EXHIBIT 2.1
[LETTERHEAD OF MAUNA LOA MACADAMIA PARTNERS, L.P.]
November 6, 1997
X. Xxxxxx Homes, Inc.
000X Xxxx Xxxxx Xxxx
Xxxxxxx, Xxxx, Xxxxxx 00000
Gentlemen:
This letter constitutes an agreement in principle between Mauna Loa
Macadamia Partners, L.P. ("MLMP") and X. Xxxxxx Homes, Inc. ("Homes") concerning
a business combination between Partnership and Homes.
By executing this letter, MLMP and Homes represent, warrant and agree as
follows:
1. The respective boards of directors of Mauna Loa Resources, Inc. (in
that company's capacity as Managing General Partner of MLMP) and of Homes have
approved the business combination and the principal terms thereof set forth in
the Term Sheet attached to this letter subject to negotiation and execution of a
mutually acceptable definitive agreement, which shall embody the matters set
forth in the Term Sheet and such representations, warranties, terms, conditions
and other provisions as are customary in a transaction of this type or are
otherwise agreed to by the parties. MLMP and Homes each agree that they will
negotiate in good faith with the other and proceed with diligence towards
executing such definitive agreement.
2. MLMP and Homes each represents to the other that it has received from
its financial advisor an opinion (subject to review of the definitive agreement)
to the effect that the transactions contemplated by the attached Term Sheet are
fair from a financial point of view to such party's limited partners or
shareholders, as applicable.
3. MLMP and Homes each agree to provide the other party and its legal and
financial advisors with such information and documents as may reasonably be
requested in connection with completion of remaining due diligence and
negotiation of the definitive agreement.
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X. Xxxxxx Homes, Inc.
November 6, 1997
Page 2
4. MLMP and Homes each agree that except as otherwise required by
judicial process, information concerning the negotiations and the transaction
contemplated hereby will remain confidential and will not be disclosed by MLMP
or Homes, or by their respective representatives, publicly or to any other
party, except as required by law or regulation upon the written advice of the
disclosing party's counsel or except with prior written consent of the other
party; provided that the parties contemplate public disclosure of this agreement
in principle promptly following its execution. In connection with any such
disclosure made without such consent by reason of judicial process or legal or
regulatory requirements, the disclosing party will use its best efforts to
afford the other a reasonable opportunity to review and comment upon the text of
such disclosure prior to its release.
5. The existing confidentiality agreement between the parties is hereby
reaffirmed.
6. Homes agrees that so long as this paragraph remains in effect Homes
will not, and Homes will use its best efforts to cause its officers, directors,
employees, representatives and agents not to, directly or indirectly, knowingly
solicit or encourage submission of proposals with respect to, or furnish any
information relating to, or participate in any negotiations or discussions
concerning, any business combination with Homes, or any acquisition or purchase
of all or any substantial portion of the assets of, or a substantial equity
interest in, Homes, except that Homes may consider, recommend or accept an
alternative bona fide written offer if its Board of Directors determines, based
on a written legal opinion of outside counsel, that its fiduciary duties require
it to do so. If Homes recommends or accepts any alternative offer, MLMP shall
be entitled to terminate the transaction and receive from Homes a cash payment
of $1 million if Homes consummates another transaction within twelve (12) months
of such termination.
7. The agreements set forth in paragraphs 1, 3 and 6 above will expire
upon execution of the definitive agreement contemplated hereby, or upon mutual
agreement of MLMP and Homes. In addition, either party not in material default
of its obligations hereunder shall have the right to terminate the agreements
set hereto in paragraphs 1, 3 and 6 if a definitive agreement has not been
executed by December 15, 1997.
8. The agreements contained herein: (a) shall be binding upon and inure
to the benefit of, and be enforceable by, each party hereto and its successors
and assigns, (b) shall be construed (both as to validity and performance) and
enforced in accordance with, and governed by, the laws of the State of Hawaii
applicable to agreements made and to be performed wholly within such
jurisdiction; and (c) may be waived, amended, or modified only by an instrument
in writing signed by the party against which such waiver, amendment, or
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X. Xxxxxx Homes, Inc.
November 6, 1997
Page 3
modification is sought to be enforced, and such written instrument shall set
forth specifically the provisions that are to be so waived, amended, or
modified.
9. The matters set forth in paragraphs 1 through 9 hereof constitute
legally binding obligations of the parties hereto (notwithstanding any contrary
provision in the confidentiality agreement, or any other prior agreement,
between the parties). Subject to the foregoing, this letter is an agreement in
principle and does not of itself obligate either of the parties to consummate
the business combination referred to herein. Neither party shall become
obligated to consummate such business combination except upon execution and
delivery of, and subject to the provisions contained in, the definite agreement
contemplated hereby.
If the foregoing correctly reflects our mutual understanding, please
execute a copy of this letter in the space provided below and return it to the
undersigned.
Very truly yours,
XXXXX XXX XXXXXXXXX PARTNERS, L.P.
By Mauna Loa Resources, Inc.
Its Managing General Partner
By /s/ Xxxxx X. Xxxx
-------------------------------
Its CHAIRMAN, NEGOTIATING
COMMITTEE
APPROVED AND AGREED ON
November 6, 1997:
----------
X. XXXXXX HOMES, INC.
By /s/ Xxxx X. Xxxxx
-------------------------------
Its PRESIDENT & CEO
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TERM SHEET
----------
Transaction Objective: Acquisition by MLMP of Homes with shareholders of Homes
to receive MLMP units in exchange for their Homes
shares.
Consideration: Based on 8,331,665 Homes shares outstanding (and 4,335
shares held in treasury, which shares will be
cancelled), each outstanding share of Homes stock,
regardless of class, would be converted into 0.667
limited partner units of MLMP, and immediately after the
transaction, 13,057,221 limited partner units will be
outstanding (together with warrants to acquire 125,000
units at $5.00 per unit).
Structure: MLMP and Homes will select by agreement one of the
following alternative structures in order to maximize
value to their respective partners and shareholders:
X. Xxxxx will merge into MLMP in accordance with
Delaware law. This transaction is expected to be
treated for tax purposes as a contribution of assets
by Homes to MLMP in exchange for partnership units,
followed by a distribution of such units by Homes to
its shareholders in liquidation of Homes. Such
acquisition is not expected to disqualify MLMP,
including the merged Homes operations, from electing
to continue to be taxed as a partnership under
Section 7704(g) of the Internal Revenue Code, but it
will be a taxable event for Homes and its
shareholders.
B. MLMP would acquire all outstanding shares of Homes
in exchange for partnership units through a reverse
triangular merger, in which a wholly owned corporate
subsidiary of MLMP would be merged into Homes, which
would be the surviving corporation. The latter
transaction is expected to be treated as tax free to
the shareholders of Homes and to Homes, but Homes
would remain a separate corporate entity, subject to
corporate taxation.
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Amendments to
Partnership Agreement: In connection with the transaction, MLMP partnership
agreement will be amended as necessary to accomplish
the transaction and to reflect broadened scope of
partnership business. Partnership agreement will
also be amended as follows: (1) existing provisions
concerning mandatory distribution of cash flow will
be eliminated, and replaced by provisions conferring
on the general partner discretion to determine
policy as to amount and timing of all distributions;
(2) Class "B" units will be cancelled; (3) Mauna Loa
Macadamia Nut Corporation will cease to serve as a
general partner. Mauna Loa Resources, Inc. will
continue as the sole general partner with a 1%
general partner interest in the Partnership, and its
corporate structure (including articles and bylaws)
will not be affected by the transaction.
Effect on Resources Board
of Directors/Officers: Xxxxx Xxx Resources' board of directors and officers
will not be changed in connection with the
transaction unless its Board of Directors otherwise
determines.
Tax Ruling: Parties' obligations to consummate the transaction,
if structured as a merger of Homes into MLMP, will
be conditioned upon receipt of favorable ruling from
the Internal Revenue Service, or waiver of such
condition by the managing general partner of MLMP
and the board of directors of Homes.
Exclusivity: Homes shall not solicit nor respond to purchase or
other business combination offers, except that a
"fiduciary out" clause will permit Homes to
consider, recommend or accept an alternative bona
fide, unsolicited written offer if Homes' board
determines, based on a written opinion of outside
legal counsel, that its fiduciary duties require it
to do so. If Homes recommends or accepts any
alternative offer, MLMP shall be entitled to
terminate the transaction and receive from Homes a
cash payment of $1 million if Homes consummates
another transaction within twelve (12) months of
such termination.
Employee Matters: Subject to the employee requirements of the combined
entities MLMP will endeavor to provide employment to
current Homes employees, but MLMP will have
discretion as to retention of Homes employees
following transaction. MLMP to provide retained
employees with compensation and benefits that in the
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aggregate are substantially equivalent to those
presently provided to such individuals. The existing
401(k) plan will be assumed. The conversion,
assumption or other disposition of other specific
programs and plans will be determined by agreement
of MLMP and Homes.
Homes Options: Homes will issue no additional options. Presently
outstanding options to acquire Homes stock will
become exercisable, and if not exercised will be
cancelled at closing, in accordance with existing
terms of Homes option plans. Homes and MLMP will
endeavor to make arrangements with optionees in lieu
of their exercise of in-the-money options, including
the payment by Homes of amounts approximating the
option spread for-in-the-money options (but not more
than $50,000 for all optionees in the aggregate).
Exchange ratio will be adjusted, if necessary, to
reflect issuance of more than 10,000 additional
Homes shares upon any exercise of any Homes options.
MLMP will, if legally permissible, adopt after
closing a plan providing for partnership unit
options, partnership unit appreciation rights, or
similar equity-based compensation.
Accounting: The transaction is expected to be accounted for as a
purchase.
Stability Agreements: Homes' significant shareholders (to be identified in
the definitive agreement) are to execute agreements
precluding sale, for a period of six (6) months
following closing, of partnership units received in
the transaction.
Assumption of Contracts,
Leases, etc.: MLMP to assume, by operation of law or otherwise,
contractual and lease obligations of Homes with
third parties, including Xxxxxx and related
entities.
Change of Names: The name of MLMP will be changed to Hawaii Land &
Farming Company. The name of Xxxxx Xxx Resources,
Inc. will be changed to HLF Resources, Inc.
Fiscal Year: The fiscal year of MLMP (December 31) will continue.
Operations Prior to
Closing: MLMP and Homes to conduct business in the ordinary
course until consummation of the transaction.
Definitive agreement to include appropriate
affirmative and negative covenants concerning pre-
closing operations.
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Conditions of Closing: Obligation to consummate transaction to be
conditioned on:
. Receipt of requisite approvals of MLMP
partners and Homes shareholders.
. Receipt of any required regulatory approvals,
and all requisite third party consents,
without imposition of materially burdensome
conditions.
. Lack of material adverse changes prior to
closing.
. Satisfaction of other customary or mutually
acceptable closing conditions.
. Approval of listing of additional limited
partner units to be issued in connection with
the transaction by NYSE.
Confidentiality: Subject to applicable legal requirements, the terms
of the transaction are to remain confidential until
disclosed in a mutually agreed upon press release.
Expected Closing: Second quarter 1998 but not later than June 30, 1998
unless extended until not later than August 31, 1998
if necessary to obtain (1) a favorable tax ruling
from the IRS or (2) MLMP limited partner approvals
(if Homes consents to such extension) or shareholder
approvals (if MLMP consents to such extension).
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