EXHIBIT 10.2
ESCROW AND EXCHANGE AGENT
AGREEMENT
THIS ESCROW AND EXCHANGE AGENT
AGREEMENT (this “ Agreement ”) is made as of
[
] , 2006 by and among Fortune Brands, Inc., a Delaware
corporation (“ Parent ”), Brightstar Acquisition
LLC, an Illinois limited liability company and an indirect
wholly-owned subsidiary of Parent (“ Merger Sub
”), SBR, Inc., a West Virginia corporation (the “
Company ”), The Bank of New York, as escrow agent (the
“ Agent ”), and Samuel B. Ross, II, in his
capacity as Holders Representative (the “ Holders
Representative ”).
WHEREAS, pursuant to that certain
Agreement and Plan of Merger, dated as of February 9, 2006 (as
amended, restated, supplemented or otherwise modified from time to
time, the “ Merger Agreement ”), by and among
Parent, Merger Sub, the Company and the Holders Representative,
either (a) Merger Sub will merge with and into the Company,
with the Company continuing as the surviving entity, or
(b) the Company will merge with and into Merger Sub, with
Merger Sub continuing as the surviving entity (the “
Merger ”). Capitalized terms used herein and defined
in the Merger Agreement but not otherwise defined herein shall have
the meanings defined in the Merger Agreement; and
WHEREAS, the Merger Agreement
contemplates that the parties hereto shall enter into this
Agreement.
NOW, THEREFORE, in consideration of
the premises and the respective agreements hereinafter set forth,
the parties hereto agree as follows:
1. Consent of Company
Stockholders; Designation of Agent . The Fully-Diluted
Stockholders have approved the Merger Agreement and, pursuant
thereto, (a) the establishment of an escrow account to secure
the Fully-Diluted Stockholders’ indemnification obligations
under Article VIII of the Merger Agreement in the manner set forth
therein and herein (the “ Indemnity Escrow ”),
(b) the establishment of an escrow account as a source of
reimbursement pursuant to Section 4.8 of the Merger Agreement
(the “ Adjustment Escrow ”), (c) the
appointment of the Holders Representative as their representative
for purposes of this Agreement and as attorney-in-fact and agent
for and on behalf of each Fully-Diluted Stockholder, and the taking
by the Holders Representative of any and all actions and the making
of any decisions required or permitted to be taken or made by the
Holders Representative under this Agreement and (d) all of the
other terms, conditions and limitations contained in the Merger
Agreement and in this Agreement. Parent and the Holders
Representative, on behalf of the Fully-Diluted Stockholders, hereby
mutually designate and appoint The Bank of New York to serve as
Agent for the purposes set forth herein. The Agent hereby accepts
such appointment and agrees to act in furtherance of the terms and
conditions herein.
2. Distribution of Materials
. Subject to the provisions of Section 4(c) and
(d) hereof, Parent shall make available to the Agent
the documents, if any, to be mailed to the Fully-Diluted
Stockholders, including the Letters of Transmittal and instructions
(which shall specify that, with respect to Company Common Shares,
the delivery shall be effected, and the risk of loss and title
shall pass, only upon proper delivery of the certificates for the
Company Common Shares) to accompany certificates for Company Common
Shares when surrendered for the Merger
Consideration and the related Guidelines for
Certification of Taxpayer Identification Number of Substitute Form
W-9. Parent does hereby instruct the Agent to mail these documents
to such Fully-Diluted Stockholders as promptly as practicable but
in no event later than two (2) Business Days following the
date hereof. Attached hereto as Schedule A is (i) a
list of such Fully-Diluted Stockholders, (ii) each
Fully-Diluted Stockholder’s respective ownership of
Fully-Diluted Company Common Shares, (iii) the aggregate cash
to be paid in lieu of fractional Parent Shares to each
Fully-Diluted Stockholder, (iv) a calculation of the aggregate
Parent Shares and cash due each such Fully-Diluted Stockholder
pursuant to the terms of the Merger Agreement, (v) each
Fully-Diluted Stockholder’s taxpayer identification number
and (vi) any holders of Parent Shares who were, at the
Effective Time, Affiliates of the Company.
3. Deposits; Payments .
Concurrent herewith, Parent or Merger Sub shall deposit, or cause
to be deposited, with the Agent, (i) the aggregate cash
consideration payable under the Merger Agreement, (ii) the
Indemnity Escrow, (iii) the Adjustment Holdback and
(iv) a sufficient amount of cash payable with respect to
fractional shares pursuant to Section 4.4 of the Merger
Agreement. The aggregate cash deposited pursuant to the preceding
sentence shall be invested at the direction of the Holders
Representative by the Agent in (i) obligations of, or
guaranteed by, the United States of America in commercial paper
obligations rated A-1 or P-1 or better by Moody’s Investor
Services, Inc. or Standard & Poor’s Corporation,
respectively, in each case with maturities not exceeding six months
(or money market funds consisting of such obligations) or
(ii) bank deposit accounts with a financial institution with a
credit rating of not less than AA by Moody’s Investor’s
Services, Inc. Subject to the adjustments set forth in
Section 11 hereof, all earnings on the Cash
Consideration, the Indemnity Escrow and the Adjustment Holdback
shall be allocated to the Fully-Diluted Stockholders.
4. Receipt of Company Common
Shares and Related Materials .
(a) In connection with the Merger,
the Agent shall receive Letters of Transmittal (or facsimiles
thereof) from the Fully-Diluted Stockholders (other than holders of
Company Purchase Rights), executed in accordance with the
instructions therein, and all other instruments and communications
submitted to the Agent in connection with the Merger, and the Agent
shall preserve the same until delivered to Parent or otherwise
disposed of in accordance with Parent’s
instructions.
(b) All Letters of Transmittal,
facsimile transmissions, letters, and other materials properly
submitted to the Agent, except certificates for Common Company
Shares, shall be stamped by the Agent to show the date and time of
receipt thereof.
(c) The Agent shall examine the
Letter of Transmittal and any certificates for Company Common
Shares contemplated thereby to ascertain whether they appear to
have been completed and executed in accordance with the
instructions set forth in the Letter of Transmittal;
provided , however , that the Agent shall accept the
Letters of Transmittal and certificates (the “
Pre-Approved Deliveries ”) received by it on the
Closing Date and certified by Mark A. Roche on behalf of the Parent
and the Holders Representative on behalf of the Fully-Diluted
Stockholders without any examination. For any irregular items, the
Agent should follow its regular procedures to attempt to cause any
such
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irregularity to be corrected. The
Agent is not authorized to waive any deficiency or irregularity in
connection with the Letter of Transmittals unless Parent provides
the Agent with written authorization. As to any irregular items the
Agent cannot resolve by following its regular procedures, the Agent
will consult with Parent and the Holders Representative for
instructions, who shall be jointly responsible for deciding what
action, if any, to be taken. Upon receipt of any certificates for
the Company Common Shares, the Agent will physically cancel the
certificates representing such Common Company Shares.
(d) Subject to the terms and
conditions of this Agreement, the Agent is authorized to accept
certificates for Company Common Shares and to issue (a) one or
more Parent Shares (which shall be in non-certificated book-entry
form unless a physical certificate is requested) representing, in
the aggregate, the whole number of Parent Shares, if any, that the
applicable Fully-Diluted Stockholder has the right to receive
pursuant to Section 4.1(a) or 4.1(b) of the Merger Agreement
and (b) a check or wire transfer to an account designated by
the Fully-Diluted Stockholder in the amount equal to the allocable
portion of the cash consideration, if any, that the applicable
Fully-Diluted Stockholder has the right to receive pursuant to
Sections 4.1(a) or 4.1(b) of the Merger Agreement, Section 4.3
of the Merger Agreement (including dividends and other
distributions pursuant to Section 4.3(f) of the Merger
Agreement) and cash payable in lieu of fractional shares pursuant
to Section 4.4 of the Merger Agreement; provided ,
however , that the Agent shall accept the Pre-Approved
Deliveries and make payments therefor to the Fully-Diluted
Stockholders in accordance with the allocations set forth on
Schedule A and consistent with Sections 4.1(a), 4.1(b), 4.3
and 4.4 of the Merger Agreement and the applicable Pre-Approved
Deliveries on the Closing Date; provided , further ,
payments of the allocable portion of the cash consideration and
Parent Shares shall be made by the Agent to holders of Company
Purchase Rights upon written direction from Parent and in
accordance with the allocations set forth on Schedule A and
consistent with Sections 4.1(a), 4.1(b), 4.3 and 4.4 of the Merger
Agreement. Subject to the terms of the Letter of Transmittal, Agent
shall deduct and withhold from the amounts paid pursuant to this
Section 4(d) any withholding taxes and such other
amounts as are required under the Code or any applicable provision
of state, local or foreign tax law, and the Agent shall provide to
the applicable Fully-Diluted Stockholder notice of the amounts so
deducted or withheld. All transfer taxes owing with respect to the
transfers hereunder shall be paid by Parent.
(e) If payment is to be made by the
Agent to a person other than the person in whose name a surrendered
certificate is registered, the Agent will make no payment until the
certificate so surrendered has been properly endorsed (or otherwise
put in proper form for transfer) and the person requesting such
payment has paid any transfer or other taxes or governmental
charges required by reason of such payment in a name other than
that of the registered holder of the certificate surrendered or has
established to its satisfaction that such tax or charge either has
been paid or is not payable. Any tax information with respect to
such payment which the Agent is required to report pursuant to
Section 4 of this Agreement shall list the registered
holder of the certificate as the payee.
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(f) If any Fully-Diluted Stockholder
reports to the Agent that such Fully-Diluted Stockholder’s
failure to surrender a certificate representing any Company Common
Shares registered in such Fully-Diluted Stockholder’s name at
the Effective Time is due to the theft, loss or destruction of his
certificate, the Agent shall require such Fully-Diluted Stockholder
to furnish an affidavit of such theft, loss or destruction. Upon
receipt of such affidavit, the Agent may effect payment to such
Fully-Diluted Stockholder as though he had surrendered such
Fully-Diluted Stockholder’s certificate.
(g) If Company Common Shares
registered in the name of any Person described on Schedule A
as an Affiliate of the Company are surrendered, Agent shall
(i) arrange for the issuance of Parent Shares in the name of
any other person only with the proper approval of Parent or its
legal counsel; and (ii) issue in exchange therefor
certificates representing Parent Shares with the following legend
applied to each such certificate:
“THE SHARES REPRESENTED BY
THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”) APPLIES, HAVE BEEN DELIVERED IN RELIANCE UPON
THE REPRESENTATION OF THE REGISTERED HOLDER HEREOF THAT THEY HAVE
BEEN ACQUIRED FOR SUCH HOLDER’S ACCOUNT, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, EXCEPT
IN COMPLIANCE WITH APPLICABLE REQUIREMENTS OF RULE 145 OR PURSUANT
TO A REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM SUCH
REGISTRATION.”
5. Tax Reporting .
(a) On or before each
January 31 of each year that any amount remains in escrow
pursuant to this Agreement, the Agent will prepare and mail to each
Fully-Diluted Stockholder receiving payment or allocated income
pursuant to this Agreement during the prior calendar year, other
than Fully-Diluted Stockholders who demonstrate their status as
nonresident aliens in accordance with United States Treasury
Regulations, an applicable Form 1099 reporting any cash payments
during the prior calendar year, in accordance with Treasury
regulations. The Agent will also prepare and file copies of such
Forms 1099 by magnetic tape with the Internal Revenue Service, in
accordance with Treasury Regulations.
(b) If the Agent has not received
notice from the surrendering Fully-Diluted Stockholder of such
Fully-Diluted Stockholder’s certified taxpayer identification
number, the Agent shall deduct and withhold backup withholding tax
from any cash payment made pursuant to the Code.
(c) Should any issue arise regarding
Federal income tax reporting or withholding, the Agent will take
such action as Parent and the Holders Representative instruct the
Agent in writing.
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(d) The Parent and the Fully-Diluted
Stockholders agree to report any payments to the Fully-Diluted
Stockholders from the Escrow Accounts as payments subject to a
contingency under the installment method described in section 453
of the Code.
6. Delivery of Payment . All
checks, other than checks delivered at the Agent’s window,
shall be forwarded by first class mail. In the case of any
Fully-Diluted Stockholder, all checks, wire transfer payments or
certificates representing Parent Shares (if requested) shall be
mailed to the address or account, as the case may be, set forth on
such Fully-Diluted Stockholder’s Letter of Transmittal (or
such other address as is subsequently provided to the Agent in
writing by such Fully-Diluted Stockholder) or as set forth on
Schedule A hereto.
7. Follow-Up Mailings . No
later than one month after the date hereof, Agent will mail or
caused to be mailed a follow-up letter to all Fully-Diluted
Stockholders who did not theretofore surrender their certificates,
or supply an affidavit pursuant to Section 4(f) of this
Agreement, for payment of the proceeds. The follow-up letter will
be mailed with a Letter of Transmittal, return envelope and W-9
Guidelines. In addition, the Agent may perform a search to locate
these holders and is authorized to comply and to report to all
states and jurisdictions in accordance with applicable state
abandoned property law for holders who cannot be located. All
reasonable out-of-pocket costs associated with the performance of
this duty shall not be incurred by Parent, but will be paid by the
Fully-Diluted Stockholder who is the recipient of such mailing by
set-off of amounts paid thereto pursuant to this Agreement from
time to time.
8. Formation of the Escrow
Accounts . Concurrently herewith, Parent shall deposit, or
cause to be deposited, with the Agent (i) the Indemnity
Escrow, and the Agent agrees to accept and hold the Indemnity
Escrow in a separate account (the “ Indemnity Escrow
Account ”), and (ii) the Adjustment Holdback, and
the Agent agrees to accept and hold the Adjustment Holdback in a
separate account (the “ Adjustment Escrow Account
”). The Indemnity Escrow represents a source of
indemnification payments in the event that any Parent Indemnified
Party is entitled to indemnification as provided in Article VIII of
the Merger Agreement. The Adjustment Holdback represents a source
of payment in the event Parent is entitled to payment pursuant to
Section 4.8 of the Merger Agreement.
9. Allocation of Distributions
and Payments . The amount of any distributions or payments to
be made to, or on behalf of, a Fully-Diluted Stockholder hereunder
will be determined by the Agent based on the percentage ownership
(calculated on a fully-diluted basis) of Fully-Diluted Company
Common Shares owned by such Fully-Diluted Stockholder immediately
prior to the Effective Time as set forth on Schedule A
hereto.
10. Tax Distributions . Each
Fully-Diluted Stockholder shall be entitled to receive a cash
distribution (a “ Tax Distribution ”) by wire
transfer to the account set forth in such Fully-Diluted
Stockholder’s Letter of Transmittal (unless the Agent shall
have subsequently received written instructions from any such
Fully-Diluted Stockholder in accordance with the Letter of
Transmittal) from the Agent for each taxable year in amounts
sufficient to enable such
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Fully- Diluted Stockholder to discharge (after
taking into account any other distributions received by such party
for such taxable year) any federal, state and local tax liability
arising as a result of the amount of the earnings on the Indemnity
Escrow and the Adjustment Holdback allocated to such Fully-Diluted
Stockholder and reported to the Internal Revenue Service by the
Agent pursuant to Section 5 hereof, determined by
assuming a combined federal, state and local tax rate of 40%. All
Tax Distributions pursuant to this Section 10 shall be
made by the Agent to the Fully-Diluted Stockholders quarterly on
the
