividends in respect of JMS Common Stock declared and paid in the
ordinary course and consistent with past practice and at a rate not
in excess of $0.64 per annum per share and (ii) dividends payable by
a wholly-owned Subsidiary of JMS to JMS or another wholly-owned
Subsidiary), or enter any agreement with respect to the voting of
its capital stock, issue or authorize the issuance of any shares of
its capital stock (other than in connection with the exercise of
currently outstanding stock options for JMS Common Stock) or any
other securities exercisable or exchangeable for or convertible into
shares of its capital stock, or repurchase, redeem, purchase or
otherwise acquire for value any shares of its capital stock or any
other securities exercisable or exchangeable for or convertible into
shares of its capital stock."
3. Schedule 2.03 to the Merger Agreement shall be in the form attached as
Annex A to this Amendment.
4. The Merger Agreement shall not otherwise be supplemented or amended by
virtue of this Amendment, but shall remain in full force and effect.
5. This Amendment may be executed in one or more counterparts, each of
which will be deemed to be an original, but all of which will constitute one
agreement.
6. This Amendment shall be governed by and construed in accordance with the
laws of the state of Ohio, whether common law or statutory, without reference to
the choice of law provisions thereof.
7. This Amendment shall be effective immediately and all references to the
Merger Agreement shall, from and after such time, be deemed to be references to
the Merger Agreement as amended by this Amendment.
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IN WITNESS WHEREOF, each of the signatories hereto has caused this
Amendment to be signed by their respective duly authorized officers as of the
date first above written.
THE PROCTER & GAMBLE COMPANY
By: /s/ Gretchen W. Price
Name: Gretchen W. Price
Title: Vice President
THE PROCTER & GAMBLE OHIO BRANDS
COMPANY
By: /s/ Gretchen W. Price
Name: Gretchen W. Price
Title: Vice President
THE J. M. SMUCKER COMPANY
By: /s/ Steven J. Ellcessor
Name: Steven J. Ellcessor
Title: Vice President -- Finance and
Administration, Secretary, and General
Counsel
A-39
ANNEX A
[Intentionally Omitted.]
[See "Amended Articles of Incorporation" beginning on page 1-F of this
document.]
A-40
ANNEX B
CONTRIBUTION AGREEMENT
AMONG
THE PROCTER & GAMBLE COMPANY,
THE PROCTER & GAMBLE MANUFACTURING COMPANY
THE PROCTER & GAMBLE OHIO BRANDS COMPANY
AND
THE J.M. SMUCKER COMPANY
DATED AS OF
OCTOBER 9, 2001
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CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT (this "Agreement"), dated as of October 9, 2001, by
and among The Procter & Gamble Company, an Ohio corporation ("P&G"), The Procter
& Gamble Manufacturing Company (together with P&G, the "Contributors"), The
Procter & Gamble Ohio Brands Company, an Ohio corporation and a wholly owned
subsidiary of P&G ("Newco") and The J.M. Smucker Company, an Ohio corporation
("JMS"), each, a "Party" or together, "Parties." All capitalized terms used
herein shall have the meaning set forth in Article I.
WHEREAS, the board of directors of P&G has determined that it would be in
the best interests of P&G and its shareholders to separate the Jif/Crisco
Business from P&G;
WHEREAS, P&G has caused Newco, which currently conducts no business
operations and has no assets or liabilities other than in connection with its
formation, to be incorporated as its wholly owned subsidiary in order to effect
such separation;
WHEREAS, the board of directors of each of the Contributors and Newco has
determined that it would be appropriate and desirable for the Contributors to
contribute and transfer to Newco, and for Newco to receive and assume,
substantially all of the assets, properties, rights and interests of P&G and its
Affiliates and certain of the liabilities associated with the Jif/Crisco
Business on the terms set forth in this Agreement;
WHEREAS, P&G and Newco intend that the contribution and assumption of
assets and liabilities will qualify as a tax-free reorganization under Section
368 (a)(1)(D) of the Internal Revenue Code, as amended (the "Code");
WHEREAS, immediately following the contribution and assumption of assets
and liabilities pursuant to this Agreement, P&G, pursuant to an Agreement and
Plan of Merger ("Merger Agreement") by and among P&G, Newco and JMS, will
distribute to the shareholders of P&G all of the outstanding shares of Newco
(the "Spin Off");
WHEREAS, immediately following the Spin Off, Newco will merge (the
"Merger") with and into JMS, upon the terms and subject to the conditions set
forth in the Merger Agreement and in accordance with the General Corporation Law
of the Ohio Revised Code;
WHEREAS, for federal income tax purposes, it is intended that (i) the Spin
Off shall be tax-free to P&G and to the shareholders of P&G pursuant to Section
355 of the Code, and (ii) the Merger shall qualify as a tax-free reorganization
within the meaning of Section 368 of the Code; and
WHEREAS, the parties intend this Agreement, including the exhibits and
schedules hereto, to set forth the arrangements between them regarding the
separation of the Jif/Crisco Business from the Contributors and the contribution
of the Jif/Crisco Business to Newco.
NOW THEREFORE, in consideration of the foregoing premises and of the mutual
covenants and agreements herein contained, the parties hereto, intending to be
legally bound hereby, agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "Action" shall mean any dispute, controversy, claim, action,
litigation, suit, cause of action, arbitration, mediation, or any proceeding by
or before any mediator or Governmental Entity, or any investigation, subpoena,
or demand preliminary to any of the foregoing.
1.02 "Affiliate" shall mean, with respect to a Person, another Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
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1.03 "Agreement" shall have the meaning set forth in the preamble.
1.04 "Ancillary Agreements" shall mean collectively (a) the Patent
Assignment Agreement; (b) the Patent License Agreement; (c) the Patent
Assignment and License Agreement; (d) the Trademark Assignment; (e) the
individual trademark, domain name and patent assignment documents, by country,
pursuant to Section 4.05; (f) the Manufacturing Plant Separation Agreement; (g)
the Transitional Services Agreement; (h) the Tax Sharing Agreement; (i) the
Shareholders Agreement; (j) the Merger Agreement; and (k) all other documents
required to be delivered on the Closing Date by any party pursuant to this
Agreement.
1.05 "Assumed Liabilities" shall mean the following, and only the following
liabilities and obligations, and no other liabilities or obligations whatsoever,
whether known or unknown, accrued or contingent, direct or indirect, arising
from the operation of the Jif/Crisco Business prior to or following the Closing
Date:
(a) subject to the provisions of this Section 1.05, all liabilities
arising out of or related to the operation of the Jif/Crisco Business or
ownership of the Jif/Crisco Assets after the Closing;
(b) all liabilities for product liability and product warranty for
products of the Jif/Crisco Business manufactured by or for Newco or its
successors after the Closing;
(c) the following Environmental Costs and Liabilities:
(i) all Environmental Costs and Liabilities for Environmental
Matters disclosed pursuant to Section 3.03 of this Agreement;
(ii) the first $1,000,000 of Environmental Costs and Liabilities
not disclosed pursuant to Section 3.03 of this Agreement;
(iii) twenty percent (20%) of Environmental Costs and Liabilities
to the extent such Environmental Costs and Liabilities exceed $1,000,000
but are less than $32,250,000 and one hundred percent (100%) of such
Environmental Costs and Liabilities in excess of $32,250,000; and
(iv) all Environmental Costs and Liabilities for all Environmental
Matters arising due to actions occurring after the Closing Date;
(d) all liabilities for Taxes arising out of or related to the
operation of the Jif/Crisco Business after the Closing, ownership of the
Jif/Crisco Assets after the Closing, and the assumption of Assumed
Liabilities;
(e) all liabilities and obligations of Newco as set forth in the
Ancillary Agreements;
(f) all liabilities of the Contributors arising after the Closing
pursuant to any Contract;
(g) all liabilities after the Closing for administration and
redemption of coupons of the Jif/Crisco Business, except as set forth in
Section 4.12;
(h) all liabilities for returns of products of the Jif/Crisco Business
shipped prior to the Closing, but returned after the Closing, as set forth
in Section 4.13;
(i) all obligations and liabilities related to Newco Employees (as
defined in the Merger Agreement) arising due to facts and circumstances
occurring after the Closing;
(j) all out-of-pocket costs incurred by Contributors arising out of
the continued performance of the Portion Pac Agreement (as hereinafter
defined) for up to 6 consecutive months after the Closing Date, which costs
shall not be deemed to include consequential damages; and
(k) all liabilities and obligations of the Jif/Crisco Business set
forth on the Audited Statements, less payments thereon and discharges
thereof prior to the Closing Date.
1.06 "Authorization" means any Material legally-required consent,
authorization, approval, order license, certificate or permit of or from, or
declaration or filing with any Governmental Entity, including,
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without limitation, any legally-required filing with any Governmental Entity and
the subsequent expiration of any legally-required waiting period under any
antitrust or competition laws.
1.07 [RESERVED]
1.08 "Books and Records" shall mean all of the Contributors' books, records
and other documents, and any copyrights related thereto, (including, without
limitation, customer and supplier lists and files; distribution lists; mailing
lists; sales materials; operating, production and other manuals; plans; files;
specifications; process drawings; computer programs data and information;
manufacturing and quality control records and procedures; research and
development files; and advertising and promotional materials) exclusively used
in the Jif/Crisco Business, and existing at the Closing Date. Notwithstanding
the foregoing, "Books and Records" shall not include information that the
Contributors received from consumers via the internet or other on-line methods
that, if given to Newco, would violate any privacy laws, regulations, rules,
opinions, other statements or positions of a Governmental Entity or the
requirements any self-regulatory body (including, without limitation, any
self-regulatory privacy body) in any country in the Geography.
1.09 "Business Day" shall mean any day on which commercial banks in New
York, New York are open for business providing substantially all services
offered by such banks.
1.10 "Claim" shall have the meaning set forth in Section 5.03(a).
1.11 "Closing" means the closing of the transactions contemplated by this
Agreement in accordance with the terms and conditions as set forth in the Merger
Agreement and this Agreement.
1.12 "Closing Date" means the date on which the Closing occurs, as provided
in the Merger Agreement.
1.13 "Code" shall have the meaning set forth in the Recitals.
1.14 "Contracts" shall mean those purchase orders, contracts, agreements
and other obligations (except Intercompany Contracts) exclusively used in the
Jif/Crisco Business. The Contracts in effect as of the date of execution of this
Agreement, other than those made in the ordinary course of business that involve
payments of less than $100,000 per year, are set forth in Schedule 1.14, which
Schedule 1.14 shall be updated by Contributors at the Closing to reflect the
Contracts at that time. Notwithstanding the foregoing, the agreement between P&G
and Portion Pac Inc., dated October 26, 2000 ("Portion Pac Agreement"), shall
not be deemed a Contract.
1.15 "Contribution" shall have the meaning set forth in Section 2.01.
1.16 "Contributors" shall have the meaning set forth in the preamble.
1.17 "Culinary Sol Business" shall mean the culinary education and retail
business for specialized cooking products conducted by the Contributors at the
Rookwood Commons store in Norwood, Ohio prior to the Closing Date.
1.18 "Domain Names" shall mean those domain names related to the Jif/Crisco
Business as listed on Schedule 1.18, and the look and feel of the corresponding
Internet sites as currently owned by the Contributors as used in the operation
of the Jif/Crisco Business and as currently existing.
1.19 "Employees" shall have the meaning set forth in Section 1.01 of the
Merger Agreement.
1.20 "Encumbrances" means all liens, security interests, pledges,
mortgages, deeds of trusts, charges, options, or other encumbrances.
1.21 "Environmental Laws" means all federal, state, provincial and local
laws, by-laws, rules regulations, orders and permit requirements applicable to
the Real Property or to owners or operators thereof or thereon or to the
operations or activities conducted thereon, relating to the protection of the
environment or to human health or safety, and including without limitation,
those environmental laws relating to the generation, manufacture, storage,
management, transportation, treatment or disposal of
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Hazardous Substances, employee and product safety, and the emission or release
of Hazardous Substances, nuisance, into the air, surface water, ground water,
land surface, subsurface strata or any building or structure.
1.22 "Environmental Matter" means any matter arising out of, relating to,
or resulting from, pollution, protection of the environment or human health or
safety, health or safety of employees, sanitation, nuisance, emissions,
discharges, releases or threatened releases of Hazardous Substances or otherwise
arising out of, resulting from, or relating to, the generation, manufacture,
storage, management, transportation, treatment or disposal of Hazardous
Substances or to the application of Environmental Laws.
1.23 "Environmental Costs and Liabilities" shall mean any and all losses,
liabilities, obligations, damages, fines, penalties, judgments, actions, claims,
costs and expenses (including, without limitation, fees, disbursements and
expenses of legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and remedial action) arising from or under
any Environmental Law or order or Contract with any Governmental Entity or other
Person or any Environmental Matter with respect to Hazardous Substances.
Notwithstanding the foregoing, Environmental Costs and Liabilities shall not
include those Environmental Costs and Liabilities, if any, arising from
Environmental Matters, in connection with any waste disposal sites located off
the Real Property to which any Hazardous Substances have been transported by
Contributors or Contributors' agents or contractors prior to the Closing Date,
regardless of whether such waste disposal sites are disclosed in any schedule to
this Agreement.
1.24 "Equipment" shall mean only those assets as set forth in Schedule
1.24, "where is", and "as is" except as provided in Section 3.02.
1.25 "Excluded Assets" shall mean any and all assets not expressly listed
as Jif/Crisco Assets, whether or not used in the Jif/Crisco Business, including,
without limitation, the following assets:
(a) subject to Section 1.33(k) of this Agreement, cash and equivalents
(or similar types of investments), prepaid expenses and accounts receivable
related to the Jif/Crisco Assets that exist on the Closing Date;
(b) insurance policies of the Contributors and their Affiliates
pertaining to the Jif/Crisco Assets and all rights of the Contributors and
their Affiliates of every nature and description under or arising out of
such insurance policies;
(c) all rights which the Contributors retain under the Ancillary
Agreements;
(d) claims for refunds of Taxes paid by the Contributors and/or their
Affiliates arising prior to the Closing Date and relating to periods prior
to Closing;
(e) any Intercompany Contract;
(f) the Proprietary Information Technology; and
(g) without limitation, the assets listed in Schedule 1.25(g).
1.26 "Excluded Liabilities" shall mean all liabilities and obligations of
the Contributors, whether known or unknown, accrued or contingent, direct or
indirect, whether or not of, associated with or arising from the Jif/Crisco
Business or the operation thereof or any of the Jif/Crisco Assets, that are not
Assumed Liabilities.
1.27 "Geography" shall mean the United States of America and Canada.
1.28 "Governmental Entity" shall mean any arbitrator, court, judicial,
legislative, administrative or regulatory agency, commission, department, board
or bureau or body or other governmental authority or instrumentality or any
Person or entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, whether foreign,
federal, state, provincial, local or other.
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1.29 "Hazardous Substance" means any contaminant, pollutant, waste or other
substance that could cause harm or degradation to the environment or adversely
affect human health or safety, or is regulated by, or may form the basis for
liability under Environmental Laws or that is present in the environment in such
quantity or state that it contravenes any Environmental Laws or that its
remediation is required by any Environmental Laws.
1.30 "IAAA" shall have the meaning set forth in Section 5.03(d).
1.31 "Intercompany Contracts" shall mean all purchase orders, contracts,
agreements and other obligations between or among any of the Contributors and
any of the Contributors and any of their Affiliates.
1.32 "Inventory" shall mean, wherever situated, all maintenance supplies,
spare parts, raw materials, finished products, goods in-process, and packaging
supplies which are exclusively used in connection with the Jif/Crisco Business
or of the character included as inventory on the balance sheet delivered as part
of the Audited Statements pursuant to Section 3.15, and including without
limitation all such items located on the Real Property, all as are owned by the
Contributors at the Closing Date.
1.33 "Jif/Crisco Assets" shall mean only the following assets, properties,
rights and interests, wherever situated:
(a) the Books and Records;
(b) the claims, interests rights and benefits of the Contributors
arising after the Closing Date pursuant to the Contracts;
(c) the Equipment;
(d) the Trademarks;
(e) goodwill exclusively related to the Jif/Crisco Business, but not
otherwise specifically identified herein;
(f) the Real Property;
(g) the Inventory;
(h) the Permits;
(i) the Domain Names;
(j) the Technology;
(k) to the extent that Cash Amount (as defined in the Merger
Agreement) is to be paid to holders of JMS Common Stock (as defined in the
Merger Agreement) pursuant to Section 3.01(d) of the Merger Agreement,
additional working capital in a form reasonably acceptable to JMS in an
aggregate amount sufficient for payment in respect of the Cash Amount; and
(l) all assets exclusively related to the Jif/Crisco Business of the
nature set forth on the Audited Statements, other than those assets
exclusively related to the Culinary Sol Business.
Notwithstanding the above, the Jif/Crisco Assets do not include any of the
Excluded Assets.
1.34 "Jif/Crisco Business" shall mean the direct and indirect business of
P&G and its affiliates relating to the manufacturing, packaging, distributing
and marketing of (i) shortening and oil products for human consumption and (ii)
peanut butter and peanut butter-based spread products for human consumption, in
each case by or on behalf of the Contributors under one or more Trademarks.
1.35 "JMS" shall have the meaning set forth in the Recitals.
1.36 "Knowledge of" means, whether or not capitalized, in the case of an
entity, the actual knowledge after due inquiry of the officers of such entity as
of the date of the representation, warranty or statement.
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1.37 "Manufacturing Plant Separation Agreement" shall mean the agreement in
the form attached hereto as Exhibit 1.37 between Newco and the Contributors, to
be executed as of the Closing Date,.
1.38 "Material" and its variations mean, with respect to an event,
circumstance or condition, that such event, circumstance or condition,
individually or in the aggregate, has a material adverse effect upon the assets,
financial condition or earnings of the Jif/Crisco Business.
1.39 "Merger" shall have the meaning set forth in the Recitals.
1.40 "Merger Agreement" shall have the meaning set forth in the Recitals.
1.41 "Newco" shall have the meaning set forth in the preamble.
1.42 "Newco Assertion" shall have the meaning set forth in Section 5.01(b).
1.43 "Patent Assignment Agreement" shall mean the general assignment of the
patents to Newco from P&G as set forth in Schedule 1.43, to be executed as of
the Closing Date, which is in substantially the form attached hereto as Exhibit
1.43.
1.44 "Patent License Agreement" shall mean that agreement in substantially
the form attached hereto as Exhibit 1.44, with respect to a license of patents
from P&G to Newco to be executed as of Closing Date. Such licensed patents are
set forth in Schedule 1.44.
1.45 "Patents" shall mean those patents, registrations, and applications
therefore set forth in Schedules 1.43 and 1.46.
1.46 "Patent Assignment and License Agreement" shall mean that agreement
with respect to the Culinary Sol Business in substantially the form attached
hereto as Exhibit 1.46, between P&G and Newco to be executed as of the Closing
Date. Such Assigned and Licensed patents are set forth in Schedule 1.46.
1.47 "Person" shall mean (as the context requires) an individual, a
corporation, a partnership, an association, a trust, a limited liability
company, or other entity or organization, including a Governmental Entity.
1.48 "Permits" mean all licenses, permits, approvals, variances, waivers or
consents, to the extent transferable without consent, issued by any Governmental
Entity exclusively related to the Jif/Crisco Business.
1.49 "P&G" shall have the meaning set forth in the preamble.
1.50 "P&G Assertion" shall have the meaning set forth in Section 5.02(b).
1.51 "Proprietary Information Technology" shall mean the list of software
and computer programs and information technology to be part of the Excluded
Assets, as identified in Schedule 1.51.
1.52 "Real Property" shall mean all right, title and interest in or to the
improved and unimproved land listed or described in Schedule 1.52, and all
buildings, structures, erections, improvements, appurtenances, and fixtures
situated on or forming part of such land.
1.53 "Shareholders Agreement" shall mean the agreement dated as of October
9, 2001 among P&G and certain shareholders of JMS and is attached as Exhibit B
to the Merger Agreement.
1.54 "Spin Off" shall have the meaning set forth in the Recitals.
1.55 "Tax Sharing Agreement" shall mean the Tax Sharing Agreement between
the Contributors and Newco which will be in the form attached hereto as Exhibit
1.55.
1.56 "Taxes or Tax" means all U.S. and non-U.S., federal, state,
provincial, local and other taxes, fees, levies, duties and other assessments or
charges of whatever kind (including without limitation, income, sales, use,
excise, stamp, transfer, property, value added, recording, registration,
intangible, documentary, goods and services, real estate, sales, payroll, gains,
gross receipts, withholding and franchise
B-7
taxes) together with any interest, penalties, or additions payable in connection
with such taxes, fees, levies, duties or other assessments or charges.
1.57 "Technology" shall mean the Patents plus any of the Contributors
non-patented formulations, trade secrets, process knowledge, and technological
and manufacturing know-how, in each case, exclusively used in the Jif/Crisco
Business as of the Closing Date.
1.58 "Trademarks" shall mean those trademarks, registrations and
applications therefore set forth in Schedule 1.58 and the goodwill associated
therewith.
1.59 "Trademark Assignment Agreement" shall mean the general assignment of
the Trademarks to Newco from P&G to be executed as of the Closing Date, which
will be substantially in the form attached hereto as Exhibit 1.59. Individual
Trademark assignment documents, by country, will be prepared and filed as
provided in Section 4.05 of this Agreement.
1.60 "Transitional Services Agreement" shall mean the agreement, in the
form attached hereto as Exhibit 1.60, between Newco and the Contributors, to be
executed as of the Closing Date, dealing with the short-term and long-term
provisions of certain services of the Contributors to Newco.
Other definitions are found in the following sections:
<Table>
"Audited Statements"........................................ Section 3.15
"Balance Sheet Date"........................................ Section 3.15
"ERISA"..................................................... Section 3.14
"ERISA Affiliate"........................................... Section 3.14
"Intellectual Property"..................................... Section 3.10
</Table>
ARTICLE II
TRANSFER AND CONTRIBUTION OF JIF/CRISCO ASSETS;
ASSUMPTION OF CERTAIN LIABILITIES
2.01 Contribution and Assumption of Liabilities. In accordance with the
terms and upon the conditions of this Agreement, on the Closing Date, but prior
to the closing of the Merger, the Contributors will convey, assign, transfer and
deliver (the "Contribution") to Newco, and Newco will acquire and accept, all of
the Contributors' right, title and interest in and to the Jif/Crisco Assets, and
Newco will assume the Assumed Liabilities.
2.02 Delivery of Closing Documents.
(a) On the Closing Date, but prior to the closing of the Merger, the
Contributors shall deliver to Newco, the following:
(i) an instrument of assignment in a form reasonably acceptable to the
Contributors, Newco and JMS for the Jif/Crisco Assets that will not be
transferred pursuant to specific documents described elsewhere in this
Section 2.02;
(ii) such other documents as are, in the reasonable opinion of counsel
for the Contributors, Newco and JMS, necessary or desirable to transfer the
Assumed Liabilities and the Jif/Crisco Assets to Newco; and
(iii) transfer deeds of land for the Real Property in a form
reasonably acceptable to the Contributors, Newco and JMS.
(b) On the Closing Date, but prior to the closing of the Merger, the
Contributors and Newco concurrently will duly execute and deliver to each other
the Ancillary Agreements.
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(c) On the Closing Date, but prior to the closing of the Merger, Newco
shall deliver to the Contributors any documents as are in the reasonable opinion
of counsel for the Contributors necessary or desirable for Newco to assume the
Assumed Liabilities and to acquire the Jif/Crisco Assets.
2.03 Interdependence. The transfers and deliveries described in this
Article II are mutually interdependent and are to be regarded as occurring
simultaneously on the Closing Date and prior to the closing of the Merger.
Unless agreed to in writing by the Contributors and Newco, no such transfer or
delivery will become effective until all other transfers and deliveries provided
for in this Article II have also become effective.
2.04 Contracts. Notwithstanding the provisions of Section 2.01, no
Contract shall be deemed to be assigned to Newco as of the Closing unless it is
freely assignable or consent for assignment has been obtained prior to the
Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTORS
The Contributors hereby represent and warrant to Newco:
3.01 Authority. The Contributors have full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. All corporate proceedings on the part of the Contributors
that are necessary to approve and authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
occurred, and this Agreement is a valid and binding obligation of the
Contributors, enforceable against the Contributors in accordance with its terms
and the other Ancillary Agreements will be valid and binding obligations of the
Contributors enforceable against the Contributors in accordance with their terms
upon execution and delivery to Newco, in each case, subject to (a) applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors rights and remedies generally and (b) the remedy of specific
performance and injunctive and other forms of equitable relief.
3.02 Equipment and Real Property. The Equipment is in good working
condition, except where not Material. Notwithstanding the foregoing, the
Equipment and Real Property is contributed by the Contributors and accepted by
Newco on a "where is", "as is" basis. Newco has had the opportunity to inspect
the Equipment and the Real Property and expressly agrees on the above. The
Contributors disclaim any and all express or implied warranties, including
without limitation the warranties of merchantability or fitness for any purpose,
with respect to the Equipment and/or the Real Property. The Equipment is
sufficient to manufacture the types of products of the Jif/Crisco Business as
such products are currently being manufactured by the Contributors in such
quantities and on such specifications as currently manufactured by the
Contributors.
3.03 Environmental Matters.
(a) Except as set forth in Schedule 3.03(a), to the Knowledge of P&G, at
the Closing, the Contributors possess all licenses, permits and other approvals
within the Geography of Governmental Entities necessary to enable them to carry
on the Jif/Crisco Business as it is currently conducted;
(b) Except as set forth in Schedule 3.03(b), to the Knowledge of P&G, no
spills, discharges or other releases of Hazardous Substances have occurred in,
on or beneath the Real Property;
(c) Except as set forth in Schedule 3.03(c), to the Knowledge of P&G, there
are no underground storage tanks at the Real Property;
(d) Except as set forth in Schedule 3.03(d), to the Knowledge of P&G, there
are no friable asbestos-containing materials, PCB's or PCB-containing equipment
at the Real Property;
(e) Newco acknowledges that the Contributors have made the Jif/Crisco
Assets available to Newco for inspection and have shared with Newco that certain
Phase I Environmental Site Assessment of the
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Real Property prepared by Arcadis G&M for The Procter & Gamble Company and The
Procter & Gamble Manufacturing Company dated June 21, 2001 and June 29, 2001,
respectively (collectively "Phase I Studies"). Except as may be, and only to the
extent, expressly set forth in this Agreement, the Contributors make no
representations, warranties, covenants or declarations whatsoever as to the
nature, quality, quantity, condition, development potential or fitness for
purpose of any of the Jif/Crisco Assets, including but not limited to the
presence or absence of any Environmental Matter, or otherwise;
(f) Except as set forth in Schedule 3.03(f), to the Knowledge of P&G, the
Real Property is not listed or proposed for listing on the National Priorities
List pursuant to CERCLA, on the CERCLIS, or on any other similar state list of
sites requiring investigation or cleanup; and
(g) Except as set forth in Schedule 3.03(g), for the past 3 years, there
have been no, and to Contributors' Knowledge threatened, (i) claims, complaints,
notices or requests for information concerning the Jif/Crisco Business with
respect to any alleged violation of Environmental Laws, or (ii) complaints,
notices or requests for information concerning the Jif/Crisco Business regarding
potential liability under any Environmental Laws.
(h) For purposes of Section 1.05(c)(i) and this Section 3.03 and the
disclosures contained herein, any reference to the Phase I Studies shall be
deemed to be adequate disclosure only if a matter contained in such Phase I
Studies provides reasonably specific notice of an Environmental Matter.
3.04 Finder's Fees and Commissions. None of the Contributors has any
liability or obligation to pay any fees or commissions to any broker, finder or
other agent with respect to the transactions contemplated by this Agreement for
which Newco or JMS could become liable or obligated.
3.05 Authorizations. No Authorization is needed by the Contributors for
the execution, delivery, or performance of this Agreement and the consummation
of the transactions contemplated hereby in the Geography, except as set forth in
Schedule 3.05.
3.06 Intellectual Property. Except as set forth in Schedule 3.06 or where
not Material, to the Knowledge of P&G, the Contributors' use of the Trademarks
and Patents in the Jif/Crisco Business as currently conducted by the
Contributors, does not infringe any trademark, trade name, service mark or
patent, as the case may be, of any third party within the Geography. The
Patents, Trademarks, Domain Names and the patents to be licensed on Schedule
1.44 (collectively the "Intellectual Property") are all the patents, trademarks
and domain names used in the Jif/Crisco Business at the Closing Date without
giving effect to "Trademarks" in the definition of Jif/Crisco Business. Except
as set forth in Schedule 3.06 or where not Material, during the past 2 years no
third party has made, or to the Knowledge of Contributors threatened, any claim
or demand or instituted any Action and Contributors have not received any
written notice that (i) challenges the rights of the Contributors in respect of
any of the Patents, Domain Names or Trademarks, (ii) asserts that the operation
of the Jif/Crisco Business is or was infringing, misappropriating or otherwise
violating the intellectual property rights of any third party, or (iii) asserts
that the Contributors are required to pay any royalty, license fee, charge or
other amount with regard to any intellectual property rights of a third party.
None of the Patents, Domain Names or Trademarks is subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any Governmental
Entity, except where not Material.
3.07 Litigation and Claims. There is no Action pending or, to the
Knowledge of P&G, threatened against or involving the Contributors arising out
of the Contributors' operation of the Jif/Crisco Business with stated claims
exceeding One Thousand ($1000) United States Dollars or which questions or
challenges the validity of this Agreement or any action to be taken pursuant
hereto, except as set forth in Schedule 3.07 or where such litigation will not
have a material adverse effect on the ability of the Contributors to consummate
the transactions contemplated hereby or on Newco's ability to operate the
Jif/Crisco Business following the Closing.
3.08 Organization and Good Standing. The Contributors are corporations
duly organized, validly existing, and in good standing under the laws of their
respective countries or states of incorporation and are duly authorized to do
business therein, with full corporate power to own their properties and conduct
the
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Jif/Crisco Business as presently conducted by them, except where not Material or
will not have a material adverse effect on the ability of the Contributors to
consummate the transactions contemplated hereby or on Newco's ability to operate
the Jif/Crisco Business following the Closing.
3.09 Title to Properties; Encumbrances. The Contributors have good, valid
and marketable title to, or, in the case of leased properties and assets, valid
leasehold interests in, all Jif/Crisco Assets, except where not Material, in
each case as such property is currently being used, subject to no Encumbrances,
except for (a) Encumbrances reflected in the Jif/Crisco balance sheet delivered
as part of the Audited Statements pursuant to Section 3.15 of this Agreement;
(b) Encumbrances consisting of zoning or planning restrictions, easements,
permits and other restrictions or limitations on the use of real property or
irregularities in title thereto which do not materially detract from the value
of, or impair the use of, the property that will be contributed to Newco; (c)
Encumbrances for current taxes, assessments or governmental charges or levies on
property not yet due or which are being contested in good faith and for which
appropriate reserves have been created; (d) Encumbrances of record; (e)
Encumbrances set forth on Schedule 3.09; and (f) Encumbrances that are not
Material. Each of P&G and its Subsidiaries is in compliance with the terms of
all leases of tangible properties that will be contributed to Newco to which it
is a party and under which it is in occupancy, and all such leases are in full
force and effect, in each case except where not Material.
3.10 Violations/Breaches. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby do not violate any law,
rule or regulation or order, judgment, or decree within the Geography binding on
the Contributors and will not result in a breach of any term of the certificate
of incorporation, code of regulation or by-laws of the Contributors or of any
contract, agreement or other instrument to which any of the Contributors is a
party, except where not Material or will not have a material adverse effect on
the ability of the Contributors to consummate the transactions contemplated
hereby or on Newco's ability to operate the Jif/Crisco Business following the
Closing.
3.11 Compliance with Applicable Laws. Except as set forth in Schedule 3.11
or where not Material, the Jif/Crisco Business is being conducted in compliance
with all statutes, laws, ordinances, rules, orders and regulations applicable
within the Geography.
3.12 Contracts. Except as set forth in Schedule 3.12(a), to the Knowledge
of P&G, each Contract is in full force and effect and is enforceable by the
Contributors in accordance with its terms, except where not Material. Except as
set forth in Schedule 3.12(b), or where not Material, each of the Contributors
has performed all obligations required to be performed by it to date under the
Contracts and is not (with or without the lapse of time or the giving of notice,
or both) in breach or default thereunder. No Intercompany Contract is material
to the operation of the Jif/Crisco Business as presently conducted.
3.13 Regulatory Matters.
(a) Except as set forth in Schedule 3.13(a), to the Knowledge of P&G, there
are no facts:
(i) which would furnish a substantial basis for the recall, withdrawal
or suspension of any products of the Jif/Crisco Business by the United
States Food and Drug Administration ("FDA") or any other competent US
governmental regulatory agency;
(ii) which, in the Geography, would otherwise reasonably be expected
to cause the Jif/Crisco Business to withdraw, recall or suspend any
products of the Jif/Crisco Business from the market or to change the
marketing classification of any products of the Jif/Crisco Business or to
terminate or suspend testing of any products of the Jif/Crisco Business;
(b) Schedule 3.13(b) contains an accurate and complete list, as of the date
hereof, of:
(i) all products which have been recalled by the Jif/Crisco Business
(whether voluntarily or otherwise) at any time during the past two (2)
years; and
(ii) all proceedings (whether completed or pending) at any time during
the past two (2) years seeking the recall, suspension or seizure of any
products of the Jif/Crisco Business.
B-11
3.14 Employment Matters.
(a) No Labor Commitments. Except as otherwise disclosed on Schedule
3.14(a) as of the date hereof, in the Geography, the Jif/Crisco Business (i) is
not obligated by or subject to any collective bargaining agreement, selection of
a collective bargaining representative for employees, order of the National
Labor Relations Board or other labor board of administration, or any unfair
labor practice decision and (ii) has not received notice of its being a party to
any labor dispute or unfair practice proceeding with respect to claims of, or
obligation to, the Employees.
(b) Immigration Matters. To the Knowledge of P&G, in the Geography, the
Jif/Crisco Business is in material compliance with all immigration laws,
statutes and regulations, including the Immigration Reform and Control Act of
1986; and is in possession of adequate documentation to demonstrate a pattern of
compliance relating to immigration matters.
(c) Compliance of Plans with ERISA and Code. As used in this Section
3.14(c), the terms "Employee Pension Benefit Plan", "Employee Welfare Benefit
Plan", shall have the respective meanings assigned to such terms in Section 3 of
the Employee Retirement Income Security Act of 1974 ("ERISA"). Except where not
Material, to the Knowledge of P&G, all ERISA plans, as defined in Section
3.14(c), are in material compliance with the provisions of ERISA, the applicable
provisions of the Code and all other applicable laws, regulations and
pronouncements. With respect to all Employee Pension Benefit Plans intended to
qualify under Section 401(a) of the Code, the Contributors have, prior to the
date hereof, received a favorable determination letter. To the extent that such
Plans have been amended since the date of receipt of the latest determination
letter, none of the Contributors are aware of any information that would
indicate that such amendments have adversely affected the status of such ERISA
plan. The Contributors have complied with all plan qualification requirements of
401(a) of the Code, as amended by the Tax Reform Act of 1986, so as to maintain
the qualified status of each Employee Pension Benefit Plan for Federal income
tax purposes. Except as set forth in Schedule 3.14(c) or where not Material, to
the Knowledge of P&G, as of the date hereof:
(i) all Employee Pension Benefit Plans that are subject to the Minimum
Funding Standards of Section 412 of the Code and Section 302 of ERISA have
met those standards, and no Employee Pension Benefit Plan of the
Contributors and any other entity which is under common control with the
Contributors or is treated as a single employer under Sections 414(b), (c),
(m), or (o) of the Code ("ERISA Affiliates") has incurred any accumulated
funding deficiency (as defined in Section 4971(c) of the Code);
(ii) the Contributors and ERISA Affiliates have made all payments due
from them to date under or with respect to each Plan, and all amounts
properly accrued to date as liabilities of the Contributors and ERISA
Affiliates under or with respect to each Plan have been recorded on the
books of the Contributors or ERISA Affiliates to the extent required by
generally accepted accounting principles;
(iii) each employee benefit plan sponsored or maintained, or
contributed to, by the Contributors or ERISA Affiliates with respect to the
Jif/Crisco Business employees has complied with the reporting and
disclosure requirements of Title I of ERISA;
(iv) no facts have occurred which have resulted or would result in a
prohibited transaction within the meaning of Section 406 of Title I of
ERISA (and not exempt under Section 408 of ERISA) or in the imposition of
any material excise tax pursuant to Section 4975 of the Code with respect
to any Plan;
(v) to the Knowledge of P&G and ERISA Affiliates, there have been no
breaches of fiduciary duty or violations of Part 4 of Subtitle B, Title I
of ERISA by the administrators, trustees or other fiduciaries of any Plan
with respect to such ERISA plan;
B-12
(vi) each of the Contributors and ERISA Affiliates has performed all
material obligations required to be performed by them under, and is not in
default under, or in violation of, any material provision of any ERISA
plan;
(vii) to the Knowledge of each P&G and ERISA Affiliates, there are no
actions, suits or claims pending (other than routine claims for benefits)
or threatened against any ERISA plan;
(viii) the Contributors and ERISA Affiliates never participated in,
and are not obligated to contribute to any employee pension benefit plan
which is a multi-employer plan; and
(ix) the Contributors and any ERISA Affiliate have complied with the
notice and continuation requirements of COBRA health care continuation
coverage under 4980B of the Code (or any predecessor provision) and the
regulations thereunder.
For purposes of this Section 4.14, materiality shall refer to a liability or
1088, taxes, penalties, interest and related legal fees, with such determination
being made on the basis of the aggregate of affected participants of a benefit
plan and not with respect to any single participant;
(d) Overtime, Back Wages, Vacation, Minimum Wages and Workers'
Compensation. To the Knowledge of P&G, except as set forth in Schedule 3.14(e)
or where otherwise not Material, in the Geography, no present or former Employee
has any valid and enforceable claim (whether under any foreign or domestic law)
under any employment agreement, or otherwise on account of or for (i) overtime
pay, other than overtime pay for the current payroll period, (ii) wages or
salary for any period other than the current payroll period, (iii) vacation or
time off (or pay in lieu thereof), other than that earned in respect of the
previous twelve months, (iv) any violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work, or (v) workers'
compensation.
(e) Discrimination, Occupational Safety and Other Statutes and
Regulations. To the Knowledge of P&G, except as set forth in Schedule 3.14(f),
in the Geography, there is no valid and enforceable claim, against the
Jif/Crisco Business arising out of any breach or violation by the Contributors
of any federal, state of foreign statute, ordinance or regulation relating to
discrimination in employment or employment practices or child labor or
occupational safety and health standards including without limitation, The
Occupational Safety and Health Act, The Fair Labor Standards Act, Title VII of
the Civil Rights Act of 1964, Executive Order 11246, the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act of 1990, which
claim, action or proceeding is or would be Material.
3.15 Financial Statements; Absence of Changes.
(a) Attached as Schedule 3.15(a) are true and correct copies of the audited
special purpose statements of inventory and property, plant and equipment -- net
as of June 30, 2001 (the "Balance Sheet Date") and June 30, 2000, together with
the audited statements of revenues, direct cost of products sold, direct
marketing expenses and direct administrative and other expenses of the
Jif/Crisco Business and the Culinary Sol Business for the years ended June 30,
2001, 2000 and 1999 and the related supplemental schedules of direct cost of
products sold accompanied by the reports thereon of Deloitte and Touche LLP (the
"Audited Statements"). The Audited Statements were derived from the books and
records of the Contributors and were prepared in accordance with generally
accepted accounting principles of the United States, as in effect from time to
time, applied on a consistent basis, and present fairly in all material respects
the statements of inventory and property, plant and equipment -- net and the
related statements of revenues, direct cost of products sold, direct marketing
expense and direct administrative and other expenses of the Jif/Crisco Business
and the Culinary Sol Business as at the dates and for the periods represented
therein;
(b) Except as set forth on Schedule 3.15(b) or as required or expressly
permitted by this Agreement, since June 30, 2001, the Contributors have operated
the Jif/Crisco Business in the ordinary course of business and there has not
occurred any event, occurrence or conditions which has had an adverse effect,
except where not Material.
B-13
3.16 Activities of Newco. Newco has not conducted any activities other
than in connection with the organization of Newco, the negotiation and execution
of this Agreement and the consummation of the transactions contemplated hereby.
After the Contribution, Newco will hold the Jif/Crisco Assets and will be liable
for the Assumed Liabilities and will not hold any other assets or be obligated
for any other liabilities.
3.17 Inventory. The inventories of finished products of the Jif/Crisco
Business on hand as of the Closing Date are of a good and merchantable quality
and are usable and salable in the ordinary course of business.
ARTICLE IV
COVENANTS
4.01 Bulk Transfer Laws. Newco waives compliance by the Contributors with
any laws relating to bulk transfers and bulk sales applicable to the
transactions contemplated by this Agreement.
4.02 Cooperation in Litigation. For a period of three (3) years after the
Closing Date, the Contributors and Newco will, in the defense of any third-party
Action relating to the Jif/Crisco Business, make available during normal
business hours, but without unreasonably disrupting their respective businesses,
all personnel and records of the Jif/Crisco Business reasonably necessary to
permit the effective defense or investigation of such Action. If information
other than that pertaining to the Jif/Crisco Business is contained in such
records, the Contributors and Newco will either agree that such information may
be omitted or redacted by the producing party, or will enter into appropriate
secrecy commitments to protect such information.
4.03 Cooperation of Third Parties. Where the cooperation of third parties
such as insurers or trustees would be necessary in order for a party to
completely fulfill its obligations under this Agreement and the Ancillary
Agreements, such party will use all reasonable efforts to cause such third
parties to provide such cooperation.
4.04 Expenses. Except as otherwise expressly provided in this Agreement,
whether or not the transactions contemplated by this Agreement are consummated,
the Contributors and Newco will bear their own costs and expenses, except that
all Taxes in connection with the transactions contemplated by this Agreement
(except Taxes on the income of the Contributors or Newco) will be borne by
Contributors. To the extent a withholding Tax or other fee is deducted with
respect to a payment between Newco and the Contributors, or with any third
parties, the amount of Tax or other fee so withheld will be for the account of
the Contributors. Newco will provide copies to the Contributors of all receipts
from any Governmental Entity evidencing payment of such Taxes and other fees and
will assist the Contributors in claiming relief from double taxation.
4.05 Intellectual Property Assignment/Recordation/Maintenance.
(a) Newco will be responsible for, and will pay all expenses (whether
incurred before or after the Closing Date) involved in notarization,
authentication, legalization and/or consularization of the signatures of the
Contributors' representatives on the Trademark Assignment Agreement, the Patent
Assignment Agreement and the Trademark and Domain Name documents, by country,
and recording such assignment documents with the appropriate Governmental
Entities. Assignment documents, by country, will be provided by the
Contributors, at Newco's expense, for approval by Newco. The Contributors will
be responsible for, and will pay all expenses (whether incurred before or after
the Closing Date) involved in notarization, authentication, legalization and/or
consularization of the signatures of the Contributors' representatives on all
assignment documents.
(b) The Contributors will pay all expenses related to the maintenance of
Patents for six (6) months from and after the Closing Date, and Newco will
reimburse the Contributors for such expenses. After this six-month period, Newco
will be solely responsible for maintenance of the Patents. Newco will be
responsible for, and will pay all expenses related to the maintenance of
Trademarks and Domain Names
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from and after the Closing Date. If the Contributors receive any bills or
invoices for expenses related to the maintenance of Trademarks and Domain Names,
from and after the Closing Date, or maintenance of Patents, after six months
from and after the Closing Date, then the Contributors will forward to Newco
such bills or invoices for payment by Newco.
(c) The Contributors will pay all bills and invoices for Trademark and
Patent expenses which are received after the Closing Date but which relate to
work performed for the benefit of the Contributors before the Closing Date or to
maintain the Trademarks, Domain Names and Patents prior to the Closing Date. The
phrase "work performed for the benefit of the Contributors" will not include any
work, whether performed before or after the Closing Date, related to the
transfer of the Trademarks, Domain Names and Patents, and the Contracts and
certain purchase orders, contracts, agreements and other obligations, other than
that specifically assumed by the Contributors pursuant hereto.
4.06 Further Assurances; Books and Records. From time to time after the
Closing Date, the Contributors and Newco will, and will cause their respective
Affiliates to, promptly execute and deliver, without consideration, such
documents as any of them may reasonably request, including, without limitation,
assignment and assumption agreements with respect to the Contracts, deeds, bills
of sale, consents and other instruments in addition to those specified in this
Agreement, in such form as may be appropriate, or take any additional actions,
if reasonably necessary or advisable in connection with the consummation of the
transactions contemplated by this Agreement to more effectively transfer, convey
and assign to Newco, and to put Newco in actual possession and control of, the
Jif/Crisco Assets, including without limitation obtaining any necessary third
party consents or approvals. In addition, Contributors shall promptly provide
Newco with copies of books and records to the extent that they are related to
the Jif/Crisco Business and to the extent they already exist, upon Newco's
reasonable request.
4.07 Use of P&G's Name or Reputation; Packaging Materials;
Advertising. Except as specifically set forth herein, including to the extent
that any items constitutes a Jif/Crisco Asset, Newco will not operate the
Jif/Crisco Business utilizing, based on or taking advantage of the name,
reputation or corporate goodwill of the Contributors. Newco will cease use of
packaging, advertising, sales and promotional materials bearing any of the
Contributors' corporate names, product identification numbers or consumer
information telephone numbers beginning six (6) months after the Closing Date,
or such shorter period if limited by the requirements of any law, rule or
regulation or if new product labeling and/or packaging is printed within such
six (6) month time period. Newco will maintain quality standards for products of
the Jif/Crisco Business at least equal to those maintained by the Contributors
at the time of the Closing Date for so long as Newco continues to use any
packaging, advertising, sales or promotional materials bearing the corporate
names, product identification numbers or consumer information telephone numbers
of the Contributors.
4.08 Assignment, Assumption and Consent. The Contributors will use
reasonable efforts to obtain the consent of any third-party to any Contract,
which consent is required for the assignment of any such Contract. For no
consideration, the Contributors will, convey, assign, transfer and deliver to
Newco, and Newco will acquire, accept and assume such Contract, after obtaining
such required consent, if obtained, and at or after the Closing Date. If such
consent cannot be obtained, Contributors shall use commercially reasonable
efforts to provide Newco the benefits of such Contracts at Newco's expense.
Contributors' only liability for any Contract that is not assigned to Newco or
JMS shall be limited to Contributors' obligations pursuant to this Section 4.08.
4.09 Removal of Assets. Except for those Books and Records and other
documents described in the Transitional Services Agreement and/or the
Manufacturing Plant Separation Agreement, all tangible Jif/Crisco Assets not
located on the Real Property will be removed and shipped by the Contributors to
Newco within a time frame reasonably agreed by the parties after the Closing
Date from the Contributors' premises, at Newco's expense and in a manner so as
to not unreasonably interfere with the Contributors' operations and to not cause
damage to such premises; provided, however, the Contributors will be entitled to
retain originals or copies, made at Newco's expense, of Books and Records
related to Trademarks and Patents to the extent necessary for the Contributors
to perform the obligations set forth in Section 4.05.
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The Contributors will ship to Newco all Books and Records and other documents
described in the Transitional Services Agreement or the Plant Separation
Agreement within fourteen (14) days after the expiration of the Transitional
Services Agreement or the Plant Separation Agreement, respectively, upon the
same terms (described in the preceding sentence) as other Jif/Crisco Assets.
4.10 Prepaid Matters. Newco will reimburse the Contributors for any
Jif/Crisco Asset which is received or service which is performed for the benefit
of Newco after the Closing Date pursuant to any Contract or purchase order,
contract, agreement or other obligation transferred to Newco pursuant to Section
4.08 which was paid by the Contributors previous to the Closing Date. Newco will
pay any reimbursement to be made as per this Section 4.10 by wire transfer to an
account specified by the Contributors within 5 (five) business days following
Newco's receipt of such Jif/Crisco Asset or performance of service at its actual
cost.
4.11 Transferring Employees. Immediately prior to the Closing Date, any
person who is a Newco Employee (as defined in the Merger Agreement) shall cease
to be an employee of the Contributors and shall automatically become an employee
of Newco.
4.12 Coupons. The Contributors will remain liable for redemption of and
administrative costs relating to all coupons set forth in Schedule 4.15 and
distributed before, but redeemed at P&G's coupon redemption center no later than
sixty (60) days after, the Closing Date.
4.13 Product Returns. Newco will assume responsibility for all returns of
products of the Jif/Crisco Business shipped prior to, but returned after, the
Closing Date, as well as all products of the Jif/Crisco Business shipped after
the Closing Date. No party hereto will undertake any action to encourage returns
of products of the Jif/Crisco Business other than in the ordinary course of
business.
4.14 Portion Pac Agreement. P&G shall provide notice to Portion Pac Inc.
terminating the Portion Pac Agreement, which notice shall be in the form and
given in the manner required by the Portion Pac Agreement, not later than 3
Business Days after all of the conditions set forth in Section 7.03 of the
Merger Agreement have been fulfilled.
ARTICLE V
INDEMNIFICATION AND ARBITRATION
5.01 Indemnification by the Contributors.
(a) Subject to the terms and conditions of this Agreement, P&G, on behalf
of itself and the other Contributors, jointly and severally, will defend,
indemnify and hold Newco harmless from and against all claims, losses,
liabilities, damages, costs and expenses (including without limitation
reasonable fees and expenses of attorneys incurred in investigation or defense
of any third-party Action, but excluding fees, costs and expenses of attorneys,
accountants, consultants and other experts and witnesses incurred in the
investigation or prosecution of any non-third-party Action) arising out of or
related to an Excluded Liability or breach of a representation or warranty
(except for any representation or warranty to the extent such representation or
warranty relates to Environmental Matters, including without limitation the
representations and warranties set forth in Section 3.03) or covenant of the
Contributors in this Agreement.
(b) Promptly after receipt by Newco of notice of any third-party Action in
respect of which indemnity may be sought against P&G hereunder (for purposes of
this Section 5.01, a "Newco Assertion"), Newco will notify P&G in writing of the
Newco Assertion, but the failure to so notify P&G will not relieve P&G of any
liability it may have to Newco, except to the extent P&G demonstrates that it
has suffered actual prejudice thereby. P&G will be entitled to participate in
and, to the extent P&G elects by written notice to Newco within thirty (30) days
after receipt by P&G of notice of such Newco Assertion, to assume the defense of
such Newco Assertion (unless Newco is also a party to such Action and Newco
determines in good faith that joint representation would be inappropriate), at
P&G's own expense, with counsel chosen by it which will be reasonably
satisfactory to Newco. With respect to any
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such Newco Assertion, Newco will promptly provide P&G with: (i) notice and
copies of any documents served upon Newco; and (ii) all reasonable cooperation
which P&G deems necessary to defend such Newco Assertion, including, without
limitation, providing P&G and its outside attorneys access to any
potentially-relevant documents, information, or individuals within the control
of Newco, other than any privileged documents. If business information of Newco
other than that pertaining to the Jif/Crisco Business is contained in such
documents or information, P&G and Newco will enter into appropriate secrecy
commitments to protect such documents or information. Notwithstanding that P&G
may have elected by written notice to assume the defense of any Newco Assertion,
Newco will have the right to participate in the investigation and defense
thereof, with separate counsel chosen by Newco, but in such event the fees and
expenses of Newco (above those which would otherwise have been incurred) and
such separate counsel will be paid by Newco.
(c) Notwithstanding anything in this Section 5.01 to the contrary: (i) P&G
will have no obligation with respect to any Newco Assertion if, in connection
therewith, Newco, without the written consent of P&G, which consent shall not be
unreasonably withheld or delayed, settles or compromises any Action or consents
to the entry of any judgment; and (ii) P&G will not, without the written consent
of Newco with respect to any Newco Assertion: (A) settle or compromise any
Action or consent to the entry of any judgment which does not include as an
unconditional term thereof the delivery by the claimant or plaintiff to Newco of
a duly executed written release of Newco from all liability in respect of such
Action, which release will be reasonably satisfactory in form and substance to
counsel for Newco; or (B) settle or compromise any Action in any manner that, in
the reasonable judgment of Newco or its counsel, will materially adversely
affect Newco other than as a result of money damages or other money payments.
(d) Upon the payment of any settlement or judgment pursuant to this Section
5.01 with respect to any Newco Assertion, P&G will be subrogated to all rights
and remedies of Newco against any third party in respect of such Newco Assertion
to the extent of the amount so paid by P&G.
(e) The indemnity provided for by this Section 5.01 will be Newco's
exclusive source of recovery against P&G with respect to matters covered hereby.
5.02 Indemnification by Newco.
(a) Subject to the terms and conditions of this Agreement, Newco will
defend, indemnify and hold P&G harmless from and against all claims, losses,
liabilities, damages, costs and expenses (including without limitation
reasonable fees and expenses of attorneys incurred in investigation or defense
of any third-party Action, but excluding fees, costs and expenses of attorneys,
accountants, consultants and other experts and witnesses incurred in the
investigation or prosecution of any non-third-party Action) arising out of or
related to an Assumed Liability or breach of a representation, warranty or
covenant of Newco in this Agreement.
(b) Promptly after receipt by P&G of notice of any Action in respect of
which indemnity may be sought against Newco hereunder (for purposes of this
Section 5.02, a "P&G Assertion"), P&G will notify Newco in writing of any P&G
Assertion, but the failure to so notify Newco will not relieve Newco of any
liability it may have to P&G, except to the extent Newco demonstrates that it
has suffered actual prejudice thereby. Newco will be entitled to participate in
and, to the extent Newco elects by written notice to P&G within thirty (30) days
after receipt by Newco of notice of such P&G Assertion, to assume the defense of
such P&G Assertion, at its own expense, with counsel chosen by it which will be
reasonably satisfactory to P&G. With respect to any such P&G Assertion (unless
Contributors are also parties to such Action and Contributors determine in good
faith that joint representation would be inappropriate), P&G will promptly
provide Newco with: (i) notice and copies of any documents served upon P&G; and
(ii) all reasonable cooperation which Newco deems necessary to defend such P&G
Assertion, including without limitation providing Newco and its outside
attorneys access to any potentially-relevant documents, information, or
individuals within the control of P&G, other than any privileged documents. If
business information of P&G other than that pertaining to the Jif/Crisco
Business is contained in such documents or information, P&G and Newco will enter
into appropriate secrecy commitments to protect such documents or information.
Notwithstanding that Newco may have elected by written notice to assume the
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defense of any P&G Assertion, P&G will have the right to participate in the
investigation and defense thereof, with separate counsel chosen by P&G, but in
such event the fees and expenses of P&G (above those which would otherwise have
been incurred) and such separate counsel will be paid by P&G.
(c) Notwithstanding anything in this Section 5.02 to the contrary: (i)
Newco will have no obligation with respect to any P&G Assertion if, in
connection therewith, P&G, without the written consent of Newco, which consent
shall not be unreasonably withheld or delayed, settles or compromises any Action
or consent to the entry of any judgment; and (ii) Newco will not, without the
written consent of P&G with respect to any P&G Assertion: (A) settle or
compromise any Action or consent to the entry of any judgment which does not
include as an unconditional term thereof the delivery by the claimant or
plaintiff to P&G of a duly executed written release of P&G from all liability in
respect of such Action, which release will be reasonably satisfactory in form
and substance to counsel for P&G; or (B) settle or compromise any Action in any
manner that, in the reasonable judgment of P&G or its counsel, will materially
adversely affect P&G other than as a result of money damages or other money
payments.
(d) Upon the payment of any settlement or judgment pursuant to this Section
5.02 with respect to any P&G Assertion, Newco will be subrogated to all rights
and remedies of P&G against any third party in respect of such P&G Assertion to
the extent of the amount so paid by Newco.
(e) The indemnity provided for by this Section 5.02 will be P&G's exclusive
source of recovery against Newco with respect to matters covered hereby.
5.03 Dispute Resolution.
(a) Any Action asserted by P&G against Newco or by Newco against P&G (a
"Claim") arising out of or related to this Agreement or any Ancillary Agreement,
including without limitation any Claim for indemnification pursuant to Article V
hereof or any issue as to whether or not a Claim is arbitrable, will be resolved
pursuant to the procedures described in this Section 5.03.
(b) Should any Claim arise, P&G and Newco will first attempt to resolve
such Claim by entering into good faith negotiations by or among their
appropriate employees or officers. Such negotiations will commence as soon as
practicable after P&G and Newco have each received notice of such Claim, but no
later than ten (10) days after such receipt, and will terminate thirty (30)
calendar days after such commencement. During negotiations, P&G and Newco will
not have the right to any discovery, unless agreed by each of P&G and Newco.
(c) Any Claim which has not been resolved pursuant to Section 5.03(b) of
this Agreement will be referred to good faith negotiations by or among one or
more Vice Presidents of P&G and Newco. Such negotiations will commence as soon
as practicable after termination of the negotiations described in Section
5.03(b), but not later than ten (10) business days thereafter, and will
terminate thirty (30) calendar days after such commencement. During the
negotiations, P&G and Newco will not have the right to any discovery, unless
otherwise agreed by P&G and Newco.
(d) Any Claim which has not been resolved pursuant to Section 5.03(c) of
this Agreement will be determined by arbitration. The arbitration will be
conducted by one arbitrator, who will be appointed pursuant to the International
Arbitration Rules of the American Arbitration Association ("IAAA"). The
arbitration will be held in Columbus, Ohio and will be conducted in accordance
with the rules of the IAAA, except that the rules set forth in this Section
5.03(d) will govern such arbitration to the extent they conflict with the rules
of the IAAA. P&G and Newco will use commercially reasonable efforts to cause the
arbitration to be conducted in an expeditious manner. P&G and Newco will use
commercially reasonable efforts to cause the arbitration to be completed within
sixty (60) days after selection of the arbitrator. In the arbitration, Ohio law
will govern, except to the extent that those laws conflict with the IAAA and the
provisions of this Section 5.03(d). There will be no discovery, except as the
arbitrator will permit following a determination by the arbitrator that the
Person seeking such discovery has a substantial, demonstrable need. All other
procedural matters will be within the discretion of the arbitrator. In the event
a Person fails to comply with the procedures in any arbitration in a manner
deemed material by the arbitrator, the arbitrator will fix a reasonable period
of time for compliance and, if the Person does not
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comply within said period, a remedy deemed just by the arbitrator, including an
award of default, may be imposed. The determination of the arbitrator will be
final and binding on P&G and Newco. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
5.04 Damage Limitations.
(a) Notwithstanding anything to the contrary in the Ancillary Agreements,
none of the Contributors nor Newco will be permitted to recover any
consequential, indirect, or punitive damages arising out of or related to this
Agreement, regardless of the form of the Claim or Action, including without
limitation Claims or Actions for indemnification, tort, breach of contract,
warranty, representation or covenant.
(b) The Contributors' aggregate liability arising out of or related to
breaches of representations and warranties pursuant to Section 5.01(a),
regardless of the form of the Claim or Action, including, without limitation,
Claims or Actions for indemnification, tort, breach of contract, warranty or
representation, is limited to the amount by which all such liabilities exceed
Twenty Million United States Dollars ($20,000,000), and in no event will the
Contributors' aggregate liability exceed a total of One Hundred Twenty Million
United States Dollars ($120,000,000). Notwithstanding the foregoing, Newco shall
only bring a Claim or Action pursuant to this Section 5.04 for breaches of
representations and warranties if such Claim or Action exceeds the amount of One
Hundred Thousand United States Dollars ($100,000).
(c) Newco's aggregate liability arising out of or related to breaches of
representations and warranties set forth in this Agreement, regardless of the
form of the Claim or Action, including without limitation Claims or Actions for
indemnification, tort, breach of contract, warranty or representation, is
limited to the amount by which all such liabilities exceed Twenty Million United
States Dollars ($20,000,000), and in no event will Newco's aggregate liability
exceed a total of One Hundred Twenty Million United States Dollars
($120,000,000). Notwithstanding the foregoing, the Contributors shall only bring
a Claim or Action pursuant to this Section 5.04 for breaches of representations
and warranties if such Claim or Action exceeds the amount of One Hundred
Thousand United States Dollars ($100,000).
(d) In the event any Claim or Action hereunder results in a Tax benefit or
is an insured loss to the indemnified Person, the indemnifying Person will be
entitled to a credit against any liability thereunder in the amount by which any
Taxes of the indemnified Person will be reduced by reason of any deduction or
adjustment allowed the indemnified Person for any payment, settlement or
satisfaction of such claim, as well as in the amount of and to the extent of any
insurance proceeds to which the indemnified Person is entitled. For the purposes
hereof, it will be presumed that the maximum possible Tax benefit is derived in
the shortest time period possible.
ARTICLE VI
MISCELLANEOUS
6.01 Amendment. This Agreement and the Ancillary Agreements may not be
amended or modified in any respect except by a written agreement signed by the
parties hereto or thereto.
6.02 Waiver of Compliance. Except as otherwise provided in this Agreement
and the Ancillary Agreements, the failure by any Person to comply with any
obligation, covenant, agreement or condition under such agreements may be waived
by the Person entitled to the benefit thereof only by a written instrument
signed by the Person granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
will not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. The failure of any Person to enforce at any time any of the
provisions of such agreements will in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of such agreements or any
part thereof or the right of any Person thereafter to enforce each and every
such provision. No waiver of any breach of such provisions will be held to be
waiver of any other or subsequent breach.
6.03 Survival. Each of the covenants and agreements contained in this
Agreement shall survive the Closing Date and continue in full force and effect
in accordance with its terms, but is subject to all
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applicable statutes of limitation, statutes of repose and other similar defenses
provided in law or equity. Each and every representation and warranty of the
Contributors contained in this Agreement, the individual trademark and patent
assignment documents, by country or any certificates or documents required to be
delivered at Closing by any Party pursuant to Section 2.02 of this Agreement,
including, without limitation, the instrument of assignment, officer's
certificates and receipts, if any, will survive any investigation and will not
be extinguished by the Closing, but will survive for a period of eighteen (18)
months following the Closing Date, except that the representations and
warranties made in Sections 3.01, 3.05, 3.08 and 3.10 survive without time
limitations, and the representations and warranties in Sections 3.03 and 3.09
each survive for 5 years from the Closing Date. No Party may initiate any Claim
nor will any Party be responsible for any Action arising out of or related to a
breach of a representation or warranty, regardless of the form of the Claim or
Action, including, without limitation, indemnification, tort, breach of
contract, warranty or representation, unless such Claim or Action is initiated
prior to the expiration of the relevant representation or warranty.
6.04 Notices. All notices required or permitted pursuant to this Agreement
will be in writing and will be deemed to be properly given when actually
received by the Person entitled to receive the notice at the address stated
below, or at such other address as a party may provide by notice to the other:
The Contributors
The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, OH 45201
Attention: Director -- Acquisitions and Divestures
With a copy to:
The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, OH 45202
Attention: Secretary
If to JMS:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
With a copy to:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attention: General Counsel
6.05 Exhibits and Schedules; Incorporation by Reference. The exhibits and
schedules attached to this Agreement, each when executed and/or delivered, are
incorporated by reference into and made a part of this Agreement.
6.06 Successors and Assigns. This Agreement and the Ancillary Agreements
will be binding upon and will inure to the benefit of the signatories hereto and
their respective successors and permitted assigns. The Contributors and Newco
may not assign this Agreement, the Ancillary Agreements, or any of their rights
or liabilities hereunder or thereunder, without the prior written consent of the
other parties hereto or thereto, provided that the Contributors and Newco may so
assign, in whole or in part, to one or more of their Affiliates. Any such
assignment will not relieve the party making the assignment from any liability
under such agreements. The parties hereof acknowledge and agree that JMS shall
succeed to the rights, obligations and liabilities of Newco, including, without
limitation, those set forth in Articles III and V, upon consummation of the
Merger.
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6.07 Third Party Beneficiaries. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
6.08 Entire Agreement. This Agreement, the Merger Agreement and the
Ancillary Agreements constitute the entire agreement between the parties hereto
with respect to the subject matter thereof and will supersede all previous
negotiations, commitments, and writings with respect to such subject matter.
6.09 Severability. The illegality or partial illegality of any or all of
this Agreement, the Ancillary Agreements, or any provision hereof or thereof,
will not affect the validity of the remainder of the such agreements, or any
provision thereof, and the illegality or partial illegality of any such
agreements will not affect the validity of any such agreement in any
jurisdiction in which such determination of illegality or partial illegality has
not been made, except in either case to the extent such illegality or partial
illegality causes such agreements to no longer contain all of the material
provisions reasonably expected by the parties to be contained therein.
6.10 Captions. The captions appearing in this Agreement and the Ancillary
Agreements are inserted only as a matter of convenience and as a reference and
in no way define, limit or describe the scope or intent of such agreements or
any of the provisions thereof.
6.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all of which
will constitute one agreement.
6.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the state of Ohio, whether common law or statutory,
without reference to the choice of law provisions thereof.
6.13 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants hereunder will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of specific performance of its obligations
hereunder.
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IN WITNESS WHEREOF, each of the signatories hereto has caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
THE PROCTER & GAMBLE COMPANY
By: /s/ GRETCHEN W. PRICE
------------------------------------
Name: Gretchen W. Price
Title: Vice President and
Treasurer
THE PROCTER & GAMBLE MANUFACTURING
COMPANY
By: /s/ GRETCHEN W. PRICE
------------------------------------
Name: Gretchen W. Price
Title: Vice President and
Treasurer
THE PROCTER & GAMBLE OHIO BRANDS
COMPANY
By: /s/ GRETCHEN W. PRICE
------------------------------------
Name: Gretchen W. Price
Title: Vice President and
Treasurer
THE J.M. SMUCKER COMPANY
By: /s/ TIMOTHY P. SMUCKER
------------------------------------
Name: Timothy P. Smucker
Title: Chairman & Co-CEO
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ANNEX C
JMS SHAREHOLDERS AGREEMENT AND IRREVOCABLE PROXY
THIS SHAREHOLDERS AGREEMENT AND IRREVOCABLE PROXY (this "Agreement") is
made and entered into as of October 9, 2001, by and among The Procter & Gamble
Company, an Ohio corporation ("P&G"), and those certain shareholders set forth
on the signature pages hereto (each individually, a "Shareholder" and
collectively, "Shareholders") of The J.M. Smucker Company, an Ohio corporation
("JMS").
RECITALS
A. Concurrently with the execution of this Agreement, P&G, The Proctor &
Gamble Ohio Brands Company, an Ohio corporation and wholly owned subsidiary of
P&G ("Newco"), and JMS are entering into an Agreement and Plan of Merger of even
date herewith (as such agreement may hereafter be amended from time to time, the
"Merger Agreement") which provides for the merger of Newco with and into JMS
(the "Merger"). Following the Merger, JMS will continue as the surviving
corporation (the "Surviving Corporation"). In the Merger, shares of common stock
of Newco, without par value ("Newco Common Stock") and shares of common stock of
JMS, without par value ("JMS Common Stock") will automatically be converted into
the right to receive shares of common stock of the Surviving Corporation,
without par value ("Surviving Corporation Common Stock") on the terms and
subject to the conditions of the Merger Agreement. Capitalized terms that are
used in this Agreement and are not otherwise defined herein will have the same
meanings that such terms have in the Merger Agreement.
B. As of the date hereof, each Shareholder is the beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Securities Act")) with respect to, in the aggregate, such number of Shares (as
defined herein) listed opposite such Shareholder's name on Schedule A attached
hereto;
C. Each Shareholder is entering into this Agreement as a material
inducement and consideration to P&G to enter into the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
1. Definitions.
(a) "Action" shall mean any dispute, controversy, claim, action,
litigation, suit, cause of action, arbitration, mediation, or any proceeding by
or before any mediator or Governmental Entity, or any investigation, subpoena,
or demand preliminary to any of the foregoing.
(b) "Expiration Date" means the earlier to occur of (i) the Effective Time;
and (ii) the termination of the Merger Agreement in accordance with its terms.
(c) "Governmental Entity" shall mean any arbitrator, court, judicial,
legislative, administrative or regulatory agency, commission, department, board
or bureau or body or other governmental authority or instrumentality or any
Person or entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, whether foreign,
federal, state, provincial, local or other.
(d) "Person" shall mean and include an association, an individual, a
partnership, a joint venture, joint stock company, a corporation, a trust, an
unincorporated organization, a limited liability company, a group, a government
or other department or agency thereof and any other entity.
(e) "Shares" means all issued and outstanding shares of JMS Common Stock
owned beneficially by each Shareholder, in each case, on the date hereof;
provided, however, that any shares of capital stock of JMS of which such
Shareholder becomes the record or beneficial owner after the execution of this
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Agreement and prior to the Expiration Date shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares on
the date hereof.
(f) "Transfer" with respect to any security means to directly or
indirectly: (i) sell, pledge, encumber, transfer or dispose of, or grant an
option with respect to, such security or any interest in such security; or (ii)
enter into an agreement or commitment providing for the sale, pledge,
encumbrance, transfer or disposition of, or grant of an option with respect to,
such security or any interest therein.
2. Agreement to Vote.
2.1 Voting Agreement. (a) Each Shareholder hereby covenants and agrees
that, prior to the Expiration Date, at any meeting (whether annual or special
and whether or not an adjourned or postponed meeting) of the shareholders of
JMS, however called, and in any action taken by the written consent of
shareholders of JMS without a meeting, unless otherwise directed in writing by
P&G, each Shareholder will appear at the meeting or otherwise cause such
Shareholder's Shares to be counted as present thereat for purposes of
establishing a quorum and vote or consent or cause to be voted or consented the
Shares:
(i) in favor of the issuance of Surviving Corporation Common Stock
pursuant to the Merger, the execution and delivery by JMS of the Merger
Agreement and the adoption of the terms thereof, and in favor of the other
actions contemplated by the Merger Agreement (including any amendment to
JMS's governing documents that is necessary or desirable in order to
consummate the Merger) and, to the extent that a vote is solicited in
connection with this Agreement or the Merger Agreement, any other action
required or desirable in furtherance hereof or thereof;
(ii) to the extent a vote is solicited in connection with the approval
of any action, agreement or proposal that would result in a breach of any
representation, warranty, covenant or obligation of JMS in the Merger
Agreement or that would delay or hinder the consummation of the Merger or
that would preclude fulfillment of a condition precedent under the Merger
Agreement to JMS's, P&G's or Newco's obligation to consummate the Merger,
against the approval of such action, agreement or proposal; and
(iii) against approval of any action, agreement or proposal made in
opposition to or in competition with the issuance of the Surviving
Corporation Common Stock pursuant to the Merger and the consummation of the
Merger, including, without limitation, any Competing Transaction or
Superior Proposal.
(b) Prior to the Expiration Date, each Shareholder will not enter into any
agreement or understanding with any person to vote or give instructions in any
manner inconsistent with any provision of this Section 2.1. This Agreement is
intended to bind each Shareholder only with respect to the specific matters set
forth herein.
2.2 Irrevocable Proxy. Contemporaneously with the execution of this
Agreement, each Shareholder will deliver to P&G a proxy with respect to such
Shareholder's Shares in the form attached hereto as Exhibit 1, which proxy will
be irrevocable to the fullest extent permitted by applicable Law (the "Proxy");
except that the Proxy shall be automatically revoked upon termination of this
Agreement in accordance with its terms.
2.3 Transfer and Other Restrictions.
(a) From and after the date hereof until the termination of this Agreement,
each Shareholder agrees not to, directly or indirectly:
(i) except pursuant to the terms of the Merger Agreement, Transfer any
or all of the Shares or any interest therein;
(ii) grant any proxy, power of attorney, deposit any Shares into a
voting trust or enter into a voting agreement or arrangement with respect
to the Shares except as provided in this Agreement; or
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(iii) take any other action that would make any representation or
warranty of such Shareholder contained herein untrue or incorrect or have
the effect of preventing or disabling such Shareholder from performing its
obligations under this Agreement.
(b) To the extent that any Shareholder is, as of the date hereof, party to
a contract or agreement that requires such Shareholder to Transfer Shares to
another person or entity (excluding a contract or agreement pledging Shares to
JMS), such Shareholder will not effect any such Transfer unless, prior to such
Transfer, such Shareholder causes the transferee to be bound by and to execute
an agreement in the form of this Agreement with respect to the Shares to be
Transferred. Nothing herein shall prohibit Shareholder from exercising any
option or warrant Shareholder may hold (in accordance with the terms of such
option or warrant, as applicable); provided, however, that the securities
acquired upon such exercise shall be deemed Shares.
(c) Each Shareholder agrees with, and covenants to, P&G that such
Shareholder shall not request that JMS register the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any
Shares, unless such transfer is made pursuant to and in compliance with this
Agreement.
(d) From and after the Effective Time until the second anniversary of the
Effective Time, each Shareholder agrees not to, directly or indirectly,
purchase, or otherwise acquire record or beneficial ownership of any additional
shares of Surviving Corporation Common Stock or warrants or options to acquire
Surviving Corporation Common Stock; or (ii) enter into any agreement or
commitment to purchase shares of Surviving Corporation Common Stock or warrants
or options to acquire Surviving Corporation Common Stock; provided, however,
that this prohibition shall not apply to the acquisition of (x) options to
purchase shares of Surviving Corporation Common Stock granted by JMS or the
Surviving Corporation to Shareholder in connection with services performed by
Shareholder as an employee or director of JMS or the Surviving Corporation
("Options"), (y) the acquisition of shares of Surviving Corporation Common Stock
upon the exercise of such Options or (z) shares of Surviving Corporation Common
Stock granted by the Surviving Corporation to the Shareholder in connection with
services performed by such Shareholder as an officer or director of the
Surviving Corporation.
(e) The foregoing restrictions shall not prohibit a transfer of Shares (i)
in the case of an individual, to any member of his or her immediate family, to a
trust for the benefit of such Shareholder or any member of his or her immediate
family or a transfer of Shares upon the death of any Shareholder or (ii) in the
case of a partnership or limited liability company, to one or more partners or
members or to an affiliated corporation; provided, however, that in each such
case, (x) such Transfer is for no consideration of any kind and (y) any
transferee shall, as a precondition to such transfer, agree in a writing
delivered to P&G, to be bound by the terms and conditions of this Agreement and
execute and deliver to P&G a proxy in the form attached hereto.
3. Waivers. Each Shareholder agrees not to exercise any rights of
appraisal and any dissenters' rights that such Shareholder may have (whether
under applicable law or otherwise) or could potentially have or acquire in
connection with the Merger or any proposal that is necessary or desirable to
consummate the Merger.
4. Representations, Warranties and Covenants of Shareholder. Each
Shareholder hereby represents, warrants and covenants to P&G severally, and not
jointly, as follows:
4.1 Authority, Enforceability. Such Shareholder has the power and
authority to enter into, execute, deliver and perform such Shareholder's
obligations under this Agreement and to make the representations, warranties and
covenants made by such Shareholder herein. This Agreement has been duly executed
and delivered by such Shareholder and constitutes a legal, valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, subject to (i) Laws of general application relating
to bankruptcy, insolvency and the relief of debtors and (ii) rules of Law
governing specific performance, injunctive relief and other equitable remedies.
4.2 No Conflicts, No Defaults and Consents. The execution and delivery of
this Agreement by such Shareholder does not, and the performance of this
Agreement by such Shareholder will not: (i) conflict
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with or violate any order, decree or judgment applicable to such Shareholder or
by which such Shareholder or any of such Shareholder's properties or Shares is
bound or affected; (ii) conflict with or violate any agreement to which such
Shareholder is a party or is subject, including, without limitation, any voting
agreement or voting trust; (iii) result in any breach of or constitute a default
(with notice or lapse of time, or both) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien, restriction, adverse claim, option on, right to acquire,
or any encumbrance or security interest in or to such Shareholder's Shares,
pursuant to any written, oral or other agreement, contract or legally binding
commitment to which such Shareholder is a party or by which such Shareholder or
any of such Shareholder's Shares is bound or affected, or (iv) require any
written, oral or other agreement, contract or legally binding commitment of any
third party.
4.3 Shares Owned. As of the date hereof, such Shareholder is the record
owner, and in the case of Timothy P. Smucker, Richard K. Smucker and H. Reid
Wagstaff, the beneficial owner (as defined in Rule 13d-3 under the Securities
Act to the extent that such Shares are not owned of record by another
Shareholder listed on Schedule A), with respect to, in the aggregate, the number
of shares of JMS Common Stock listed opposite such Shareholder's name on
Schedule A, and does not beneficially own or otherwise have the power to direct
the voting with respect to, any shares of capital stock of JMS other than the
Shares listed on Schedule A. Schedule A further sets forth as of the date hereof
the number of Shares for which such Shareholder is entitled to cast one vote per
Share and the number of Shares for which such Shareholder is entitled to cast
ten votes per Share, in each case on any matter submitted for the approval of
holders of JMS Common Stock.
4.4 Accuracy of Representations; Reliance by Company. The representations
and warranties contained in this Agreement are accurate in all respects as of
the date of this Agreement, will be accurate in all respects at all times
through the Expiration Date and will be accurate in all respects as of the
Effective Time of the Merger as if made on that date. Each Shareholder
understands and acknowledges that P&G and Newco are entering into the Merger
Agreement in reliance upon each Shareholder's execution and delivery of this
Agreement.
4.5 Further Assurances. Each Shareholder agrees to execute and deliver any
additional documents reasonably necessary or desirable, in the reasonable
opinion of P&G, Newco or JMS, to carry out the purposes and intent of this
Agreement and the Proxy.
4.6 No Restraint on Officer or Director Action. Notwithstanding anything
herein to the contrary, no person executing this Agreement who is, or becomes
during the term hereof, a director or an officer of JMS makes any agreement,
understanding or undertaking herein in his or her capacity as a director or
officer, and the agreements set forth herein shall in no way restrict any
director or officer in the exercise of his or her fiduciary duties as a director
or officer of JMS. Each Shareholder has executed this Agreement solely in his or
her capacity as the beneficial holder of such Shareholder's Shares or as the
trustee of a trust whose beneficiaries are the beneficial owners of such
Shareholder's Shares.
4.7 Limited Proxy. Each Shareholder will retain at all times the right to
vote such Shareholder's Shares, in such Shareholder's sole discretion, on all
matters other than those set forth in Section 2.1 which are at any time or from
time to time presented to JMS's shareholders generally.
4.8 Confidentiality. Each Shareholder agrees (i) to hold any non-public
information regarding this Agreement and the Merger in strict confidence and
(ii) not to divulge any such non-public information to any third person.
4.9 No Solicitation. Each Shareholder agrees that it will not take any
action that Affiliates of JMS are prohibited from taking under Section 6.16 of
the Merger Agreement.
5. Miscellaneous.
5.1 Severability. If any provision of this Agreement is found by any court
of competent jurisdiction to be invalid or unenforceable, then the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable and to the extent that to do so would not deprive one of the
parties of the
C-4
substantial benefit of its bargain. Such provision will, to the extent allowable
by Law and the preceding sentence, not be voided or canceled but will instead be
modified by such arbitrator or court so that it becomes enforceable and, as
modified, will be enforced as any other provision hereof, all the other
provisions hereof continuing in full force and effect.
5.2 Amendment; Waiver. This Agreement may be amended, modified,
superseded, canceled, renewed, or extended only by an agreement in writing
executed by P&G and each Shareholder. The failure by any party at any time to
require performance or compliance by another party of any of its obligations or
agreements will in no way affect the right to require such performance or
compliance at any time thereafter. The waiver by any party of a breach of any
provision of this Agreement will not be treated as a waiver of any preceding or
succeeding breach of such provision or as a waiver of the provision itself. No
waiver of any kind will be effective or binding, unless it is in writing and is
signed by the party against whom such waiver is sought to be enforced.
5.3 Entire Agreement; No Third Party Beneficiaries. This Agreement,
together with the Merger Agreement and the Ancilliary Agreements, constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all other prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and are not intended to convey upon any person other than P&G and each
Shareholder any rights or remedies hereunder.
5.4 Assignment. This Agreement and all rights and obligations hereunder
are personal to each Shareholder and may not be transferred or assigned by any
Shareholder at any time. P&G may assign its rights, and may delegate its
obligations hereunder, to any Subsidiary of P&G; provided however, that any such
assignee assumes the obligations of P&G hereunder. This Agreement will be
binding upon, and inure to the benefit of, the persons or entities who are
permitted, by the terms of this Agreement, to be successors, assigns and
personal representatives of the respective parties hereto.
5.5 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Ohio, whether common law or statutory,
without reference to the choice of law provisions thereof.
5.6 Notices. All notices required or permitted pursuant to this Agreement
will be in writing and will be deemed to be properly given when actually
received by the person entitled to receive the notice at the address stated
below, or at such other address as a party may provide by notice to the other:
If to P&G:
The Procter & Gamble Company
P.O. Box 599
Cincinnati, OH 45201
Attention: Director -- Acquisitions Divestures
With a copy to:
The Procter & Gamble Company
P.O. Box 599
Cincinnati, OH 45201
Attention: Secretary
C-5
If to JMS:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
With a copy to:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attention: General Counsel
If to the Shareholders:
At the address listed on Schedule A.
With a copy to:
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Attention: General Counsel
5.7 Specific Performance. The parties hereby acknowledge and agree that
the failure of any party to perform its agreements and covenants hereunder,
including its failure to take all actions as are necessary on its part to the
consummation of the Transactions, will cause irreparable injury to the other
parties for which damages, even if available, will not be an adequate remedy.
Accordingly, each party hereby consents to the issuance of injunctive relief by
any court of competent jurisdiction to compel performance of such party's
obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder.
5.8 Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original, but all of which, taken together, constitute
one and the same agreement.
5.9 Titles. The titles and captions of the sections and paragraphs of this
Agreement are included for convenience of reference only and will have no effect
on the construction or meaning of this Agreement.
5.10 Termination. This Agreement, other than the Transfer prohibitions
contained in Section 2.3(d), which shall terminate upon the second anniversary
of the Effective Time, will be terminated and will be of no further force and
effect upon the Expiration Date.
5.11 Fees and Expenses. Except as specifically provided to the contrary in
this Agreement, all costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such expenses.
5.12 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
Expiration Date; provided, however, that the termination of this Agreement shall
not relieve any party from any liability for any breach of this Agreement that
has occurred prior to the termination of this Agreement as provided for in
Section 5.10.
5.13 Legal Counsel. Each Shareholder acknowledges that it has been advised
to, and has had the opportunity to consult with its personal attorney prior to
entering into this Agreement. Each Shareholder acknowledges that attorneys for
JMS represent JMS and do not represent any of the shareholders of JMS in
connection with the Merger Agreement, this Agreement or any of the transactions
contemplated hereby or thereby.
5.14 Agreement Negotiated. The form of this Agreement has been negotiated
by or on behalf of JMS and P&G, each of which was represented by attorneys who
have carefully negotiated the provisions
C-6
hereof. No law or rule relating to the construction or interpretation of
contracts against the drafter of any particular clause should be applied with
respect to this Agreement or the Proxy.
5.15 Legends. Any stock certificates representing the Shares shall at the
request of P&G reflect this Agreement and, if applicable, the irrevocable proxy
granted by this Agreement.
C-7
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the date first above written.
SHAREHOLDERS
<Table>
/s/ TIMOTHY P. SMUCKER /s/ TIMOTHY P. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Timothy P. Smucker Timothy P. Smucker
Individually Trustee, Reid S. Smucker Revocable Trust
/s/ TIMOTHY P. SMUCKER /s/ TIMOTHY P. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Timothy P. Smucker Timothy P. Smucker
Trustee, Sarah L. Smucker Revocable Trust Trustee, Protected Trust and Exempt Trust
FBO Timothy P. Smucker
/s/ TIMOTHY P. SMUCKER /s/ TIMOTHY P. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Timothy P. Smucker Timothy P. Smucker
Trustee, Willard E. Smucker Trust Trustee, Willard E. Smucker Foundation
FBO Marcella S. Clark
/s/ JENNIFER C. SMUCKER /s/ JENNIFER C. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Jennifer C. Smucker Jennifer C. Smucker
Individually Trustee, Timothy P. Smucker Trust
FBO John Enoch Smucker
/s/ RICHARD K. SMUCKER /s/ RICHARD K. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Richard K. Smucker Richard K. Smucker
Individually Trustee, Protected Trust and Exempt Trust
FBO Julie E. Smucker
/s/ EMILY D. SMUCKER /s/ EMILY D. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Emily D. Smucker Emily D. Smucker
Individually Custodian, Julie E. Smucker UGMA
/s/ RICHARD K. SMUCKER /s/ LORRAINE E. SMUCKER
- ----------------------------------------------------- ------------------------------------------------------
Richard K. Smucker Lorraine E. Smucker
Trustee, Willard E. Smucker Foundation Trustee, Lorraine E. Smucker Personal Trust
/s/ SUSAN S. WAGSTAFF /s/ SUSAN S. WAGSTAFF
- ----------------------------------------------------- ------------------------------------------------------
Susan S. Wagstaff Susan S. Wagstaff
Individually Trustee, Protected Trust and Exempt Trust
FBO Susan S. Wagstaff
/s/ SUSAN S. WAGSTAFF /s/ H. REID WAGSTAFF
- ----------------------------------------------------- ------------------------------------------------------
Susan S. Wagstaff H. Reid Wagstaff
Custodian, Kimberly A. Wagstaff UGMA Individually
</Table>
[INTENTIONALLY LEFT BLANK]
C-8
THE PROCTER & GAMBLE COMPANY
By: /s/ GRETCHEN W. PRICE
------------------------------------
Name: Gretchen W. Price
Title: Vice President -- Treasurer
C-9
EXHIBIT 1 TO SHAREHOLDERS AGREEMENT
IRREVOCABLE PROXY
The undersigned shareholder (the "Shareholder") of JMS, an Ohio
corporation, ("JMS") hereby irrevocably (to the fullest extent permitted by
applicable law) appoints and constitutes those officers of The Procter and
Gamble Company, an Ohio corporation ("P&G") designated by P&G in writing and
each of them (collectively the "Proxyholders"), the agents, attorneys and
proxies of the undersigned, with full power of substitution and resubstitution,
to the fullest extent of the undersigned's rights with respect to (i) the shares
of capital stock of JMS beneficially owned (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) by the undersigned as of the date
of this proxy, which shares are specified on Schedule A to the Shareholders
Agreement (as defined below); (ii) any and all other shares of capital stock of
JMS with respect to which the undersigned shall become the record or beneficial
owner or over which the undersigned shall otherwise exercise voting power after
the date hereof, including, without limitation, in the event of a dividend or
distribution of capital stock of JMS, or any change in JMS's capital stock by
reason of any stock dividend, split-up, recapitalization, combination, exchange
of shares or the like, all shares of JMS's capital stock issued or distributed
pursuant to such stock dividends and distributions and any shares of JMS's
capital stock into which or for which any or all of the shares otherwise held by
the undersigned may be so changed or exchanged. (The shares of the capital stock
of JMS referred to in clauses (i) and (ii) of the immediately preceding sentence
are collectively referred to as the "Shares.") Upon the execution hereof, all
prior proxies given by the undersigned with respect to any of the Shares are
hereby revoked, and no subsequent proxies will be given with respect to any of
the Shares until such time as this proxy shall be terminated in accordance with
its terms.
The Proxyholders named above will be empowered, and may exercise this
proxy, to vote the Shares at any time until the Expiration Date (as defined in
the Shareholders Agreement dated as of the date hereof, between P&G and the
undersigned (the "Shareholders Agreement") at any meeting of the shareholders of
JMS, however called, or in any action by written consent of shareholders of JMS
with respect to the following matters and only the following matters:
(i) in favor of the issuance of JMS Common Stock pursuant to the
merger (the "Merger") contemplated by the Agreement and Plan of Merger by
and among P&G, The Procter & Gamble Ohio Brands Company, an Ohio
corporation and a wholly owned subsidiary of P&G, ("Newco"), JMS and JMS
Acquisition Corp., an Ohio corporation and a wholly owned subsidiary of JMS
("Merger Sub"), dated as of the date hereof (the "Merger Agreement"), the
execution and delivery by JMS of the Merger Agreement and the adoption and
approval of the terms thereof, and in favor of the other actions
contemplated by the Merger Agreement (including any amendment to JMS's
governing documents that is necessary or desirable in order to consummate
the Merger) and, to the extent that a vote is solicited in connection with
the Shareholders Agreement or the Merger Agreement, any other action
required or desirable in furtherance hereof or thereof;
(ii) against approval of any action, agreement or proposal that would
result in a breach of any representation, warranty, covenant or obligation
of JMS in the Merger Agreement or that would delay or hinder the
consummation of the Merger or that would preclude fulfillment of a
condition precedent under the Merger Agreement to JMS', P&G's or Newco's
obligation to consummate the Merger; and
(iii) against approval of any action, agreement or proposal made in
opposition to or in competition with the consummation of the Merger
including, without limitation, any Competing Transaction or Superior
Proposal (each as defined in the Merger Agreement).
The Proxyholders may not exercise this proxy on any other matter. The
Shareholder may vote the Shares on all such other matters. The proxy granted by
the Shareholder to the Proxyholders hereby is granted as of the date of this
Irrevocable Proxy in order to secure the obligations of the Shareholder set
forth in Section 2 of the Shareholders Agreement.
This proxy will terminate upon the termination of the Shareholders
Agreement in accordance with its terms. Any obligation of the undersigned
hereunder shall be binding upon the successors and assigns of the
undersigned. The undersigned Shareholder authorizes the Proxyholders to file
this proxy and any substitution or revocation of substitution with the Secretary
of JMS and with any Inspector of Elections at any meeting of the shareholders of
JMS.
This proxy is irrevocable, is coupled with an interest, and shall survive
the insolvency, incapacity, death or liquidation of the undersigned and will be
binding upon the heirs, successors and assigns of the undersigned (including any
transferee of any of the Shares).
Dated: October 9, 2001
SHAREHOLDER
By:
------------------------------------
ANNEX D
WILLIAM BLAIR & COMPANY
October 8, 2001
Board of Directors of
The J.M. Smucker Company
Strawberry Lane
Orrville, Ohio 44667
Ladies and Gentlemen:
We understand that The J. M. Smucker Company ("Smucker") proposes to enter
into an Agreement and Plan of Merger dated as of October 9, 2001 (the "Merger
Agreement") by and among Smucker, The Procter & Gamble Company ("Procter &
Gamble") and The Procter & Gamble Ohio Brands Company, a wholly-owned subsidiary
of Procter & Gamble ("P&G Ohio"). The Merger Agreement contemplates that,
subject to the terms and conditions contained therein, (A) pursuant to a
Contribution Agreement dated as of October 9, 2001 among Smucker, P&G Ohio,
Procter & Gamble and certain affiliates of Procter & Gamble (the "Contribution
Agreement"), substantially all of the assets, properties, rights and interests
and certain of the liabilities of Procter & Gamble and its affiliates of the
JIF/Crisco Business (as defined in the Contribution Agreement) will be
transferred and contributed to P&G Ohio (the "Contribution"), (B) following the
Contribution, Procter & Gamble will distribute to all the holders of Procter &
Gamble common shares, without par value ("Procter & Gamble Common Shares"), one
P&G Ohio common share, without par value ("P&G Ohio Common Shares"), for each
Procter & Gamble Common Share held by such holders (the "Spin Off") and (C)
immediately following the Spin Off, P&G Ohio will merge with and into Smucker
(the "Merger," together with the Contribution and the Spin Off, the
"Transactions") following which Smucker will be the surviving corporation (the
"Surviving Corporation") and pursuant to which (i) each Smucker common share,
without par value ("Smucker Common Shares"), then outstanding will be converted
into the right to receive a fractional number of common shares, without par
value, of the Surviving Corporation ("Surviving Corporation Common Shares")
determined pursuant to a formula set forth in the Merger Agreement and defined
therein as the "Applicable Percentage," together with, in certain circumstances,
a cash payment defined in the Merger Agreement as the "Cash Amount," and (ii)
each P&G Ohio Common Share issued and outstanding immediately prior to the
effective time of the Merger (other than P&G Ohio Common Shares owned by Smucker
or any of its direct or indirect wholly-owned subsidiaries) will be converted
into the right to receive 0.0200 shares of Surviving Corporation Common Shares
(the "Transaction Consideration").
You have requested our opinion as to the fairness, from a financial point
of view, to Smucker and the current holders of Smucker Common Shares, of the
Transaction Consideration to be paid by Smucker to the holders of P&G Ohio
Common Shares in the Merger pursuant to the Merger Agreement.
In connection with our review of the proposed Merger and the preparation of
our opinion herein, we have examined: (a) drafts of the Merger Agreement, the
Contribution Agreement, the Manufacturing Plant Separation Agreement (as defined
in the Contribution Agreement), the Shareholders Agreement (as defined in the
Merger Agreement), the Transitional Services Agreement (as defined in the
Contribution Agreement) and the Tax Sharing Agreement (as defined in the
Contribution Agreement) (collectively, the "Agreements"); (b) certain audited
historical financial statements of Smucker for the three years ended April 30,
2001; (c) audited special purpose statements of inventory, property, plant and
equipment-net as of June 30, 2001 and June 30, 2000 and the audited statements
of revenues, direct cost of products sold, direct marketing expenses and direct
administrative and other expenses for each of the three years in the period
ended June 30, 2001 for the JIF/Crisco Business; (d) the unaudited financial
statements of Smucker for the three months ended July 31, 2001; (e) certain
internal business, operating and financial
D-1
information and projections of Smucker and the JIF/Crisco Business (the
"Projections"), prepared by the senior management of Smucker and Procter &
Gamble, respectively; (f) information regarding the strategic, financial and
operational benefits anticipated from the Merger and the prospects of Smucker
(with and without the Merger) prepared by Smucker's senior management; (g) the
pro forma impact of the Merger on the earnings per share of Smucker based on
certain financial information prepared by the senior management of Smucker and
Procter & Gamble, respectively; (h) information provided by Smucker's senior
management regarding the amount and timing of cost savings and related expenses
and potential synergies that the senior management of Smucker expects will
result from the Merger (the "Expected Synergies"); (i) the publicly available
financial terms of certain other business combinations that we deemed relevant;
(j) the financial position and operating results of Smucker and operating
results of the JIF/Crisco Business compared with those of certain other publicly
traded companies we deemed relevant; (k) current and historical market prices
and trading volumes of the Smucker Common Shares; and (l) certain other publicly
available information relating to Smucker, Procter & Gamble and the JIF/ Crisco
Business. We have also held discussions with the respective representatives and
the members of the respective senior management of Smucker, Procter & Gamble and
the JIF/Crisco Business to discuss the foregoing, the past and current business
operations, the financial condition and the future prospects of Smucker and the
JIF/Crisco Business. We have also held discussions with you and Smucker's legal
counsel to discuss the JIF/Crisco Business, the Transactions and the results of
our analysis and examination and have considered other matters which we have
deemed relevant to our inquiry and have taken into account such accepted
financial and investment banking procedures and considerations, as we have
deemed relevant or appropriate. The senior management of Smucker has advised us
that Smucker is not considering any change of control transaction and
accordingly we did not evaluate the fairness, from a financial point of view, to
Smucker and the current holders of Smucker Common Shares, of the Transaction
Consideration to be paid by Smucker to the holders of P&G Ohio Common Shares in
the Merger pursuant to the Merger Agreement in the context of a change of
control of Smucker.
In rendering our opinion, we have assumed and relied, without any duty of
independent verification, upon the accuracy and completeness of all the
information examined by or otherwise reviewed or discussed with us for purposes
of our opinion, including without limitation the number of Smucker Common
Shares, Procter & Gamble Common Shares and P&G Ohio Common Shares currently
issued and outstanding, or expected to be issued and outstanding, and subject to
the Transactions, and we have assumed, with your consent, that the total number
of Surviving Corporation Common Shares that will be issued to the holders of
Smucker Common Shares pursuant to the Merger will be at least equal to 45
percent of the total number of Surviving Corporation Common Shares issued and
outstanding immediately following the completion of the Merger. We have assumed
that there are and will be no outstanding rights or options to acquire or
obligations to issue P&G Ohio Common Shares or any other security of P&G Ohio
other than pursuant to the Spin Off. We have not made or obtained an independent
valuation or appraisal of the assets, liabilities or solvency of Smucker, P&G
Ohio or the JIF/Crisco Business. We have been advised by the respective senior
management of Smucker and Procter & Gamble that the Projections and the other
information and data provided to or otherwise reviewed by, discussed with, or
examined by us, have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the senior management of Smucker
or Procter & Gamble, as the case may be, as to the future financial performance
of Smucker and the JIF/Crisco Business and the strategic implications and
operational benefits anticipated to result from the Merger. In addition, we have
assumed that the Expected Synergies have been reasonably prepared to reflect the
best currently available estimates and judgments of the senior management of
Smucker. In that regard, we have assumed, with your consent, that (i) on a stand
alone basis, Smucker and the JIF/Crisco Business would perform, and on a pro
forma basis the Surviving Corporation will perform, substantially in accordance
with the Projections and the Expected Synergies and (ii) all material assets and
liabilities (contingent or otherwise) of the JIF/Crisco Business are as set
forth in the JIF/Crisco Business' financial statements or other information made
available to us. We express no opinion with respect to the Projections or
Expected Synergies or the estimates and judgments on which they are based. Our
opinion does not address the relative merits of the Transactions as compared to
any alternative business strategies that might exist for Smucker or the effect
of any other transaction in which
D-2
Smucker might engage. We were not requested to solicit, and we did not solicit,
any expressions of interest from any other parties with respect to the sale of
all or any part of Smucker or any other alternative transaction and accordingly
have relied upon our discussions with the senior management of Smucker with
respect to the availability and consequences of alternatives to the
Transactions. In addition, we were not requested to consider, and our opinion
does not address, any term of the Transactions or the Agreements other than the
Transaction Consideration to be paid by Smucker to the holders of P&G Ohio
Common Shares in the Merger pursuant to the Merger Agreement. Our opinion herein
is based upon economic, market, financial and other conditions existing on, and
other information disclosed to us as of, the date of this letter. It should be
understood that, although subsequent developments may affect our opinion, we do
not have any obligation to update, revise or reaffirm our opinion herein.
We have further assumed, with your consent, that the Transactions (other
than the receipt of the Cash Amount, if any, by holders of Smucker Common
Shares) will be non-taxable for United States federal and other income tax
purposes to the respective shareholders of Smucker, Procter & Gamble and P&G
Ohio, and that none of Smucker, Procter & Gamble or P&G Ohio will recognize
material income, gain or loss for United States federal or other income tax
purposes as a result of the Transactions. We have not independently verified
that such tax treatment will be available in respect of the Transactions, and we
express no view with respect to the tax treatment that will be required to be
applied to the Transactions. In addition, we have assumed, with your consent,
that following the consummation of the Transactions, no indemnification payments
with respect to any taxes or otherwise will be required to be made by Smucker
pursuant to the Agreements. We have relied as to all legal and tax matters on
advice of counsel and tax advisors to Smucker, and have assumed that the
Transactions will be consummated on the terms described in the Agreements,
without any waiver of any material terms or conditions by Procter & Gamble, P&G
Ohio or Smucker, and that the executed forms of the Agreements will be in
substantially the form of the last drafts of the Agreements reviewed by us.
William Blair & Company ("Blair") has been engaged in the investment
banking business since 1935. We continually undertake the valuation of
investment securities in connection with public offerings, private placements,
business combinations, estate and gift tax valuations and similar transactions.
We have acted as an investment banker to Smucker in connection with the
Transactions and will receive a fee from Smucker for our services, a significant
portion of which is contingent upon consummation of the Transactions. In
addition, Smucker has agreed to indemnify us against certain liabilities arising
out of our engagement. Blair has, in the past, provided financial advisory and
financing services to Smucker and its affiliates and may continue to do so and
we have received, and may receive, fees for the rendering of such services. In
addition, in the ordinary course of our business, we may beneficially own or
actively trade the common shares and other securities of Smucker, as well as the
common shares and other securities of Procter & Gamble, for our own account and
for the accounts of customers and, accordingly, may at any time hold a long or
short position in such securities.
Our opinion, as set forth herein, relates to the fairness, from a financial
point of view, to Smucker and the current holders of Smucker Common Shares of
the Transaction Consideration to be paid by Smucker to the holders of P&G Ohio
Common Shares in the Merger pursuant to the Merger Agreement. We are expressing
no opinion herein as to the price at which Smucker Common Shares will trade at
any future time or as to the effect of the Transactions on the trading price of
Surviving Corporation Common Shares subsequent to the completion of the
Transactions. Such trading price may be affected by a number of factors,
including but not limited to (i) dispositions of Surviving Corporation Common
Shares by shareholders within a short period of time after the completion of the
Transactions, (ii) changes in prevailing interest rates and other factors which
generally influence the price of securities, (iii) adverse changes in the
current capital markets, (iv) the occurrence of adverse changes in the financial
condition, business, assets, results of operations or prospects of Smucker or of
the JIF/Crisco Business or in the markets they serve, (v) any necessary actions
by or restrictions of federal, state or other governmental agencies or
regulatory authorities and (vi) timely completion of the Transactions on terms
and conditions described in the Agreements.
D-3
Our investment banking services and our opinion were provided for the use
and benefit of the Board of Directors of Smucker in connection with its
consideration of the Transactions contemplated by the Agreements. Our opinion is
limited to the fairness, from a financial point of view, to Smucker and the
current holders of Smucker Common Shares of the Transaction Consideration to be
paid by Smucker to the holders of P&G Ohio Common Shares in the Merger pursuant
to the Merger Agreement and we do not address the merits of the underlying
decision by Smucker to engage in the transactions contemplated by the
Agreements. Our opinion does not constitute a recommendation to any Smucker
shareholder as to how such shareholder should vote or any action they should
take with respect to the proposed Merger or other transactions contemplated by
the Merger Agreement. It is understood that this opinion, and any written
materials provided by Blair, will be solely for the confidential use of the
Board of Directors of Smucker and will not be reproduced, summarized, described,
relied upon or referred to or given to any other person (other than Smucker's
Board of Directors or employees involved in the acquisition of the JIF/Crisco
Business) for any purpose without Blair's prior written consent. Notwithstanding
the preceding sentence, this opinion may be included in a filing by Smucker with
the Securities and Exchange Commission or a document to be mailed to the
shareholders of Smucker and Procter & Gamble in connection with the Merger,
provided that (i) this opinion is reproduced therein in its entirety or (ii) any
description of or reference to Blair or the advice rendered by it in such filing
or document is in a form reasonably acceptable to Blair and its counsel.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Transaction Consideration to be paid by
Smucker to the holders of P&G Ohio Common Shares in the Merger pursuant to the
Merger Agreement is fair, from a financial point of view, to Smucker and the
current holders of Smucker Common Shares.
Very truly yours,
/s/ WILLIAM BLAIR & COMPANY, L.L.C.
D-4
ANNEX E
SECTIONS 1701.84 AND 1701.85 OF THE OHIO REVISED CODE
SECTION 1701.84 DISSENTS IN CASE OF A MERGER, CONSOLIDATION, COMBINATION, OR
MAJORITY SHARE ACQUISITION.
The following are entitled to relief as dissenting shareholders under
section 1701.85 of the Revised Code:
(A) Shareholders of a domestic corporation that is being merged or
consolidated into a surviving or new entity, domestic or foreign,
pursuant to section 1701.78, 1701.781, 1701.79, 1701.791, or 1701.801
of the Revised Code;
(B) In the case of a merger into a domestic corporation, shareholders of
the surviving corporation who under section 1701.78 or 1701.781 of the
Revised Code are entitled to vote on the adoption of an agreement of
merger, but only as to the shares so entitling them to vote;
(C) Shareholders, other than the parent corporation, of a domestic
subsidiary corporation that is being merged into the domestic or
foreign parent corporation pursuant to section 1701.80 of the Revised
Code;
(D) In the case of a combination or a majority share acquisition,
shareholders of the acquiring corporation who under section 1701.83 of
the Revised Code are entitled to vote on such transaction, but only as
to the shares so entitling them to vote;
(E) Shareholders of a domestic subsidiary corporation into which one or
more domestic or foreign corporations are being merged pursuant to
section 1701.801 of the Revised Code.
SECTION 1701.85 PROCEDURE IN CASE OF DISSENTS.
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in
sections 1701.74, 1701.76, and 1701.84 of the Revised Code, only in
compliance with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record
holder of the shares of the corporation as to which he seeks relief
as of the date fixed for the determination of shareholders entitled
to notice of a meeting of the shareholders at which the proposal is
to be submitted, and such shares shall not have been voted in favor
of the proposal. Not later than ten days after the date on which the
vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written
demand for payment to him of the fair cash value of the shares as to
which he seeks relief, which demand shall state his address, the
number and class of such shares, and the amount claimed by him as the
fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant
to section 1701.80 of the Revised Code and a dissenting shareholder
entitled to relief under division (E) of section 1701.84 of the
Revised Code in the case of a merger pursuant to section 1701.801 of
the Revised Code shall be a record holder of the shares of the
corporation as to which he seeks relief as of the date on which the
agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in
section 1701.80 or 1701.801 of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for
payment with the same information as that provided for in division
(A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving
or the new entity, whether the demand is served before, on, or after
the effective date of the merger or consolidation.
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(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates
representing the shares as to which he seeks relief, the dissenting
shareholder, within fifteen days from the date of the sending of such
request, shall deliver to the corporation the certificates requested
so that the corporation may forthwith endorse on them a legend to the
effect that demand for the fair cash value of such shares has been
made. The corporation promptly shall return such endorsed
certificates to the dissenting shareholder. A dissenting
shareholder's failure to deliver such certificates terminates his
rights as a dissenting shareholder, at the option of the corporation,
exercised by written notice sent to the dissenting shareholder within
twenty days after the lapse of the fifteen-day period, unless a court
for good cause shown otherwise directs. If shares represented by a
certificate on which such a legend has been endorsed are transferred,
each new certificate issued for them shall bear a similar legend,
together with the name of the original dissenting holder of such
shares. Upon receiving a demand for payment from a dissenting
shareholder who is the record holder of uncertificated securities,
the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for
which payment has been demanded are to be transferred, any new
certificate issued for the shares shall bear the legend required for
certificated securities as provided in this paragraph. A transferee
of the shares so endorsed, or of uncertificated securities where such
notation has been made, acquires only such rights in the corporation
as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of
the shares. A request under this paragraph by the corporation is not
an admission by the corporation that the shareholder is entitled to
relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which
the dissenting shareholder seeks relief, the dissenting shareholder or
the corporation, which in case of a merger or consolidation may be the
surviving or new entity, within three months after the service of the
demand by the dissenting shareholder, may file a complaint in the court
of common pleas of the county in which the principal office of the
corporation that issued the shares is located or was located when the
proposal was adopted by the shareholders of the corporation, or, if the
proposal was not required to be submitted to the shareholders, was
approved by the directors. Other dissenting shareholders, within that
three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings
may be consolidated. The complaint shall contain a brief statement of
the facts, including the vote and the facts entitling the dissenting
shareholder to the relief demanded. No answer to such a complaint is
required. Upon the filing of such a complaint, the court, on motion of
the petitioner, shall enter an order fixing a date for a hearing on the
complaint and requiring that a copy of the complaint and a notice of
the filing and of the date for hearing be given to the respondent or
defendant in the manner in which summons is required to be served or
substituted service is required to be made in other cases. On the day
fixed for the hearing on the complaint or any adjournment of it, the
court shall determine from the complaint and from such evidence as is
submitted by either party whether the dissenting shareholder is
entitled to be paid the fair cash value of any shares and, if so, the
number and class of such shares. If the court finds that the dissenting
shareholder is so entitled, the court may appoint one or more persons
as appraisers to receive evidence and to recommend a decision on the
amount of the fair cash value. The appraisers have such power and
authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and
shall render judgment against the corporation for the payment of it,
with interest at such rate and from such date as the court considers
equitable. The costs of the proceeding, including reasonable
compensation to the appraisers to be fixed by the court, shall be
assessed or apportioned as the court considers equitable. The
proceeding is a special proceeding and final orders in it may be
vacated, modified, or reversed on appeal pursuant to the Rules of
Appellate Procedure and, to the extent not in conflict with those
rules, Chapter 2505 of the Revised Code. If, during the pendency of any
proceeding instituted under
E-2
this section, a suit or proceeding is or has been instituted to enjoin
or otherwise to prevent the carrying out of the action as to which the
shareholder has dissented, the proceeding instituted under this section
shall be stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is
applicable, the fair cash value of the shares that is agreed upon by
the parties or as fixed under this section shall be paid within thirty
days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon
the occurrence of the last such event, payment shall be made
immediately to a holder of uncertificated securities entitled to such
payment. In the case of holders of shares represented by certificates,
payment shall be made only upon and simultaneously with the surrender
to the corporation of the certificates representing the shares for
which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be
determined as of the day prior to the day on which the vote by the
shareholders was taken and, in the case of a merger pursuant to section
1701.80 or 1701.801 of the Revised Code, fair cash value as to
shareholders of a constituent subsidiary corporation shall be
determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair
cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell would be
willing to accept and that a willing buyer who is under no compulsion
to purchase would be willing to pay, but in no event shall the fair
cash value of a share exceed the amount specified in the demand of the
particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the
proposal submitted to the directors or to the shareholders shall be
excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief,
and the right and obligation of the corporation to purchase such
shares and to pay the fair cash value of them terminates if any of
the following applies:
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders
rescind their adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the
shareholder nor the corporation has filed or joined in a complaint
under division (B) of this section within the period provided in
that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity
is not a corporation, action required to be taken by the directors
of the corporation shall be taken by the general partners of a
surviving or new partnership or the comparable representatives of
any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from
it or the purchase of the shares by the corporation, all other rights
accruing from such shares, including voting and dividend or
distribution rights, are suspended. If during the suspension, any
dividend or distribution is paid in money upon shares of such class or
any dividend, distribution, or interest is paid in money upon any
securities issued in extinguishment of or in substitution for such
shares, an amount equal to the dividend,
E-3
distribution, or interest which, except for the suspension, would have
been payable upon such shares or securities, shall be paid to the
holder of record as a credit upon the fair cash value of the shares. If
the right to receive fair cash value is terminated other than by the
purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the
suspension, would have been made shall be made to the holder of record
of the shares at the time of termination.
E-4
ANNEX F
AMENDED
ARTICLES OF INCORPORATION
OF
THE J. M. SMUCKER COMPANY
FIRST. The name of the Company is The J. M. Smucker Company.
SECOND. The place in Ohio where its principal office is located is the
City of Orrville, in Wayne County.
THIRD. The purpose or purposes of the Company are:
(a) To manufacture, preserve, can, pack, purchase, sell, import,
export, store, hold, use, distribute, transport, and deal in and with food
products, food by-products, and containers therefor;
(b) To manufacture, to purchase, lease, or otherwise acquire, to hold
and use, to sell, lease, or otherwise dispose of, and to deal in or with
personal property of any description and any interest therein;
(c) To purchase, lease, or otherwise acquire, to invest in, hold, use,
and encumber, to sell, lease, exchange, transfer, or otherwise dispose of,
and to construct, develop, improve, equip, maintain, and operate structures
and real property of any description and any interest therein;
(d) To borrow money, to issue, sell, and pledge its notes, bonds, and
other evidences of indebtedness, to secure any of its obligations by
mortgage, pledge, or deed of trust of all or any of its property, and to
guarantee and secure obligations of any person, all to the extent
necessary, useful, or conducive to carrying out any of the purposes of the
Company;
(e) To invest its funds in any shares or other securities of another
corporation, business, or undertaking or of a government, governmental
authority, or governmental subdivision; and
(f) To do whatever is deemed necessary, useful, or conducive to
carrying out any of the purposes of the Company and to exercise all other
authority enjoyed by corporations generally by virtue of the provisions of
Chapter 1701 of the Ohio Revised Code.
Fourth. The authorized number of shares of the Company is 156,000,000
consisting of 6,000,000 serial preferred shares without par value ("Serial
Preferred Shares") and 150,000,000 common shares without par value ("Common
Shares"). This Article Fourth may be amended by the Board of Directors without
shareholder approval as permitted by Chapter 1701 of the Ohio Revised Code, as
it may be amended from time to time.
DIVISION I
EXPRESS TERMS OF SERIAL PREFERRED SHARES
The Serial Preferred Shares may be issued from time to time in series. Each
Serial Preferred Share of any one series shall be identical with each other
share of the same series in all respects, except as to the date from which
dividends thereon shall be cumulative; and all Serial Preferred Shares of all
series shall rank equally and shall be identical, except that there may be
variations in respect of the dividend rate, the dates of payment of dividends
and the dates from which they are cumulative, redemption rights and price,
sinking fund requirements, conversion rights, liquidation price, and
restrictions on the issuance of shares of the same series or of any other class
or series. Subject to the requirement that all Serial Preferred Shares shall be
identical in respect of voting rights and rights of alteration of express terms,
the Board of Directors, without any further action by the shareholders, may, at
any time and from time to time, adopt an amendment or amendments to these
Amended Articles of Incorporation, or adopt further Amended Articles of
Incorporation, in respect of any Serial Preferred Shares that constitute
unissued or treasury
1-F
shares at the time of such adoption for the purpose of dividing any or all of
such Serial Preferred Shares into such series as the Board of Directors shall
determine and fix the express terms of any such series of Serial Preferred
Shares, which may include statements specifying:
(a) Dividend rights, which may be cumulative or non-cumulative, at a
specified rate, amount, or proportion, with or without further
participation rights, and in preference to, junior to, or on a parity in
whole or in part with dividend rights of shares of any other class or
series;
(b) Redemption rights and price;
(c) Sinking fund requirements, which may require the Company to
provide a sinking fund out of earnings or otherwise for the purchase or
redemption of such shares or for dividends thereon;
(d) Voting rights, which may be full, limited or denied, except as
otherwise required by law;
(e) Conversion rights;
(f) Liquidation rights, preferences, and price; and
(g) Restrictions on the issuance of shares of any class or series of
the Company.
DIVISION I-A
SERIES A JUNIOR PARTICIPATING PREFERRED SHARES
SECTION 1. There is established hereby a series of Serial Preferred Shares
that shall be designated Series A Junior Participating Preferred Shares
(hereinafter sometimes called this "Series" or the "Series A Junior
Participating Preferred Shares") and that shall have the terms set forth in this
Division I-A.
SECTION 2. The number of shares of this Series shall be 1,500,000.
SECTION 3. (a) The holders of record of Series A Junior Participating
Preferred Shares shall be entitled to receive, when and as declared by the
Directors in accordance with the terms hereof, out of funds legally available
for the purpose, cumulative quarterly dividends payable in cash on the first day
of March, June, September, and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a Series A
Junior Participating Preferred Share or fraction of a Series A Junior
Participating Preferred Share. Such quarterly dividend payments shall be in an
amount per share (rounded to the nearest cent) equal to the greater of (i) $1.00
per share or (ii) subject to the provision for adjustment hereinafter set forth,
100 times the aggregate per share amount of all cash dividends, plus 100 times
the aggregate per share amount (payable in kind) of all non-cash dividends or
other distributions (other than a dividend payable in Common Shares, or a
subdivision of the outstanding Common Shares (by reclassification or
otherwise)), declared on the Common Shares since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any Series A Junior
Participating Preferred Share or fraction of a Series A Junior Participating
Preferred Share. In the event the Company shall at any time declare or pay any
dividend on the Common Shares payable in Common Shares, or effect a subdivision
or combination or consolidation of the outstanding Common Shares (by
reclassification or otherwise than by payment of a dividend in Common Shares)
into a greater or lesser number of Common Shares, then in each such case the
amount to which holders of Series A Junior Participating Preferred Shares were
entitled immediately prior to such event under clause (ii) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of Common Shares outstanding immediately after
such event and the denominator of which is the number of Common Shares that were
outstanding immediately prior to such event.
(b) Dividends shall begin to accrue and be cumulative on outstanding Series
A Junior Participating Preferred Shares from the Quarterly Dividend Payment Date
next preceding the date of issue of such Series A Junior Participating Preferred
Shares, unless (i) the date of issue of such shares is prior to the
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record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or (ii) the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Shares entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. No dividends
shall be paid upon or declared and set apart for any Series A Junior
Participating Preferred Shares for any dividend period unless at the same time a
dividend for the same dividend period, ratably in proportion to the respective
annual dividend rates fixed therefor, shall be paid upon or declared and set
apart for all Serial Preferred Shares of all series then outstanding and
entitled to receive such dividend. The Directors may fix a record date for the
determination of holders of Series A Junior Participating Preferred Shares
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be no more than 40 days prior to the date fixed for the
payment thereof.
SECTION 4. The Series A Junior Participating Preferred Shares are not
redeemable.
SECTION 5. (a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company (hereinafter referred to
as a "Liquidation"), no distribution shall be made to the holders of shares
ranking junior (either as to dividends or upon Liquidation) to the Series A
Junior Participating Preferred Shares, unless, prior thereto, the holders of
Series A Junior Participating Preferred Shares shall have received at least an
amount per share equal to one hundred times the then applicable Purchase Price
as defined in the Rights Agreement, dated as of April 22, 1999 between the
Company and Harris Trust and Savings Bank, as the same may be from time to time
amended in accordance with its terms (which Purchase Price is $90.00 as of April
22, 1999), subject to adjustment from time to time as provided in the Rights
Agreement, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the date of such
payment; provided that the holders of Series A Junior Participating Preferred
Shares shall be entitled to receive at least an aggregate amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount to be distributed per share to holders of Common
Shares (the "Series A Junior Participating Preferred Shares Liquidation
Preference").
(b) In the event, however, that the net assets of the Company are not
sufficient to pay in full the amount of the Series A Junior Participating
Preferred Shares Liquidation Preference and the liquidation preferences of all
other series of Serial Preferred Shares, if any, which rank on a parity with the
Series A Junior Participating Preferred Shares as to distribution of assets in
Liquidation, all shares of this Series and of such other series of Serial
Preferred Shares shall share ratably in the distribution of assets (or proceeds
thereof) in Liquidation in proportion to the full amounts to which they are
respectively entitled.
(c) In the event the Company shall at any time declare or pay any dividend
on the Common Shares payable in consolidation of the outstanding Common Shares
(by reclassification or otherwise than by payment of a dividend in Common
Shares) into a greater or lesser number of Common Shares, then in each such case
the amount to which holders of Series A Junior Participating Preferred Shares
were entitled immediately prior to such event pursuant to the proviso set forth
in paragraph (a) above, shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Shares
outstanding immediately after such event and the denominator of which is the
number of Common Shares that were outstanding immediately prior to such event.
(d) The merger or consolidation of the Company into or with any other
corporation, or the merger of any other corporation into it, or the sale, lease
or conveyance of all or substantially all the property or business of the
Company, shall not be deemed to be a Liquidation for the purpose of this Section
5.
SECTION 6. The Series A Junior Participating Preferred Shares shall not be
convertible into Common Shares.
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DIVISION II
EXPRESS TERMS OF COMMON SHARES
SECTION 1. Except as expressly set forth in Section 2 of this Division II,
each outstanding Common Share shall entitle the holder thereof to one vote on
each matter properly submitted to the shareholders for their vote, consent,
waiver, release, or other action, including any vote or consent for the election
or removal of directors.
SECTION 2. (a) Notwithstanding Section 1 of this Division II, each
outstanding Common Share shall entitle the holder thereof to ten votes on each
of the following matters properly submitted to the shareholders to the extent
such matters (x) are required under the Ohio Revised Code, any provisions of
these Amended Articles of Incorporation or the Regulations of the Company or
applicable stock exchange rules, to be submitted to the shareholders for their
vote, consent, waiver or other action or (y) are submitted or presented to the
shareholders for their vote, consent waiver or other action: (1) any matter that
relates to or would result in the dissolution or liquidation of the Company,
whether voluntary or involuntary, and whether pursuant to Section 1701.86 or
1701.91 of the Ohio Revised Code or otherwise, (2) the adoption of any amendment
to these Amended Articles of Incorporation, or the Regulations of the Company,
or the adoption of Amended Articles of Incorporation, other than the adoption of
any amendment or Amended Articles of Incorporation that increases the number of
votes to which holders of Common Shares are entitled or expand the matters to
which this Section 2(a) applies, (3) any proposal or other action to be taken by
the shareholders of the Company, whether or not proposed by the shareholders of
the Company, and whether proposed by authority of the Board of Directors or
otherwise, relating to the Rights Agreement, dated as of April 22, 1999, as
amended on August 28, 2000, and as it may be further amended from time to time
pursuant to its terms, or any successor plan, (4) any matter relating to any
stock option plan, stock purchase plan, executive compensation plan, executive
benefit plan, or other similar plan, arrangement or agreement, (5) adoption of
any agreement or plan of or for the merger, consolidation, or majority share
acquisition of the Company or any subsidiary with or into any other person,
whether domestic or foreign, corporate, or noncorporate, or the authorization of
the lease, sale, exchange, transfer or other disposition of all, or
substantially all, of the Company's assets, (6) any matter submitted to the
shareholders pursuant to Article Fifth or Article Seventh of these Amended
Articles of Incorporation, as they may be further amended, or any issuance of
shares of the Company for which shareholder approval is required by applicable
stock exchange rules or (7) any matter relating to the issuance of shares of the
Company, or the repurchase of shares of the Company that the Board of Directors
determines is required or appropriate to be submitted to the shareholders under
the Ohio Revised Code or applicable stock exchange rules, except that:
(i) no holder of Common Shares shall be entitled to exercise more than
one vote on any such matter in respect of any Common Share with respect to
which there has been a change in beneficial ownership following the
Effective Time of the Merger (as such terms are defined in the Agreement
and Plan of Merger, dated as of October 9, 2001, as it may be amended from
time to time (the "Merger Agreement"), by and among The Procter & Gamble
Company, The Procter & Gamble Ohio Brands Company and the Company) and
during the four years immediately preceding the date on which a
determination is made of the shareholders who are entitled to take any such
action; and
(ii) no holder shall be entitled to exercise more than one vote on any
such matter in respect of any Common Share if the aggregate voting power
such holder otherwise would be entitled to exercise as of the date of such
a determination (disregarding the voting power of any Common Shares held by
such holder on August 20, 1985 or acquired by such holder in a transaction
not involving any change in beneficial ownership by reason of Section 2 (c)
of this Division II) would constitute one-fifth or more of the voting power
of the Company and the holders of the Common Shares have not authorized the
ownership of Common Shares by such person as and to the extent contemplated
by Article Seventh hereof.
(b) A change in beneficial ownership of an outstanding Common Share shall
be deemed to have occurred whenever a change occurs in any person or group of
persons who, directly or indirectly, through
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any contract, arrangement, understanding, relationship or otherwise has or
shares (1) voting power, which includes the power to vote, or to direct the
voting of such Common Share, (2) investment power, which includes the power to
direct the sale or other disposition of such Common Share, (3) the right to
receive or retain the proceeds of any sale or other disposition of such Common
Share, or (4) the right to receive any distributions, including cash dividends,
in respect of such Common Share.
(A) In the absence of proof to the contrary provided in accordance
with the procedures referred to in Section 2 (d) of this Division II, a
change in beneficial ownership shall be deemed to have occurred whenever a
Common Share is transferred of record into the name of any other person.
(B) In the case of a Common Share held of record in the name of a
corporation, general partnership, limited partnership, voting trustee,
bank, trust company, broker, nominee or clearing agency, if it has not been
established pursuant to the procedures referred to in Section 2 (d) of this
Division II that there has been no change in the person or persons who
direct the exercise of the rights referred to in clauses (b)(1) through
(b)(4) of Section 2 of this Division II with respect to such Common Share
during the period of four years immediately preceding the date on which a
determination is made of the shareholders who are entitled to take any
action, then a change in beneficial ownership shall be deemed to have
occurred during such period.
(C) In the case of a Common Share held of record in the name of any
person as a trustee, agent, guardian or custodian under the Uniform Gifts
to Minors Act as in effect in any state, a change in beneficial ownership
shall be deemed to have occurred whenever there is a change in the
beneficiary of such trust, the principal of such agent, the ward of such
guardian or the minor for whom such custodian is acting or in such trustee,
agent, guardian or custodian.
(D) In the case of Common Shares beneficially owned by a person or
group of persons who, after acquiring directly or indirectly the beneficial
ownership of five percent of the outstanding Common Shares, failed to
notify the Company of such ownership, a change in beneficial ownership of
such Common Shares shall be deemed to occur on each day while such failure
continues.
(c) Notwithstanding anything in this Section 2 of this Division II to the
contrary, no change in beneficial ownership shall be deemed to have occurred
solely as a result of:
(1) any event that occurred prior to August 20, 1985 or pursuant to
the terms of any contract (other than a contract for the purchase and sale
of Common Shares contemplating prompt settlement), including contracts
providing for options, rights of first refusal and similar arrangements in
existence on such date to which any holder of Common Shares is a party;
(2) any transfer of any interest in a Common Share pursuant to a
bequest or inheritance, by operation of law upon the death of any
individual, or by any other transfer without valuable consideration,
including a gift that is made in good faith and not for the purpose of
circumventing this Article Fourth;
(3) any change in the beneficiary of any trust, or any distribution of
a Common Share from trust, by reason of the birth, death, marriage or
divorce of any natural person, the adoption of any natural person prior to
age 18 or the passage of a given period of time or the attainment by any
natural person of a specific age, or the creation or termination of any
guardianship or custodial arrangement;
(4) any appointment of a successor trustee, agent, guardian or
custodian with respect to a Common Share if neither such successor has nor
its predecessor had the power to vote or to dispose of such Common Share
without further instructions from others;
(5) any change in the person to whom dividends or other distributions
in respect of a Common Share are to be paid pursuant to the issuance or
modification of a revocable dividend payment order; or
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(6) any issuance of a Common Share by the Company or any transfer by
the Company of a Common Share held in treasury unless otherwise determined
by the Board of Directors at the time of authorizing such issuance, or
transfer, including without limitation those Common Shares issued pursuant
to the Merger Agreement.
(d) For purposes of Section 2 of this Division II, all determinations
concerning changes in beneficial ownership, or the absence of any such change,
shall be made by the Company or, at any time when a transfer agent is acting
with respect to the Common Shares, by such transfer agent on the Company's
behalf. Written procedures designed to facilitate such determinations shall be
established by the Company and refined from time to time. Such procedures shall
provide, among other things, the manner of proof of facts that will be accepted
and the frequency with which such proof may be required to be renewed. The
Company and any transfer agent shall be entitled to rely on all information
concerning beneficial ownership of the Common Shares coming to their attention
from any source and in any manner reasonably deemed by them to be reliable, but
neither the Company nor any transfer agent shall be charged with any other
knowledge concerning the beneficial ownership of the Common Shares.
(e) In the event of any stock split or stock dividend with respect to the
Common Shares, each Common Share acquired by reason of such split or dividend
shall be deemed to have been beneficially owned by the same person continuously
from the same date as that on which beneficial ownership of the Common Share,
with respect to which such Common Share was distributed, was acquired.
SECTION 3. No reference to any matter in this Division II shall be deemed
to entitle any shareholder of the Company the right to vote thereon, consent
thereto, grant a waiver or release in respect thereof, or take any other action
with respect thereto.
SECTION 4. Each Common Share, whether at any particular time the holder
thereof is entitled to exercise ten votes or one vote pursuant to Section 2 of
this Division II, shall be identical to all other Common Shares in all respects,
and together the Common Shares shall constitute a single class of shares of the
Company.
FIFTH. (a) Unless the conditions set forth in clauses (1) through (4) of
this paragraph (a) are satisfied, the affirmative vote of the holders of 85% of
all shares of the Company entitled to vote in elections of Directors, considered
for the purposes of this Article Fifth as one class, shall be required for the
adoption or authorization of a business combination (as hereinafter defined)
with any other entity (as hereinafter defined) if, as of the record date for the
determination of shareholders entitled to notice thereof and to vote thereon,
the other entity is the beneficial owner, directly or indirectly, of more than
30% of the outstanding shares of the Company entitled to vote in elections of
Directors, considered for the purposes of this Article Fifth as one class. The
85% voting requirement set forth in the foregoing sentence shall not be
applicable if:
(1) The cash, or fair market value of other consideration, to be
received per share by holders of Common Shares of the Company in the
business combination is at least an amount equal to (A) the highest per
share price paid by the other entity in acquiring any of its holdings of
the Common Shares of the Company plus (B) the aggregate amount, if any, by
which 5% per annum of the per share price exceeds the aggregate amount of
all dividends paid in cash, in each case since the date on which the other
entity acquired the 30% interest;
(2) After the other entity has acquired a 30% interest and prior to
the consummation of the business combination: (A) the other entity shall
have taken steps to ensure that the Company's Board of Directors included
at all times representation by continuing director(s) (as hereinafter
defined) proportionate to the shareholdings of the public holders of Common
Shares of the Company not affiliated with the other entity (with a
continuing director to occupy any resulting fractional board position); (B)
the other entity shall not have acquired any newly issued shares, directly
or indirectly, from the Company (except upon conversion of convertible
securities acquired by it prior to obtaining a 30% interest or as a result
of a pro rata share dividend or share split); and (C) the other entity
shall not have acquired any additional outstanding Common Shares of the
Company or securities
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convertible into Common Shares except as a part of the transaction that
resulted in the other entity's acquiring its 30% interest;
(3) The other entity shall not have (A) received the benefit, directly
or indirectly (except proportionately as a shareholder), of any loans,
advances, guarantees, pledges, or other financial assistance or tax credits
provided by the Company or (B) made any major change in the Company's
business or equity capital structure without in either case the approval of
at least a majority of all the directors and at least two-thirds of the
continuing directors, in either case prior to the consummation of the
business combination; and
(4) A proxy statement responsive to the requirements of the Securities
Exchange Act of 1934 shall have been mailed to public shareholders of the
Company for the purpose of soliciting shareholder approval of the business
combination and shall have contained at the front thereof, in a prominent
place, any recommendations as to the advisability (or inadvisability) of
the business combination that the continuing directors, or any of them, may
choose to state and, if deemed advisable by a majority of the continuing
directors, an opinion of a reputable investment banking firm as to the
fairness (or not) of the terms of the business combination, from the point
of view of the remaining public shareholders of the Company (the investment
banking firm to be selected by a majority of the continuing directors and
to be paid a reasonable fee for their services by the Company upon receipt
of the opinion).
The provisions of this Article Fifth shall also apply to a business combination
with any other entity that at any time has been the beneficial owner, directly
or indirectly, of more than 30% of the outstanding shares of the Company
entitled to vote in elections of Directors, considered for the purposes of this
Article Fifth as one class, notwithstanding the fact that the other entity has
reduced its shareholdings below 30% if, as of the record date for the
determination of shareholders entitled to notice of and to vote on the business
combination, the other entity is an "affiliate" of the Company (as hereinafter
defined).
(b) As used in this Article Fifth, (1) the term "other entity" shall
include any corporation, person, or other entity and any other entity with which
it or its "affiliate" or "associate" (as defined below) has any agreement,
arrangement, or understanding, directly or indirectly, for the purpose of
acquiring, holding, voting, or disposing of shares of the Company, or that is
its "affiliate" or "associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934,
together with the successors and assigns of those persons in any transaction or
series of transactions not involving a public offering of the Company's shares
within the meaning of the Securities Act of 1933; (2) another entity shall be
deemed to be the beneficial owner of any shares of the Company that the other
entity (as defined above) has the right to acquire pursuant to any agreement or
upon exercise of conversion rights, warrants, or options, or otherwise; (3) the
outstanding shares of any class of the Company shall include shares deemed owned
through application of clause (2) above but shall not include any other shares
that may be issuable pursuant to any agreement or upon exercise of conversion
rights, warrants, or options, or otherwise; (4) the term "business combination"
shall include (A) the sale, exchange, lease, transfer, or other disposition by
the Company of all, or substantially all, of its assets or business to any other
entity, (B) the consolidation of the Company with or its merger into any other
entity, (C) the merger into the Company of any other entity, and (D) a
"combination" or "majority share acquisition" in which the Company is the
"acquiring corporation" (as those terms are defined in Section 1701.01 of the
Ohio Revised Code or any similar provision hereafter enacted) and its voting
shares are issued or transferred to any other entity or to shareholders of any
other entity, and the term "business combination" shall also include any
agreement, contract, or other arrangement with another entity providing for any
of the transactions described in (A) through (D) of this clause (4); (5) the
term "continuing director" shall mean either a person who was a member of the
Board of Directors of the Company elected by the public shareholders prior to
the time when the other entity acquired in excess of 5% of the shares of the
Company entitled to vote in the election of Directors, considered for the
purposes of this Article Fifth as one class, or a person recommended to succeed
a continuing director or by a majority of the continuing directors; and (6), for
the purposes of clause (a) (1) of this Article Fifth, the term "other
consideration to be received" shall mean Common Shares of the Company retained
by its
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existing public shareholders in the event of a business combination with the
other entity in which the Company is the surviving corporation.
(c) A majority of the continuing directors shall have the power and duty to
determine for the purposes of this Article Fifth, on the basis of information
known to them, whether (1) the other entity beneficially owns more than 30% of
the outstanding shares of the Company entitled to vote in the election of
Directors, (2) another entity is an "affiliate" or "associate" (as defined
above) of another, or (3) another entity has an agreement, arrangement, or
understanding with another.
(d) No amendment to the Articles of Incorporation of the Company shall
amend, alter, change, or repeal any of the provisions of this Article Fifth
unless the amendment effecting such amendment, alteration, change, or repeal
receives the affirmative vote of the holders of 85% of all shares of the Company
entitled to vote in the election of Directors, considered for the purposes of
this Article Fifth as one class, except that this paragraph (d) shall not apply
to, and the 85% vote shall not be required for, any amendment, alteration,
change, or repeal recommended to the shareholders by the Board of Directors of
the Company if the recommendation has been approved by at least a majority of
all of the directors and by at least two-thirds of the continuing directors.
(e) Nothing contained in this Article Fifth shall be construed to relieve
any other entity from any fiduciary obligation imposed by law.
SIXTH. Section 1701.831 of the Ohio Revised Code shall not apply to
"control share acquisitions" of shares of the Company so long as Article Seventh
hereof is in effect.
SEVENTH. The Control Share Acquisition provisions applicable to the shares
of the Company, in lieu of those contained in Section 1701.831 of the Ohio
Revised Code, are set forth in this Article Seventh.
(A) As used in this Article Seventh:
(1) (a) "Control Share Acquisition" means the acquisition, directly or
indirectly, by any Person (as hereinafter defined) of shares of the Company
(other than in accordance with the provisions of paragraph (1) (b) of this
Section (A)) that, when added to all other shares of the Company in respect
of which that person, directly or indirectly, may exercise or direct the
exercise of voting power as provided herein, would entitle such Person,
immediately after the acquisition, directly or indirectly, to exercise or
direct the exercise of the voting power in the election of Directors of the
Company of a number of the outstanding shares of the Company (as
distinguished from the number of votes to which the holder of such shares
is entitled) within any of the following ranges (each a "Range"):
(i) One-fifth or more but less than one-third of such outstanding
shares,
(ii) One-third or more but less than a majority of such outstanding
shares, and
(iii) A majority or more of such outstanding shares.
For the purposes of this definition, a bank, broker, nominee, trustee, or other
person who acquires shares in the ordinary course of business for the benefit of
others in good faith and not for the purpose of circumventing this Article
Seventh shall, however, be deemed to have voting power only of shares in respect
of which that person would be able to exercise or direct the exercise of votes
without further instruction from others on the proposed Control Share
Acquisition at the meeting of shareholders called under this Article Seventh.
(b) The acquisition of any shares of the Company does not constitute a
Control Share Acquisition for the purposes of this Article Seventh if the
acquisition is consummated:
(i) Prior to August 28, 1991;
(ii) Pursuant to a contract existing prior to August 28, 1991;
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(iii) Under such circumstances that the acquisition does not result in
the Person's being entitled, immediately thereafter and for the first time,
to exercise or direct the exercise of voting power in the election of
Directors of a number of outstanding shares within the Range of one-fifth
or more but less than one-third of such outstanding shares or within a
Range higher than the Range applicable prior to the acquisition;
(iv) By bequest or inheritance, by operation of law upon the death of
any individual, or by any other transfer without valuable consideration,
including a gift that is made in good faith and not for the purpose of
circumventing this Article Seventh;
(v) Pursuant to the satisfaction of a pledge or other security
interest created in good faith and not for the purpose of circumventing
this Article Seventh; or
(vi) Pursuant to a merger, consolidation, combination, or majority
share acquisition adopted or authorized by shareholder vote in compliance
with the provisions of Section 1701.78 or 1701.79 of the Ohio Revised Code
if the Company is the surviving or new corporation in the merger or
consolidation or is the acquiring corporation in a combination or majority
share acquisition.
The acquisition by any Person of shares of the Company in a manner described
under this paragraph (1) (b) of this Section (A) shall be deemed a Control Share
Acquisition authorized pursuant to this Article Seventh within the Range
applicable after the acquisition, provided, in the case of an acquisition in a
manner described under clause (1) (b) (iv) or (v) of this Section (A), the
transferor of shares to that Person had previously obtained any authorization of
shareholders required under this Article Seventh or under Section 1701.831 of
the Ohio Revised Code in connection with that transferor's acquisition of shares
of the Company.
(c) The acquisition of shares of the Company in good faith and not for the
purpose of circumventing this Article Seventh from any Person whose Control
Share Acquisition had previously been authorized by shareholders, or from any
Person whose previous acquisition of shares would have constituted a Control
Share Acquisition but for paragraph (1) (b) of this Section (A), does not
constitute a Control Share Acquisition unless that acquisition entitles the
acquiring Person, directly or indirectly, to exercise or direct the exercise of
voting power in the election of Directors of the Company of a number of shares
in excess of the Range authorized by the shareholders or defined to be
authorized under paragraph (1)(b) of this Section (A).
(2) "Person" includes, without limitation, a natural person, a corporation
(whether nonprofit or for profit), a partnership, a limited liability company,
an unincorporated society or association, and two or more persons having a joint
or common interest.
(3) "Acquiring Person" means any Person who has delivered an Acquiring
Person Statement to the Company pursuant to Section (B) of this Article Seventh.
(4) "Acquiring Person Statement" means a written statement that complies
with Section (B) of this Article Seventh.
(5) "Interested Shares" means the shares of the Company in respect of which
any of the following persons may exercise or direct the exercise of the voting
power of the Company in the election of Directors:
(a) An Acquiring Person;
(b) Any officer of the Company elected or appointed by the Directors,
provided, however, that shares which, as of the record date of any special
meeting held pursuant to this Article Seventh, have been owned beneficially
by such person for four or more years shall not be deemed to be "Interested
Shares" for purposes of any vote at such meeting;
(c) Any employee of the Company who is also a Director, provided,
however, that shares which, as of the record date of any special meeting
held pursuant to this Article Seventh, have been owned
9-F
beneficially by such person for four or more years shall not be deemed to
be "Interested Shares" for purposes of any vote at such meeting; and
(d) Any Person that acquires such shares for valuable consideration
during the period beginning with the date of the first public disclosure of
a proposed Control Share Acquisition of the Company or any proposed merger,
consolidation, or other transaction that would result in a change in
control of the Company or all or substantially all of its assets, and
ending on the record date established by the directors pursuant to Section
1701.45 of the Ohio Revised Code and Section (D) of this Article Seventh,
if either of the following applies:
(i) The aggregate consideration paid or given by the Person who
acquired the shares, and any other Persons acting in concert with the
Person, for all such shares exceeds two hundred fifty thousand dollars;
(ii) The number of shares acquired by the Person who acquired the
shares, and any other Persons acting in concert with the Person, exceeds
one-half of one per cent of the outstanding shares of the Company
entitled to vote in the election of Directors.
(e) Any Person that transfers such shares for valuable consideration
after the record date described in paragraph 5(d) of this Section (D) as to
shares so transferred, if accompanied by the voting power in the form of a
blank proxy, an agreement to vote as instructed by the transferee, or
otherwise.
(2) If any part of this division is held to be illegal or invalid in
application, the illegality or invalidity does not affect any legal and valid
application thereof or any other provision or application of this Article
Seventh that can be given effect without the invalid or illegal provision, and
the parts and applications of this Article Seventh are severable.
(B) Any Person who proposes to make a Control Share Acquisition, or seeks
to exercise one-fifth or more of the voting power of the Company under paragraph
(a) of Division II of Article Fourth hereof, shall deliver an Acquiring Person
Statement to the Company's principal executive offices. The Acquiring Person
Statement shall set forth all of the following to the extent appropriate to the
authorization such Person is seeking:
(1) The identity of the Acquiring Person;
(2) A statement that the Acquiring Person Statement is given pursuant
to this Article Seventh;
(3) The number and class of shares of the Company owned, directly or
indirectly, by the Acquiring Person and the date or dates when such shares
were acquired;
(4) The Range under which the proposed Control Share Acquisition
would, if consummated, fall;
(5) A description in reasonable detail of the terms of the proposed
Control Share Acquisition; and
(6) Representations of the Acquiring Person, together with a statement
in reasonable detail of the facts upon which they are based, that the
proposed Control Share Acquisition, if consummated, will not be contrary to
law and that the Acquiring Person has the financial capacity to make the
proposed Control Share Acquisition.
(C) Within ten days after receipt of an Acquiring Person Statement that
complies with Section (B) of this Article Seventh, the Directors of the Company
shall call a special meeting of shareholders of the Company for the purpose of
voting on the proposed Control Share Acquisition. Unless the Acquiring Person
agrees in writing to another date, the special meeting of shareholders shall be
held within fifty days after receipt by the Company of the Acquiring Person
Statement. If the Acquiring Person so requests in writing at the time of
delivery of the Acquiring Person Statement, the special meeting shall be held no
sooner than thirty days after receipt by the Company of the Acquiring Person
Statement. The special
10-F
meeting of shareholders shall not be held later than any other special meeting
that is called, after receipt by the Company of the Acquiring Person Statement,
in compliance with Section 1701.76, 1701.78, 1701.79 or 1701.83 of the Ohio
Revised Code or this Article Seventh.
(D) Notice of the special meeting of shareholders shall be given, as
promptly as reasonably practicable, to all shareholders of record, whether or
not entitled to vote thereat, as of the record date fixed for the meeting. The
notice shall include or be accompanied by the following:
(1) A copy of the Acquiring Person Statement delivered to the Company
pursuant to this Article Seventh; and
(2) A statement by the Company, authorized by its Directors, of its
position or recommendation, or that it is taking no position or making no
recommendation, with respect to the proposed Control Share Acquisition.
(E) The Acquiring Person may make the proposed Control Share Acquisition if
both of the following occur:
(1) The shareholders of the Company who hold shares entitling them to
vote in the election of Directors authorize the acquisition at the special
meeting held for that purpose at which a quorum is present by an
affirmative vote of a majority of the voting power of the Company in the
election of Directors represented at such meeting in person or by proxy and
a majority of the portion of such voting power excluding the voting power
of Interested Shares represented at the meeting in person or by proxy. A
quorum shall be deemed to be present at such meeting if at least a majority
of the voting power of the Company in the election of Directors is
represented at the meeting in person or by proxy.
(2) The acquisition is consummated, in accordance with the terms so
authorized, not later than three hundred sixty days following shareholder
authorization of the Control Share Acquisition.
(F) As provided in Section 1701.48 of the Ohio Revised Code, no proxy
appointed by or in connection with a shareholder authorization of a Control
Share Acquisition is valid if it (1) provides that it is irrevocable or (2) is
sought, appointed, and received other than (a) in accordance with all applicable
requirements of the laws of the State of Ohio and of the United States and (b)
separate and apart from the sale or purchase, contract or tender for sale or
purchase, or request or invitation for tender for sale of purchase, of shares of
the Company.
(G) Shares acquired in violation of this Article Seventh shall be subject
to restrictions on transfer of such shares and such other provisions as may be
contained in the Regulations of the Company.
EIGHTH. No holder of shares of the Company of any class, as such, shall
have any pre-emptive right to purchase or subscribe for shares of the Company,
of any class, or other securities of the Company, of any class, whether now or
hereafter authorized.
NINTH. The Company, by action of its directors and without action by its
shareholders, may purchase its own shares in accordance with the provisions of
Chapter 1701 of the Ohio Revised Code. Such purchases may be made either in the
open market or at public or private sale, in such manner and amounts of any one
class or any combination of classes, from such holder or holders of outstanding
shares of the Company, and at such prices as the directors shall from time to
time determine without regard to differences among the classes in price and
other terms under which shares may be purchased or in relative number of shares
that may be available for purchase.
Tenth. These Amended Articles of Incorporation supersede the existing
Amended Articles of Incorporation of the Company.
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[Map showing location of Annual Meeting]
PROXY
THE J.M. SMUCKER COMPANY
STRAWBERRY LANE, ORRVILLE, OHIO 44667-0280
SOLICITED BY THE BOARD OF DIRECTORS FOR THE SPECIAL MEETING OF
SHAREHOLDERS ON ____________
The undersigned hereby appoints Timothy P. Smucker, Richard K. Smucker, and
Steven J. Ellcessor, or any one of them, proxies with full power of substitution
to vote, as designated on the reverse side, all Common Shares that the
undersigned is entitled to vote at the Special Meeting of Shareholders of The
J.M. Smucker Company to be held on __________________ or at any adjournment or
adjournments, and any postponement or postponements thereof.
When properly executed, this proxy will be voted in the manner directed. If no
direction is given, this proxy will be voted FOR Proposal 1.
Please mark, date, sign and return this proxy card promptly, using the enclosed
envelope. No postage is required if mailed in the United States.
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SEE REVERSE SIDE
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PLEASE NOTE THAT ADMISSION TO THE SPECIAL MEETING WILL BE BY ADMISSION CARD
ONLY. IF YOU PLAN TO ATTEND THE MEETING, PLEASE MARK THE INDICATED BOX ON YOUR
PROXY. ALSO, IF YOU PLAN TO BRING A GUEST, PLEASE SO STATE ON YOUR CARD. DUE TO
SPACE LIMITATIONS, NO MORE THAN TWO ADMISSION CARDS PER SHAREHOLDER ACCOUNT WILL
BE PROVIDED.
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NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE
QUICK - EASY - IMMEDIATE - AVAILABLE 24 HOURS A DAY - 7 DAYS A WEEK
The J.M. Smucker Company encourages you to take advantage of the convenient
telephone voting method to vote your shares for the proposal to be covered at
the Special Meeting of Shareholders. Your telephone vote authorizes the named
proxies to vote your shares in the same manner as if you marked, signed and
returned your proxy card. To vote by telephone, read the accompanying proxy
statement and then follow these steps:
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TO VOTE BY TELEPHONE Call toll free 1-877-587-0760 in the United States or
- -------------------- Canada any time on a touch tone telephone. There is NO
CHARGE to you for this call. Have your proxy card in
hand when you call.
Enter the 6-digit Control Number located below.
Option #1: To vote as the Board of Directors recommends
on Proposal 1, Press 1. When asked, please
confirm your vote by pressing 1.
Option #2: If you choose to vote against Proposal 1,
press 0 and follow the recorded instructions.
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IF YOU VOTE BY TELEPHONE, DO NOT MAIL BACK THE PROXY CARD.
THANK YOU FOR VOTING!
CONTROL NUMBER
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+ THE J.M. SMUCKER COMPANY [ ]
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0079CC
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CONTROL NUMBER
[ ] Mark this box with an X if you have made changes to your name or address details below.
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PROXY CARD
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PLEASE MARK YOUR VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL.
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FOR AGAINST ABSTAIN
1.Approval of a merger of a wholly owned subsidiary of [ ] [ ] [ ]
Procter & Gamble, which will hold the Jif and Crisco
businesses, into Smucker with Smucker as the
surviving company, and to amend Smucker's articles in
connection with the merger, by adopting the merger
agreement relating to the merger.
WILL ATTEND
Will attend meeting/number attending [ ]
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PLEASE REFER TO THE FRONT SIDE OF THIS PROXYCARD FOR TELEPHONE VOTING INSTRUCTIONS.
NOTE: Please sign exactly as your name appears above. Joint owners should each sign. When signing as an attorney, executor,
administrator, trustee or guardian, please give full title as such.
Signature Signature Date
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/ /
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(Month) (Day) (Year)
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In general, a director of an Ohio corporation will not be found to have
violated his or her fiduciary duties unless there is proof by clear and
convincing evidence that the director (1) has not acted in good faith, (2) has
not acted in a manner the director reasonably believes to be in or not opposed
to the best interests of the corporation, or (3) has not acted with the care
that an ordinarily prudent person in a like position would use under similar
circumstances. Monetary damages for any act taken or omission made as a director
are generally awarded only if it is proved by clear and convincing evidence that
the director undertook such act or omission either with deliberate intent to
cause injury to the corporation or with reckless disregard for the best
interests of the corporation.
Under Ohio law, a corporation must indemnify its directors, officers,
employees, and agents against expenses reasonably incurred in connection with
the successful defense (on the merits or otherwise) of an action, suit, or
proceeding. A corporation may indemnify such persons in actions, suits, and
proceedings (including certain derivative suits) if the individual has acted in
good faith and in a manner that the individual believes to be in or not opposed
to the best interests of the corporation. In the case of a criminal proceeding,
the individual must also have no reasonable cause to believe that his or her
conduct was unlawful.
Indemnification may be made only if ordered by a court or if authorized in
a specific case upon a determination that the applicable standard of conduct has
been met. Such a determination may be made by a majority of the disinterested
directors, by independent legal counsel, or by the shareholders.
Under Ohio law, a corporation may pay the expenses of any indemnified
individual as they are incurred, in advance of the final disposition of the
matter, if the individual provides an undertaking to repay the amount if it is
ultimately determined that the individual is not entitled to be indemnified.
Ohio law generally requires all expenses, including attorney's fees, incurred by
a director in defending any action, suit, or proceeding to be paid by the
corporation as they are incurred if the director agrees (i) to repay such
amounts in the event that it is proved by clear and convincing evidence that the
director's action or omission was undertaken with deliberate intent to cause
injury to the corporation or with reckless disregard for the best interests of
the corporation and (ii) to reasonably cooperate with the corporation concerning
the action, suit, or proceeding.
Smucker's regulations require Smucker to indemnify, to the full extent
permitted by Ohio law, any person made, or threatened to be made, a party to any
threatened, pending or completed action, suit, or proceeding (whether civil,
criminal, administrative, or investigative) because that person is or was a
director, officer, or employee of Smucker or was serving, at the request of
Smucker, as a director, trustee, officer, or employee of another entity. Smucker
also has in effect insurance policies for general officers' and directors'
liability insurance covering all of its directors and officers.
Following the merger, the indemnification arrangements discussed above will
remain unchanged. In addition, Smucker may enter into indemnification agreements
with each of its directors and officers that indemnify its directors and
officers to the maximum extent permitted by law.
For the undertaking with respect to indemnification, see Item 22 herein.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) See Exhibit Index.
(b) Not applicable.
(c) The opinion of William Blair & Company, L.L.C., is included as Annex D
to the proxy statement-prospectus included as part of this Registration
Statement.
II-1
ITEM 22. UNDERTAKINGS.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of each of the Registrants' annual reports pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(g)(1) The undersigned Registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the
applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information
called for by the other items of the applicable form.
(2) The undersigned Registrant hereby undertakes that every prospectus:
(i) that is filed pursuant to paragraph 1 immediately preceding, or
(ii) that purports to meet the requirements of Section 10(a)(3) of
the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of each registrant pursuant to the foregoing provisions, or
otherwise, each Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by a Registrant of
expenses incurred or paid by a director, officer or controlling person
of such Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Joint Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Orrville, State of Ohio,
on February 8, 2002.
THE J. M. SMUCKER COMPANY
(Registrant)
By: /s/ STEVEN J. ELLCESSOR
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Steven J. Ellcessor
Vice President -- Finance and Administration,
Secretary, and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman and Co-Chief Executive February 8, 2002
------------------------------------------- Officer, and Director
Timothy P. Smucker (Principal Executive Officer)
* President and Co-Chief Executive February 8, 2002
------------------------------------------- Officer, and Director
Richard K. Smucker (Principal Executive Officer)
/s/ STEVEN J. ELLCESSOR Vice President -- Finance and February 8, 2002
------------------------------------------- Administration, Secretary, and
Steven J. Ellcessor General Counsel
(Principal Financial Officer)
* Vice President -- Information February 8, 2002
------------------------------------------- Systems and Corporate Controller
Richard G. Jirsa (Controller)
* Director February 8, 2002
-------------------------------------------
Vincent C. Byrd
* Director February 8, 2002
-------------------------------------------
Kathryn W. Dindo
* Director February 8, 2002
-------------------------------------------
Fred A. Duncan
* Director February 8, 2002
-------------------------------------------
Elizabeth Valk Long
* Director February 8, 2002
-------------------------------------------
Charles S. Mechem, Jr.
* Director February 8, 2002
-------------------------------------------
William H. Steinbrink
* Director February 8, 2002
-------------------------------------------
William Wrigley, Jr.
* The undersigned, by signing his name hereto, does sign and execute this registration statement
pursuant to the powers of attorney executed by the above-named officers and directors of the
registrant, which are being filed herewith with the Securities and Exchange Commission on behalf of
such officers and directors.
By: /s/ STEVEN J. ELLCESSOR
-------------------------------------
Steven J. Ellcessor
</Table>
II-3
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. EXHIBIT DESCRIPTION
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2.1 Agreement and Plan of Merger, dated as of October 9, 2001,
by and among P&G, P&G Ohio and Smucker (attached as Annex A
to the proxy statement-prospectus).
2.2 Amendment No. 1 to the Agreement and Plan of Merger, dated
as of November 30, 2001, by and among P&G, P&G Ohio and
Smucker (attached as Annex A to the proxy statement-
prospectus).
3.1 Amended Articles of Incorporation of The J. M. Smucker
Company (attached as Annex F to the proxy
statement-prospectus).
5.1 Opinion of General Counsel of The J. M. Smucker Company, as
to the validity of the Smucker common shares being
registered hereby.
8.1 Opinion of Ernst & Young LLP as to certain tax matters.
10.1 Contribution Agreement, dated as of October 9, 2001, among
P&G, The Procter & Gamble Manufacturing Company, P&G Ohio
and Smucker (attached as Annex B to the proxy
statement-prospectus).
10.2+ Form of Manufacturing Plant Separation Agreement between P&G
and Smucker.
10.3+ Form of Tax Sharing Agreement between P&G and Smucker.
10.4+ Transitional Services Agreement, dated October 9, 2001,
between P&G and Smucker.
23.1 Consent of Ernst & Young LLP relating to the audited
financial statements of Smucker.
23.2 Consent of Deloitte & Touche relating to the audited
financial statements of the Jif and Crisco businesses of The
Procter & Gamble Company.
23.3 Consent of General Counsel of The J. M. Smucker Company
(included in Exhibit 5.1).
23.4 Consent of Ernst & Young LLP (included in Exhibit 8.1).
23.5+ Consent of William Blair & Company, L.L.C.
24.1+ Power of Attorney of Directors and officers of Smucker.
99.1 JMS Shareholder Agreement and Irrevocable Proxy, dated
October 9, 2001, between P&G and the shareholders listed on
the signature page thereto (attached as Annex C to the proxy
statement-prospectus).
99.2 Opinion of William Blair & Company, L.L.C. (attached as
Annex D to the proxy statement-prospectus).
</Table>
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+ Previously filed.
II-4