I'm sad to report that one of FEI's greatest leaders, Bill Parfet, lost a son this week in a boating accident. Bill is well-known member of FEI. The family has suggested that any contributions be made in memory of Kiley Johnson, and I encourage you to do so. You can send them to the Coast Guard Foundation, 394 Taugwonk Road, Stonington, CT 06378-1807.

M&A
Mergers and acquisitions are so important to our members that the recent court decision forcing Tyson to complete its acquisition of IBP prompted the issuance of a legal summary. What's Your Beef? M&A Lessons to Be Learned from the IBP Versus Tyson Foods Case, is an alert from Barry Brooks, Esq., of Paul, Hastings, Janofsky & Walker LLP. Barry is a long-time associate and supporter of FEI. He was kind enough to summarize the important lessons for deal-making financial officers. Check out http://www.financialexecutives.org/news/Tyson-Foods.pdf. You can contact Barry directly at: babrooks@phjw.com.

On June 15, the Delaware Chancery Court declared that IBP, the nation's number-one beef and number-two pork distributor, could force Tyson Foods, the poultry giant, to specifically implement its agreement to purchase IBP for cash and Tyson stock, valued at $3.2 billion. The court ruled, in essence, that Tyson had no legal basis for avoiding its obligation to consummate the merger agreement, notwithstanding allegations by Tyson of false representations and warranties by IBP in that agreement. The transaction was the result of an intense auction process, during which Tyson made sure it was the winning bidder. When the dust settled and it was time to close the transaction, Tyson suffered from "buyer's remorse" and wanted to renegotiate. Without dwelling on the details, there is a lot to learn and remember from this case. Highlights include:

• It's hard for a buyer to argue breach of representations and warranties when the seller is forthcoming during the diligence process. Tyson's attorneys laid out multiple technical arguments to show that IBP didn't fully disclose its financial and accounting problems in the merger agreement. It turns out, however, that IBP disclosed or made available all of the material issues. Full disclosure is great insurance. The court was willing to retrace the diligence and disclosure history in painstaking detail, and concluded that Tyson was provided all relevant information prior to signing the merger agreement. Further, if there were red flags in the materials produced by IBP, it was Tyson's responsibility to follow up.
• Disclosure schedules and representations and warranties ARE important. Leaving these matters to the lawyers or the "B" transactional team can be a huge mistake. Sophisticated buyers and sellers, with teams of professionals, will be charged with the strict meaning of contractual language and knowledge of due diligence results and disclosure schedules. Maybe it is better to bury your head in the sand!
• Reliance on projections produced by the seller in a merger or other acquisition transaction is problematic. Tyson's assertions that IBP's projections were misleading went nowhere. IBP's projections were based on reasonable assumptions, but they were prepared for different purposes (not the sale of the company), and did not represent a guarantee of meeting projections.
• The court awarded the extraordinary relief of specific performance. This relief is even more unusual in view of the fact that the seller, and not the buyer, was seeking this result.

US Loses Important FSC Case Before WTO Dispute Panel
Mark Rosen of our DC staff summarized this important issue. You can contact him directly at mrosen@feidc.org. On June 22, the World Trade Organization Dispute Panel issued an interim report indicating that the changes Congress made last year to the section of the tax code dealing with foreign sales corporations (FSCs) did not comply with the WTO agreement. The three-member panel, chaired by New Zealander Crawford Falconer, concluded that the FSC Replacement Act provides less favorable treatment to imported products than to similar products made in the U.S., in violation of Article III:4 of the basic WTO agreement. The case against the United States was brought by the European Union, and the preliminary decision (still confidential) was described by most who have seen it as "overwhelmingly" against the United States FSC Replacement system. Once the interim agreement is formally confirmed by the WTO Appellate Body, the stage is set for additional negotiations or use of an arbitration panel. If the United States ultimately loses the case, retaliatory tariffs in the $4 billion range could be imposed by the EU on U.S. goods entering that market. The burden is now shifting to office of the United States Trade Representative (USTR) to try to broker some type of compromise to avert a trade war with the EU.

Large companies rely heavily upon the FSC benefits, as do many smaller and medium-sized businesses. For companies that are heavily involved in exports, the impact of the decision - if carried forward to conclusion - is likely to be a moderate to significant increase in the effective tax rate.

International Accounting Standards Advisory Council
Four FEI members were appointed to the new Advisory Council this week: David Sidwell, CFO of JP Morgan Chase & Co. Investment Bank; David Shedlarz, CFO of Pfizer; Keith Sherin, CFO of General Electric; and yours truly. The first meeting of the advisory council is set for July 23, to discuss possible projects for the IASB agenda. Here is a link to the press release announcing the full advisory committee.

IASB and Stock Option Accounting
Leading compensation consultant Frederick Cook put out an alert this week on this matter. The new IASB is considering reopening the option accounting debate, after a decade-long battle in the United States that put the issue to rest. Fred makes the important point that currently, this is one subject on which global accounting standards already exist. No country requires a fair value expense for fixed-term, at-the-money options granted to employees. All countries permit the grant-date, intrinsic value method allowed by the FASB. So, this isn't a global harmonization move, but rather another step in the endless and relentless media, academic and regulator movement to intervene in corporate governance matters through accounting rules and undermine employee stock option programs they are so envious of. Read Fred's update for more discussion.

CFOs See Economic Rebound, But Not This Year
Chief Financial Officers predict U.S. economic growth will remain slow during 2001 but foresee an economic rebound next year. They also anticipate moderate corporate earnings increases over the next twelve months. They do not, however, expect the recently mandated tax rebates to contribute to their firm's revenues. Read the full press release here.

Free Webinar
diCarta, Inc., invites you a free Webinar on Revenue Management Best Practices with Dr. Mary Barth, Professor Stanford Graduate School of Business, and Gary Matuszak, Office Managing Partner with Andersen. For more information, click here.

Upcoming Teleconferences
Don't miss "Expensing of Pension Plan Costs," Wednesday, July 11, 2 pm ET, and "Succession Planning: Tales from the Front Lines," Wednesday, July 18, 2 pm ET. Register for these and all teleconferences here.

Job Posting: CFO (FEI Job Number 5365)
Ideal candidate has 5 - 10 yrs experience as Controller, Dir. Finance or CFO of a software firm, and has successfully taken a company public. Will manage finance, tax, accounting, HR, IR and admin/facilities. As a key member of Management team, will work closely w/ CEO and VP Sales on creating strategic business alliances and int'l expansion plans. Will build and manage to the operating plan. Will be a regular presenter at Board of Directors meetings. Contact Peggy Weigle, pweigle@sanctuminc.com. For more career opportunities, visit the FEI Career Center.

New Member Welcome
Congratulations to Christopher Culver, Controller, John Deere Landscapes, Atlanta, and Richard Passov, Treasurer, Pfizer, Inc., New York City, NY.

That's all for now,