ASSET PURCHASE AGREEMENT
BY AND AMONG
CALIFORNIA AND HAWAIIAN SUGAR COMPANY, INC.
A & B - HAWAII, INC.
▇▇▇▇▇▇▇ SUGAR COMPANY, LIMITED
AND
SUGAR ACQUISITION CORPORATION
DATED AS OF AUGUST 5, 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 ......................13
ARTICLE II TRANSFER OF ASSETS.................................13
2.01. Transfer of Assets by Seller .................13
2.02. Excluded Assets ..............................16
2.03. Assumption of Liabilities ....................16
2.04. Excluded Liabilities .........................16
2.05. Assignment of Contracts and Rights ...........17
2.06. Purchase Consideration .......................18
2.07. Closing ......................................19
2.08. Purchase Consideration Allocation ............20
2.09. Preparation of Final Statement of Working
Capital ...................................20
2.10. Adjustments Resulting From The Statement of
Working Capital ...........................23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..........24
3.01. Corporate Existence and Power ................24
3.02. Authorization ................................25
3.03. Governmental Authorization ...................25
3.04. Non-Contravention ............................25
3.05. Financial Statements; Undisclosed Liabilities 26
3.06. Absence of Certain Changes ...................27
3.07. Properties; Leases; Tangible Assets ..........27
3.08. Sufficiency of and Title to the Transferred
Assets ....................................29
3.09. Litigation ...................................29
3.10. Contracts ....................................30
3.11. Permits; Required Consents ...................32
3.12. Compliance with Applicable Laws ..............33
3.13. Employment Agreements; Change in Control;
and Employee Benefits .....................34
3.14. Labor and Employment Matters .................37
3.15. Intellectual Property ........................38
3.16. Advisory Fees ................................39
3.17. Environmental Compliance .....................40
3.18. Insurance ....................................41
3.19. Tax Matters ..................................42
3.20. Investment Representations ...................43
3.21. Transactions with Affiliates .................45
3.22. Accounts Receivable and Inventory ............45
3.23. Substantial Customers and Suppliers ..........46
3.24. Disclosure ...................................46
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEWCO............47
4.01. Corporate Existence and Power ................47
4.02. Corporate Authorization ......................47
4.03. Capital Stock ................................48
4.04. Governmental Authorization ...................48
4.05. Non-Contravention ............................48
4.06. Advisory Fees ................................49
4.07. Litigation ...................................49
4.08. Conduct of Newco .............................49
4.09. Disclosure ...................................49
ARTICLE V COVENANTS OF SELLER.................................50
5.01. Conduct of the Business; Distributions .......50
5.02. Access to Information ........................53
5.03. Compliance with Terms of Required
Governmental Approvals and Required
Contractual Consents ......................53
5.04. Maintenance of Insurance Policies ............54
5.05. Change of Name ...............................55
5.06. Administration of Accounts ...................55
5.07. Notice of Events .............................56
5.08. Bulk Sale Filings ............................56
5.09. Exclusivity ..................................56
5.10. Confidentiality ..............................57
5.11. Non-Competition ..............................58
5.12. Specific Performance .........................59
5.13. Termination of Intercompany Arrangements .....59
5.14. Amendment of the HSTC Sugar Contract .........59
ARTICLE VI COVENANTS OF NEWCO.................................60
6.01. Access to Information ........................60
6.02. Compliance with Terms of Required
Governmental Approvals and Required
Contractual Consents ......................60
6.03. Confidentiality ..............................61
6.04. Specific Performance .........................62
6.05. Amendment of Certificate of Incorporation ....62
6.06. Company Employees ............................62
6.07. Payment of ASRS Note and Pollution Control
Bond Interest .............................63
6.08. Performance of Certain Obligations by Newco ..63
6.09. Re-marketing Costs of Preferred Stock ........64
ARTICLE VII COVENANTS OF ALL PARTIES..........................65
7.01. Further Assurances ...........................65
7.02. Certain Filings ..............................65
7.03. Public Announcements .........................66
7.04. Disposition of Benefit Plans .................66
7.05. Newco Senior Subordinated Notes ..............68
7.06. Working Capital Facility .....................68
7.07. Cooperation in Tax Matters ...................69
7.08. Registration Rights Agreement ................69
7.09. Indenture ....................................69
7.10. Disposition of Certain Properties ............70
ARTICLE VIII CONDITIONS TO CLOSING............................70
8.01. Conditions of All Parties ....................70
8.02. Conditions to Obligation of Newco ............73
8.03. Conditions to Obligation of Sellers ..........74
ARTICLE IX INDEMNIFICATION...................................75
9.01. Agreement to Indemnify .......................75
9.02. Survival of Representation, Warranties and
Covenants .................................77
9.03. Claims for Indemnification ...................78
9.04. Defense of Claims ............................78
9.05. Nature of Payments ..........................80
9.06. ABHI's Financial Condition ..................80
ARTICLE X TERMINATION.........................................81
10.01. Grounds for Termination .....................81
10.02. Effect of Termination .......................83
ARTICLE XI MISCELLANEOUS......................................83
11.01. Notices .....................................83
11.02. Amendments; No Waivers ......................85
11.03. Expenses ....................................86
11.04. Successors and Assigns ......................86
11.05. Governing Law ...............................86
11.06. Counterparts; Effectiveness .................86
11.07. Entire Agreement ............................87
11.08. Captions ....................................87
11.09. Severability ................................87
11.10. Construction ................................87
11.11. Cumulative Remedies .........................88
11.12. Third Party Beneficiaries ...................88
11.13. Knowledge ...................................88
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (the "Agreement"), dated as of August
5, 1998, is by and among CALIFORNIA AND HAWAIIAN SUGAR COMPANY, INC., a Hawaii
corporation (the "Seller"), A & B - HAWAII, INC., a Hawaii corporation
("ABHI"), ▇▇▇▇▇▇▇ SUGAR COMPANY, LIMITED, a Hawaii corporation ("▇▇▇▇▇▇▇"), 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"); and
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.
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 & ▇▇▇▇▇▇▇, 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 by blood, marriage or adoption to a Person or to any partner, share-
holder, 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 or
MLM (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 or
MLM 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 biphenols (PCBs) or asbestos.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇; 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 ▇▇▇▇▇▇▇ 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
and MLM taken as a whole, 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 Class B Common Stock" means Newco's Class B common stock, par
value $0.01 per share, that will have the same rights, preferences and
privileges as the Newco Common Stock except that the Newco Class B Common Stock
shall be (i) non-voting and (ii) convertible at any time on a one to one basis
into shares of Newco Common Stock at the election of the holder.
"Newco Common Stock" means Newco's common stock, par value $0.01 per
share.
"Newco Exchangeable Preferred Stock" means Newco's 12.5% Series A
Exchangeable Preferred Stock, stated value $1,000 per share, having the rights,
preferences and privileges set forth on or referred to on Exhibit A and such
---------
other customary rights, preferences and privileges that are satisfactory to
Seller and Newco in their reasonable discretion.
"Newco Junior Preferred Stock" means Newco's Junior Preferred Stock,
stated value $1,000 per share, having such rights, preferences and privileges
as are satisfactory to Seller and Newco in their reasonable discretion.
"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 and MLM (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 and MLM (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) hereto.
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"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 required to be
paid to the holders of the ASRS Notes under certain circumstances upon pre-
payment 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, Indenture for the Newco Exchange Debentures, an Indenture for
the Newco Senior Subordinated Notes, a Note Purchase Agreement for the Newco
Senior Subordinated Notes, the Securityholders 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
"Shareholders" means ABHI and ▇▇▇▇▇▇▇.
"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 trans-
action 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.
"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)
"▇▇▇▇▇▇▇▇ 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)
"▇▇▇▇▇▇▇" Recitals
"MLM" 2.01(n)
"Newco Exchange Debentures" 7.09
"Newco Indemnitees" 9.01(a)
"Newco Senior Subordinated Notes" 7.05
"Newco Shares" 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(d)
"Subsequent Material Contract" 5.01(b)(v)
"Transferred Assets" 2.01
"Working Capital Facility" 7.06
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
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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 ▇▇▇ 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 Trans-
ferred Assets of Seller and all rights in and to the Business as a going
concern;
(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; and
(n) all of the outstanding capital stock of MLM Corporation,
a California corporation ("MLM"), and any other securities of or ownership
interests in any other Person.
2.02. Excluded Assets. Newco expressly understands and agrees that
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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
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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
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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 ASRS Notes and the
Pollution Control Bonds from and after the Closing Date and (iii) any Pre-
payment Penalties that become due and payable with respect to the ASRS Notes on
or after the Closing Date, 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
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that certain order of the California Regional Water Quality Control Board --
San Francisco Bay Region (Order No. 95-191) dated September 13, 1995 (the
"▇▇▇▇▇▇▇▇ Order") shall not be excluded but shall be assumed by Newco);
(D) any Intercompany Payables; (E) any Liability of Seller or, with respect to
pre-Closing periods, MLM 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.
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(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.
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(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) $88,000,000, 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
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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) 24,000 shares of Newco Junior Preferred Stock;
(iv) 1,000,000 shares Newco Common Stock. Seller, with
the consent of Newco, may elect to receive, in lieu of a portion of the
Newco Common Stock, an equal number of 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 Working
Capital (the "Preliminary Statement of Working Capital") of Seller as of the
last day of the last full calendar month preceding the Closing Date. The
Preliminary Statement of Working Capital shall be based upon 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). The amount by which the Working Capital of Seller
as set forth in the Preliminary Statement of Working Capital exceeds or is less
than $45,462,000 (subject to adjustment pursuant to Section 2.09(a), the
"December 31 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 ▇▇▇▇▇▇,
▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 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) one or more certificates representing in the aggregate
24,000 shares of Newco Junior Preferred Stock and (iii) one or more certifi-
▇▇▇▇▇ representing in the aggregate 1,000,000 shares of Newco Common Stock or
Newco Class B Common Stock as applicable.
2.08. Purchase Consideration Allocation. Schedule 2.08 sets forth
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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 trans-
actions 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.
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(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; 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
adjustment shall be made to the December 31 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 December 31 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.
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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.
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(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) Except for MLM, 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. MLM 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 MLM as now conducted. MLM 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 been, and would not reasonably be expected to have a Material Adverse
Effect.
3.02. Authorization. The execution, delivery and performance by
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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
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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
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by Seller of this Agreement do not and will not (a) contravene or conflict with
the certificate of incorporation or bylaws of Seller or MLM, true and correct
copies of which have 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 or
MLM, 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
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termination, cancellation or acceleration of, or to a loss of any benefit to
which Seller or MLM 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.
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(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 and MLM 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 and MLM as of the dates
indicated or for the periods indicated; and (ii) contains and reflects all
necessary adjustments, 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 and MLM for the periods covered by
such financial statement.
(c) Except as set forth on Schedule 3.05(c), there are no
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material Liabilities of Seller or MLM 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
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Schedule 3.06, between the date of the Seller Balance Sheet and the date of
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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 circum-
stances 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 and (d) neither Seller
nor MLM has 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.
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(a) Each of Seller and MLM 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
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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), each of Seller and MLM holds title to each such property
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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
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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 either Seller or MLM is a party or by which either Seller or MLM 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
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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 or MLM (collectively,
the "Leases"). With respect to the Leases, except as disclosed in
Schedule 3.07(c), there exists no default by Seller or MLM or, to the knowledge
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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 either
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Seller or MLM, as applicable, that is a party to such Lease, 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, MLM, 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 and/or MLM that are material to Seller or MLM,
including without limitation the following (collectively with the Leases and
the Employment Agreements, the "Scheduled Contracts"):
(i) each Contract between Seller or MLM and (A) each
present or former director, officer or other member of management or other
personnel of Seller or MLM, 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 or MLM exceeded in 1997, and (C)
any Person in which the aggregate payments made to Seller or MLM 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 or
MLM that requires the payment or incurrence of Liabilities, or the
rendering of services, by Seller or MLM, 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 or MLM is a party or by which Seller
or MLM 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 or MLM which (1) are by their terms terminable by
Seller or MLM 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 MLM 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
or MLM that is a party to the Scheduled Contract or result in any material
Liability of Seller or MLM. Except as disclosed in Schedule 3.10(b),
----------------
each Scheduled Contract is a legal, valid and binding obligation of Seller or
MLM which is a party to it, 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 or MLM by virtue of the
execution and delivery of this Agreement or the consummation of the trans-
actions 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 or MLM, 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 or MLM is a party under which the transactions
contemplated by this Agreement (i) will require any payment by Seller or MLM,
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 MLM 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
----------------
and MLM. 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 main-
tained 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 under-
standing, other than as required by applicable law. The Accumulated Post-
retirement 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 determina-
tion 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 or MLM 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 or MLM 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 or MLM.
(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 or MLM; (ii) no grievance or arbitration proceeding arising out of or
under any collective bargaining agreement of Seller or MLM 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 or MLM. 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, neither the
Company nor MLM has 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 ▇▇▇▇ 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
or MLM.
(b) Except as disclosed in Schedule 3.15(b), neither Seller
----------------
nor MLM is or has, 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 deter-
mination materially adverse to Seller or MLM that involved or may involve a
claim of misappropriation or infringement made by any Person (including any
Governmental Authority) against Seller or MLM 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 MLM, or restricting the
licensing thereof by Seller or MLM 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 ▇▇▇▇, 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 infringe-
ment or violation would not have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.15(c), Seller or MLM
----------------
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 or MLM 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 mis-
appropriated 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 ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co., PaineWebber
-------------
Incorporated and Cybus Capital Markets, there is no investment banker, broker,
finder or other intermediary or 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, each
of Seller and MLM 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, each of Seller and MLM have 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, MLM, 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, MLM, any of their respective 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, or the emission, discharge, release
or threatened release of any Hazardous Substance, or (iii) resulting from
exposure to workplace hazards.
3.18. Insurance. Schedule 3.18 sets forth a complete and correct
--------- -------------
list 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 or MLM 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) Neither Seller nor MLM has any material liability for
unpaid Taxes other than Taxes that are not yet due and payable. Each of Seller
and MLM 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) For each of Seller and MLM, 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 or MLM 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) None of Seller or MLM currently is 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 or MLM is
includible. None of Seller or MLM has 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 or MLM, 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) None of Seller or MLM has filed a consent under Code
S341(f) concerning collapsible corporations.
(h) None of Seller or MLM is party to any Tax allocation or
sharing agreement.
(i) MLM has not been a member of an affiliated group filing a
consolidated federal income Tax Return (other than a group which included
Seller) and has 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 and the Newco Common Stock (collectively the "Newco Shares")
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 Shares will not be
registered under the Securities Act on the ground that the issuance of the
Newco Shares 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 Shares being purchased
hereunder are restricted securities within the meaning of Rule 144 under the
Securities Act and that the Newco Shares 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 Shares and (b) any other securities issued in respect of the
Newco Shares 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 Shares 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 Shares.
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 or MLM. 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. None of the information supplied or to be supplied by
Seller relating to the Business for inclusion or incorporation by reference in
any offering memorandum or prospectus relating to the Newco Senior Subordinated
Notes (as defined below) contains or will contain, at the time the information
is supplied or as of the date of such offering memorandum or prospectus, any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
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
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.
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 out-
standing 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) Newco Shares 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 Shares pursuant to
the terms of this Agreement will not require registration and/or qualification
under the Securities Act or any state securities laws. The shares of Newco
Exchangeable Preferred Stock to be issued to Seller hereunder, when issued,
will have the rights, preferences and privileges set forth in Exhibit A 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 ▇▇▇▇▇▇▇,
-------------
Sachs & Co., PaineWebber Incorporated and Cybus Capital Markets, there is no
investment banker, broker, finder or other intermediary or 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.
4.09. Disclosure. None of the information supplied or to be
----------
supplied by Newco for inclusion or incorporation by reference in any offering
memorandum or prospectus relating to the Newco Senior Subordinated Notes
contains or will contain, at the time the information is supplied and as of the
date of any such offering memorandum or prospectus, any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
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 and MLM 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 termi-
nate 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) 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 assump-
tions 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;
(xii) with respect to MLM only, create, incur or assume
any indebtedness for borrowed money, or guaranty any indebtedness for
borrowed money or any capitalized lease obligation, in each case in excess
of $25,000 individually or in the aggregate; or
(xiii) 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
applicability 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 representa-
tives, so long as such other party is not in breach of a confidentiality obli-
gation, (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 or MLM, 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, any contract or agreement in effect between
Seller and HSTC.
5.14. Amendment of the HSTC Sugar Contract. Seller and ABHI will
------------------------------------
use commercially reasonable efforts to cause, from and after the Closing Date,
HSTC to cease receiving, pursuant to the HSTC Sugar Contract, cash advances
from Seller (from Newco after the Closing) with respect to sugar delivered by
ABHI to HSTC; provided, however, the forgoing is subject to the HSTC Sugar
Contract, and/or the standard sugar marketing contracts between HSTC and the
members of HSTC (including ABHI), being amended in such manner as ▇▇▇▇ ▇▇▇▇▇
necessary or appropriate, in its sole discretion and without cost to Seller or
ABHI, to reflect such termination of cash advances with respect to ABHI's
sugar, which may include without limitation amending the method by which ABHI
is paid for its sugar and the method by which the interest cost attributable to
HSTC's cash advances is allocated among the HSTC members; provided, further,
that neither Seller nor ABHI guarantees whether or not such amendments may be
made, and if such amendments are made, when such amendments may be made. ABHI
agrees to use commercially reasonable efforts to cause such acceptable
amendment of the HSTC Sugar Contract and/or standard sugar marketing contracts.
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 confiden-
tiality 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,
24,000 shares of Newco Junior Preferred Stock, 2,000,000 shares of Newco Common
Stock, and 1,000,000 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 ASRS Notes and Pollution
Control Bonds from and after the Closing Date other than in respect of any
amounts due in respect of the ASRS Notes prior to such date and (ii) to pay any
Prepayment Penalties due and payable on or after the Closing Date. At any
time from and after December 1, 1998, Seller shall have the unrestricted right,
and upon the written request of Newco, Seller shall have the obligation, to
prepay the ASRS Notes in full. In addition, prior to December 1, 1998, Seller
shall have the right to prepay the ASRS Notes in full if it is advised by
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP that such prepayment is required by the terms of
the ASRS Notes as the result of the transactions contemplated hereby. Seller
shall provide Newco with not less than thirty (30) days prior written notice of
any prepayment of the ASRS Notes (other than a prepayment required by Newco);
and Newco shall provide Seller of similar written notice of any prepayment
required by it hereunder. In the event Seller prepays the ASRS Notes, Newco
shall deposit with Seller not less than one (1) business day in advance of the
specified date of prepayment sufficient funds in cash to pay any Prepayment
Penalties and all accrued interest payable by Newco on the ASRS Notes as of the
specified prepayment date. In the event that Seller refuses to, or is unable
to, prepay the ASRS Notes in full as required pursuant to this Section 6.07,
Newco shall be entitled to prepay the ASRS Notes in full, and Seller and the
Shareholders will indemnify Newco for the full amount, including collection and
enforcement expenses.
6.08. Performance of Certain Obligations by Newco. 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 obli-
gation 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 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 or tender substitute letters
of credit and/or surety bonds to such third parties. 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 letters of credit and/or surety bonds on or prior to the
Closing Date. 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 of $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 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.
6.09. Re-marketing Costs 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 and the Newco Junior
Preferred Stock received under the terms of this Agreement, 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 private placement or
underwriting agreement and transactions contemplated thereby; provided,
--------
however, that Newco shall not be required to reimburse Seller for underwriting
-------
discounts or commissions in excess of 4% of the aggregate proceeds received by
Seller in connection with its remarketing of the Newco Exchangeable Preferred
Stock and Newco Junior Preferred Stock.
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 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.
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 trans-
actions 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 trans-
actions 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 confi-
dential 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 contem-
plated by this Agreement to occur on the Closing Date.
(b) In connection with any Benefit Plan sponsored and
maintained by A&B and in which employees and former employees of Seller parti-
cipate, 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. 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 Newco's plan
as soon as practicable after the Closing Date and after 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 under-
written 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 December 31, 1998, and
Newco shall reimburse A&B for the cost of providing such benefits.
(iii) Notwithstanding the foregoing, 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 liabilities 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. Newco Senior Subordinated Notes. The parties shall cooperate
-------------------------------
with one another and shall use their commercially reasonable efforts to arrange
for the issuance and sale, in an offering pursuant to Rule 144A of the
Securities Act of senior subordinated notes having commercially reasonable
terms and provisions satisfactory to Seller and Newco in their reasonable
discretion (the "Newco Senior Subordinated Notes"), such offering to result in
net cash proceeds to Newco (after the payment of underwriting discounts,
commissions and offering expenses) of not less than $96,000,000. Newco shall
prepare, with the cooperation and assistance of seller, an offering memorandum
relating to the issuance of the Newco Senior Subordinated Notes. Each of Newco
and Seller agrees to provide promptly to the other such information concerning
its business and financial statements and affairs as may be reasonably required
or appropriate for inclusion in the offering memorandum with respect to the
Newco Senior Subordinated Notes, or in any amendments or supplements thereto,
and to cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the same.
7.06. Working Capital Facility. The parties shall cooperate with one
------------------------
another and each party shall use its commercially reasonable efforts to arrange
for 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 $40,000,000 of borrowing capacity as of the Closing Date immediately
prior to the consummation of the transactions contemplated hereby.
7.07. 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.
7.08. Registration Rights Agreement. Newco and Seller shall enter
-----------------------------
into a Registration 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.
7.09. 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 (the
"Newco Exchange Debentures"), concurrently with the Closing, containing the
terms set forth at Exhibit A and such other commercially reasonable terms
and conditions satisfactory to Seller and Newco in their reasonable discretion.
7.10. 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
▇▇▇▇▇▇▇▇ Power Plant Committee, which amends that certain Settlement Agreement
dated July 21, 1993 among the ▇▇▇▇▇▇▇▇ Power Plant Committee, the ▇▇▇▇▇ Cove
Homeowners Association, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, 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 ▇▇▇▇▇▇▇▇ 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 thatwould 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
to authorize the issuance of 25,000 shares of Newco Exchangeable Preferred
Stock, 24,000 shares of Newco Junior Preferred Stock, 2,000,000 shares of Newco
Common Stock, and 1,000,000 shares of Newco Class B Common Stock, and each
party hereto shall have delivered to the other party a certificate to the
effect that the provisions in such amendment are satisfactory.
(e) Seller and CVC shall have entered into a Stock Sale
Agreement, substantially in the form attached hereto as Exhibit B (the "Stock
---------
Sale Agreement"), relating to the purchase by CVC from Seller of 600,000 shares
of Newco Common Stock or 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 a duly authorized executive officer of CVC to
the foregoing effect and to the effect that CVC has irrevocably and
unconditionally committed to consummate the transactions contemplated by the
Stock Sale Agreement and to pay the purchase price for the shares of Newco
Common Stock and Newco Junior Preferred Stock to be sold thereunder following
consummation of the transactions contemplated hereby.
(f) Concurrently with the Closing, Newco shall have issued
and sold the Newco Senior Subordinated Notes, resulting in net cash proceeds to
Newco (after the payment of underwriting discounts, commissions and offering
expenses) of not less than $96,000,000.
(g) 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 $40,000,000 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.
(h) 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.
(i) 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.
(j) 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.
(k) Seller shall have obtained fee title to that certain
parcel of real property located in Crockett, California commonly referred to as
15 and ▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ (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.
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") 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) if 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
▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ or ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ 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 the resolution 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 con-
currently 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 there-
from 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 administra-
tive 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 October 15, 1998 (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 provided further, however, that if, as of
-------- ------- -------
October 15, 1998, the California State Lands Commission has not formally
approved or disapproved of the assignment to Newco of those certain real
property leases identified as items A(1) and (2) on Schedule 3.07(c) of the
Disclosure Schedules (the "Tidelands Leases") and the failure to obtain such
approval is the only remaining condition to the Closing that has not been
satisfied or waived as of such date, then the Outside Date shall be
automatically extended to November 15, 1998, after which time either
Newco or Seller may terminate this Agreement if the Closing shall not have been
consummated; 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 con-
templated 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 its representations, 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:
------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
--------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Alexander & ▇▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
If to Newco:
-----------
▇▇▇▇▇ ▇▇▇▇
Citicorp Venture Capital, Ltd.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
--------------
▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
Citicorp Center
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
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 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/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
NEWCO:
SUGAR ACQUISITION CORPORATION, A DELAWARE
CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
SHAREHOLDERS:
A & B - HAWAII, INC., A HAWAII CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President, Chief
Financial Officer and Treasurer
▇▇▇▇▇▇▇ SUGAR COMPANY, LIMITED, A HAWAII
CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
