AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
BY AND AMONG
CALIFORNIA AND HAWAIIAN SUGAR COMPANY, INC.
A & B - HAWAII, INC.
MCBRYDE SUGAR COMPANY, LIMITED
AND
SUGAR ACQUISITION CORPORATION
DATED AS OF DECEMBER 24, 1998
TABLE OF CONTENTS
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Page
ARTICLE I DEFINITIONS..........................................1
1.01. Definitions ......................................1
1.02. Index of Other Defined Terms ....................10
1.03. Rules of Interpretation .........................12
ARTICLE II TRANSFER OF ASSETS.................................12
2.01. Transfer of Assets by Seller ....................12
2.02. Excluded Assets .................................15
2.03. Assumption of Liabilities .......................15
2.04. Excluded Liabilities ............................15
2.05. Assignment of Contracts and Rights ..............16
2.06. Purchase Consideration ..........................17
2.07. Closing .........................................18
2.08. Purchase Consideration Allocation ..............19
2.09. Preparation of Final Statement of Working
Capital..........................................20
2.10. Adjustments Resulting From The Statement of
Working Capital..................................22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........23
3.01. Corporate Existence and Power ...................23
3.02. Authorization ...................................24
3.03. Governmental Authorization ......................24
3.04. Non-Contravention ...............................24
3.05. Financial Statements; Undisclosed Liabilities ...25
3.06. Absence of Certain Changes ......................26
3.07. Properties; Leases; Tangible Assets .............27
3.08. Sufficiency of and Title to the Transferred
Assets...........................................28
3.09. Litigation ......................................29
3.10. Contracts .......................................29
3.11. Permits; Required Consents ......................32
3.12. Compliance with Applicable Laws .................33
3.13. Employment Agreements; Change in Control;
and Employee Benefits ...........................33
3.14. Labor and Employment Matters ....................36
3.15. Intellectual Property ...........................37
3.16. Advisory Fees ...................................39
3.17. Environmental Compliance ........................39
3.18. Insurance .......................................40
3.19. Tax Matters .....................................41
3.20. Investment Representations ......................43
3.21. Transactions with Affiliates ....................44
3.22. Accounts Receivable and Inventory ...............45
3.23. Substantial Customers and Suppliers .............45
3.24. Disclosure ......................................46
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEWCO............46
4.01. Corporate Existence and Power ...................46
4.02. Corporate Authorization .........................46
4.03. Capital Stock ...................................47
4.04. Governmental Authorization ......................47
4.05. Non-Contravention ...............................48
4.06. Advisory Fees ...................................48
4.07. Litigation ......................................48
4.08. Conduct of Newco ................................48
ARTICLE V COVENANTS OF SELLER.................................49
5.01. Conduct of the Business; Distributions ..........49
5.02. Access to Information ...........................51
5.03. Compliance with Terms of Required Governmental
Approvals and Required Contractual Consents .....52
5.04. Maintenance of Insurance Policies ...............52
5.05. Change of Name ..................................54
5.06. Administration of Accounts ......................54
5.07. Notice of Events ................................54
5.08. Bulk Sale Filings ...............................55
5.09. Exclusivity .....................................55
5.10. Confidentiality .................................56
5.11. Non-Competition .................................57
5.12. Specific Performance ............................57
5.13. Termination of Intercompany Arrangements ........58
5.14. Amendment of the HSTC Sugar Contract ............41
ARTICLE VI COVENANTS OF NEWCO.................................58
6.01. Access to Information ...........................58
6.02. Compliance with Terms of Required Governmental
Approvals and Required Contractual Consents .....59
6.03. Confidentiality .................................59
6.04. Specific Performance ............................60
6.05. Amendment of Certificate of Incorporation .......60
6.06. Company Employees ...............................61
6.07. Payment of ASRS Note and Pollution Control Bond
Interest ........................................61
6.08. Performance of Certain Obligations by Newco .....61
6.09. Re-marketing of Debentures ......................63
ARTICLE VII COVENANTS OF ALL PARTIES..........................64
7.01. Further Assurances ..............................64
7.02. Certain Filings .................................65
7.03. Public Announcements ............................65
7.04. Disposition of Benefit Plans ....................66
7.05. Working Capital Facility ........................68
7.06. Cooperation in Tax Matters ......................68
7.07. Registration Rights Agreement ...................68
7.08. Indenture .......................................69
7.09. Disposition of Certain Properties ...............69
ARTICLE VIII CONDITIONS TO CLOSING............................69
8.01. Conditions of All Parties .......................69
8.02. Conditions to Obligation of Newco ...............72
8.03. Conditions to Obligation of Sellers .............74
ARTICLE IX INDEMNIFICATION...................................74
9.01. Agreement to Indemnify ..........................74
9.02. Survival of Representation, Warranties and
Covenants .......................................77
9.03. Claims for Indemnification ......................77
9.04. Defense of Claims ...............................78
9.05. Nature of Payments .............................79
9.06. ABHI's Financial Condition .....................79
ARTICLE X TERMINATION.........................................79
10.01. Grounds for Termination ........................80
10.02. Effect of Termination ..........................82
ARTICLE XI MISCELLANEOUS......................................82
11.01. Notices ........................................82
11.02. Amendments; No Waivers .........................84
11.03. Expenses .......................................84
11.04. Successors and Assigns .........................85
11.05. Governing Law ..................................85
11.06. Counterparts; Effectiveness ....................85
11.07. Entire Agreement ...............................85
11.08. Captions .......................................86
11.09. Severability ...................................86
11.10. Construction ...................................86
11.11. Cumulative Remedies ............................87
11.12. Third Party Beneficiaries ......................87
11.13. Knowledge ......................................87
EXHIBITS
EXHIBIT A Form of Newco Charter
EXHIBIT B Form of Stock Sale Agreement
EXHIBIT C Warrant Terms
EXHIBIT D Form of Newco Note
EXHIBIT E Form of Exchange Debenture Indenture
EXHIBIT F Standby Financing Agreement
SCHEDULES
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Schedule 1.01(a) Permitted Liens
Schedule 2.08 Purchase Consideration Allocation
Schedule 2.09(a) Estimated Working Capital Amount
Schedule 3.04(c) Conflicts
Schedule 3.05(c) Undisclosed Liabilities
Schedule 3.06 Absence of Certain Changes
Schedule 3.07(a) Encumbrances on Property
Schedule 3.07(c) Leases
Schedule 3.08 Sufficiency of and Title to the Transferred Assets
Schedule 3.09 Litigation
Schedule 3.10(a) Scheduled Contracts
Schedule 3.10(b) Valid and Binding Contracts
Schedule 3.11(a) Permits
Schedule 3.11(b) Required Consents
Schedule 3.12 Compliance with Applicable Laws
Schedule 3.13(a) Employment Agreements
Schedule 3.13(b) Benefit Plans
Schedule 3.13(c) Pension Plans
Schedule 3.13(d) Multiemployer Plans
Schedule 3.13(e) Individuals Entitled to Certain Rights
Schedule 3.13(g) Benefit Claims
Schedule 3.13(j) Retiree Benefits
Schedule 3.14(a) Labor and Employment Matters
Schedule 3.14(b) Labor Disputes
Schedule 3.15(a) Intellectual Property Rights
Schedule 3.15(b) Actions Affecting Intellectual Property
Schedule 3.15(c) Ownership of Intellectual Property Rights
Schedule 3.15(d) Infringement of Intellectual Property Rights
Schedule 3.17(a) Environmental Permits
Schedule 3.17(b) Compliance with Environmental Laws
Schedule 3.17(c) Continuing Compliance with Environmental Laws
Schedule 3.17(d) Continuing Compliance with Environmental Laws
Schedule 3.18 Insurance Policies
Schedule 3.19 Tax Matters
Schedule 3.21 Transactions with Affiliates
Schedule 3.23 Substantial Customers and Suppliers
Schedule 7.04(a) Seller Benefit Plans
Schedule 11.13 Persons to Whom Knowledge is Attributed
ASSET PURCHASE AGREEMENT
------------------------
This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the "Agreement"),
dated as of December 24, 1998, is by and among CALIFORNIA AND HAWAIIAN SUGAR
COMPANY, INC., a Hawaii corporation (the "Seller"), A & B - HAWAII, INC., a
Hawaii corporation ("ABHI"), McBRYDE SUGAR COMPANY, LIMITED, a Hawaii
corporation ("McBryde"), and SUGAR ACQUISITION CORPORATION, a Delaware
corporation ("Newco").
R E C I T A L S
A. WHEREAS, Seller is engaged in the business of sugar refining and
distribution (the "Business");
B. WHEREAS, Seller desires to sell and transfer to Newco, and Newco
desires to buy from Seller, substantially all of Seller's assets in
consideration of Newco's obligations hereunder; and
C. WHEREAS, Seller, ABHI, McBryde and Newco entered into an Asset
Purchase Agreement, dated as of August 5, 1998, pursuant to which Seller
proposed to sell to Newco, and Newco proposed to buy from Seller, substantially
all of Seller's assets; and, as of the date hereof, the parties desire to amend
and restate the Asset Purchase Agreement as provided herein
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth,
the parties hereto agree as follows.
ARTICLE I
DEFINITIONS
1.01. Definitions. The following terms, as used herein, have the
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following meanings:
"A&B" means Alexander & Baldwin, Inc., a Hawaii corporation.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such other Person and includes (a) any shareholder,
officer, director or employee of a particular Person, and (b) any individual
related byblood, marriage or adoption to a Person or to any partner,
shareholder, officer, director or employee of a particular Person, (ii) any
Person in which any of the foregoing owns a beneficial interest or (iii) any
corporation or other business organization of which such Person is an officer
or is the beneficial owner, directly or indirectly, of ten percent (10%) or
more of any class of equity securities. For purposes of this definition, the
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlled" and "controlling" have meanings correlative thereto.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, rule, administrative
interpretation, regulation, order, writ, injunction, judgment, decree or other
requirement of any Governmental Authority (including any Environmental Law)
applicable to such Person or any of its Affiliates or Plan Affiliates or any of
their respective properties, assets, officers, directors, employees,
consultants or agents (in connection with such officer's, director's,
employee's, consultant's or agent's activities on behalf of such Person or any
of its Affiliates or Plan Affiliates).
"ASRS Notes" means those certain 9.80% Unsecured Senior Notes due
2004, in the aggregate principal amount of $25,000,000, issued pursuant to that
certain Note Purchase Agreement by and among Seller and the note purchasers
party thereto dated December 8, 1989, as amended pursuant to that Amendment to
Note Purchase Agreement dated as of December 12, 1989, those certain Amendments
to Unsecured Notes dated December 12, 1989 and that certain Amended and
Restated Note Purchase Agreement dated as of July 1, 1993, as amended by those
certain amendments dated January 24, 1995, October 27, 1995, and February 22,
1996.
"Benefit Arrangement" means any material benefit arrangement that is
not an Employee Benefit Plan, including, without limitation, (i) each employ-
ment or consulting agreement, (ii) each arrangement providing for insurance
coverage or workers' compensation benefits, (iii) each incentive bonus or
deferred bonus arrangement, (iv) each arrangement providing termination
allowance, severance or similar benefits, (v) each equity compensation plan,
(vi) each deferred compensation plan and (vii) each compensation policy and
practice maintained by Seller or any ERISA Affiliate of Seller covering the
employees, former employees, directors and former directors of Seller and the
beneficiaries of any
of them.
"Benefit Plan" means an Employee Benefit Plan or Benefit Arrangement.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"CVC" means Citicorp Venture Capital, Ltd.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, net of
insurance proceeds actually received, including without limitation (i) interest
on cash disbursements in respect of any of the foregoing at the Reference Rate
in effect from time to time, compounded quarterly, from the date each such cash
disbursement is made until the Person incurring the same shall have been
indemnified in respect thereof and (ii) reasonable costs, fees and expenses of
attorneys, accountants and other agents of such Person.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by Seller or any
ERISA Affiliate thereof covering employees or former employees of Seller.
"Employee Pension Benefit Plan" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of
ERISA, other than a Multiemployer Plan.
"Environmental Laws" means all Applicable Laws (including common law)
relating to Hazardous Substances, toxic torts, occupational health and safety,
pollution or the environment, including without limitation, the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response Compensation and Liability Act ("CERCLA"), the Clean Air Act, the
Water Pollution Control Act, the Safe Drinking Water Act, and the Toxic
Substances Control Act ("TSCA"), and any requirements promulgated pursuant
to these Applicable Laws.
"Environmental Liabilities" means all Liabilities of a Person
(whether such Liabilities are owed by such Person to Governmental Authorities
or other Persons) whether currently in existence or arising hereafter which
arise under or relate to any Environmental Law, including, without limitation,
any liability for personal injury, property damage, natural resource damage and
any obligation for investigations, clean-up or corrective or remedial action.
"ERISA Affiliate" of any Person means any other Person that, together
with such Person as of the relevant measuring date under ERISA, was or is
required to be treated as a single employer under Section 414 of the Code.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Funded Debt" means any liabilities for borrowed money of Seller
(including short-term commercial paper borrowings and long term debt),
including all principal, interest, fees, expenses, overdrafts, penalties,
premiums and indemnities due thereunder, or intercompany payables of Seller in
any case of a nature that would be required to be reflected on a balance sheet
under GAAP.
"GAAP" means, with respect to any set of financial statements or
schedules referred to herein, generally accepted accounting principles in the
United States as in effect on the date of such financial statements or
schedules and applied on a basis consistent with the prior financial statements
of Seller.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
"Hazardous Substance" means any substance or material: (i) the
presence or release of which requires investigation or remediation under any
Applicable Law; or (ii) that is defined as a "hazardous waste" or "hazardous
substance" under any Applicable Law; or (iii) that is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic or mutagenic or
otherwise hazardous and is regulated by any Governmental Authority having or
asserting jurisdiction over Seller; or (iv) the presence or release of which
causes a nuisance, trespass or other tortious condition; (v) the presence or
release of which poses a hazard to the health or safety of Persons; or
(vi) without limitation, that contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HSTC" means the Hawaiian Sugar & Transportation Cooperative.
"HSTC Sugar Contract" means the Delivery and Sale Agreement between
HSTC and Seller dated as of June 4, 1993.
"Indemnifying Party" means: (1) with respect to any Newco Indemnitee
asserting a claim under Section 9.01, Seller, ABHI and McBryde; and (2) with
respect to any Seller Indemnitee asserting a claim under Section 9.02, Newco.
"Indemnitee" means: (1) each of Newco and its respective Affiliates
with respect to any claim for which Seller, ABHI or McBryde is an Indemnifying
Party under Section 9.01 and (2) each of Seller and its respective Affiliates
with respect to claims for which Newco is an Indemnifying Party under
Section 9.02.
"Intercompany Payables" means any Liability of Seller to the
Shareholders or any of their respective Affiliates, other than any liability of
Seller to HSTC pursuant to the HSTC Sugar Contract.
"Intercompany Receivables" means any amounts payable by any of the
Shareholders or their Affiliates to Seller other than any amount payable to
Seller by HSTC pursuant to the HSTC Sugar Contract.
"IRS" means the Internal Revenue Service.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested or executory and whether or not the same is required to be
accrued on the financial statements of such Person or is disclosed on any
schedule to this Agreement.
"Lien" means, with respect to any asset, any mortgage, title defect
or objection, lien, pledge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
"Material Adverse Effect" means a change or effect that (A) results
in a material adverse effect on, or results in a material adverse change to,
the assets, operations, financial condition or results of operations of Seller
or, after the Closing, the assets, operations, financial condition or results
of operations of Newco (excluding (i) adverse changes of an industry-wide
impact or (ii) adverse changes attributable to the execution of this Agreement
and the publicity attendant thereto) or (B) materially impairs or prohibits the
ability of Seller and Newco to consummate the transactions contemplated hereby.
"Maui Warehouse" means that certain steel building measuring 390 feet
by 300 feet, located at Puunene, Maui, Hawaii at Tax Map Key No. 3-8-006-070.
"Newco Charter" shall mean the form of Amended and Restated
Certificate of Incorporation of Newco attached hereto as Exhibit A, to be
---------
adopted by the Board of Directors of Newco prior to the Closing Date.
"Newco Class B Common Stock" means Newco's Class B Common Stock, par
value $0.01 per share, having the rights, preferences and privileges set forth
in the Newco Charter attached hereto as Exhibit A.
---------
"Newco Common Stock" means Newco's Class A Common Stock, par value
$0.01 per share, having the rights, preferences and privileges set forth in the
Newco Charter attached hereto as Exhibit A.
---------
"Newco Exchangeable Preferred Stock" means Newco's 12.5% Senior
Cumulative Exchangeable Series A Preferred Stock, par value $.01 per share,
having the rights, preferences and privileges set forth in the Newco Charter
attached hereto as Exhibit A.
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"Newco Junior Preferred Stock" means Newco's Series C Preferred Stock,
par value $.01 per share, having the rights, preferences and privileges as set
forth in the Newco Charter attached hereto as Exhibit A.
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"Newco Note" means that certain promissory note of Newco in form
attached hereto as Exhibit D in the principal amount of $25 million to be
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issued to Seller pursuant to Section 2.06(a) of this Agreement.
"Newco Series B Preferred Stock" means Newco's 12.5% Senior
Cumulative Series B Preferred Stock, par value $.01 per share, having the
rights, preferences and privileges set forth in the Newco Charter attached
hereto as Exhibit A.
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"Multiemployer Plan" means a multiemployer plan, as defined in
Section 3(37) and 4001(a)(3) of ERISA.
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet delinquent
beyond any applicable grace period, or the validity of which is being contested
in good faith by appropriate proceedings; (ii) statutory Liens of landlords and
Liens of carriers, warehousemen, mechanics, materialmen and other similar
Persons and other Liens imposed by Applicable Law incurred in the ordinary
course of business for sums not yet delinquent beyond any applicable grace
period and being contested in good faith; (iii) Liens relating to deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security or to secure the
performance of leases, trade contracts or other similar agreements; (iv) Liens
and Encumbrances specifically identified as such in the Seller Balance Sheet;
(v) Liens and Encumbrances that are a matter of public record and that do not
detract from the ability of Seller (or Newco as the case may be) to utilize the
assets encumbered thereby in the operation of the Business; (vi) Liens securing
executory obligations under any Lease that constitutes an "operating lease"
under GAAP; (vii) Liens and Encumbrances incurred in the ordinary course of
business that do not materially detract from the ability of Seller (or Newco as
the case may be) to utilize the assets encumbered thereby in the operation of
the Business and that do not materially affect the value of any asset; and
(viii) other Liens and Encumbrances set forth on Schedule 1.01(a){xe
"Schedule 1.01(a) Permitted Liens"} hereto.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust, estate or other entity or organization,
including a Governmental Authority.
"Plan Affiliate" means, with respect to any Person, any employee
benefit plan or arrangement sponsored by, maintained by or contributed to by
such Person, and with respect to any employee benefit plan or arrangement, any
Person sponsoring, maintaining or contributing to such plan or arrangement.
"Pollution Control Bonds" means those certain 6.25% Bonds due 2002,
in the aggregate principal amount of $5,400,000, issued by the California
Pollution Control Financing Authority and secured by a pledge of revenues
under a Pollution Control Facilities Lease, dated as of March 1, 1977, by and
between the California Pollution Control Financing Authority and Seller.
"Prepayment Penalties" means the Make-Whole Amount paid to the
holders of the ASRS Notes as a result of the prepayment by Seller, on December
11, 1998, of the ASRS Notes, pursuant to Section 7 of that certain Amended and
Restated Note Purchase Agreement dated as of July 1, 1993 among Seller and the
note purchasers party thereto.
"Prohibited Transaction" means a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA, respectively.
"Reference Rate" means LIBOR plus 2.75% per annum.
"Related Agreements" means the Stock Sale Agreement, the Registration
Rights Agreement to be entered into pursuant to Section 7.07 of this Agreement,
the Registration Rights Agreement to be entered into pursuant to Section 4.04
of the Stock Sale Agreement, an Indenture for the Newco Exchange Debentures,
the Stockholders Agreement (as defined in the Stock Sale Agreement), the CMP
Loan Agreement (as defined in the Stock Sale Agreement), the Transition
Services Agreement and the other agreements to be entered into in connection
with, and as a condition to, the consummation of the transactions contemplated
by this Agreement and the Stock Sale Agreement.
"Seller Key Employees" means David Koncelik, Jerry Dotson, Jon
Wolthuis, Nazeer Doomun, Jean Paul Merle, Richard Riffer, Eric Dorn, Ron
Harris, Kerry Borges, Wayne Garrett, Gary Kemp, Steven Ball, John Basi, Vijay
Hemraj, Thomas Wilson, William Duff, John McManus, John Grazioli, Michael
Haynes, Phil Gibbons, Teshager Essayas, Carolyn Braden, James Orear, Robert
Guilbault and Michael Carnahan.
"Shareholders" means ABHI and McBryde.
"Subsidiary" means, with respect to any Person, (i) any corporation
as to which more than 25% of the outstanding stock having ordinary voting
rights or power (and excluding stock having voting rights only upon the
occurrence of a contingency unless and until such contingency occurs and such
rights may be exercised) is owned or controlled, directly or indirectly, by
such Person and/or by one or more of such Person's Subsidiaries, and (ii) any
partnership, joint venture or other similar relationship between such Person
(or any Subsidiary thereof) and any other Person (whether pursuant to a
written agreement or otherwise), if such Person has a 10% or more equity
interest therein.
"Tax Return" means all returns, reports, forms or other information
(including schedules and exhibits thereto) and any amendments thereof, filed or
required to be filed with respect to any Tax.
"Tax" means all taxes imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income or gross
receipts tax, employment related tax (including employee withholding or
employer payroll tax, FICA or FUTA), real or personal property tax or ad
valorem tax, sales or use tax, excise tax, stamp tax or duty, any withholding
or back up withholding tax, value added tax, severance tax, prohibited
transaction tax, premiums tax, environmental tax, intangibles tax or occupation
tax, together with any interest or any penalty, addition to tax or additional
amount imposed by any governmental authority (domestic or foreign) responsible
for the imposition of any such tax.
"Warrants" shall mean warrants to purchase shares of Newco Common
Stock having the terms set forth in Exhibit C and such other customary rights,
preferences and privileges that are satisfactory to Seller and Newco in their
reasonable discretion.
"Working Capital" means the excess of (i) the sum of the Company's
current assets which would be required to be reflected on a balance sheet of
the Company prepared as of the Closing Date in conformity with GAAP (including,
without limitation, receivables, inventories (sugar, raw materials and
supplies) and prepaid expenses and other assets), over (ii) the sum of all
current liabilities which would be required to be reflected in or reserved on a
balance sheet of the Company prepared as of the Closing Date in conformity with
GAAP (including, without limitation, accounts payable, payables to HSTC and
accrued expenses and other current liabilities). Notwithstanding any contrary
accounting policies under GAAP, (A) Working Capital shall be calculated before
giving effect to the consummation of the transactions under this Agreement
which are contemplated to take effect as of the Closing Date, (B) Working
Capital shall not include any unpaid liabilities of the Company with respect to
any fees, expenses or other costs owed by it or for which it is responsible
(including, without limitation, all fees and expenses described in
Section 11.03(a)), in connection with the negotiation, execution and delivery
of this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby, (C) Working Capital shall not
include, as current assets, any Excluded Assets and (D) Working Capital shall
not include, as current liabilities, any Excluded Liabilities.
1.02. Index of Other Defined Terms. In addition to those terms
----------------------------
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
DEFINED TERM SECTION
"ABHI" Recitals
"Allocation Statement" 2.08
"Accounting Principles" 2.09(a)
"Assumed Liabilities" 2.03
"Business" Recitals
"Cash Component" 2.06(a)(i)
"Closing Date" 2.07(a)
"Closing" 2.07(a)
"Contracts" 2.01(c)
"Crockett Order" 2.04
"Employment Agreements" 3.13(a)
"Encumbrances" 3.07(a)
"Equipment" 2.01(a)
"Excluded Assets" 2.02
"Excluded Liabilities" 2.04
"Expenses" 11.03
"Financial Statements" 3.05(a)
"Insurance Policies" 3.18
"Intellectual Property Rights" 2.01(h)
"Inventory" 2.01(b)
"Leases" 3.07(c)
"McBryde" Recitals
"MLM" 3.19(i)
"Newco Exchange Debentures" 7.08
"Newco Indemnitees" 9.01(a)
"Newco Senior Subordinated Notes" 7.05
"Newco Securities" 3.20(a)
"Newco" Preamble
"Outside Date" 10.01(f)
"Permits" 3.11(a)
"Preliminary Statement of Working Capital" 2.06(b)
"Preliminary Working Capital Adjustment" 2.06(b)
"Proceedings" 3.09
"Purchase Consideration" 2.06(a)
"Required Consents" 3.11(b)
"Required Contractual Consent" 3.11(b)
"Required Governmental Approval" 3.11(b)
"Scheduled Contracts" 3.10(a)
"Securities Act" 3.20(a)
"Seller Balance Sheet" 3.05(a)
"Seller Indemnitees" 9.01(b)
"Seller Insurance Policies" 3.18
"Statement of Working Capital" 2.09(a)
"Stock Sale Agreement" 8.01(e)
"Subsequent Material Contract" 5.01(b)(v)
"Transferred Assets" 2.01
"Working Capital Facility" 7.05
1.03. Rules of Interpretation.
-----------------------
(a) The words "include", "includes" and "including" as used
herein are not limiting.
(b) Any pronoun used herein shall be considered gender
neutral.
ARTICLE II
TRANSFER OF ASSETS
2.01. Transfer of Assets by Seller. Upon the terms and subject to
----------------------------
the conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Newco agrees to purchase from
Seller and Seller agrees to sell or cause to be sold to Newco at the Closing,
free and clear of all Liens, other than Permitted Liens, all the assets,
properties, leases, rights, licenses, permits, contracts, causes of action,
claims, operations and businesses of Seller of every kind and description as
the same shall exist on the Closing Date (other than the Excluded Assets (as
defined in Section 2.02) or any of the foregoing that relate solely to the
Excluded Assets), wherever located, whether tangible or intangible, real,
personal or mixed, that are owned by, leased by or in the possession of Seller,
whether or not reflected on the books and records of Seller (the collective
assets, properties, rights, licenses, permits, contracts, causes of action,
claims, operations and businesses to be transferred to Newco by Seller
pursuant hereto are referred to collectively herein as the "Transferred
Assets") and including without limitation all right, title and interest of
Seller in, to and under:
(a) all machinery, equipment, furniture, office equipment,
computer equipment (including all hardware and software), communications
equipment, vehicles, storage tanks, spare and replacement parts, fuel and other
tangible property (and interests in any of the foregoing) (collectively, the
"Equipment");
(b) all items of inventory notwithstanding how classified in
the financial records of Seller, including all raw materials, work-in-process,
finished goods, supplies, spare parts and samples (collectively, the
"Inventory");
(c) all contracts, agreements, options, leases, licenses,
sales and purchase orders, commitments and other instruments of any kind,
whether written or oral, to which Seller is a party on the Closing Date,
including the Scheduled Contracts and the Subsequent Material Contracts, but
excluding any documents, instruments or agreements governing Funded Debt of
Seller other than the Pollution Control Bonds (collectively, the "Contracts");
(d) all accounts, accounts receivable and notes receivable,
together with any unpaid interest or fees accrued thereon or other amounts due
with respect thereto, of Seller, and any security or collateral therefor,
including recoverable advances and deposits;
(e) all prepaid charges and expenses of Seller, including any
such charges and expenses with respect to ad valorem taxes, leases and rentals
and utilities;
(f) subject to Section 5.04(b), the Seller Insurance Policies
and all rights of Seller to insurance proceeds with respect to claims for
Damages to the Transferred Assets occurring prior to the Closing Date, unless
such proceeds reimburse Seller for the repair or restoration of such
Transferred Assets and such amounts are so used;
(g) all of Seller's rights, claims, credits, causes of action
or rights of set-off against third parties relating to the Business or the
Transferred Assets, whether liquidated or unliquidated, fixed or contingent,
including claims pursuant to all warranties, representations and guarantees
made by suppliers, manufacturers, contractors and other third parties in
connection with products or services purchased by or furnished to Seller for
use in the Business or affecting any of the Transferred Assets;
(h) all of Seller's patents, patent applications, copyrights,
trademarks, trade names, brand names, slogans, logos, service marks, service
names, designs, and any registrations or applications for registration of any
of the foregoing, know-how, chip designs, mask works, processes, trade secrets,
inventions, confidential information, formulae and other proprietary data and
information, together with the right to sue for past infringements or
misappropriations thereof, and any and all corresponding rights that now or
hereafter may be secured throughout the world and all copies and tangible
embodiments thereof (together, the "Intellectual Property Rights");
(i) all transferable franchises, licenses, permits or other
authorizations issued or granted by any Governmental Authority that are owned
by, granted to or held or used by Seller whether or not utilized in the
Business;
(j) to the extent available, all books, records, files and
papers of Seller, whether in hard copy or computer format, including bank
account records, books of account, invoices, engineering information, sales and
promotional literature, manuals and data, sales and purchase correspondence,
lists of present suppliers, personnel and employment records of present and, to
the extent lawful, former employees, and documentation developed or used for
accounting, marketing, engineering, manufacturing or any other purpose related
to the conduct of the Business at any time prior to the Closing except to the
extent any such materials constitute Excluded Assets (as defined below);
(k) to the extent available, all lists of present customers
and lists of former customers;
(l) all goodwill associated with the Business or the
Transferred Assets of Seller and all rights in and to the Business as a going
concern; and
(m) except as specifically provided in Section 2.02, all
other assets and properties of Seller which exist on the Closing Date, whether
tangible or intangible, real or personal.
2.02. Excluded Assets. Newco expressly understands and agrees that
---------------
the following assets shall be excluded from the Transferred Assets: (i) any
cash or cash equivalents of Seller, (ii) deferred income tax assets and claims
for refund of income taxes of Seller, (iii) Intercompany Receivables and (iv)
the Maui Warehouse (collectively, the "Excluded Assets").
2.03. Assumption of Liabilities. Upon the terms and subject to the
-------------------------
conditions of this Agreement and in reliance upon the representations,
warranties and agreements herein set forth, Newco agrees, effective at the time
of Closing, to assume, perform and timely pay and discharge all Liabilities of
Seller other than the Excluded Liabilities (as defined in Section 2.04) (the
"Assumed Liabilities").
2.04. Excluded Liabilities. Newco does not hereby assume, and shall
--------------------
not at any time hereafter (including on or after the Closing Date) become
liable for: (A) any Funded Debt of Seller (other than the obligations of Seller
to pay (i) the principal amount of, and all accrued and unpaid interest on, the
Pollution Control Bonds, (ii) any interest accruing on the Pollution Control
Bonds from and after the Closing Date and (iii) Prepayment Penalties that have
been paid with respect to the ASRS Notes prior to the date hereof, as is more
specifically addressed in Section 6.07); (B) any Liability (including without
limitation any Environmental Liabilities) relating to or arising from the
ownership or operation of the Maui Warehouse or any Excluded Asset; (C) any
Environmental Liability relating to or arising from real property owned,
operated, leased or used by Seller prior to the Closing Date that is no longer
owned, operated, leased or used by Seller as of the Closing Date (provided,
that any Liability or obligation of Seller pursuant to that certain order of
the California Regional Water Quality Control Board -- San Francisco Bay Region
(Order No. 95-191) dated September 13, 1995 (the "Crockett Order") shall not be
excluded but shall be assumed by Newco); (D) any Intercompany Payables; (E) any
Liability of Seller in respect of income Taxes; or (F) any Liability relating
to any current or former employee of Seller under any Employee Benefit Plan or
Benefit Arrangement other than a Liability specifically assumed by Newco in
Article VII (collectively, the "Excluded Liabilities").
2.05. Assignment of Contracts and Rights.
----------------------------------
(a) With respect to any Scheduled Contract (as defined in
Section 3.10(a)) and any other Contract for which consent is required and any
claim, right or benefit arising thereunder or resulting therefrom, promptly
after the date hereof, Seller will use its commercially reasonable efforts to
obtain prior to Closing each Required Contractual Consent (as defined in
Section 3.11(b)) to any such Scheduled Contract and any other Contract for
which consent is required for the assignment thereof to Newco in form and
substance reasonably satisfactory to Newco.
(b) If (i) any such Required Contractual Consent is not
obtained with respect to any such Scheduled Contract and (ii) notwithstanding
the provisions of Section 8.01(b), Newco shall elect to consummate the Closing,
Seller and Newco shall cooperate in an arrangement reasonably satisfactory to
Newco and Seller under which Newco would obtain, to the extent practicable, the
claims, rights and benefits arising under such Scheduled Contract and assume
the corresponding obligations thereunder in accordance with this Agreement,
including subcontracting, sub-licensing or sub-leasing to Newco, or under which
Seller would enforce for the benefit of Newco, with Newco assuming Seller's
obligations, any and all claims, rights and benefits of Seller against a third
party thereto. Seller will promptly pay to Newco when received all moneys
received by Seller under any Transferred Asset or any claim, right or benefit
arising thereunder not transferred to Newco pursuant to this Section 2.05.
2.06. Purchase Consideration.
----------------------
(a) In addition to the assumption by Newco of the Assumed
Liabilities, the consideration for the Transferred Assets shall consist of the
following:
(i) an amount in cash (hereinafter referred to as the
"Cash Component") equal to (A) $68,000,000, as adjusted in accordance with
Section 2.06(b) by the Preliminary Working Capital Adjustment (as defined
in Section 2.06(b) below), minus (B) the principal amount of, and interest
accrued through the Closing Date on, the Pollution Control Bonds, which
principal amount and accrued interest shall be set forth on a statement to
be delivered to Newco by Seller not less than three (3) Business Days
prior to the Closing Date;
(ii) 25,000 shares of Newco Exchangeable Preferred
Stock;
(iii) the Newco Note in the principal amount of $25
million;
(iv) 24,000 shares of Newco Junior Preferred Stock; and
(iv) 810,000 shares Newco Common Stock and 90,000
shares of Newco Class B Common Stock.
The consideration described in clauses (i) (as finally
adjusted pursuant to Section 2.10), (ii), (iii) and (iv) is referred to herein
collectively as the "Purchase Consideration".
(b) Not later than three (3) Business Days prior to the
Closing Date, Seller will prepare and deliver to Newco a statement of projected
Working Capital (the "Preliminary Statement of Working Capital") of Seller as
of the Closing Date (which shall be prepared no more than five (5) days prior
to the Closing Date). The Preliminary Statement of Working Capital shall be
based upon the balance sheet of Seller as of the last day of the calendar month
preceding the Closing Date and the books and records of Seller and (except as
otherwise provided in the definition of "Working Capital") shall be prepared in
accordance with GAAP in a manner consistent with the accounting principles used
in preparing the Seller Balance Sheet (as defined below), with such reasonable
assumptions and estimates regarding changes in Working Capital between the
month preceding the Closing Date and the Closing Date as are agreed upon by
Seller and Newco. Theount by which the Working Capital of Seller as set forth
in the Preliminary Statement of Working Capital exceeds or is less than
$64,263,000 (subject to adjustment pursuant to Section 2.09(a), the "Estimated
Working Capital Amount") (such excess or deficiency, as applicable, being
referred to as the "Preliminary Working Capital Adjustment"), shall be an
addition (in the case of an excess), or a deduction (in the case of a
deficiency), in the formula for determining the Cash Component pursuant to
Section 2.06(a)(i).
2.07. Closing.
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(a) The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of Gibson, Dunn
& Crutcher LLP, 333 South Grand Avenue, Los Angeles, California 90071 on the
third (3rd) Business Day following the date on which the last of the conditions
to Closing set forth in Sections 8.01, 8.02 and 8.03 have been satisfied or
waived by the party or parties entitled to waive the same or such other date as
to which Newco and Seller may agree (the "Closing Date").
(b) At the Closing, Newco shall deliver to Seller such
customary instruments of assumption as may be reasonably requested by Seller to
evidence such assumption of the Assumed Liabilities.
(c) At the Closing, Seller shall deliver to Newco such bills
of sale, certificates of title, endorsements, consents, assignments and other
good and sufficient instruments of conveyance and assignment (which in the case
of Intellectual Property Rights, shall be documents recordable in their
delivered form in the respective countries of origin) necessary or appropriate
to vest in Newco all of Seller's right, title and interest in, to and under the
Transferred Assets.
(d) At the Closing, Newco shall deliver to Seller, at
Seller's election, by wire transfer (to a bank account designated by Seller in
writing at least three (3) Business Days prior to the Closing Date), in imme-
diately available funds, an amount in U.S. Dollars equal to the Cash Component.
(e) At the Closing, Seller shall receive (i) one or more
certificates representing in the aggregate 25,000 shares of Newco Exchangeable
Preferred Stock; (ii) the Newco Note; (iii) one or more certificates
representing in the aggregate 24,000 shares of Newco Junior Preferred Stock;
(iv) one or more certificates representing in the aggregate 810,000 shares of
Newco Common Stock; and (v) one or more certificates representing in the
aggregate 90,000 shares of Newco Class B Common Stock as applicable.
2.08. Purchase Consideration Allocation. Schedule 2.08 sets forth
--------------------------------- -------------
the mechanism by which the parties will allocate the Purchase Consideration and
Assumed Liabilities (to the extent taken into account for federal income tax
purposes) among the Transferred Assets for purposes of complying with Section
1060 of the Code and making any required filings under state or local law
(the "Allocation Statement"). Newco and Seller shall report the tax
consequences of the transactions contemplated by this Agreement in a manner
consistent with the Allocation Statement, as it may be revised from time to
time, and shall not take any position inconsistent therewith. The parties
agree that the transactions contemplated hereby constitute a taxable sale of
assets for income tax purposes and not as a transaction described in Part III,
Subchapter C, Chapter 1, Subtitle A of the Code.
2.09. Preparation of Final Statement of Working Capital.
-------------------------------------------------
(a) Within 90 days after the Closing Date, Seller will
prepare and deliver to Newco a statement of Working Capital (the "Statement
of Working Capital") of Seller as of the Closing Date (immediately prior to,
and without giving effect to, the Closing), which shall be audited by Deloitte
& Touche LLP, the independent public accountants of Seller. In connection with
the preparation of the Statement of Working Capital, Seller shall give to the
representatives of Newco reasonable opportunity to participate in the physical
inventory count and other examinations relating to the preparation of such
Statement of Working Capital. The Statement of Working Capital shall be based
upon the books and records of Seller and (except as otherwise provided in this
Section 2.09 or the definition of "Working Capital") shall be prepared in
accordance with GAAP in a manner consistent with the Accounting Principles
(as defined below). "Accounting Principles" means that each accounting term
used herein (including in the definition of Working Capital) shall have the
meaning that is applied thereto in accordance with GAAP and each account
included in the Statement of Working Capital of the Seller prepared as of the
Closing Date shall be calculated in accordance with GAAP, in each case,
consistent with the Financial Statements and books and records of, and the past
practice of, the Seller and in a manner consistent with the method of
calculation used in determining the Estimated Working Capital Amount as set
forth on Schedule 2.09(a); provided, that all known errors shall be taken into
account in the calculation of each account set forth in the Statement of
Working Capital, regardless of their materiality, and a corresponding adjust-
ment shall be made to the Estimated Working Capital Amount to the extent such
known errors would have an impact upon the calculation of any account included
in the determination of the Estimated Working Capital Amount. With respect to
the calculation of the levels of the accounts set forth above, no change in
Accounting Principles shall be made from those utilized in preparing the
Financial Statements (with regard to materiality) including, without
limitation, with respect to the nature or classification of accounts,
closing proceedings, levels of reserves, levels of accruals or reserve policies
other than as a result of objective changes in the underlying business. For
purposes of the preceding sentence, "changes in accounting principles" includes
all changes in accounting principles, policies, practices, procedures or
methodologies with respect to financial statements, their classification or
their display, as well as all changes in practices, methods, conventions or
assumptions utilized in making accounting estimates.
(b) If Newco has no objections to the Statement of Working
Capital prepared and delivered by Seller pursuant to subsection (a), it shall
so notify Seller, and the Statement of Working Capital shall become final on
the date Newco provides such notice. If Newco has any objections to the
Statement of Working Capital delivered by Seller, it will deliver a statement
describing its objections to the calculation of any item on the Statement of
Working Capital to Seller within 30 days after receiving such Statement of
Working Capital. Newco's failure to deliver a written statement of objections
within 30 days after its receipt of the Statement of Working Capital shall
constitute Newco's acceptance of the Statement of Working Capital, in which
event, the Statement of Working Capital shall become final on such 30th day
after Newco's receipt of the Statement of Working Capital. Newco, and its
independent certified public accountants, Ernst & Young LLP shall, during the
period between the delivery by Seller of the Statement of Working Capital and
the final resolution of any dispute relating thereto, be permitted to have
access to, examine and make copies of all books and records (including but not
limited to correspondence, memoranda, books of account and the like) in the
possession of Seller relating to the sale of assets and, upon execution of the
standard form indemnity letter of Deloitte & Touche LLP, be permitted to review
the working papers of Deloitte & Touche LLP relating to such Statement of
Working Capital and shall have such access to Seller and its personnel as may
be reasonably necessary to permit Ernst & Young LLP to review in detail the
manner in which such Statement of Working Capital was prepared. Seller and
Deloitte & Touche LLP shall cooperate with Newco and Ernst & Young LLP in
facilitating such review. If any matter cannot be resolved by the parties
within 15 days following delivery of Newco's notice of objection, the San
Francisco office of KPMG Peat Marwick LLP (or if such office of KPMG Peat
Marwick LLP is unavailable for any reason, the San Francisco office of Price
Waterhouse Coopers LLP) (in each case, the "Independent Auditors") will be
retained to resolve all remaining objections. Any determination shall be made
by the Independent Auditors on the basis of such procedures as it, in its sole
judgment, deems appropriate and expeditious, taking into account the nature of
the issues, the amount in dispute and the positions asserted by the parties.
The Independent Auditors shall not be required to follow any particular rules
or procedures (except as provided in this Agreement and except that the
Independent Auditors shall be bound by the provisions of this Section 2.09 and
the defined accounting terms and other terms set forth in this Agreement),
it being the intention of the parties to create a flexible, practical and
expeditious method for resolving any disagreement hereunder. The parties may
submit to such firm any facts or materials which they deem relevant to the
determination. The determination of the Independent Auditors will be set forth
in writing and will be conclusive, nonappealable and binding upon the parties
hereto for all purposes (if prepared in accordance with this Section 2.09).
(c) The parties shall pay the fees and expenses of their
respective internal and independent accountants and personnel incurred pursuant
to this Section 2.09. In the event the parties submit any unresolved
objections to the Independent Auditors for resolution as provided in Section
2.09(b) above, Newco, on the one hand, and Seller, on the other hand, shall
each bear equal responsibility for the fees and expenses of the Independent
Auditors.
2.10. Adjustments Resulting From The Statement of Working Capital.
-----------------------------------------------------------
The Cash Component described in Section 2.06 will be adjusted as follows:
(a) If the Working Capital of Seller measured as of the
Closing Date, as finally determined pursuant to Section 2.09, exceeds the
Working Capital as set forth in the Preliminary Statement of Working Capital,
Newco will pay to Seller an amount equal to such excess, together with interest
on the amount of such payment from the Closing Date until the date of such
payment at a floating rate of interest equal to the Reference Rate, by wire
transfer or delivery of other immediately available funds within five business
days after the date on which the Working Capital of Seller as reflected on the
Statement of Working Capital is finally determined pursuant to Section 2.09
above; and
(b) If the Working Capital of Seller measured as of the
Closing Date, as finally determined pursuant to Section 2.09, is less than the
Working Capital as set forth in the Preliminary Statement of Working Capital,
Seller will pay to Newco an amount equal to such deficiency, together with
interest on the amount of such payment from the Closing Date until the date of
such payment at a floating rate of interest equal to the Reference Rate, by
wire transfer or delivery of other immediately available funds within five
business days after the date on which the Working Capital of Seller as
reflected on the Statement of Working Capital finally is determined pursuant to
Section 2.09 above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Newco, and with respect to
Sections 3.01 through 3.04 only, the Shareholders represent and warrant to
Newco as follows:
3.01. Corporate Existence and Power.
-----------------------------
(a) Seller is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, and has
all requisite power and all governmental licenses, authorizations, consents and
approvals required to carry on the Business of Seller as now conducted and to
own and operate the Transferred Assets as now owned and operated. Seller is
duly qualified to do business as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary to carry on the Business as now
conducted, except for those jurisdictions where the failure to be so qualified
has not had, and would not reasonably be expected to have, a Material Adverse
Effect.
(b) The Company does not, directly or indirectly, (a) have
any Subsidiaries or (b) own or hold beneficially or of record any shares of
capital stock, equity interests or any other securities of any other entity.
3.02. Authorization. The execution, delivery and performance by
-------------
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby are within Seller's corporate powers and have been duly
authorized by all necessary action on the part of Seller. This Agreement has
been duly and validly executed by Seller and constitutes the legal, valid and
binding agreement of Seller, enforceable against it in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and subject to general principles of equity.
3.03. Governmental Authorization. The execution, delivery and
--------------------------
performance by Seller of this Agreement require no action by, consent or
approval of, or filing with, any Governmental Authority other than
(a) compliance with any applicable requirements of the HSR Act and Federal and
state securities laws or (b) any actions, consents, approvals or filings
otherwise expressly referred to in this Agreement. To the knowledge of Seller,
there are no facts relating to the identity or circumstances of Seller that
would prevent or materially delay obtaining any of the Required Consents.
3.04. Non-Contravention. The execution, delivery and performance by
-----------------
Seller of this Agreement do not and will not (a) contravene or conflict with
the certificate of incorporation or bylaws of Seller, a true and correct copy
of which has been delivered to Newco by Seller; (b) assuming receipt of the
Required Consents, contravene or conflict with or constitute a violation of any
provision of any Applicable Law binding upon or applicable to Seller, the
Business or any of the Transferred Assets; (c) except as set forth on Schedule
--------
3.04(c), constitute a default under or give rise to any right of
-------
termination, cancellation or acceleration of, or to a loss of any benefit to
which Seller is entitled under, any Scheduled Contract, any Subsequent
Material Contract or any Permit or similar authorization relating to the
Business or included in any of the Transferred Assets or by which the Business
or any of the Transferred Assets may be bound; or (d) result in the creation or
imposition of any Lien on any Transferred Assets, other than Permitted Liens;
except, with respect to clauses (b) and (d), where the violation or Lien would
not have a Material Adverse Effect.
3.05. Financial Statements; Undisclosed Liabilities.
---------------------------------------------
(a) Seller has heretofore delivered to Newco or its
Affiliates true and complete copies of the consolidated balance sheet and
related statement of operations and retained earnings and of cash flows for
Seller as of and for the years ended December 31, 1995, 1996 and 1997, in each
case audited by Deloitte & Touche LLP (the "Financial Statements"). The
December 31, 1997 balance sheet is referred to herein as the "Seller Balance
Sheet".
(b) Each of the Financial Statements (i) has been prepared
based on the books and records of Seller in accordance with GAAP and Seller's
normal accounting practices, consistent with past practice, and present fairly
in all material respects the consolidated financial condition, results of
operations and statements of cash flow of Seller as of the dates indicated or
for the periods indicated; and (ii) contains and reflects all necessary adjust-
ments, accruals, provisions and allowances for a fair presentation in all
material respects of the combined financial condition and the combined results
of operations of Seller for the periods covered by such financial statement;
provided, however, that Newco acknowledges that, prior to the filing or
distribution of any public or private equity or debt offering document which
includes historical financial statements of the Seller for any period ended or
ending at or prior to December 31, 1998 ("Historical Financial Statements"),
the Seller may, upon the advice of its independent accountants, Delloite & Touche, revise and reissue, or cooperate in the revision and reissuance of,
any such Historical Financial Statements to make appropriate revisions to
comply with Regulation S-X and to modify the footnote description of Other
Assets, provided that such changes do not change the amounts recorded in the
Balance Sheets, Statements of Operations, or Statements of Cash Flows and that
such changes do not change the amortization lives assigned to assets. The
Seller further agrees to work with Deloitte & Touche to obtain from that firm
unqualified audit opinions on such revised and reissued Historical Financial
Statements and to obtain the agreement of such firm to consent to the inclusion
of their unqualified opinions on the revised and reissued Historical Financial
Statements in any filings with the United States Securities and Exchange
Commission or other body in connection with which such consents are required.
(c) Except as set forth on Schedule 3.05(c), there are no
----------------
material Liabilities of Seller required by GAAP to be included on a balance
sheet or the notes thereto other than: (i) any Liability accrued as a
Liability on Seller Balance Sheet; (ii) Liabilities specifically disclosed and
identified as such in the schedules to this Agreement; (iii) Liabilities
incurred since the date of the Seller Balance Sheet in the ordinary course of
business and (iv) Liabilities that do not, and will not, individually or in the
aggregate, have a Material Adverse Effect.
3.06. Absence of Certain Changes. Except as set forth on
--------------------------
Schedule 3.06, between the date of the Seller Balance Sheet and the date of
-------------
execution of this Agreement, (a) the Business has been conducted
in the ordinary course consistent with past custom and practice, (b) there has
not been any event, occurrence, development or state of circumstances or facts
or change in the Transferred Assets or the Business (including any damage,
destruction or other casualty loss, but excluding any event, occurrence,
development or state of circumstances or facts or change resulting from changes
in general economic conditions) affecting the Business or any Transferred
Assets that has had or that may be reasonably expected to have, either alone or
together with all such events, occurrences, developments, states of
circumstances or facts or changes, a Material Adverse Effect, (c) there has not
been any material change by Seller in its accounting principles, methods or
practices or in the manner in which it keeps its books and records or any
material change by Seller of its current practices with regards to inventory,
sales, receivables, payables or accrued expenses which would affect the timing
of collection of receivables or the payment of payables (provided, however,
that Newco acknowledges that, prior to the filing or distribution of any public
or private equity or debt offering document which includes Historical Financial
Statements, the Seller may, upon the advice of its independent accountants,
Deloitte & Touche, revise and reissue, or cooperate in the revision and
reissuance of, any such Historical Financial Statements to make appropriate
revisions to comply with Regulation S-X and to modify the footnote description
of Other Assets, provided that such changes do not change the amounts recorded
in the Balance Sheets, Statements of Operations, or Statements of Cash Flows
and that such changes do not change the amortization lives assigned to assets)
and (d) Seller has not taken any of the actions set forth in or required to be
disclosed pursuant to Section 5.01(b).
3.07. Properties; Leases; Tangible Assets.
-----------------------------------
(a) Seller has a good, valid title to or, in the case of the
Leased Real Properties (as defined below) or properties held under license, a
good and valid leasehold or license interest in, all of its properties,
including all such properties (real, personal or mixed, tangible or intangible
(including the Intellectual Property Rights)) reflected in the Seller Balance
Sheet, except those properties disposed of in the ordinary course of business
after the date thereof. Disclosed on Schedule 3.07(a) is the address and legal
----------------
description of each parcel of real property (other than real property that is
an Excluded Asset) owned by Seller. Except as disclosed in Schedule 3.07(a),
----------------
Seller holds title to each such property and asset free and clear of all Liens,
adverse claims, easements, rights of way, servitudes, or any other rights of
others or other adverse interests of any kind, including leases, chattel
mortgages, conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements (collectively, "Encumbrances"),
except Permitted Liens.
(b) Except as set forth on Schedule 3.07(b), all tangible
----------------
properties and assets (other than inventory) included in the Transferred Assets
are in all material respects structurally sound and are in good operating
condition and repair (other than normal wear and tear) and are adequate for the
uses to which they are put.
(c) Schedule 3.07(c) sets forth all personal property leases
----------------
to which Seller is a party or by which either Seller is bound involving annual
lease payments of in excess of $1,600,000 and all real property leases (such
Schedule 3.07(c) describing separately those leases relating to real property
----------------
(the "Leased Real Property") and indicating where appropriate those leases that
have been recorded for tax, protection of title or interest, or other purposes)
entered into by Seller (collectively, the "Leases"). With respect to the
Leases, except as disclosed in Schedule 3.07(c), there exists no default by
----------------
Seller or, to the knowledge of Seller, any default beyond any applicable grace,
cure or notice periods by any third party thereunder, except for defaults which
could not, individually or in the aggregate, have a Material Adverse Effect.
Except as disclosed in Schedule 3.07(c), each Lease is a legal, valid
----------------
and binding obligation of Seller, and, to the best knowledge of Seller, each
other party thereto, enforceable against each such party thereto in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and subject to general principles of equity. Assuming that the
necessary Required Contractual Consents (as defined in Section 3.11(b)) are
obtained, the transfer of the Transferred Assets contemplated by this Agreement
will not result in any default, penalty or modification to any Lease, except
for defaults, penalties or modifications that would not, individually or in the
aggregate, have a Material Adverse Effect.
3.08. Sufficiency of and Title to the Transferred Assets. Upon
--------------------------------------------------
consummation of the transactions contemplated by this Agreement, Seller will
have sold, assigned, transferred and conveyed to Newco all of the Transferred
Assets, free and clear of all Liens (other than Permitted Liens securing
Assumed Liabilities). The Transferred Assets include all of the assets and
properties of Seller (other than the Excluded Assets) used or employed by
Seller in the ordinary course of operating the Business consistent with past
practice as of the date of and as reflected on the Seller Balance Sheet and
will include all of the assets and properties of Seller (other than the
Excluded Assets) used or employed by Seller in the ordinary course of operating
the Business consistent with past practice as of the Closing Date. Except as
disclosed on Schedule 3.08, there are no facilities, assets or properties
-------------
included within the Transferred Assets that are used by any Person for purposes
other than the operation of the Business.
3.09. Litigation. Except as disclosed in Schedule 3.09, (i) there
---------- -------------
are no actions, suits, hearings, arbitrations, proceedings (public or private)
or, to the knowledge of Seller, governmental investigations, that have been
brought by or against any Governmental Authority or any other Person
(collectively, "Proceedings") pending or, to the knowledge of Seller,
threatened, against Seller, the Business or any of the Transferred
Assets, which, if adversely determined, could have a Material Adverse Effect or
which seek to enjoin or rescind the transactions contemplated by this Agreement
or otherwise seek to prevent Seller from complying with the terms and
provisions of this Agreement; and (ii) to the knowledge of Seller, there are no
existing orders, judgments or decrees of any Governmental Authority directly
affecting any of the Transferred Assets or the Business.
3.10. Contracts.
---------
(a) Schedule 3.10(a) sets forth a complete list of all
----------------
existing Contracts of Seller that are material to Seller, including without
limitation the following (collectively with the Leases and the Employment
Agreements, the "Scheduled Contracts"):
(i) each Contract between Seller and (A) each present
or former director, officer or other member of management or other
personnel of Seller, the dollar volume of which exceeds $50,000 on an
annual basis, (B) any supplier of services or products to the Business
whose dollar volume of sales to Seller exceeded in 1997, and (C) any
Person in which the aggregate payments made to Seller under such Contract
exceeded in 1997 $50,000 (excluding for the purposes of clauses (B) and
(C) purchase orders or sales orders entered into in the ordinary course of
business);
(ii) each other agreement or arrangement of Seller that
requires the payment or incurrence of Liabilities, or the rendering of
services, by Seller, subsequent to the date of this Agreement, of more
than $100,000;
(iii) all Contracts relating to, and evidences of or
guarantees of, or providing security for, the deferred purchase price of
property (whether incurred, assumed, guaranteed or secured by any asset)
the purchase price of which exceeds $100,000;
(iv) all material partnership, joint venture or other
similar Contracts, arrangements or agreements;
(v) all material license, sale, distribution,
commission, marketing, agent, franchise, technical assistance or similar
agreements relating to or providing for the marketing and/or sale of the
products or services to which Seller is a party or by which Seller is
otherwise bound;
(vi) each Contract and other agreement with any labor
union or association representing any employee;
(vii) each Contract and other agreement for the sale of
any of its assets or properties or for the grant to any Person of any
preferential rights to purchase any of its assets or properties, in each
case in an amount exceeding $100,000;
(viii) all take or pay or requirements Contracts or
agreements or any other Contracts or agreements requiring the Seller to
pay regardless of whether products or services are received;
(ix) each Contract and other agreement containing
covenants pertaining to the right to compete or not compete in any line of
business or similarly restricting the ability to conduct business with any
Person or in any geographical area;
(x) each Contract and other agreement relating to the
acquisition by the Seller of any operating business or the capital stock
of any other Person; and
(xi) all mortgages, indentures, notes, bonds, letters
of credit and other agreements relating to the borrowing of money,
creation of Liens, any indemnity, or the guarantee of the payment of
liabilities or performance of obligations to or by the Seller, to or by
any other Person;
provided, however, that the following Contracts shall not be required to be
disclosed on Schedule 3.10(a): (A) Contracts with third parties providing
----------------
goods or services to Seller which (1) are by their terms terminable by Seller
without penalties upon ninety (90) days' notice or less or (2) have remaining
annual payments thereunder of less than $50,000, (B) Contracts with customers
which provide for (1) monthly payments of less than $10,000 and (2) annual
price adjustments of not more than the amount of the annual adjustment of the
Consumer Price Index and (3) a remaining term of not more than twenty-four (24)
months or (C) purchase orders or sales orders entered into in the ordinary
course of business.
(b) Seller has made true and correct copies of all such
Scheduled Contracts available to Newco. With respect to the Scheduled
Contracts, there exists no material default by Seller or, to the knowledge of
Seller, any material default or threatened material default by any third party
thereunder, that has affected or could reasonably be expected to affect
materially and adversely the rights and privileges thereunder of Seller that is
a party to the Scheduled Contract or result in any material Liability of
Seller. Except as disclosed in Schedule 3.10(b), each Scheduled Contract is a
----------------
legal, valid and binding obligation of Seller, and to the knowledge of Seller,
each other party thereto, and is enforceable against each such party thereto in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and subject to general principles of equity. Except as
provided in Schedule 3.10(b), assuming that the necessary Required Contractual
----------------
Consents are obtained, the transfer of the Transferred Assets contemplated by
this Agreement will not result in any default, penalty or modification to any
Scheduled Contract, except for defaults, penalties or modifications that would
not, individually or in the aggregate, have a Material Adverse Effect.
3.11. Permits; Required Consents.
--------------------------
(a) Schedule 3.11(a) sets forth all approvals,
----------------
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons),
other than those relating to Environmental Laws (which are the subject of
Section 3.17), necessary under Applicable Law for the ownership or
operation of the Transferred Assets or the Business in substantially the same
manner as operated on the date of the Seller Balance Sheet and the date hereof
and as of the Closing Date (the "Permits") except for those the absence of
which would not individually or in the aggregate have a Material Adverse
Effect.
(b) Schedule 3.11(b) lists (i) each governmental or other
----------------
registration, filing, application, notice, transfer, consent, approval, order,
qualification and waiver (each, a "Required Governmental Approval"), other than
those relating to Environmental Laws (which are the subject of Section 3.17),
required under Applicable Law to be obtained by Seller by virtue of the
execution and delivery of this Agreement or the consummation of the trans-
actions contemplated hereby to avoid the loss of any material Permit, and
(ii) each Scheduled Contract with respect to which the consent of the other
party or parties thereto must be obtained by Seller by virtue of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the invalidity of the transfer of such Scheduled
Contract, the termination thereof or a material breach or default or
acceleration thereunder (each, a "Required Contractual Consent" and
collectively with the Required Governmental Approvals, the "Required
Consents"). Except as set forth in Schedule 3.11(b), to the knowledge of
----------------
Seller, each Permit is valid and in full force and effect in all material
respects and, assuming the related Required Consents have been obtained prior
to the Closing Date, are or will be transferable by Seller, and assuming the
related Required Consents have been obtained prior to the Closing Date, none of
the Permits will be terminated or become terminable or impaired in any material
respect as a result of the transactions contemplated hereby.
3.12. Compliance with Applicable Laws. Except as set forth in
-------------------------------
Schedule 3.12, and except for violations or infringements of Applicable Law
-------------
that do not individually or in the aggregate have a Material Adverse Effect,
Seller is currently in compliance with, and the operation of the Business and
condition of the Transferred Assets during the past two (2) years have not
violated or infringed, any Applicable Law; provided, however, that this
Section 3.12 shall not be deemed to address compliance with Environmental Laws,
which are the subject of Section 3.17.
3.13. Employment Agreements; Change in Control; and Employee
------------------------------------------------------
Benefits.
--------
(a) Except as set forth on Schedule 3.13(a), there are no
----------------
employment, consulting, severance pay, continuation pay, termination pay or
indemnification agreements or other similar agreements (collectively,
"Employment Agreements") between Seller, on the one hand, and any current or
former stockholder, officer, director, employee or Affiliate of Seller or any
of its respective Affiliates or any consultant or agent of Seller, on the other
hand, that are currently in effect. Except as set forth on Schedule 3.13(a),
----------------
there are no Employment Agreements or any other similar agreements to which
Seller is a party under which the transactions contemplated by this Agreement
(i) will require any payment by Seller, or any consent or waiver from any
stockholder, officer, director, employee or Affiliate of Seller or any of their
respective Affiliates or any consultant or agent of Seller or (ii) will result
in any material adverse change in the nature of any rights of any stockholder,
officer, director, employee or Affiliate of Seller or any of their respective
Affiliates or any consultant or agent of Seller under any such Employment
Agreement or other similar agreement.
(b) Schedule 3.13(b) sets forth all Benefit Plans of Seller.
Seller has made true and correct copies of all governing instruments and
related agreements pertaining to such Benefit Plans available to Newco.
(c) With respect to any Employee Pension Benefit Plan
maintained by Seller or any of its ERISA Affiliates, there have within the last
two years been no reportable events under ERISA Section 4043 with respect to
which the 30 day reporting requirement has not been waived and no such plan has
been terminated or is reasonably expected to be terminated under ERISA Section
4041(c) or 4042 and, with respect to any Employee Pension Benefit Plan assumed
by Newco in accordance with Section 7.04(a), there is no liability under
Title IV of ERISA other than for premiums due in the future to the PBGC.
(d) Neither Seller nor any of its ERISA Affiliates has within
the last two years incurred or reasonably expects to incur any withdrawal
liability to any Multiemployer Plan which is a pension plan within the meaning
of ERISA Section 3(2).
(e) Except pursuant to the Benefit Plans listed in
Schedule 3.13(e), no individual shall accrue or receive additional benefits,
----------------
service or accelerated rights to payments of benefits under any Benefit Plan,
including the right to receive any parachute payment, as defined in Section
280G of the Code, or become entitled to severance, termination allowance or
similar payments as a direct result of the transactions contemplated by this
Agreement.
(f) No Employee Benefit Plan has participated in, engaged in
or been a party to any non-exempt Prohibited Transaction, and Seller nor any of
Seller's Affiliates or ERISA Affiliates has had asserted against it any claim
for taxes under Chapter 43 of Subtitle A of the Code and Section 5000 of the
Code, or for penalties under ERISA Section 502(c), (i) or (l), with respect to
any Employee Benefit Plan nor, to the knowledge of Seller, is there a material
basis for any such claim. No officer, director or employee of Seller has
committed a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA with respect to any Employee Benefit Plan.
(g) Except as set forth in Schedule 3.13(g), other than
----------------
routine claims for benefits, there is no claim pending, or to the knowledge of
Seller, threatened, involving any Benefit Plan by any Person against such
Benefit Plan, Seller or its Affiliates and ERISA Affiliates. There is no
pending, or to the knowledge of Seller, threatened, proceeding involving any
Employee Benefit Plan before the IRS, the United States Department of Labor or
any other Governmental Authority.
(h) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any Benefit
Plan.
(i) Each Benefit Plan has at all times prior hereto been
maintained in all material respects, by its terms and in operation, in
accordance with ERISA, the Code, and any other applicable law. Each Employee
Benefit Plan which is intended to be a "qualified plan" under Code
Section 401(a) has received a favorable determination letter from the Internal
Revenue Service that it is qualified and Seller is not aware of any facts or
circumstances which could result in any Employee Benefit Plan losing its
qualified status. Seller, its Affiliates and ERISA Affiliates have made full
and timely payment of all amounts required to be contributed under the terms of
each Benefit Plan and Applicable Law or required to be paid as expenses under
such Benefit Plan, and Seller and its Affiliates and ERISA Affiliates shall
continue to do so through the Closing.
(j) With respect to any Group Health Plans maintained by
Seller or Seller's Affiliates or ERISA Affiliates, whether or not for the
benefit of the employees of Seller, its Affiliates or its ERISA Affiliates,
Seller and, to its knowledge its Affiliates and ERISA Affiliates, have
complied in all material respects with the provisions of Part 6 of Title I of
ERISA and 4980B of the Code and with the provisions of the Health Insurance
Portability and Accountability Act of 1996 ("HIPAA"). Except as set forth in
Schedule 3.13(j), neither Seller nor any of Seller's Affiliates or ERISA
-------
Affiliates is obligated to provide health care benefits of any kind to its
retired employees pursuant to any Employee Benefit Plan, including without
limitation any Group Health Plan, or pursuant to any agreement
or understanding, other than as required by applicable law. The Accumulated
Postretirement Benefit Obligation, within the meaning of FAS 106, for the
postretirement benefits set forth on Schedule 3.13(j) does not exceed
$28 million as reported in the Valuation of Postretirement Benefits Other Than
Pensions as of January 1, 1998, and based on the assumptions included therein.
(k) Seller has made available to Newco a copy of (i) the most
recently filed Federal Form 5500 series and accountant's opinion, if
applicable, for each Employee Benefit Plan, (ii) the most recent IRS
determination letter obtained with respect to each Benefit Plan intended to be
qualified under Section 401(a) of the Code or exempt under Section 501(a) of
the Code, and (iii) the most recently prepared financial statements of each
Benefit Plan.
(l) The actual cost of all liabilities known by Seller as of
the date hereof with respect to workers compensation claims of employees
incurred prior to the Closing Date will not exceed the amounts reserved
therefor on the Seller Balance Sheet.
3.14. Labor and Employment Matters.
----------------------------
(a) Except as set forth on Schedule 3.14(a), as of the date
----------------
of this Agreement, no collective bargaining agreement exists that is binding
on Seller and, except as described on Schedule 3.14(a), no petition has been
----------------
filed or proceedings instituted by an employee or group of employees of Seller
with any labor relations board seeking recognition of a bargaining
representative at any time subsequent to January 1, 1997. Schedule 3.14(a)
----------------
describes each organizational effort currently being made or threatened by or
on behalf of any labor union to organize any employees of Seller.
(b) Except as set forth on Schedule 3.14(b), as of the date
----------------
of this Agreement, (i) there is no labor strike, slow down or stoppage pending
or, to the knowledge of Seller, threatened, against or directly affecting
Seller; (ii) no grievance or arbitration proceeding arising out of or under any
collective bargaining agreement of Seller is pending and (iii) neither Seller
nor any Affiliate of Seller has received any notice or has any knowledge of any
threatened labor or employment dispute, controversy or grievance or any other
unfair labor practice proceeding or breach of contract claim or action with
respect to claims of, or obligations to, any employee or group of employees of
Seller. During the two years preceding the date of this Agreement, all notices
to employees required under any law or collective bargaining agreement have
been given, and all bargaining obligations with any employee representative
have been satisfied in all material respects. During the two years preceding
the date of this Agreement, Seller has not implemented any plant closing or
mass layoff of employees as those terms are defined in the Worker Adjustment
Retraining and Notification ("WARN") Act, as amended, or any similar state or
local law or regulation, and no layoffs that could implicate such laws or
regulations will be implemented prior to the Closing without advance
notification to Newco.
3.15. Intellectual Property.
---------------------
(a) Schedule 3.15(a) sets forth a complete and correct list
----------------
of each patent, patent application and docketed invention, chip design, mask
work, registration, application for registration and material unregistered,
trademark, trade name, copyright, servicemark, brand mark or brand name
included among the Intellectual Property Rights and each material license or
licensing agreement for any of the Intellectual Property Rights held by Seller.
(b) Except as disclosed in Schedule 3.15(b), Seller is not
----------------
and has not, during the three years preceding the date of this Agreement, been
a party to any Proceeding, nor to the knowledge of Seller is any Proceeding
threatened, as to which there is a reasonable likelihood of a determination
materially adverse to Seller that involved or may involve a claim of mis-
appropriation or infringement made by any Person (including any Governmental
Authority) against Seller or any claim contesting the validity, enforceability,
use or ownership of any of the Intellectual Property Rights. Except as
disclosed in Schedule 3.15(b), no Intellectual Property Right is subject to
----------------
any outstanding order, judgment, decree, stipulation or agreement restricting
the use thereof by Seller, or restricting the licensing thereof by Seller to
any Person. To the knowledge of Seller, the use of such Intellectual Property
Rights and the operation of the Business as currently operated does not
conflict with, infringe upon or violate any patent, patent application,
docketed invention, trademark, trade name, trademark or trade name registration
or application, copyright, copyright registration or application for copyright
registration, service mark, brand or brand name or any pending application
relating thereto, or any trade secret, know-how, programs or processes, license
or licensing arrangement for any of the foregoing or any similar rights, of any
Person except where such infringement or violation would not have a Material
Adverse Effect.
(c) Except as set forth in Schedule 3.15(c), Seller either
----------------
owns the entire right, title and interest in, to and under, free and clear of
any Liens (other than Permitted Liens), or has a lawful right to use the
Intellectual Property Rights, and the Intellectual Property Rights comprise all
the inventions, processes, computer programs, know-how, formulae, trade
secrets, patents, chip designs, mask works, trademarks, service marks, trade
names, brand names, copyrights and other intellectual property rights which are
necessary for the conduct of the Business by Seller in the manner that such
Business has heretofore been conducted except where the absence of rights would
not have a Material Adverse Effect.
(d) Except as set forth in Schedule 3.15(d), the Seller has
----------------
no knowledge that, during the past two years, any Person has infringed or
misappropriated any of the Intellectual Property Rights.
(e) Seller is not aware of any facts which would lead it to
believe that it will incur costs or expenses relating to or arising from the
inability of Seller's computer systems or software to appropriately interpret
dates in the twenty first century, except for any of the foregoing which would
not, individually or in the aggregate, have a Material Adverse Effect.
3.16. Advisory Fees. Except for Goldman, Sachs & Co., PaineWebber
-------------
Incorporated and Cybus Capital Markets, there is no investment banker, broker,
finder or other intermediary orfinancial advisor that has been retained by or
is authorized to act on behalf of Seller who might be entitled to any fee,
commission or reimbursement of expenses from Newco or any of its Affiliates
upon consummation of the transactions contemplated by this Agreement.
3.17. Environmental Compliance.
------------------------
(a) Except as disclosed in Schedule 3.17(a) and except where
----------------
the failure to obtain approvals would not have a Material Adverse Effect,
Seller has obtained all approvals, authorizations, certificates, consents,
licenses, orders and permits or other similar authorizations of all
Governmental Authorities, or from any other Person, that are required under any
Environmental Law for the ownership or operation of the Transferred Assets or
the Business.
(b) Except as disclosed in Schedule 3.17(b) and except where
----------------
non-compliance would not have a Material Adverse Effect, for periods following
the acquisition of all of the outstanding capital stock of Seller by the
Shareholders, Seller has complied with and is in compliance with all
Environmental Laws and all terms and conditions of all approvals,
authorizations, certificates, consents, licenses, orders and permits or other
similar authorizations of all Governmental Authorities (and all other Persons)
required under all Environmental Laws for the ownership and operation of the
Business or that relate to the Transferred Assets, and is also in compliance
with all other limitations, restrictions, conditions, standards, requirements,
schedules and timetables required or imposed under all Environmental Laws.
(c) Except as described in Schedule 3.17(c), except for
----------------
matters that have been fully settled and resolved and except for notices the
subject of which would not have a Material Adverse Effect, Seller has received
no notice of violation of or liability (contingent or otherwise) under any
Environmental Law arising out of past facts, events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans relating to or in
any way affecting Seller, the Business or the Transferred Assets.
(d) Except as disclosed in Schedule 3.17(d), except for
----------------
matters that have been fully settled and resolved and except for matters that
would not have a Material Adverse Effect, to Seller's knowledge, there are no
past or present facts, events, conditions, circumstances, activities,
practices, incidents, actions, omissions or plans relating to or in any way
affecting Seller, any of its predecessors or Affiliates, the Business or the
Transferred Assets that would interfere with or prevent continued compliance
with any Environmental Law by Newco after the Closing, or that would give rise
to any Environmental Liability, or otherwise form the basis of any claim,
action, demand, suit, Proceeding (as defined below), hearing, study or
investigation (i) under any Environmental Law, (ii) based on or related to the
manufacture, processing, distribution, use, treatment, storage (including
without limitation underground storage tanks), on-site or off-site disposal,
transport or handling, r the emission, discharge, release or threatened release
of any Hazardous ubstance, or (iii) resulting from exposure to workplace
hazards.
3.18. Insurance. Schedule 3.18 sets forth a complete and correct
--------- -------------
list of all known insurance policies currently in force with respect to the
Business or relating to the Transferred Assets or Assumed Liabilities (the
"Insurance Policies"), including all known "occurrence based" liability
policies regardless of the periods to which they relate. Each
Insurance Policy issued in the name of Seller and which covers only liabilities
arising with respect to the business of Seller is denoted by an asterisk (*) on
Schedule 3.18 (the "Seller Insurance Policies"). The Seller Insurance Policies
are valid and enforceable in accordance with their terms in all material
respects and are in full force and effect. All of such Seller Insurance
Policies have been issued by insurance companies actively engaged in the
insurance business. The Seller is not in material default with respect to any
provision contained in any such Seller Insurance Policy and has not failed to
give any notice or present any claim under any such Seller Insurance Policy in
due and timely fashion. Except for claims disclosed on Schedule 3.18, there
-------------
are no outstanding unpaid claims under any Insurance Policy which have gone
unpaid for more than forty-five (45) days or as to which the carrier has
disclaimed liability. All known claims or circumstances likely to give rise to
any claims, if any, against the Seller have been disclosed and tendered to the
appropriate insurance companies and are being defended by such appropriate
insurance companies in accordance with the policy terms and limits.
3.19. Tax Matters.
-----------
Except as set forth on Schedule 3.19:
-------------
(a) Seller has no material liability for unpaid Taxes other
than Taxes that are not yet due and payable. Seller has filed all material Tax
Returns that it was required to file on or prior to the date hereof, and all
such Tax Returns were correct and complete in all material respects when filed.
(b) There are no Liens for Taxes other than Liens for current
Taxes not yet due and payable on the Transferred Assets or which are being
contested in good faith or any Liens for Taxes owed with respect to the
Excluded Assets.
(c) All Taxes and other amounts that are required to be
collected or withheld by Seller prior to the date hereof have been duly
collected or withheld and all such amounts that are required to be remitted to
any taxing authority have been duly remitted.
(d) None of the Transferred Assets is property that is
required to be treated as owned by any other Person pursuant to the "safe
harbor lease" provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954 as amended and in effect immediately prior to the enactment of the
Tax Reform Act of 1986 and none of the Transferred Assets is "tax exempt use
property" within the meaning of Section 168(h) of the Code.
(e) Seller currently is not the beneficiary of any extension
of time within which to file any Tax Return, other than any combined,
consolidated, unitary or similar Tax Return in which Seller is includible.
Seller has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency, other
than with respect to any Tax imposed in connection with a combined,
consolidated, unitary or similar Tax Return.
(f) There is no dispute or claim concerning any Tax liability
of Seller, other than with respect to any Tax imposed in connection with a
combined, consolidated, unitary or similar Tax Return, either (i) claimed or
raised by any authority in writing or (ii) as to which any of Seller's
directors, officers or other employees responsible for Tax matters has
knowledge.
(g) Seller has not filed a consent under Code S341(f)
concerning collapsible corporations.
(h) Seller is not a party to any Tax allocation or sharing
agreement.
(i) MLM Corporation, a California corporation ("MLM"), prior
to its merger with and into Seller, was not a member of an affiliated group
filing a consolidated federal income Tax Return (other than a group which
included Seller) and had no liability for any Taxes of any Person (other than
Seller) as a transferee or successor.
(j) All Taxes (other than income Taxes) incurred by Seller or
MLM on or prior to December 31, 1997 that are required by GAAP to be included
on a balance sheet as of December 31, 1997 are reflected on the Seller Balance
Sheet; and all Taxes (other than income Taxes) incurred by Seller or MLM after
December 31, 1997 and prior to the Closing Date that are required by GAAP to be
included on a balance sheet as of the Closing Date will be reflected on the
Statement of Working Capital.
3.20. Investment Representations.
--------------------------
(a) The Newco Exchangeable Preferred Stock, the Newco Junior
Preferred Stock, the Newco Common Stock, the Newco Class B Common Stock and the
Newco Note (collectively the "Newco Securities") will be acquired by Seller for
its own account, not as a nominee or agent, and not with a view to or in
connection with the sale or distribution of any part thereof, other than as
contemplated by the Stock Sale Agreement or pursuant to a valid exemption from
the registration requirements of the Securities Act of 1933 (the "Securities
Act").
(b) Seller understands that the Newco Securities will not be
registered under the Securities Act on the ground that the issuance of the
Newco Securities provided for in this Agreement is exempt from registration
under of the Securities Act, and that the reliance of Newco on such exemption
is predicated in part on Seller's representations set forth in this Agreement.
(c) Seller acknowledges that it is able to fend for itself in
the transactions contemplated by this Agreement and has the ability to bear the
economic risks of its investment pursuant to this Agreement.
(d) Seller understands that the Newco Securities being
purchased hereunder are restricted securities within the meaning of Rule 144
under the Securities Act and that the Newco Securities are not registered and
must be held indefinitely unless they are subsequently registered or an
exemption from such registration is available.
(e) It is understood that each certificate representing
(a) the Newco Securities and (b) any other securities issued in respect of the
Newco Securities upon any stock split, stock dividend, recapitalization, merger
or similar event (unless no longer required in the opinion of counsel for
Newco) shall be stamped or otherwise imprinted with a legend substantially in
the following form (in addition to any legend that may now or hereafter be
required by applicable state law):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER TO THE EFFECT
THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
The legend set forth above shall be removed by Newco from any
certificate evidencing the Newco Securities upon delivery to Newco of an
opinion of counsel, reasonably satisfactory to Newco, that a registration
statement under the Securities Act is at that time in effect with respect to
the legended security or that such security can be freely transferred in a
public sale without such a registration statement being in effect and that such
transfer will not jeopardize the exemption or exemptions from registration
pursuant to which Newco issued the Newco Securities.
3.21. Transactions with Affiliates. Other than the HSTC Sugar
----------------------------
Contract and Intercompany Liabilities, except as set forth on Schedule 3.21,
-------------
no director, officer, Shareholder or Affiliate of the Seller or of such
director, officer or Shareholder has, since the date of the Seller Balance
Sheet: (a) borrowed money from or loaned money to the Seller which remains
outstanding; (b) had any contractual or other claim, express or implied, of any
kind whatsoever against the Seller; (c) owned any interest in any property or
assets (tangible or intangible) used or useful by the Seller in the Business;
(d) engaged in any other transaction with the Seller or (e) owned, directly or
indirectly, any interest in (except not more than two percent (2%) stock-
holdings for investment purposes in securities of publicly held and traded
companies), or served as an officer, director, employee or consultant of or
otherwise receives remuneration from, any Person which is, or
has engaged in business as, a competitor, lessor, lessee, licensor, licensee,
customer or supplier of the Seller. Each contract set forth on Schedule 3.21
-------------
is on terms no less favorable to the Seller party thereto than would otherwise
be available in an arm's length transaction with an unaffiliated third party.
3.22. Accounts Receivable and Inventory. All accounts receivable
---------------------------------
reflected on the Seller Balance Sheet, and all accounts receivable arising
subsequent to the date of the Seller Balance Sheet, have arisen from bona fide
sales transactions in the ordinary course of business of the Seller, and to the
knowledge of Seller, there exist no valid, material set-offs or counterclaims
with respect thereto except for those created in the ordinary course of
business. All items included in the inventory of Seller are the property of
the Seller, free and clear of any Lien (other than Permitted Liens), and are
not held by the Seller on consignment from others.
3.23. Substantial Customers and Suppliers. Schedule 3.23 lists the
----------------------------------- -------------
ten (10) largest customers of the Seller, on the basis of revenues for goods
sold or services provided for the most recently-completed fiscal year.
Schedule 3.23 lists the five (5) largest suppliers of the Seller, on the basis
-------------
of cost of goods or services purchased for the most recently-completed fiscal
year. Except as disclosed in Schedule 3.23, no such customer or supplier
-------------
(i) has ceased or materially reduced its purchases from, use of the services
of, sales to or provision of services to the Seller since the Seller Balance
Sheet date, or (ii) to the knowledge of the Seller or any Shareholder,
notified the Seller in writing of its intent to cease or materially reduce such
purchases, use, sales or provision of services after the date hereof.
3.24. Disclosure. Neither this Agreement, nor any Schedule or
----------
Exhibit to this Agreement, contains an untrue statement of material fact or
omits to state a material fact necessary to make the statements contained
herein or therein not misleading. All information provided to Newco and its
agents by the Seller and its Affiliates or agents is true and correct in all
material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NEWCO
Newco hereby represents and warrants to Seller and the Shareholders
that:
4.01. Corporate Existence and Power.
-----------------------------
(a) Newco is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and has
all corporate power to carry out its business as now conducted. Newco is duly
qualified to do business as a foreign corporation in each jurisdiction where
the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary to carry on its business as now
conducted, except for those jurisdictions where the failure to be so qualified
has not been, and may not reasonably be expected to be, material.
(b) Newco does not, directly or indirectly, (a) have any
Subsidiariesor (b) own or hold beneficially or of record any shares of capital
stock, equity interests or any other securities of any other entity.
4.02. Corporate Authorization. The execution, delivery and
-----------------------
performance by Newco of this Agreement and the Related Agreements and the
consummation by Newco of the transactions contemplated hereby are within the
corporate powers of Newco and have been duly authorized by all necessary
corporate action on the part of Newco. This Agreement has been, and the
Related Agreements as of the Closing Date will be, duly and validly executed
by Newco and constitutes, or will constitute, as applicable, legal, valid and
binding agreements of Newco, enforceable in accordance with their terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and subject to
general principles of equity.
4.03. Capital Stock.
-------------
(a) As of the date of this Agreement, the authorized capital
stock of Newco consists of 1000 shares of Newco Common Stock. As of the date
of this Agreement, no shares of capital stock or other voting securities of
Newco are issued or outstanding. Except as set forth above or as otherwise
required by this Agreement, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, stock appreciation rights,
profit sharing plans, phantom stock awards, rights, commitments, agreements,
arrangements or undertakings of any kind, to which Newco is a party or by which
it is bound, obligating Newco to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of Newco, or obligating Newco to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
(b) The Newco Securities that are being issued by Newco
pursuant to this Agreement have been duly authorized for issuance to Seller
and, when issued and delivered by Newco pursuant to this Agreement, will be
validly issued, fully paid and nonassessable. The issuance of Newco Securities
pursuant to the terms of this Agreement will not require registration and/or
qualification under the Securities Act or any state securities laws. The Newco
Common Stock, Newco Class B Common Stock, Newco Exchangeable Preferred Stock
and Newco Junior Preferred Stock to be issued to Seller hereunder, when issued,
will have the rights, preferences and privileges set forth in Exhibit A hereto,
---------
and the Warrants to be issued to persons that purchase shares of Newco
Exchangeable Preferred Stock from Seller pursuant to Section 6.09, when issued,
will have the rights, preferences and privileges set forth in Exhibit C hereto.
---------
4.04. Governmental Authorization. The execution, delivery and
--------------------------
performance by Newco of this Agreement and the Related Agreements require no
action by, consent or approval of, or filing with, any Governmental Authority
or any other Person other than (i) compliance with any applicable requirements
of the HSR Act and Federal and state securities laws or (ii) any actions,
consents, approvals or filings otherwise expressly referred to in this
Agreement.
4.05. Non-Contravention. The execution, delivery and performance by
-----------------
Newco of this Agreement and the Related Agreements do not and will not
(a) contravene or conflict with the Certificate of Incorporation or Bylaws of
Newco, (b) assuming compliance with the matters referred to in Section 4.03,
contravene or conflict with or constitute a violation of any provision of any
Applicable Law binding upon or applicable to Newco or (c) constitute a default
under or give rise to any right of termination, cancellation or acceleration
of, or to a loss of any benefit to which Newco is entitled under, any contract,
commitment, agreement or obligation to which Newco is a party or by which Newco
or any of its assets may be bound.
4.06. Advisory Fees. Prior to the Closing Date, except for Goldman,
-------------
Sachs & Co., PaineWebber Incorporated and Cybus Capital Markets, there is no
investment banker, broker, finder or other intermediary or financial advisor
that has been retained by or is authorized to act on behalf of Newco who might
be entitled to any fee, commission or reimbursement of expenses from Seller or
any of its Affiliates or any of their respective Affiliates upon consummation
of the transactions contemplated by this Agreement.
4.07. Litigation. There is no Proceeding pending against, or to the
----------
knowledge of Newco, threatened against or affecting, Newco before any court or
arbitrators or any governmental body, agency or official.
4.08. Conduct of Newco. Newco (i) was formed solely to acquire and
----------------
carry on the Business as contemplated in this Agreement, (ii) is not a party to
any contract or agreement, whether written or oral, of any nature and does not
own any assets, tangible or otherwise, (iii) has no employees and has not
conducted any business activities or incurred any obligations prior to the date
of this Agreement, and (iv) on the date of this Agreement does not currently
conduct any business activities or have any liabilities other than under this
Agreement and any other documents contemplated by or entered into in connection
with this Agreement.
ARTICLE V
COVENANTS OF SELLER
Seller hereby agrees that:
5.01. Conduct of the Business; Distributions. From the date hereof
--------------------------------------
until the Closing Date, Seller shall conduct the Business in the ordinary
course consistent with past practice and procedure and shall use its best
efforts to preserve intact the business organizations and relationships and
goodwill of Seller with third parties and shall use its best efforts to keep
available the services of the present officers, employees, agents and other
personnel of the Business. Without limiting the generality of this Section
5.01, from the date hereof until the Closing Date:
(a) Seller will:
(i) (A) use its commercially reasonable efforts to
maintain the Transferred Assets in the ordinary course of business
consistent with past practice in good operating order and condition,
reasonable wear and tear, damage by fire and other casualty excepted and
(B) promptly repair, restore or replace any Transferred Assets in the
ordinary course of business consistent with past practice;
(ii) use its commercially reasonable efforts to comply
with all material Applicable Laws;
(iii) use its commercially reasonable efforts to obtain,
prior to the Closing Date, all Required Consents set forth on
Schedule 3.11(b);
(iv) use its commercially reasonable efforts to be in
compliance with, and to maintain the effectiveness of, all Permits; and
(v) promptly notify Newco in writing of the occurrence
of any material breach by such Seller of any representation or warranty,
or any covenant or agreement, contained in this Agreement.
(b) except as contemplated by this Agreement, without Newco's
prior consent (which consent shall not be unreasonably withheld), Seller will
not agree to:
(i) purchase or otherwise acquire all or any substan-
tial part of the assets of, or capital stock of, any other Person;
(ii) except in the ordinary course of business, amend,
in any material respect, terminate or renew any Lease of real property
other than a renewal pursuant to a renewal option contained in a Lease
listed on Schedule 3.07(c);
(iii) except in the ordinary course of business, subject
to clause (ii) above, sell, assign, lease, license, transfer, abandon, let
lapse or otherwise dispose of, or mortgage, pledge or encumber (other than
with Permitted Liens), any of its assets (other than Excluded Assets)
except pursuant to existing obligations of Seller as set forth in
Schedule 3.07(a);
(iv) amend or modify in any material respect or
terminate any Scheduled Contract other than in the ordinary course of
business;
(v) other than the execution of (or amendment of)
purchase orders or sales orders or raw sugar supply contracts entered into
or amended in the ordinary course of business, enter into or commit to
enter into any Contract which, if in existence on the date hereof, would
be required to be set forth in the Schedule 3.10(a)" as a Scheduled
----------------
Contract (each, a "Subsequent Material Contract") or, if any
Subsequent Material Contract shall have been entered into or committed to,
amend or modify in any material respect or terminate any such Subsequent
Material Contract;
(vi) except as contemplated by Section 3.05, make any
change in its accounting methods or in the manner of keeping its books and
records or any change in its current practices with respect to inventory,
sales, receivables, payables or accrued expenses, except as required by
changes in GAAP or Applicable Law.
(vii) enter into, amend or terminate (a) any employment
agreement except in the ordinary course of business or (b) any collective
bargaining agreement or adopt, enter into or amend any arrangement which
is, or would be, a Benefit Plan or make any change in any actuarial
methods or assumptions used in funding any Benefit Plan or in the
assumptions or factors used in determining benefit equivalents thereunder;
(viii) declare, set aside or pay any distributions of any
kind to the Shareholders or holders of its equity interests, or make any
direct or indirect redemption, retirement, purchase or other acquisition
of any shares of its capital stock or other equity interests other than
cash distributions to the Shareholders;
(ix) make any wage or salary increase or increase any
other compensation or bonus payable or to become payable for or to any of
its officers, directors, employees, consultants, agents or other
representatives, or make any accrual for or commitment or agreement to
make or pay the same, other than increases made in the ordinary course of
business consistent with past practice;
(x) make any payment or commitment to pay any
severance or termination pay to any Person or any of its officers,
directors, employees, consultants, agents or other representatives, other
than payments or commitments to pay such Persons or its officers,
directors, employees in the ordinary course of business consistent with
past practice;
(xi) pay, directly or indirectly, any of its
liabilities before the same become due in accordance with its terms
otherwise than in the ordinary course of business, except to obtain the
benefit of discounts available for early payment; or
(xii) make any capital expenditure or commitments for
capital expenditures other than in the ordinary course of business
consistent with past practice.
5.02. Access to Information. Subject to compliance with Applicable
---------------------
Laws, from the date hereof until the Closing Date, Seller will promptly:
(a) give Newco and its counsel, financial advisors, auditors and other
authorized representatives reasonable access during normal business hours to
the offices, properties, books and records relating to the Business and the
Transferred Assets upon reasonable prior notice, (b) furnish to Newco its
counsel, financial advisors, auditors and other authorized representatives such
information relating to the Business or the Transferred Assets as Newco may
reasonably request and (c) instruct the directors, officers, employees,
counsel, auditors and financial advisors of Seller to cooperate with Newco and
its counsel, financial advisors, auditors and other authorized representatives
in their investigation of the Business and the Transferred Assets. During such
period, subject to prior notice to and approval of Seller (which approval will
not be unreasonably withheld), Newco's representatives shall be permitted to
make copies of such books and records and other data at Newco's expense.
Newco and its representatives will conduct all inspections pursuant to this
Section 5.02 in a manner which will seek to minimize any disruptions of the
business and operations of Seller.
5.03. Compliance with Terms of Required Governmental Approvals and
------------------------------------------------------------
Required Contractual Consents. On and after the Closing Date, Seller shall
-----------------------------
comply at its own expense with all conditions and requirements set forth in
(i) all Required Governmental Approvals as necessary to keep the same in full
force and effect assuming continued compliance with the terms thereof by Newco
and (ii) all Required Contractual Consents as necessary to keep the same
effective and enforceable against the Persons giving such Required Contractual
Consents assuming continued compliance with the terms thereof by Newco.
5.04. Maintenance of Insurance Policies.
---------------------------------
(a) On and after the date hereof (including after the Closing
Date), Seller shall not unreasonably take or fail to take any action if such
action or inaction, as the case may be, would adversely affect the applica-
bility of any insurance in effect on the date hereof that covers all or any
part of the Transferred Assets or the Business. Notwithstanding the foregoing,
Seller shall not have any obligation to make any monetary payment to maintain
the effectiveness of any such Insurance Policy after the Closing Date.
(b) Seller shall take or cause to be taken all reasonable
actions within its power to cause Newco to be the direct or indirect bene-
ficiary of, or otherwise gain the benefit of, any occurrence-based Insurance
Policies known to such Seller, including, but not limited to, the following:
(i) Seller shall, to the extent permissible by Applicable Law and the terms of
the Insurance Policies, take all reasonable actions (but without any additional
costs and expenses) necessary to assign the occurrence-based Seller Insurance
Policies to Newco on or before the Closing Date, subject to the provisions of
this Section 5.04; and (ii) with respect to any occurrence-based Insurance
Policy issued in the name of any entity other than Seller or insuring any
entity other than Seller and any occurrence-based Seller Insurance Policy that
is not assignable to Newco as provided herein, Seller shall take reasonable
efforts (but without any additional costs and expenses) to (A) retain and
maintain, including after the Closing Date, such occurrence-based Insurance
Policy as it applies to occurrences prior to the Closing Date, (B) from time to
time and at Newco's request and Newco's expense, Seller shall submit claims and
aggressively pursue the benefits under such occurrence-based Insurance Policy
with respect to occurrences arising prior to the Closing Date and (C) promptly
apply any amounts recovered from any such Insurance Policy to pay such claims
and any costs incurred in defending the same, and, to the extent such claim has
been asserted against Newco, to indemnify Newco in connection with any and all
Damages actually incurred by Newco in connection with such claim, to the extent
of the proceeds of the Insurance Policy remaining after payment of such claims
and costs.
(c) With respect to any Damages incurred by Newco or the
Business as a result of an action, suit, hearing, arbitration, proceeding
(public or private) or governmental investigation arising from or connected to
the operation of the Business, Seller or the Transferred Assets prior to the
Closing, such Damages shall be deemed reduced for purposes of Article IX hereof
to the extent that amounts are paid to Newco in connection therewith from any
Insurance Policy.
(d) With respect to any Damages incurred by Seller as a
result of an action, suit, hearing, arbitration, proceeding (public or private)
or governmental investigation arising from or connected to the operation of the
Business or the Transferred Assets prior to the Closing, Seller shall be
considered to be a joint beneficiary of any Seller Insurance Policy that has
been assigned to Newco covering such Damages to the extent any such Seller
Insurance Policy entitles Seller to be a direct or an indirect beneficiary
thereof.
5.05. Change of Name. Seller will amend its Articles of
--------------
Incorporation within ten (10) Business Days after the Closing Date so as to
change its corporate name to a name dissimilar to the name by which the
Business of Seller is known, including, "C&H," "C&H Sugar Company" or
"California and Hawaiian Sugar Company," and will file as promptly as
practicable, but in any event within sixty (60) days after the
Closing, in all jurisdictions in which it is qualified to do business, any
documents necessary to reflect such change in its corporate name or to
terminate its qualification therein.
5.06. Administration of Accounts. All payments and reimbursements
--------------------------
made in the ordinary course by any third party in the name of or to any Seller
or Affiliate thereof in connection with or arising out of the Transferred
Assets, the Business or the Assumed Liabilities after the Closing Date shall be
held by Seller or such Affiliate in trust for the benefit of Newco and,
immediately upon receipt by Seller or any such Affiliate of any such payment or
reimbursement, Seller shall pay, or cause to be paid, over to Newco as soon as
practicable the amount of such payment or reimbursement without right of set
off.
5.07. Notice of Events. The Seller and each Shareholder with
----------------
knowledge thereof shall promptly notify Newco of (a) any event, condition or
circumstance occurring from the date hereof through the Closing Date that would
constitute a violation or breach of this Agreement, (b) any event, occurrence,
transaction or other item which would have been required to have been disclosed
on any Schedule or statement delivered hereunder had such event, occurrence,
transaction or item existed on the date hereof, other than items arising in the
ordinary course of business which would not render any representation or
warranty of the Seller or the Shareholders materially misleading.
5.08. Bulk Sale Filings. The Seller shall timely make all required
-----------------
filings under all applicable state bulk sales notification statutes and
regulations in connection with the sale of the Transferred Assets to Newco.
5.09. Exclusivity. Until the earlier occurs of the Closing or the
-----------
termination of this Agreement, none of the Seller, the Shareholders nor any of
their respective directors, officers, employees, agents, representatives,
members or Affiliates shall initiate, solicit, entertain, negotiate, accept
or discuss, directly or indirectly, or encourage inquiries or proposals
(each, an "Acquisition Proposal") with respect to, or furnish any
information relating to or participate in any negotiations or discussions
concerning, or enter into any agreement with respect to, any acquisition or
purchase of all or a substantial portion of the assets of, or of a substantial
equity interest in, the Business or any business combination with the Seller or
any reorganizations, dissolution, recapitalization, merger or consolidation of
the Seller other than as contemplated by this Agreement (a "Third Party
-----------
Acquisition"). The Seller shall, and shall cause each of their respective
-----------
Affiliates to, immediately cease and cause to be terminated any existing
activities, including discussions or negotiations with any parties, conducted
prior to the date hereof with respect to any Acquisition Proposal. Each of
the Seller and Shareholders represent that it is not a party to or bound by any
agreement with respect to an Acquisition Proposal other than under this
Agreement. Each of the Seller and the Shareholders shall cause its
officers, directors, agents and advisors to comply with the provisions of this
Section 5.09.
5.10. Confidentiality.
---------------
(a) For a period of two (2) years following the Closing,
Seller will, and will cause its Affiliates and representatives to, treat any
data and information obtained with respect to CVC or any of its Affiliates
from any representative, officer, director or employee of CVC, or from any
books or records of CVC in connection with this Agreement, confidentially and
with commercially reasonable care and discretion, and will not disclose any
such information to third parties; provided, however, that the foregoing shall
not apply to (i) information in the public domain or that becomes public
through disclosure by any party other than Seller, or its Affiliates or
representatives, so long as such other party is not in breach of a
confidentiality obligation, (ii) information regarding CVC required to be
disclosed by Applicable Law, (iii) with CVC's consent (which shall not be
unreasonably withheld), information required to be disclosed, on a confidential
basis, whenever possible, to obtain any Required Consents; or (iv) with CVC's
consent (which shall not be unreasonably withheld), any information regarding
CVC that is disclosed, on a confidential basis, whenever possible, by Seller or
its Affiliates to any of their actual or prospective lenders or investors in
connection with financing the transactions contemplated by this Agreement or in
connection with future financings.
(b) In the event that the Closing fails to take place and
this Agreement is terminated, Seller, upon the written request of CVC and at
CVC's request, will, and will cause its Affiliates and representatives to,
promptly deliver to CVC any and all documents or other materials furnished by
CVC to Seller in connection with this Agreement without retaining any copy
thereof and without using any confidential information of CVC to solicit any
customers of CVC. In the event of such request, all other documents, whether
analyses, compilations or studies, that contain or otherwise reflect the
information furnished by CVC to Seller shall be destroyed by Seller or shall
be returned to CVC, and Seller shall confirm to CVC in writing that all such
materials have been returned or destroyed. No failure or delay by CVC in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any right, power or privilege
hereunder.
5.11. Non-Competition.
---------------
(a) For a period of three years following the Closing Date,
neither Seller, the Shareholders nor their respective Affiliates shall solicit
Newco employees for employment in the business of sugar refining or marketing.
In addition, for a period of three years following the Closing Date, neither
Seller, the Shareholders nor their respective Affiliates shall hire or employ
any of the Seller Key Employees for positions in the business of sugar refining
or marketing.
(b) For the period from the Closing Date through June 4, 2003
(the "Non-Compete Period"), neither Seller, the Shareholders nor their
respective Affiliates shall (i) build any new sugar refinery or add refining
capacity to its existing sugar factory (which shall not prohibit ABHI from
performing improvements and upgrades at its existing sugar factory so long as
neither Seller, the Shareholders nor their respective Affiliates produce sugar
at the factory during such Non-Compete Period having whole color less than 1150
ICUMSA or having polarity greater than 99.5 percent); (ii) sell or license, for
use other than in connection with the sale of ABHI raw sugar, any existing
brand names or trademarks relating to the ABHI raw sugar business, or (iii)
sell in the aggregate more than 10,000 tons of raw or refined sugar per annum
to any Person other than HSTC or Newco. As remedy for breach of clause (iii)
of this subsection (b), Seller or the Shareholders shall pay liquidated damages
equal to the number of tons of raw or refined sugar exceeding 10,000 sold by
Seller or the Shareholders to persons other than HSTC or Newco in any twelve
month period multiplied by $25 per ton.
5.12. Specific Performance. The parties hereto recognize and agree
--------------------
that in the event of a breach by Seller of Sections 5.10 and 5.11, money
damages would not be an adequate remedy to CVC for such breach and, even if
money damages were adequate, it would be impossible to ascertain or measure
with any degree of accuracy the damages sustained by CVC therefrom.
Accordingly, if there should be a breach or threatened breach by Seller of
provisions of Sections 5.10 or 5.11, CVC shall be entitled to an injunction
restraining Seller from any breach without showing or proving actual damage
sustained by CVC. Nothing in the preceding sentence shall limit or otherwise
affect any remedies that CVC may otherwise have under Applicable Law.
5.13. Termination of Intercompany Arrangements. Seller shall cause
----------------------------------------
all contracts, agreements and arrangements between Seller, on the one hand, and
A&B, the Shareholders or any Affiliate of A&B, on the other hand, to be
terminated effective as of the Closing Date; provided, however, that this
Section 5.13 shall not apply to any agreement or covenant contained in this
Agreement or any contract or agreement entered into between Newco, on the one
hand, and A&B, the Shareholders or any Affiliate of A&B, on the other hand, in
connection with the consummation of the transactions contemplated hereby; and
provided, further, however, that this Section 5.13 shall not require the
termination of, or amendment of, (i) any contract or agreement in effect
between Seller and HSTC or (ii) that certain Transfer Pricing Agreement dated
as of December 21, 1998 between ABHI. and Seller, which is being assigned by
Seller to Newco pursuant to this Agreement.
ARTICLE VI
COVENANTS OF NEWCO
6.01. Access to Information. Subject to compliance with Applicable
---------------------
Laws, after the Closing Date, Newco will promptly: (a) give Seller and its
counsel, financial advisors, auditors and other authorized representatives
reasonable access during normal business hours to the offices, properties,
books and records relating to the Business and the Transferred Assets (in each
case for any periods prior to the Closing Date) upon reasonable prior notice,
(b) furnish to Seller, its counsel, financial advisors, auditors and other
authorized representatives such information relating to the Business or the
Transferred Assets (in each case for any periods prior to the Closing Date)
as Seller may reasonably request and (c) instruct the directors, officers,
employees, counsel, auditors and financial advisors of Newco to cooperate with
Seller and its counsel, financial advisors, auditors and other authorized
representatives in their preparation of all necessary certificates or similar
documents required to be prepared and delivered by Seller to Newco by this
Agreement.
6.02. Compliance with Terms of Required Governmental Approvals and
------------------------------------------------------------
Required Contractual Consents. On and after the Closing Date, Newco shall
-----------------------------
comply at its own expense with all conditions and requirements set forth in
(i) all Required Governmental Approvals as necessary to keep the same in full
force and effect assuming continued compliance with the terms thereof by Seller
and (ii) all Required Contractual Consents as necessary to keep the same
effective and enforceable against the Persons giving such Required Contractual
Consents assuming continued compliance with the terms thereof by Seller.
6.03. Confidentiality.
---------------
(a) For a period of two (2) years following the Closing,
Newco will, and will cause its Affiliates and representatives to, treat any
data and information obtained with respect to Seller or any of its Affiliates
from any representative, officer, director or employee of Seller, or from any
books or records of Seller in connection with this Agreement, confidentially
and with commercially reasonable care and discretion, and will not disclose any
such information to third parties; provided, however, that the foregoing shall
not apply to (i) information in the public domain or that becomes public
through disclosure by any party other than Newco, or its Affiliates or
representatives, so long as such other party is not in breach of a
confidentiality obligation, (ii) information regarding Seller required to be
disclosed by Applicable Law, (iii) information required to be disclosed, on a
confidential basis, whenever possible, to obtain any Required Consents; or
(iv) any information regarding Seller that is disclosed, on a confidential
basis, whenever possible, by Newco or its Affiliates to any of their actual or
prospective lenders or investors in connection with financing the transactions
contemplated by this Agreement or in connection with future financings.
(b) In the event that the Closing fails to take place and
this Agreement is terminated, Newco, upon the written request of Seller and at
Seller's request, will, and will cause its Affiliates and representatives to,
promptly deliver to Seller any and all documents or other materials furnished
by Seller to Newco in connection with this Agreement without retaining any copy
thereof and without using any confidential information of Seller to solicit any
customers of Seller. In the event of such request, all other documents,
whether analyses, compilations or studies, that contain or otherwise reflect
the information furnished by Seller to Newco shall be destroyed by Newco or
shall be returned to Seller, and Newco shall confirm to Seller in writing that
all such materials have been returned or destroyed. No failure or delay by
Seller in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
6.04. Specific Performance. The parties hereto recognize and agree
--------------------
that in the event of a breach by Newco of Section 6.03, money damages would not
be an adequate remedy to Seller for such breach and, even if money damages were
adequate, it would be impossible to ascertain or measure with any degree of
accuracy the damages sustained by Seller therefrom. Accordingly, if there
should be a breach or threatened breach by Newco of provisions of Section 6.03,
Seller shall be entitled to an injunction restraining Newco from any breach
without showing or proving actual damage sustained by Seller. Nothing in the
preceding sentence shall limit or otherwise affect any remedies that Seller may
otherwise have under Applicable Law.
6.05. Amendment of Certificate of Incorporation. Newco will, prior
-----------------------------------------
to the Closing, amend and restate its Certificate of Incorporation in order to
authorize the issuance of 25,000 shares of Newco Exchangeable Preferred Stock,
25,000 shares of Newco Series B Preferred Stock, 24,000 shares of Newco Junior
Preferred Stock, 1,200,000 shares of Newco Common Stock, and 237,929 shares of
Newco Class B Common Stock.
6.06. Company Employees. Effective as of the Closing Date, Newco
-----------------
shall offer at will employment to all active employees of Seller not otherwise
covered by a collective bargaining agreement, including any Person on
short-term or (to the extent required by law or any applicable contract)
long-term disability, workers' compensation or personal leave, and, for a
period of one year after the Closing Date, shall compensate such employees
at current pay rates and shall provide such employees with benefits
substantially similar in the aggregate to those benefits provided to the
employees by Seller immediately prior to the Closing.
6.07. Payment of ASRS Note and Pollution Control Bond Interest.
--------------------------------------------------------
Newco agrees (i) to pay all interest accruing on the Pollution
Control Bonds from and after the Closing Date and (ii) to reimburse Seller for
Prepayment Penalties, which have been paid on the ASRS Notes as a result of the
repayment of the ASRS Notes on December 11, 1998.
6.08 Performance of Certain Obligations by Newco.
-------------------------------------------
(a) On and after the Closing Date, Newco shall, or shall
cause its designated subsidiaries to, duly, promptly and faithfully pay,
perform and discharge when due, all Assumed Liabilities. Without limiting the
foregoing, Newco shall, or shall cause its designated subsidiaries to, duly,
promptly and faithfully pay, perform and discharge when due, any liability or
obligation under any guarantee or obligation to assure performance given or
made by the Seller, the Shareholders, A&B or its Affiliates with respect to any
Assumed Liability. On or prior to the Closing Date, Newco shall either
(i) assume existing letters of credit and/or surety bonds tendered to third
parties by Seller, the Shareholders, A&B or its Affiliates with respect to any
Assumed Liability, (ii) tender substitute letters of credit and/or surety bonds
to such third parties or (iii) issue to ABHI and Seller one or more standby
letters of credit (in form and substance acceptable to ABHI and Seller) in an
aggregate amount equal to the aggregate contingent liability of ABHI and Seller
under such existing letters of credit and surety bonds, pursuant to which ABHI
or Seller, as applicable, will be entitled to draw payment in the event of,
and in the amount of, any payment made by ABHI as Seller after the Closing Date
in respect of any existing letter of credit or surety bond. To the extent that
any such letters of credit and/or surety bonds of the Seller, the Shareholders,
A&B or its Affiliates with respect to any Assumed Liability are not assumed by
Newco, Newco shall take all actions that are necessary in order to obtain the
release of any such existing letters of credit and/or surety bonds on or prior
to the Closing Date. If Seller permits the Closing to occur prior to the
release of any such existing letters of credit and/or surety bonds of Seller,
Newco agrees (i) to maintain in effect the standby letter or letters of credit
referred to in clause (iii) of Section 6.08(a) in an aggregate amount equal to
the aggregate contingent liabilities of ABHI and Seller under such letters of
credit and surety bonds for as long as any such existing letters of credit
and/or surety bonds remain in effect and (ii) to take any and all actions that
are necessary (including by the payment of money, as necessary) to obtain the
release of any such existing letter of credit and/or surety bond having a term
of six (6) months or greater and representing an aggregate contingent liability
of ABHI or Seller of in excess of $200,000 as soon as practicable following the
Closing Date, and in any event by no later than thirty (30) days following the
Closing Date.
(b) Notwithstanding any provision to the contrary contained
in this Section 6.08, Newco shall not be required to assume or obtain the
release of that certain letter of credit issued on behalf of Seller by First
Hawaiian Bank in the amount not to exceed $10,432,131 in favor of the State of
California for workers compensation self insurance or any successor letter of
credit issued by any banking institution on behalf of Seller with respect to
workers compensation claims arising prior to the Closing Date (the "Workers
Compensation LC") until the earlier of (i) the fifth (5th) anniversary of the
Closing Date and (ii) the first date upon which Newco or any successor entity
(a) consummates an offering of equity securities registered under the
Securities Act of 1933, as amended, (b) consummates a sale, in a single
transaction or series of related transactions, of all or a substantial portion
of its assets or (c) consummates a merger with or into another entity or any
other reorganization or recapitalization transaction as a result of which the
owners of the outstanding voting capital stock of Newco or such successor
receive capital stock of the surviving entity in the merger, reorganization or
recapitalization representing less than 50% of the voting power of all
outstanding capital stock of the surviving entity. Newco agrees that the
Workers Compensation LC has been issued to the State of California to cover
only workers compensation liabilities of Newco arising prior to the Closing
Date that, together with all other such workers compensation liabilities of
Newco arising prior to the Closing Date, exceed, in the aggregate, the sum of
(i) self insurance reserves established on the balance sheet of Seller as of
the Closing Date for workers compensation charges and expenses (the "Closing
Workers Compensation Reserve") and (ii) Newco's workers compensation insurance
coverage, if any; and Newco agrees not to allow any draw to be made on the
Workers Compensation LC prior to such time, if ever, that the workers
compensation liabilities of Newco arising prior to the Closing Date exceed, in
the aggregate, the sum of (i) the Closing Workers Compensation Reserve and
(ii) Newco's workers compensation insurance coverage, if any. The provisions
of this Section 6.08(b) shall not, in any event, alter Newco's agreement to
duly, promptly and faithfully pay, perform and discharge, when due, all
Assumed Liabilities, including any workers compensation liabilities included
within the Assumed Liabilities.
6.09. Re-marketing of Preferred Stock. Upon Seller's request, Newco
-------------------------------
will cooperate in all reasonable respects in connection with Seller's resale of
the Newco Exchangeable Preferred Stock received under the terms of this
Agreement (including preparing a customary prospectus or offering memorandum
for such resale), and Newco shall reimburse and indemnify Seller for all costs,
expenses, liabilities, Taxes (including but not limited to sales and other
transfer Taxes) and other charges incurred in connection with such resale,
including, but not limited to, the costs and expenses associated with entering
into any purchase greement, placement agent agreement or underwriting agreement
and the ransactions contemplated thereby; provided, however, that Newco shall
not be equired to reimburse Seller for underwriting discounts or commissions in
excess f 4% of the aggregate proceeds received by Seller in connection with its
remarketing of the Newco Exchangeable Preferred Stock. In connection with any
sale by Seller of its Newco Exchangeable Preferred Stock covered by this
Section 6.09, Newco agrees, in addition to the reimbursement and indemnifica-
ion provided for in the preceding sentence, (i) to issue Warrants to the
purchasers of such Exchangeable Preferred Stock at the direction of Seller in
the amount and having the terms set forth in Exhibit C and to enter into a
Warrant Agreement (covering the Warrants) and Registration Rights Agreement
(covering the registration rights set forth on Exhibit C) with such purchasers
containing terms and provisions, including representations, warranties and
covenants of Newco, and indemnities by Newco, as are customary for a
transaction of this nature and (ii) to enter into a purchase agreement,
placement agent agreement or underwriting agreement with the initial purchaser,
placement agent or underwriter, as applicable, and Seller, containing
reasonable and customary representations, warranties and covenants of Newco,
and indemnities by Newco of the Seller and the initial purchaser, placement
agent or underwriter, as applicable, as are customary for a transaction of
this nature. Newco agrees, for as long as shares of Newco Exchangeable
Preferred Stock are outstanding, to make available to any purchaser or
subsequent purchaser the information described in Rule 144A(d) in order to
enable resales of the Newco Exchangeable Preferred Stock to occur pursuant to
Rule 144A under the Securities Act.
ARTICLE VII
COVENANTS OF ALL PARTIES
7.01. Further Assurances. Subject to the terms and conditions of
------------------
this Agreement, each party will use all commercially reasonable efforts
(whether before or after the Closing Date) to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or reasonably
desirable under Applicable Law to consummate the transactions contemplated by
this Agreement. Newco and Seller agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be reasonably necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement;
provided, however, that nothing contained in any such documents, certificates,
agreements or other writings shall be deemed to supersede, amend or modify any
of the terms, conditions or any of the rights or obligations of the parties
hereunder and, to the extent of any conflict between any such documents,
certificates, agreements or other writings, on the one hand, and this
Agreement, on the other hand, the terms and provisions of this Agreement shall
prevail.
7.02. Certain Filings. The parties hereto shall cooperate with one
---------------
another in determining whether any action by or in respect of, or filing with,
any Governmental Authority is required or reasonably appropriate, or any
action, consent, approval or waiver from any party to any Contract is required
or reasonably appropriate, in connection with the consummation of the
transactions contemplated by this Agreement. Subject to the terms and
conditions of this Agreement, in taking such actions or making any such
filings, the parties hereto shall furnish information required in connection
therewith and seek timely to obtain any such actions, consents, approvals or
waivers. Without limiting the foregoing, the parties hereto shall each
promptly complete and file all reports and forms, and respond to all requests
or further requests for additional information, if any, as may be required or
authorized under the HSR Act.
7.03. Public Announcements. Up to (and including) the Closing Date,
--------------------
each party agrees that, without the consent of the other party, it will not,
except as may be required by Applicable Law, issue any press release or make
any public statement with respect to this Agreement or the transactions
contemplated hereby. For a period of ninety (90) days after the Closing Date,
the parties agree to consult with each other before issuing any press release
or making any public statement with respect to this Agreement or the
transactions contemplated hereby, and, except as may be required by Applicable
Law, will not issue any such press release or public statement prior to such
consultation. Notwithstanding the foregoing, the parties may, on a
confidential basis, advise and release information regarding the existence and
content of this Agreement or the transactions contemplated hereby to their
respective Affiliates or any of their agents, accountants,
attorneys and prospective lenders or investors in connection with or related to
the transactions contemplated by this Agreement, including without limitation
the financing of such transactions.
7.04. Disposition of Benefit Plans. The following provisions shall
----------------------------
govern the disposition of Benefit Plans in which employees of Seller
participate.
(a) Effective as of the Closing Date, Newco shall assume the
sponsorship of and responsibility for the maintenance, funding and
administration of each Benefit Plan in which employees and former employees of
Seller are the sole participants and which are listed on Schedule 7.04(a).
Appropriate arrangements shall be made to transfer any assets of such plans held
in an A&B sponsored master trust to a funding arrangement to be established as
of the Closing Date by Newco. In the case of the A&B Retirement Plan for
Salaried Employees of C&H, C&H shall on or before the Closing Date cause such
plan to be amended to strike Article XII thereof effective as of the Closing
Date and contingent on the consummation of the transactions contemplated by
this Agreement to occur on the Closing Date.
(b) In connection with any Benefit Plan sponsored and main-
tained by A&B and in which employees and former employees of Seller partici-
pate, but are not the sole participants, the following shall apply:
(i) In the case of any Employee Pension Benefit Plan,
employees of Seller shall cease active participation in such plan as of
the Closing Date and shall thereafter participate in a substantially
similar plan to be established by Newco effective as of the Closing Date.
Contributions to the Newco tax sheltered investment plan shall be funded
through a date that is three months after the Closing Date through the
Alexander & Baldwin Deferred Compensation Trust. Such assets along with
other assets and liabilities attributable to current employees of Seller
who will be transferred to Newco's payroll as of the Closing Date shall be
transferred to the Newco Plan as soon as practicable after the later to
occur of the date that is three months after the Closing Date or the date
upon which Newco confirms to Seller that Newco's plan and trust qualify
under Code Sections 401 and 501, respectively.
(ii) In the case of the A&B Flexible Benefit Program
and the A&B Retiree Health and Welfare Benefit Plan, Newco shall,
effective as of the Closing Date, establish substantially similar plans in
the aggregate and cause such plans to be adequately insured either through
commercially underwritten insurance or a self insurance arrangement.
Accounts maintained as of the Closing under the Flexible Benefit Program
pertaining to the medical reimbursement and dependent care reimbursement
plans in respect of employees of Seller for 1998 shall be transferred to
and assumed by Newco and Newco shall therefore be responsible for claims
(expenses)incurred during 1998 prior to the Closing Date and shall be
responsible for any claims incurred thereafter. Individuals who are
participants in the A&B Retiree Health and Welfare Benefit Plan as of the
Closing Date shall cease participation in such plan as of the Closing Date
and be covered thereafter under Newco's plan. Except as provided above,
Seller shall retain all liability for benefits accrued and claims whether
or not reported incurred prior to the Closing Date under any Benefit Plan
which is an Employee Welfare Benefit Plan (as described in 3(1) of ERISA).
A&B shall extend coverage under the medical, vision, dental, life
insurance and disability programs to current or former employees of Seller
(including those employed by Newco on and after the Closing Date) through
a date that is three (3) months after the Closing Date, and Newco shall
reimburse A&B for the cost of providing such benefits.
(iii) Notwithstanding the foregoing, effective as of the
Closing Date, Newco shall establish a plan substantially similar to A&B's
Excess Benefit Plan and the one year Performance Improvement Incentive
Plan in respect of employees or former employees of Seller and all liabi-
lities attributable to them, to the extent accrued, shall be assumed by
Newco. In the case of both the Excess Benefit Plan and the one year
Performance Improvement Incentive Plan, Newco may not diminish benefits
accrued through the Closing and must allow benefits to accrue through the
end of 1998 on terms at least as favorable as those presently in effect.
7.05. Working Capital Facility. The parties shall cooperate with
------------------------
one another and each party shall use its commercially reasonable efforts to
arrange for a term loan and a revolving working capital credit facility for
Newco on terms satisfactory to Newco (the "Working Capital Facility") pursuant
to which Newco will have not less than $75,500,000 of borrowing capacity as of
the Closing Date immediately prior to the consummation of the transactions
contemplated hereby.
7.06. Cooperation in Tax Matters. Newco and Seller shall
--------------------------
(i) provide each other with such assistance as may reasonably be requested in
connection with the preparation of any Tax Return and the conduct of any audit
or other examination by any taxing authority or in connection with judicial or
administrative proceedings relating to any liability for Taxes and (ii) retain
and provide each other with all records or other information that may be
relevant to the preparation of any Tax Returns, or the conduct of any audit or
examination, or other Tax Proceeding. Seller shall retain all relevant
documents, including prior year's Tax Returns, supporting work schedules and
other records or information that may be relevant to such returns and shall not
destroy or otherwise dispose of any such records without the prior written
consent of the other party. All tax sharing or similar agreements with respect
to or involving MLM shall be terminated as of the Closing Date and, after the
Closing Date, MLM shall not be bound thereby or have any Liability thereunder.
7.07. Registration Rights Agreement. Newco and Seller shall enter
-----------------------------
into aRegistration Rights Agreement relating to the Newco Exchangeable
Preferred Stock, on commercially reasonable terms and conditions satisfactory
to Newco and Seller in their reasonable discretion, concurrently with the
Closing.
7.08. Indenture. The parties shall cooperate with one another and
---------
shall use their commercially reasonable efforts to arrange for Newco to enter
into an Indenture, relating to Newco's 12.5% Subordinated Exchange Debentures
issuable in exchange for shares of Newco Exchangeable Preferred Stock ("Newco
Exchange Debentures"), concurrently with the Closing, containing the terms set
forth in Exhibit E.
7.09. Disposition of Certain Properties. Seller and Newco
---------------------------------
acknowledge thatcertain parcels of real property referred to in that certain
Amendment to Settlement Agreement dated August 9, 1996 between Seller and the
Crockett Power Plant Committee, which amends that certain Settlement Agreement
dated July 21, 1993 among the Crockett Power Plant Committee, the Glenn Cove
Homeowners Association, Ruth Blakeny, Douglas Tubb, Energy National, Inc. and
Seller (collectively, the "Settlement Agreement"), are owned by A&B and/or its
Affiliates and not by Seller. Seller and Newco acknowledge that A&B and its
Affiliates, either before or after the Closing Date, may elect to transfer some
or all of such parcels in fee title (i) to Seller (for inclusion in the
Transferred Assets), (ii) to Newco, (iii) to a governmental agency or body or
(iv) to the Crockett Community Foundation (or any successor organization); and,
in the event that some or all of such parcels are transferred to Seller (for
inclusion in the Transferred Assets) prior to the Closing Date or to Newco
within six (6) months after the Closing Date, Newco agrees to accept conveyance
of title to such parcels.
ARTICLE VIII
CONDITIONS TO CLOSING
8.01. Conditions of All Parties.
-------------------------
(a) All Required Governmental Approvals for the transactions
contemplated by this Agreement indicated with an asterisk (*) on
Schedule 3.11(b) and all Permits indicated with an asterisk (*) on
----------------
Schedule 3.11(a) shall have been obtained without the imposition of any
----------------
material conditions. All such Required Governmental Approvals and such Permits
shall be in effect, and no Proceedings shall have been instituted or threatened
by any Governmental Authority against Seller or Newco (or any of their
Affiliates) with respect thereto as to which there is a material risk of a
determination that would terminate the effectiveness of, or otherwise
materially and adversely modify the terms of, any such Required Governmental
Approval or such Permit; all applicable waiting periods with respect to such
Required Governmental Approvals and such Permits shall have expired; and all
conditions and requirements prescribed by Applicable Law or by such Required
Governmental Approvals and such Permits to be satisfied on or prior to the
Closing Date shall have been satisfied allowing all such Required Governmental
Approvals and such Permits to be and to remain in full force and effect
assuming continued compliance with the terms thereof after the Closing.
(b) The Required Contractual Consents indicated with an
asterisk (*) on Schedule 3.11(b) shall have been obtained without the
----------------
imposition of any material conditions. All such Required Contractual Consents
(and with respect to the Subsequent Material Contracts, such other consents as
may be required) shall be in full force and effect and no Proceeding shall have
been instituted or threatened with respect thereto that would have a Material
Adverse Effect. All conditions and requirements prescribed by any required
Contractual Consent (or any such other consent) to be satisfied on or prior to
the Closing Date shall have been satisfied in all material respects.
c) The transactions contemplated by this Agreement and the
consummation of the Closing shall not violate any Applicable Law. No temporary
restraining order, preliminary or permanent injunction, cease and desist order
or other order issued by any court of competent jurisdiction or any competent
Governmental Authority or any other legal restraint or prohibition preventing
the consummation of the transactions contemplated hereby shall be in effect,
and there shall be no pending or threatened actions or proceedings by any
Governmental Authority (or determinations by any Governmental Authority) or by
any other Person challenging or in any manner seeking to restrict or prohibit
the consummation of the transactions contemplated hereby.
(d) Newco shall have amended its certificate of incorporation
and restated its certificate of incorporation in substantially the form of the
Newco Charter attached hereto as Exhibit A.
(e) Seller and CVC (the "Purchaser") shall have entered into
an Amended and Restated Stock Sale Agreement, substantially in the form
attached hereto as Exhibit B (the "Stock Sale Agreement"), relating to the
---------
purchase by Purchaser from Seller of, in the aggregate, 450,000 shares of Newco
Common Stock, 90,000 shares of Newco Class B Common Stock and 14,400 shares of
Newco Junior Preferred Stock immediately following the Closing. The Stock Sale
Agreement shall remain in full force and effect and all conditions to closing
contained in the Stock Sale Agreement shall have been satisfied (other than the
consummation of the transactions contemplated hereby); and Seller shall have
received a certificate signed by Purchaser and Citicorp Mezzanine Partners,
L.P. ("CMP") to the foregoing effect and to the effect that (i) Purchaser has
irrevocably and unconditionally committed to consummate the transactions
contemplated by the Stock Sale Agreement and to pay the purchase price for the
Newco Common Stock, Newco Class B Common Stock, and Newco Junior Preferred
Stock to be sold thereunder following consummation of the transactions
contemplated hereby, (ii) CMP has irrevoacably and unconditionally committed
to consummate the CMP Loan (as defined in the Stock Sale Agreement).
(f) Concurrently with the Closing, Newco shall be satisfied
with all of its working capital financing, including the terms of the Working
Capital Facility, which, among other things, will provide Newco with not less
than $75,500,000 of borrowing capacity on the Closing Date prior to the
consummation of the transactions contemplated hereby; and Newco shall have
received cash funds under its working capital facilities sufficient, when taken
together with all other funds available to Newco on the Closing Date, to pay
the Cash Component to Seller. The parties hereto agree and acknowledge that
Newco's financing arrangements with HSTC are satisfactory to Newco.
(g) Concurrently with the Closing, Newco and Seller shall
have entered into the Registration Rights Agreement relating to the Newco
Exchangeable Preferred Stock, Newco Common Stock and Newco Class B Common Stock
on commercially reasonable terms and conditions satisfactory to Newco and
Seller in their reasonable discretion, and each party shall have delivered to
the other party a certificate to the effect that the provisions contained in
such agreement are satisfactory.
(h) Concurrently with the Closing, Newco shall have entered
into an Indenture relating to the Newco Exchange Debentures, and each party
shall have delivered to the other party a certificate to the effect that the
provisions contained in the Indenture are satisfactory.
(i) Concurrently with or prior to the Closing Date, except as
otherwise provided in Section 6.08, all letters of credit tendered on behalf of
the Seller to third parties and all guarantees by Seller, the Shareholders or
A&B of any Assumed Liabilities shall have been released, extinguished or
assumed by Newco or arrangements satisfactory to Seller shall have been made
for their release, extinguishment or assumption promptly after the Closing.
(j) Seller shall have obtained fee title to that certain
parcel of real property located in Crockett, California commonly referred to
as 15 and 9 Crolona Heights Drive (the "Company Guest House and Cottage" listed
as item 3 on Schedule 3.07(a)), and such parcel shall be included in the
Transferred Assets.
(k) Newco, ABHI and the lender under the Working Capital
Facility shall have entered into the Standby Financing Agreement in the form
attached hereto as Exhibit F.
8.02. Conditions to Obligation of Newco. The obligations of Newco
---------------------------------
to consummate the Closing are subject to the satisfaction on or prior to the
Closing Date of each of the following conditions:
(a) (i) Seller shall have performed and satisfied, in all
material respects, each of its obligations hereunder required to be performed
and satisfied by it on or prior to the Closing Date, (ii) each of the
representations and warranties of Seller contained in this Agreement shall be
true and correct, at and as of the Closing Date with the same force and effect
as if made as of the Closing Date (except (x) for any breach of any such
representations or warranties which, when combined with all other breaches of
such representations and warranties, would not result in a Material Adverse
Effect, (y) representations and warranties made as of a specific date (other
than the date of execution of this Agreement) shall continue to be true and
correct in all material respects as of such specific date, and (z) any event,
occurrence, development or state of circumstances or facts or change in the
Transferred Assets or Business occurring or arising after the date of execution
of this Agreement shall not be deemed to constitute a breach of the
representations and warranties contained in clause (b) of Section 3.06) and
(iii) Newco shall have received certificates signed by a duly authorized
executive officer of Seller on behalf of Seller to the foregoing effect and to
the effect that, to the knowledge of such executive officer, the conditions
specified within this Section 8.02 have been satisfied.
(b) Since the date hereof, there shall not have been any
event, occurrence, development or change of circumstances, in any case,
resulting directly from the resolution of any collective bargaining issues of
Seller or the Business that has had or that may be reasonably expected to have
a Material Adverse Effect.
(c) The Required Contractual Consents indicated with a
plus (+) sign on Schedule 3.11(b) shall have been obtained without the
----------------
imposition of any material conditions. All such Required Contractual Consents
(and with respect to the Subsequent Material Contracts, such other consents as
may be required) shall be in full force and effect and no Proceeding shall have
been instituted or threatened with respect thereto that, would have a Material
Adverse Effect. All conditions and requirements prescribed by any required
Contractual Consent (or any such other consent) to be satisfied on or prior to
the Closing Date shall have been satisfied in all material respects.
(d) A&B shall have delivered to Newco a letter, signed by an
authorized officer of A&B, certifying that: "For a period of five (5) years
after the Closing Date, A&B shall cause ABHI to comply with the covenant
contained in Section 9.06 of this Agreement."
8.03. Conditions to Obligation of Seller. The obligations of
----------------------------------
Seller to consummate the Closing is subject to the satisfaction on or prior to
the Closing Date of each of the following conditions: (i) Newco shall have
performed and satisfied in all material respects its obligations hereunder
required to be performed and satisfied by it on or prior to the Closing Date;
(ii) the representations and warranties of Newco contained in this Agreement
shall be true, complete and accurate in all material respects at and as of the
Closing Date, as if made at and as of the Closing Date (except (y) for any
breach of any such representations and warranties which, when combined with all
other breaches of such representations and warranties, would not be materially
adverse to seller, and (z) representations and warranties made as of a specific
date (other than the date of this Agreement) shall continue to be true and
correct in all material respects as of such specific date), (iii) Seller shall
have received a "resale certificate" in form and substance satisfactory to
Seller pertaining to that portion of the Transferred Assets being acquired by
Newco for resale, and (iv) Seller shall have received a certificate signed by a
duly authorized executive officer of Newco to the foregoing effect and to the
effect that, to such executive officer's knowledge, the conditions specified
within this Section 8.03 have been satisfied.
ARTICLE IX
INDEMNIFICATION
9.01. Agreement to Indemnify.
----------------------
(a) Newco and its Affiliates, and each officer, director,
shareholder, employer, representative and agent of the foregoing (collectively,
the "Newco Indemnitees"{xe "\"Newco Indemnitees\" 9.01(a)"}) shall each be
indemnified and held harmless to the extent set forth in this Article IX,
jointly and severally, by Seller and each of the Shareholders jointly and
severally in respect of any and all Damages reasonably and proximately incurred
by any Newco Indemnitee as a result of:
(i) any inaccuracy or misrepresentation in or breach
of any representation or warranty made by Seller in this Agreement or any
certificate delivered by Seller pursuant hereto and any covenant of Seller
or the Shareholders contained in Section 5.01(a) to be performed prior to
or as of the Closing (other than those representations and warranties of
Seller contained in Sections 3.01, 3.02, 3.16, or 3.19 of this Agreement);
provided, however, that Seller shall have no obligation under clause (i)
of this Section 9.01(a) unless and until the aggregate amount of Damages
so incurred exceeds One Million Four Hundred Thirty Thousand Dollars
($1,430,000), whereupon Seller shall be liable to indemnify all amounts
over One Million Four Hundred Thirty Thousand Dollars ($1,430,000);
provided, further, that Seller shall have no obligation under clause (i)
of this Section 9.01(a) with respect to any individual item where the
Damages relating to such item are less than Ten Thousand Dollars ($10,000)
(and such items shall not be aggregated for purposes of the first proviso
in clause (i) of this Section 9.01(a)); provided, further, that Seller
shall have no obligation under clause (i) of this Section 9.01(a) to the
extent that the aggregate amount of Damages so incurred exceeds Fourteen
Million Three Hundred Thousand Dollars ($14,300,000), after which point
Seller will have no obligation hereunder to indemnify Newco Indemnitees
from and against further such Damages pursuant to this Section 9.01(a)(i);
(ii) any inaccuracy or misrepresentation in or breach
of any representation or warranty made by Seller in Sections 3.01, 3.02,
3.16 or 3.19 of this Agreement or with respect to such Sections in any
certificate delivered by Seller pursuant hereto;
(iii) any breach of any covenant or agreement of Seller
(other than the covenants contained in Section 5.01(a) of this Agreement);
(iv) any Excluded Liabilities; and
(v) any loss, claim, or expense arising from the
amendment of the A&B Retirement Plan for Salaried Employees of C&H
referenced in Section 7.04(a), above, to strike Article XII thereof.
(b) Seller and its Affiliates, and each officer, director,
shareholder, employer, representative and agent of the foregoing (collectively,
the "Seller Indemnitees") shall each be indemnified and held harmless to the
extent set forth in this Article IX by Newco in respect of any and all Damages
reasonably and proximately incurred by any Seller Indemnitee as a result of:
(i) any inaccuracy or misrepresentation in or breach
of any representation, warranty, covenant or agreement made by Newco in
this Agreement;
(ii) any Assumed Liabilities;
(iii) any liability or obligation arising pursuant to
the Crockett Order; and
(iv) any liabilities of Newco or the Business incurred
or arising after the Closing Date other than Excluded Liabilities.
(c) Nothing set forth in this Article IX shall be deemed to
prohibit or limit any Newco Indemnitee's or Seller Indemnitee's right at any
time before, on or after the Closing Date, to seek injunctive or other
equitable relief for the failure of any Indemnifying Party to perform any
covenant or agreement contained herein.
(d) For purposes of the indemnification obligations hereunder
and the calculation of Damages, any inaccuracy in or breach of a representation
or warranty shall be deemed to constitute a breach of such representation or
warranty, notwithstanding any limitation or qualification as to materiality set
forth in such representation or warranty as to the scope, accuracy or
completeness thereof or any such limitation or qualification with respect to
any such matter resulting in a Material Adverse Effect, it being the intention
of the parties that, subject to the provisos set forth in clause (i) of
Section 9.01(a), the Newco Indemnitees shall be indemnified and held harmless
from and against any and all Damages arising out of or based upon or with
respect to the failure of any such representation or warranty to be true,
correct and complete in any respect.
9.02. Survival of Representation, Warranties and Covenants. Except
----------------------------------------------------
as hereinafter provided in this Section 9.02, all representations, warranties,
covenants, agreements and obligations of each Indemnifying Party contained
herein (including the indemnification obligations contained in this Article IX)
and all claims of any Newco Indemnitee or Seller Indemnitee in respect of any
breach of any representation, warranty, covenant, agreement or obligation of
any Indemnifying Party contained in this Agreement, shall survive the Closing
and shall expire on the second anniversary of the Closing Date; provided,
however, that the representations and warranties contained in Sections
3.01-3.04 and 3.16 of this Agreement shall survive the Closing indefinitely;
provided, further, that the representations and warranties contained in Section
3.19 of this Agreement shall survive the Closing through the applicable statute
of limitations; and provided, further, that the representations and warranties
contained in Section 3.17 of this Agreement shall survive the Closing and shall
expire on the fifth anniversary of the Closing Date.
9.03. Claims for Indemnification. If any Indemnitee shall believe
--------------------------
that such Indemnitee is entitled to indemnification pursuant to this Article IX
in respect of any Damages, such Indemnitee shall give the appropriate
Indemnifying Parties prompt written notice thereof. Any such notice shall set
forth in reasonable detail and to the extent then known the basis for such
claim for indemnification. The failure of such Indemnitee to give notice of
any claim for indemnification promptly, but within the periods specified by
Section 9.02, as the case may be, shall not adversely affect such Indemnitee's
right to indemnity hereunder except to the extent that such failure adversely
affects the right of the Indemnifying Parties to assert any reasonable defense
to such claim. Each such claim for indemnity shall expressly state that the
Indemnifying Parties shall have only the thirty (30) Business Day period
referred to in the next sentence to dispute or deny such claim. The
Indemnifying Parties shall have thirty (30) Business Days following its receipt
of such notice either (y) to acquiesce in such claim by giving such Indemnitee
written notice of such acquiescence or (z) to object to the claim by giving
such Indemnitee written notice of the objection.
9.04. Defense of Claims. In connection with any claim which may
-----------------
give rise to indemnity under this Article IX resulting from or arising out of
any claim or Proceeding against an Indemnitee by a Person that is not a party
hereto, the Indemnifying Parties may (unless such Indemnitee elects not to
seek indemnity hereunder for such claim), upon written notice sent at any time
to the relevant Indemnitee, assume the defense of any such claim or Proceeding
if all Indemnifying Parties with respect to such claim or Proceeding jointly
acknowledge to the Indemnitee the Indemnitee's right to indemnity pursuant
hereto in respect of the entirety of such claim (as such claim may have been
modified through written agreement of the parties or arbitration hereunder)
and provide assurances, reasonably satisfactory to such Indemnitee, that the
Indemnifying Parties will be financially able to satisfy such claim in full
if such claim or Proceeding is decided adversely. If the Indemnifying Parties
assume the defense of any such claim or Proceeding, the Indemnifying Parties
shall select counsel reasonably acceptable to such Indemnitee (the parties
agree that any Indemnitee shall be precluded from asserting that the firms of
Kirkland & Ellis or Gibson, Dunn & Crutcher LLP are not reasonably acceptable)
to conduct the defense of such claim or Proceeding, shall take all steps
reasonably necessary in the defense or settlement thereof and shall at all
times diligently and promptly pursue theresolution thereof. If the
Indemnifying Parties shall have assumed the defense of any claim or Proceeding
in accordance with this Section 9.04, the Indemnifying Parties shall be
authorized to consent to a settlement of, or the entry of any judgment arising
from, any such claim or Proceeding, without the prior written consent of such
Indemnitee; provided, however, that the Indemnifying Parties shall pay or cause
to be paid all amounts arising out of such settlement or judgment either
concurrently with the effectiveness thereof or shall obtain and deliver to such
Indemnitees prior to the execution of such settlement a general release
executed by the Person not a party hereto, which general release shall release
such Indemnitee from any liability in such matter; provided, further, that the
Indemnifying Parties shall not be authorized to encumber any of the assets of
any Indemnitee or to agree to any restriction that would apply to any
Indemnitee or to its conduct of business; and provided, further, that a
condition to any such settlement shall be a complete release of such Indemnitee
and its Affiliates, officers, employees, consultants and agents with respect to
such claim. Such Indemnitee shall be entitled to participate in (but not
control) the defense of any such action, with its own counsel and at its own
expense. Each Indemnitee shall, and shall cause each of its Affiliates,
officers, employees, consultants and agents to, cooperate fully with the
Indemnifying Parties in the defense of any claim or Proceeding being defended
by the Indemnifying Parties pursuant to this Section 9.04. If the Indemnifying
Parties do not assume the defense of any claim or Proceeding resulting
therefrom in accordance with the terms of this Section 9.04, such Indemnitee
may defend against such claim or Proceeding in such manner as it may deem
appropriate, including settling such claim or Proceeding after giving notice of
the same to the Indemnifying Parties, on such terms as such Indemnitee may deem
appropriate. If the Indemnifying Parties seek to question the manner in which
such Indemnitee defended such claim or Proceeding or the amount of or nature of
any such settlement, the Indemnifying Parties shall have the burden to prove
by a preponderance of the evidence that such Indemnitee did not defend such
claim or Proceeding in a reasonably prudent manner.
9.05. Nature of Payments. Any payment under this Article IX shall
------------------
be treated for tax purposes as an adjustment of the Purchase Consideration to
the extent such characterization is proper and permissible under relevant Tax
authorities, including court decisions, statutes, regulations and
administrative promulgations.
9.06. ABHI's Financial Condition. ABHI agrees that, for a period of
--------------------------
five (5) years after the Closing Date, it will maintain shareholder's equity,
determined in accordance with GAAP, of not less than $25 million.
ARTICLE X
TERMINATION
10.01. Grounds for Termination. This Agreement may be terminated at
-----------------------
any time prior to the Closing:
(a) by mutual written agreement of all of the parties
hereto.
(b) by Newco after written notice to Seller of any one or
more misrepresentations in or breaches of the representations or warranties
made by Seller contained herein that, if not cured on or prior to the Closing
Date, could be reasonably expected to give Newco grounds not to close under
Article VIII when taken into account with all other uncured misrepresentations
in or breaches of such representations or warranties as to which Newco shall
have given notice to Seller as provided in this clause (b). A termination
pursuant to this paragraph (b) shall become effective (i) fifteen (15) days
after such notice with respect to such a misrepresentation or breach that is
not capable of being cured on or prior to the Closing Date, or (ii) immediately
prior to the Closing with respect to such a misrepresentation or breach that is
capable of being cured, but is not cured, on or prior to the Closing Date;
(c) by Newco after written notice to Seller of the failure
by Seller to perform and satisfy any of its obligations under this Agreement
required to be performed and satisfied by Seller on or prior to the Closing
Date, if the aggregate of all such failures shall be material. A termination
pursuant to this paragraph (c) shall become effective (i) fifteen (15) days
after such notice with respect to such a failure that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a failure that is capable of being cured, but is not
cured, on or prior to the Closing Date;
(d) by Seller after written notice to Newco of any one or
more misrepresentations in or breaches of the representations or warranties
made by Newco herein which, if not cured on or prior to the Closing Date,
could be reasonably expected to give Seller grounds not to close under Article
VIII when taken into account with all other uncured misrepresentations in or
breaches of such representations or warranties as to which Seller shall have
given notice to Newco as provided in this clause (d). A termination pursuant to
this paragraph (d) shall become effective (i) fifteen (15) days after such
notice with respect to such a misrepresentation or breach that is not capable
of being cured on or prior to the Closing Date, or (ii) immediately prior to
the Closing with respect to such a misrepresentation or breach that is capable
of being cured, but is not cured, on or prior to the Closing Date;
(e) by Seller after written notice to Newco of Newco's
failure to perform and satisfy any of its obligations under this Agreement
required to be performed and satisfied by Newco on or prior to the Closing
Date, if the aggregate of all such failures shall be material. A termination
pursuant to this paragraph (e) shall become effective (i) fifteen (15) days
after such notice with respect to such a failure that is not capable of being
cured on or prior to the Closing Date, or (ii) immediately prior to the Closing
with respect to such a failure that is capable of being cured, but is not
cured, on or prior to the Closing Date;
(f) by Newco or by Seller, if the Closing shall not have
been consummated by March 31, 1999 (the "Outside Date"); provided, however,
that neither Newco nor Seller may terminate this Agreement pursuant to this
clause (f) if the Closing shall not have been consummated within such time
period by reason of the failure of such party or any of its Affiliates to
perform in all material respects any of its or their respective covenants or
agreements contained in this Agreement; and
(g) by any party hereto if any Federal, state or foreign
law or regulation thereunder shall hereafter be enacted or become applicable
that makes the transactions contemplated hereby or the consummation of the
Closing illegal or otherwise prohibited, or if any judgment, injunction, order
or decree enjoining either party hereto from consummating the transactions
contemplated hereby is entered, and such judgment, injunction, order or decree
shall become final and nonappealable.
The party desiring to terminate this Agreement pursuant to
clauses (b) through (g) shall give written notice of such termination to the
other party as soon as is practicable.
10.02. Effect of Termination. If this Agreement is terminated as
---------------------
permitted by Section 10.01, such termination shall be without liability of any
party to any other party to this Agreement except as hereinafter expressly
provided in this Section 10.02. If such termination shall result from the
breach by any party of itsrepresentations, warranties or covenants contained
in this Agreement, such party shall be fully liable for any and all Damages
incurred or suffered by the other parties as a result of such failure or
breach. The provisions of Sections 5.10, 5.11, 6.03, 6.04, 11.03 and 11.05
shall survive any termination of this Agreement pursuant to Article X, and each
party hereto shall be fully responsible for any breach of any such provision,
whether or not such breach occurs prior to the termination of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.01. Notices. All notices, requests, demands, claims and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) if
personally delivered, when so delivered, (ii) if mailed, five Business Days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below, (iii) if given by telex or telecopier, once such notice or other
communication is transmitted to the telex or telecopier number specified below
and the appropriate answer back or telephonic confirmation is received,
provided that such notice or other communication is promptly thereafter mailed
in accordance with the provisions of clause (ii) above or (iv) if sent through
an overnight delivery service in circumstances to which such service guarantees
next day delivery, the day following being so sent:
If to Seller:
------------
Glenn R. Rogers
Alexander & Baldwin, Inc.
333 Market Street
P.O. Box 7452
San Francisco, CA 94120
Telecopier: (415) 546-9630
with copies to:
--------------
Michael J. Marks, Esq.
Alexander & Baldwin, Inc.
Post Office Box 3440
Honolulu, HI 96801
Telecopier: (808) 525-6678
Bradford P. Weirick, Esq.
Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, CA 90071
Telecopier: (213) 229-7520
If to Newco:
-----------
David Howe
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10043
Telecopier: (212) 888-2940
with a copy to:
--------------
Kirk Radke, Esq.
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Telecopier: (212) 446-4900
Any party may give any notice, request, demand, claim or other
communication hereunder using any other means (including ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the individual for whom it is intended. Any party may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other parties
notice in the manner herein set forth.
11.02. Amendments; No Waivers.
----------------------
(a) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by all parties hereto, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) No waiver by a party of any default, misrepresentation
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence. No failure or delay
by a party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
11.03. Expenses.
--------
(a) Except as otherwise provided herein, all costs,
expenses, liabilities, Taxes (excluding sales and transfer Taxes) and other
charges incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by Newco, including the reasonable fees and
expenses of investment banks, attorneys and other advisors. Newco and Seller
shall each pay 50% of all sales and transfer Taxes arising as a result of the
sale of the Transferred Assets pursuant to this Agreement.
(b) In the event that this Agreement is terminated and/or
the transactions contemplated hereby are not consummated, Seller shall be
responsible for all of its expenses (including any fees and expenses of
investment banks, attorneys and other advisors engaged by Seller) and CVC shall
be responsible for its expenses (including any fees and expenses of investment
banks, attorneys and other advisors engaged by CVC).
11.04. Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. No party hereto may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of each other party, which approval shall not be unreasonably
withheld; provided, however, that Newco may assign either this Agreement or any
of its rights, interests or obligations hereunder without the prior written
approval of each other party if such assignment is expressly requested in
writing by any party providing funds or other financings in connection with
this Agreement.
11.05. Governing Law. This Agreement shall be construed in
-------------
accordance with and governed by the internal laws (without reference to choice
or conflict of laws) of the State of California.
11.06. Counterparts; Effectiveness. This Agreement may be signed in
---------------------------
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received a counterpart hereof signed by the other parties hereto.
11.07. Entire Agreement. This Agreement (including the Schedules
----------------
and Exhibits referred to herein which are hereby incorporated by reference)
constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements (including the Letter
of Intent, dated May 5, 1998 and that certain Confidentiality Agreement, dated
as of August 8, 1997, between Cybus Capital Markets and Citicorp Venture
Capital, Ltd., which terminates at Closing), understandings and negotiations,
both written and oral, between the parties with respect to the subject matter
of this Agreement. Neither this Agreement nor any provision hereof is intended
to confer upon any Person other than the parties hereto any rights or remedies
hereunder.
11.08. Captions. The captions herein are included for convenience
--------
of reference only and shall be ignored in the construction or interpretation
hereof. All references to an Article or Section include all subparts thereof.
11.09. Severability. If any provision of this Agreement, or the
------------
application thereof to any Person, place or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places and circumstances shall remain in full force and effect only if, after
excluding the portion deemed to be unenforceable, the remaining terms shall
provide for the consummation of the transactions contemplated hereby in
substantially the same manner as originally set forth at the later of the
date this Agreement was executed or last amended.
11.10. Construction.
------------
(a) The language used in this Agreement will be deemed to be
the language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction shall be applied against either party. Any
reference to any Applicable Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise.
Whenever required by the context, any gender shall include any other gender,
the singular shall include the plural and the plural shall include the
singular. The words "herein," "hereof," "hereunder," and words of similar
import refer to the Agreement as a whole and not to a particular section.
Whenever the word "including" is used in this Agreement, it shall be deemed to
mean "including, without limitation," "including, but not limited to" or other
words of similar import such that the items following the word "including"
shall be deemed to be a list by way of illustration only and shall not be
deemed to be an exhaustive list of applicable items in the context thereof.
(b) The parties hereto intend that each representation,
warranty, and covenant contained herein shall have independent significance.
If any party has breached any representation, warranty or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) that the party has not breached shall not
detract from or mitigate the fact that the party is in breach of the first
representation, warranty or covenant.
11.11. Cumulative Remedies. The rights, remedies, powers and
-------------------
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law. The parties hereto agree that
any party may seek specific performance by the other party of its obligations
hereunder without the requirement of posting a bond.
11.12. Third Party Beneficiaries. Except for any rights provided
-------------------------
under the Stock Sale Agreement, no provision of this Agreement shall create any
third party beneficiary rights in any Person, including any employee of Newco
or employee or former employee of Seller or any Affiliate thereof (including
any beneficiary or dependent thereof).
11.13. Knowledge. Whenever "knowledge," "to the knowledge of" "has
---------
received no notice" or "is not aware" (and all variants and derivatives
thereof) with respect to any Person, means the current actual knowledge of
such Person, after reasonable inquiry. Notwithstanding the foregoing, the
foregoing terms, when applied to Seller, shall mean the actual knowledge, after
reasonable inquiry, of any and all persons listed on Schedule 11.13.
--------------
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Asset Purchase Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
SELLER:
CALIFORNIA AND HAWAIIAN SUGAR COMPANY, INC.,
A HAWAII CORPORATION
By: /s/ Robert J. Guilbault
----------------------------
Name: Robert J. Guilbault
Title: Vice President
NEWCO:
SUGAR ACQUISITION CORPORATION, A DELAWARE
CORPORATION
By: /s/ David G. Koncelik
----------------------------
Name: David G. Koncelik
Title: President and Chief Executive Officer
SHAREHOLDERS:
A & B - HAWAII, INC., A HAWAII CORPORATION
By: /s/ Glenn R. Rogers
----------------------------
Name: Glenn R. Rogers
Title: Senior Vice President, Chief
Financial Officer and Treasurer
MCBRYDE SUGAR COMPANY, LIMITED, A HAWAII
CORPORATION
By: /s/ Glenn R. Rogers
----------------------------
Name: Glenn R. Rogers
Title: Vice President
Asset Purchase Agreement - California and Hawaii Sugar Co. Inc., A & B - Hawaii Inc., and McBryde Sugar Co. Ltd.
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