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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission file number 1-10307
______________________________
IMPERIAL HOLLY CORPORATION
(Exact name of registrant as specified in its charter)
Texas 74-0704500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Imperial Square, Suite 200, P.O. Box 9, Sugar Land, Texas 77487
(Address of principal executive offices, including Zip Code)
(713) 491-9181
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of February 9, 1996.
10,310,910 shares.
Exhibit Index Appears on Page 14
Page 1 of 55 Pages
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IMPERIAL HOLLY CORPORATION
Index
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Consolidated Statement of Changes in
Shareholders' Equity 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
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PART I - FINANCIAL INFORMATION
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
December 31, 1995 March 31, 1995
------------------ -----------------
ASSETS (In Thousands of Dollars)
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary investments $ 6,543 $ 1,686
Marketable securities 34,842 35,079
Accounts receivable 46,083 38,234
Inventories:
Finished products 92,198 100,540
Raw and in-process materials 38,755 22,633
Supplies 11,986 11,990
Manufacturing costs prior to production 3,295 11,969
Prepaid expenses 4,435 4,394
-------- --------
Total current assets 238,137 226,525
NOTES RECEIVABLE 1,216 2,445
OTHER INVESTMENTS 6,691 6,450
PROPERTY, PLANT AND EQUIPMENT - net 126,191 128,952
OTHER ASSETS 6,710 9,752
-------- --------
TOTAL $378,945 $374,124
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -- trade $ 53,467 $ 44,756
Short-term borrowings 71,170 61,092
Current maturities of long-term debt 13 51
Other current liabilities 28,189 33,421
-------- --------
Total current liabilities 152,839 139,320
LONG-TERM DEBT 89,800 100,010
DEFERRED TAXES AND OTHER CREDITS 25,349 24,817
SHAREHOLDERS' EQUITY
Preferred stock - -
Common stock 32,241 32,046
Retained earnings 71,864 72,854
Unrealized securities gains - net 7,410 5,635
Pension liability adjustment (558) (558)
-------- --------
Total shareholders' equity 110,957 109,977
-------- --------
TOTAL $378,945 $374,124
======== ========
</TABLE>
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
-------------------------- --------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
NET SALES $ 171,569 $ 147,776 $ 486,179 $ 459,172
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 157,809 130,867 443,944 413,918
Selling, general and administrative 14,608 14,637 43,213 42,285
Cost of work force reduction 475 - 475 -
----------- ----------- ----------- -----------
Total 172,892 145,504 487,632 456,203
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (1,323) 2,272 (1,453) 2,969
INTEREST EXPENSE (2,723) (2,870) (8,445) (8,057)
REALIZED SECURITIES GAINS (LOSSES)- NET 2,226 (89) 5,388 1,649
OTHER INCOME -- Net 967 724 2,821 3,230
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (853) 37 (1,689) (209)
PROVISION (CREDIT) FOR INCOME TAXES (434) (70) (506) (172)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (419) 107 (1,183) (37)
EXTRAORDINARY ITEM - NET OF TAX 224 - 604 -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (195) $ 107 $ (579) $ (37)
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK:
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM $ (0.04) $0.01 $ (0.12) $ -
EXTRAORDINARY ITEM - NET OF TAX 0.02 - 0.06 -
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (0.02) $0.01 $ (0.06) $ -
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 10,305,527 10,268,278 10,297,010 10,262,337
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
1995 1994
--------- --------
(In Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (579) $ (37)
Adjustments for non-cash and non-operating items:
Extraordinary item - net (604) -
Depreciation 9,434 10,242
Other (5,623) (2,733)
Working capital changes:
Receivables (7,849) 8,402
Advances on raw sugar cargos - (1,483)
Inventory (7,776) (46,184)
Deferred and prepaid costs 8,633 7,915
Accounts payable 8,711 17,570
Other liabilities (5,985) 1,105
--------- --------
Operating cash flow (1,638) (5,203)
--------- --------
INVESTMENT ACTIVITIES:
Capital expenditures (6,887) (6,717)
Investment in marketable securities (6,396) (6,482)
Proceeds from sale of marketable securities 14,717 4,182
Proceeds from sale of fixed assets 847 4,136
Other 3,688 (1,178)
--------- --------
Investing cash flow 5,969 (6,059)
--------- --------
FINANCING ACTIVITIES:
Short-term debt:
Bank borrowings - net 23,060 29,826
CCC borrowings - advancements 119,833 55,462
CCC borrowings - repayments (132,815) (70,434)
Repayment of long-term debt (9,319) (46)
Dividends paid (411) (1,231)
Other 178 130
--------- --------
Financing cash flow 526 13,707
--------- --------
INCREASE IN CASH AND TEMPORARY INVESTMENTS 4,857 2,445
CASH AND TEMPORARY INVESTMENTS, BEGINNING OF PERIOD 1,686 555
--------- --------
CASH AND TEMPORARY INVESTMENTS, END OF PERIOD $ 6,543 $ 3,000
========= ========
</TABLE>
See notes to consolidated financial statements.
- 5 -
<PAGE>
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Nine Months Ended December 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
__________________ Unrealized Pension
Retained Securities Liability
Shares Amount Earnings Gains Adjustment Total
---------- -------- -------- ---------- ---------- --------
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 10,283,445 $32,046 $72,854 $5,635 $ (558) $109,977
Net income (loss) (579) (579)
Cash dividend (411) (411)
Employee stock
purchase plan and
stock option exercises 25,381 195 195
Change in unrealized
securities gains - net 1,775 1,775
---------- ------- ------- ------ ------- --------
BALANCE, DECEMBER 31, 1995 10,308,826 $32,241 $71,864 $7,410 $ (558) $110,957
========== ======= ======= ====== ======= ========
</TABLE>
See notes to consolidated financial statements.
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IMPERIAL HOLLY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
Basis of Presentation -- The unaudited condensed consolidated financial
statements included herein have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission and reflect in the opinion
of management, all adjustments, consisting only of normal recurring accruals,
that are necessary for a fair presentation of financial position and results of
operations for the interim periods presented. These financial statements
include the accounts of Imperial Holly Corporation and its majority owned
subsidiaries (the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation. Certain information and
footnote disclosures required by generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations. The financial
statements included herein should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form 10-
K for the year ended March 31, 1995.
Cost of Sales -- Payments to growers for sugarbeets are based in part upon
the Company's average net return for sugar sold (as defined in the participating
contracts with growers) during the grower contract years, some of which extend
beyond December 31. The contracts provide for the sharing of the net selling
price (gross sales price less certain marketing costs, including packaging
costs, brokerage, freight expense and amortization of costs for certain
facilities used in connection with marketing) with growers. Cost of sales
includes an accrual for estimated additional amounts to be paid to growers based
on the average net return realized for sugar sold in each of the contract years
through December 31. The final cost of sugarbeets cannot be determined until
the end of the contract year for each growing area. Manufacturing costs prior
to production are deferred and allocated to production costs based on estimated
total units of production for each sugar manufacturing campaign. Additionally,
the Company's sugar inventories, which are accounted for on a LIFO basis, are
periodically reduced at interim dates to levels below that of the beginning of
the fiscal year. When such interim LIFO liquidations are expected to be
restored prior to fiscal year-end, the estimated replacement cost of the
liquidated layers is utilized as the basis of the cost of sugar sold from
beginning of the year inventory. Accordingly, the cost of sugar utilized in the
determination of cost of sales for interim periods includes estimates which may
require adjustment in future fiscal periods.
Extraordinary Item -- The Company purchased and retired $4.7 million principal
amount in the first quarter and $5.5 million principal amount in the third
quarter of its 8-3/8% senior notes due 1999, resulting in gains which are
reported, net of related income tax expense aggregating $325,000, as an
extraordinary item.
Pending Acquisition -- The Company has entered into a definitive agreement to
acquire Spreckels Sugar Company, a California based beet sugar processor, for
net working capital plus $3 million, subject to adjustments at closing.
- 7 -
<PAGE>
Based on reports provided by Spreckel's parent company, net working capital was
approximately $25 million at December 31, 1995. Additionally, Spreckels Sugar
Company had non-current liabilities totaling approximately $7 million related
principally to capital leases and employee pension liabilities. In
consideration of the $3 million, the seller will retain all liabilities for
post-retirement medical costs of Spreckels Sugar Company retirees at date of
closing. The purchase, which is subject to regulatory approval, is expected to
close during the Company's fourth fiscal quarter.
- 8 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company finances its working capital and capital expenditure requirements
from a combination of funds generated by operations and short-term borrowing
arrangements, including short-term, secured, non-recourse borrowings from the
Commodity Credit Corporation ("CCC"). CCC loans outstanding at December 31,
1995 totaled $38.2 million.
The increase in accounts receivable for the nine months ended December 31,
1995 results from higher sales volumes in the current quarter as compared to the
quarter ended March 31, 1995. The increase in raw and in-process inventory
during the nine months ended December 31, 1995 was primarily due to the seasonal
production schedule of the Company's beet sugar operations. Net proceeds from
the sale of marketable securities, as well as an increase in short-term
borrowings for the nine months ended December 31, 1995 was used principally to
fund capital expenditures and reduce long-term debt.
During the nine months ended December 31, 1995, the Company purchased and
retired $10.2 million principal amount of its 8-3/8% senior notes due 1999; the
remaining notes, with an aggregate principal amount of $89.8 million, require
semi-annual interest-only payments prior to maturity. As discussed in the Notes
to Consolidated Financial Statements, the Company has agreed to acquire
Spreckels Sugar Company and expects to incur long-term bank debt to finance the
purchase. Management believes that existing internal and external sources are
adequate to meet its other financing requirements, including fiscal 1996 capital
expenditures, estimated at $8.0 million.
The Company has entered into a limited partnership agreement with a sugarbeet
growers' cooperative in Washington state to build and operate a new sugarbeet
factory. The Company's capital commitment primarily consists of certain
production equipment which is not presently in use.
The Company's marketable securities portfolio is reported at its market value
of $34.8 million at December 31, 1995, $11.4 million in excess of its cost
basis. In July 1995, the Board of Directors discontinued payment of dividends
on the Company's common stock.
RESULTS OF OPERATIONS
The Company's results of operations continue to be adversely affected by a
combination of low refined sugar prices and high raw cane sugar prices. The
Company's average refined sugar selling prices, which have been depressed by an
oversupply of refined sugar from expanded beet sugar production in recent years,
have increased modestly in the current fiscal year. Spot prices began
increasing during the Company's third fiscal quarter as a result of a smaller
domestic beet sugar crop. Raw cane sugar costs, although reduced from the peak
levels established during the summer months, continue well above previous years'
levels. A significant portion of the Company's industrial sales
- 9 -
<PAGE>
are made under forward sales contract resulting in a lagging effect of market
price changes on the Company's sugar sales. The Company enters into forward
purchase contracts for raw cane sugar to reduce its exposure to future price
changes.
Congress is currently formulating a new Farm Bill. The Senate has passed a
version of the bill which would continue raw cane sugar import restrictions,
would provide that CCC loans will be with recourse unless raw cane sugar import
levels are above a specified level and would eliminate marketing allotments. The
Company is not able to predict if the Senate bill or any other proposal will
become law, nor the effects of such legislation on market prices for refined and
raw sugar, the margins received by the Company on the sugar it sells or the
results of operations of the Company. The domestic sugar industry operated under
marketing allotments imposed by the USDA for the year ended September 30, 1995.
The Company is unable to predict if marketing allotments which expired September
30, 1995 will be re-imposed, or, if re-imposed, what the allotment level for the
total market or the Company's share thereof would be, nor the effect of any such
action on raw and refined sugar prices, margins and the Company's results of
operations.
Net sales increased $23.8 million or 16.1% for the three months ended December
31, 1995, compared to the same period of the prior year, largely as a result of
increased sugar volume sold, combined with moderately higher sales prices. Sugar
sales volume reflected increases in both beet sugar and cane sugar sales.
Average sugar sales prices increased from the year earlier period due to a shift
in product mix and modest increases in selling prices. For the nine month period
ended December 31, 1995, net sales increased $27.0 million or 5.9% attributable
to both increases in average sugar sales price and increases in sugar sales
volume.
Cost of sales as a percent of sales increased to 92.0% from 88.6% for the
three month and to 91.3% from 90.1% for the nine month periods ended December
31, 1995 when compared to the prior year's periods. A smaller than expected
sugarbeet crop in the Company's Rocky Mountain and Texas growing areas, coupled
with reductions in sugarbeet acreage in Northern California resulting from last
winter's heavy rains, combined to reduce sugar production and correspondingly
increase unit manufacturing costs at the Company's beet sugar factories. The
unit cost of raw cane sugar purchased increased more than the average sales
price resulting in a decrease in unit margins on cane sugar sales. Domestic raw
cane market prices remain higher than the previous year, and absent similar
increases in refined sugar prices, will continue to negatively impact the
Company's results of operations for at least the remainder of the current fiscal
year. Recent increases in the raw cane sugar import quota have not significantly
reduced raw market prices. The Company purchases sugar beets under participatory
contracts which provide for a percentage sharing of the net selling price
realized on refined beet sugar sales between the Company and the grower. Use of
this type of contract reduces the Company's exposure to inventory price risk on
sugarbeet purchases so long as the contract net selling price does not fall
below the regional minimum support prices established by the USDA. Low refined
sugar selling prices resulted in net selling prices falling below such minimum
support levels in some contract areas during previous years, however net selling
prices are currently above
- 10 -
<PAGE>
such minimum levels. Consequently, the increase in the unit selling price of
refined beet sugar resulted in a modest increase in the unit cost of sugarbeets
purchased.
Selling, general and administrative expenses were virtually unchanged for the
three months and increased $928,000 or 2.2% for the nine months ended December
31, 1995 compared to the same period of the prior year, as volume related
increases in shipping and warehousing costs were largely offset by reductions in
general and administrative costs. During its third fiscal quarter, the Company
commenced a cost reduction program in the sales, administrative and
manufacturing overhead areas, including a reduction in force, which is expected
to yield annual cost savings of $8,000,000. In connection with the reduction in
force, which is expected to be substantially complete by March 31, 1996, the
Company recorded a charge to pre-tax earnings of $475,000 in the quarter ended
December 31, 1995 of which $300,000 has been paid through December 31, 1995.
Interest expense for the three month period ended December 31, 1995 was lower
than the comparable period of the prior year as a result of lower average long
and short-term borrowings. For the nine month period, higher average short-term
interest rates more than offset lower average borrowings, resulting in an
increase in interest expense. Other income -- net for the nine months ended
December 31, 1995 includes gains on the sale of assets of $0.6 million compared
to $1.5 million of such gains in the prior year period. The extraordinary gains
resulted from the purchase and retirement of $10.2 million principal amount of
8-3/8% senior notes.
The Company's effective tax rate varies from the statutory tax largely due to
the effect of nontaxable interest and dividends included in income (loss) before
income taxes.
- ----------------
The statements regarding future market prices and the other statements which
are not historical facts contained in this report on Form 10-Q are forward-
looking statements that involve risks and uncertainties, including, but not
limited to, market factors, the effect of weather and economic conditions, farm
and trade policy, the available supply of sugar and other factors detailed
elsewhere in this and other Company filings with the Securities and Exchange
Commission.
- 11 -
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required to be filed with this report are listed in the
Exhibit Index which immediately follows the signatures page of this report.
Registrant is a party to several long-term debt instruments under which in
each case the total amount of securities authorized does not exceed 10% of the
total assets of Registrant and its subsidiaries on a consolidated basis.
Pursuant to paragraph 4(iii) (A) of Item 601(b) of Regulation S-K, Registrant
agrees to furnish a copy of such instruments to the Securities and Exchange
Commission upon request.
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1995.
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMPERIAL HOLLY CORPORATION
(Registrant)
Dated: February 12, 1996 By: /s/ James C. Kempner
--------------------
James C. Kempner
President,
Chief Executive Officer
and Chief Financial Officer
(Principal Financial Officer)
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<PAGE>
IMPERIAL HOLLY CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1995
Exhibit Index
Exhibit Sequential Page Number
4 Stock Purchase Agreement dated Page 15
as of January 8, 1996 by and
between Holly Sugar Corporation
and Spreckels Industries, Inc.
11 Computation of Income Per Page 55
Common Share.
27 Financial Data Schedule
- 14 -
<PAGE>
EXHIBIT 4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of January
8, 1996 by and between HOLLY SUGAR CORPORATION, a New York corporation
("Buyer"), and SPRECKELS INDUSTRIES, INC., a Delaware corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller owns (i) all of the issued and outstanding shares (the
"Sugar Shares") of capital stock of Spreckels Sugar Company, Inc., a Delaware
corporation ("SSC"), and (ii) all of the issued and outstanding shares (the
"Limestone Shares") of capital stock of Limestone Products Company, Inc., a
Delaware corporation ("LPC") (all of the Sugar Shares and the Limestone Shares
being hereinafter referred to collectively as the "Shares"); and
WHEREAS, Seller desires to sell the Shares to Buyer and Buyer desires
to purchase the Shares from Seller, on the terms and subject to the conditions
of this Agreement:
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:
ARTICLE 1
PURCHASE AND SALE OF THE SHARES; PAYMENTS
1.1 General. On the Closing Date (as hereinafter defined) and upon
the terms and subject to the conditions set forth in this Agreement, Seller
shall sell the Shares to Buyer, and Buyer shall purchase the Shares from Seller.
1.2 Purchase Price. The aggregate consideration for the Shares (the
"Purchase Price") shall be an amount equal to the Net Current Asset Value of SSC
and LPC as of December 31, 1995 (the "Net Current Asset Value Amount"), plus
three million dollars ($3,000,000), plus or minus an amount equal to the Final
Adjustment Amount defined below, minus the Excess Environmental Remediation
Amount (defined in Section 11.1) if the Seller has elected to waive the
condition set forth in Section 7.5 hereof. For purposes of this Agreement, the
term "Net Current Asset Value" shall mean the difference between current assets
minus current liabilities, determined using generally accepted accounting
principles, consistent with Seller's past practices in connection with
preparation of Seller's consolidated financial statements, but excluding
therefrom (a) any intercompany payables or receivables due to or due from Seller
or any subsidiary of Seller, and (b) current assets and current liabilities of
SSC and LPC of the types and kinds eliminated as adjustments to the Pro Forma
Balance Sheet of SSC and LPC at November 30, 1995 described in
<PAGE>
Section 2.5. For purposes of determining the Net Current Asset Value Amount,
current liabilities shall take account of any Pension Plan Shortfall and of the
March 1, 1992 and March 1, 1995 modifications to the benefit formula under the
Pension Plan. Seller shall provide to Buyer on or before January 29, 1996 but
no later than two business days prior to the Closing Date a balance sheet of SSC
and LPC as of December 31, 1995 reflecting the Net Current Asset Value Amount.
For purposes of this Agreement, the term "Final Adjustment Amount" shall mean
the net amount of any cash infusions less distributions from Seller or any of
its subsidiaries to SSC or LPC or from SSC and LPC to Seller or any of its
subsidiaries, including transfers relating to Seller's standard cash management
practices, from January 1, 1996 to the Closing Date, but excluding any transfers
to Seller of cash proceeds from any Sand Business Sale (defined in Section 4.1
below) and any infusions to SSC or LPC as provided in clause (i) of Section
4.1(c). For purposes of this Agreement, the term "Pension Plan Shortfall" means
the sum of (i) the accumulated funding deficiency (within the meaning of section
412 of the Code) under the Pension Plan as of June 30, 1995, after
redetermination of actuarial valuations as of July 1, 1992, July 1, 1993 and
July 1, 1994, reflecting the March 1, 1992 modifications to the benefit formula
under the Pension Plan, (ii) the amount by which the required quarterly
contributions (within the meaning of section 412 of the Code) to the Pension
Plan on or after July 1, 1995 and prior to January 1, 1996 exceeds the quarterly
contributions actually made to the Pension Plan for that period (taking into
account the March 1, 1995 modifications to the benefit formula under the Pension
Plan), and (iii) any excise tax obligation of SSC attributable to the Pension
Plan as of December 31, 1995 under section 4971(a) of the Code or additional
premiums payable by SSC to the Pension Benefit Guaranty Corporation as of that
date.
1.3 Closing Date. The consummation of the purchase and sale of the
Shares (the "Closing") shall be held at 9:00 A.M. on the second business day
after the satisfaction or waiver of the conditions set forth in Sections 6.3,
6.4, 6.5, 7.3 and 7.4, or at such other time and date as the parties hereto
shall agree in writing (such date and time being referred to herein as the
"Closing Date") at the offices of Pillsbury Madison & Sutro LLP, 235 Montgomery
Street, San Francisco, CA 94104.
1.4 Closing Payments and Deliveries. Subject to the conditions to
the respective obligations of the parties hereto, on the Closing Date (a) Seller
shall deliver to Buyer share certificates representing the Shares duly endorsed
or accompanied by duly executed stock powers (in blank) and (b) Buyer shall pay
to Seller by wire transfer in immediately available funds to Seller's account at
Harris Trust and Savings Bank that portion of the Purchase Price equal to the
Net Current Asset Value Amount, plus three million dollars ($3,000,000), minus
the Excess Environmental Remediation Amount (if any). The final Purchase Price,
taking into account the effect of the Final Adjustment Amount, shall be
2
<PAGE>
finally determined and settled in accordance with Section 1.5 hereof.
1.5 Final Determination and Settlement of Purchase Price.
(a) Not later than five (5) business days after the Closing Date,
Seller shall deliver to Buyer a summary (the "Payment Summary") which describes
in reasonable detail the calculations of and setting forth the Final Adjustment
Amount, which shall also show whether the determination of the Purchase Price
results in an obligation of Buyer to pay an additional amount to Seller in
settlement of the Purchase Price or an obligation of Seller to make a payment to
Buyer in settlement of the Purchase Price.
(b) Not later than twenty (20) business days after Buyer's receipt of
the Payment Summary, unless Buyer elects to dispute the Net Current Asset Value
Amount or the Final Adjustment Amount determinations, Buyer shall pay to Seller,
or Seller shall pay to Buyer, as the case may be, the Final Adjustment Amount,
or in any case the part thereof which is not in dispute, plus interest from the
Closing Date to the date of payment at a rate of interest per annum equal to
Harris Trust and Savings Bank's "prime rate."
(c) Buyer may dispute any amounts shown or reflected in the
determination of the Net Current Asset Value Amount or the Final Adjustment
Amount on the basis that the calculations of such amounts are not consistent
with the provisions of this Agreement; provided, however, that Buyer shall have
notified Seller in writing of each disputed item, specifying the amount thereof
in dispute and setting forth, in reasonable detail, the basis for such dispute.
In the event of such a dispute, Seller and Buyer shall attempt to reconcile
their differences. If Buyer and Seller are unable to so agree within twenty
(20) days after receipt by Seller of a written notice of dispute, then either
Seller or Buyer may submit the items remaining in dispute to Ernst & Young (or,
if such firm shall decline to act or is not, at the time of such submission,
independent of Buyer and Seller, to another independent accounting firm mutually
acceptable to Buyer and Seller (either Ernst & Young or such other accounting
firm being referred to herein as the "Independent Accounting Firm")), which
shall, within thirty (30) days after such submission, determine and report to
Buyer and Seller upon such remaining disputed items (and only such disputed
items), and such report shall be final and binding on both Seller and Buyer.
Promptly upon such resolution of the disputed items, Buyer shall pay to Seller,
or Seller shall pay to Buyer, as the case may be, the amount determined to be
due in settlement of the Purchase Price, plus interest to the date of payment at
the rate provided above. The fees and disbursements of the Independent
Accounting Firm shall be allocated between Buyer and Seller in the same
proportion that the aggregate amount of such remaining disputed items so
submitted to the Independent Accounting Firm that is unsuccessfully disputed by
each such party (as finally determined by the Independent Accounting Firm) bears
to the total amount of such remaining disputed items so submitted.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents, warrants and agrees as follows:
2.1 Corporate Organization. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to enter into this Agreement
and to perform its obligations hereunder. Each of SSC and LPC is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, has the corporate power to own its properties and carry on
its business as the same is now being conducted and is duly qualified to do
business in each jurisdiction in which the nature of its business or properties
makes such qualification necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined). Complete and correct copies of the corporate charter and
by-laws of SSC and LPC, as amended to the date hereof, have been delivered to
Buyer.
2.2 Capitalization; Title to Shares. The authorized capital stock of
SSC consists of 1,000 shares of Common Stock, par value $1.00 per share, of
which 1,000 shares are outstanding. The authorized capital stock of LPC
consists of 1,000 shares of Common Stock, par value $1.00 per share, of which
1,000 shares are outstanding. All of the Shares are duly authorized, validly
issued, fully paid and nonassessable, and none of the issued and outstanding
shares of Common Stock of SSC or LPC were issued in violation of the preemptive
rights of any present or former stockholder of SSC or LPC, respectively. No
equity securities (as defined in the Securities Exchange Act of 1934, as
amended) of SSC or LPC are reserved for issuance for any purpose, and there are
no contracts, commitments, agreements, understandings, arrangements or
restrictions to which SSC or LPC is a party or by which SSC or LPC is bound
relating to any shares of the capital stock or other equity securities of SSC or
LPC (including the Shares), whether or not outstanding. The Shares are owned
beneficially and of record by Seller, free and clear of any liens, claims,
encumbrances or other contractual restrictions of any kind (other than liens
imposed by the Indenture, which will be released on or as of the Closing Date).
No options, warrants or other rights to acquire, sell or issue shares of capital
stock of SSC or LPC are outstanding. The transfer and delivery of the Shares by
Seller to Buyer as contemplated by this Agreement will transfer good title to
the Shares to Buyer, free and clear of all security interests, liens, claims,
encumbrances and other contractual restrictions of any kind (except for any of
the foregoing which may contemporaneously or thereafter be created or permitted
to exist by or on behalf of Buyer or any of its Affiliates). Except for all of
the outstanding shares of Spreckels Development Company owned by SSC (which
shall be distributed out of SSC in accordance with Section 4.2)
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and shares of West Coast Beet Seed Company owned by SSC, neither SSC nor LPC
owns equity interests in any other entity.
2.3 Authorization and Validity of Agreement. The execution and
delivery of this Agreement by Seller and the performance of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Seller, which constitutes all required corporate action of Seller. This
Agreement has been duly executed and delivered by Seller and, assuming due
authorization, execution and delivery by Buyer, constitutes the valid and
binding agreement of Seller, enforceable against it in accordance with the terms
hereof except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforceability of creditors' rights
generally and except for the application of equitable principles.
2.4 No Conflict or Violation. Neither the execution and delivery of
this Agreement nor the performance by Seller of the transactions contemplated
hereby will (a) conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under any provision of the respective charter documents or
Bylaws of Seller, SSC or LPC or any agreement or instrument, permit, franchise,
license, judgment, order, statute or regulation applicable to Seller, SSC or LPC
or their respective properties or assets, other than any such conflicts,
violations, defaults, terminations, cancelations or accelerations which would
not have a Material Adverse Effect, or (b) result in the creation of any lien,
security interest, charge or other encumbrance upon any of the properties or
assets of SSC or LPC under any of the terms, conditions or provisions of any
such agreement or instrument.
2.5 Financial Statements. Attached as Schedule 2.5 are the unaudited
historical balance sheets of SSC, LPC, Spreckels Water Company ("SWC") and
Spreckels Land Company ("SLC") (collectively, the "Combined Entities") as of
June 30, 1995 and November 30, 1995 (referred to individually as a "Balance
Sheet" or collectively as the "Balance Sheets") and the unaudited statements of
income of the Combined Entities for the year ended June 30, 1995 and the five
months ended November 30, 1995 (such statements of income and the Balance Sheets
being collectively referred to as the "Historical Financial Statements").
Attached also as Schedule 2.5 is the pro forma balance sheet of SSC and LPC as
of November 30, 1995, which is the historical November 30, 1995 Balance Sheet of
the Combined Entities, with certain pro forma adjustments described therein to
separate SSC and LPC from the Combined Entities and other adjustments consistent
with this Agreement (the "Pro Forma Balance Sheet"). The Historical Financial
Statements present fairly the financial condition of the Combined Entities as of
their respective dates and the combined results of their operations for their
respective periods, subject in the case of the November 30, 1995 Financial
Statements, to normal and
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recurring year-end adjustments and to the absence of footnotes. As of the date
of its most recently regularly prepared financial statements and for the 12-
month period then ended, neither the assets nor the annual revenues of LPC
exceed twenty-five million dollars ($25,000,000).
2.6 Absence of Certain Changes or Events. Since November 30, 1995,
except as contemplated by or disclosed in this Agreement, SSC and LPC have
operated their respective businesses only in the ordinary course, and there has
not been:
(a) any sale, lease, distribution, transfer, mortgage, pledge or
subjection to lien of any material assets of SSC or LPC, except sales of
inventory and obsolete or surplus equipment in the ordinary and usual
course of business and the creation of Permitted Liens (defined in Section
2.7);
(b) any material damage, destruction or loss to the assets of SSC or
LPC whether or not covered by insurance;
(c) a termination, or a threatened termination, or material
modification, in any such case not in the ordinary course of business, of
any material contract or the relationship of SSC or LPC with any customer
or supplier, who in the aggregate accounted for in excess of $250,000 of
sales or purchases of Seller during the last full fiscal year of Seller;
(d) any change in accounting methods or principles or the application
thereof or any change in policies or practices with respect to items
affecting working capital;
(e) any material delay or reduction in capital expenditures or
"inter-campaign" maintenance in contemplation of this Agreement or
otherwise, or any material failure to continue to make capital expenditures
or to perform "inter-campaign" maintenance in the ordinary course of
business consistent with past practice;
(f) any bonus payments, salary increases, commission increases or
modifications, the execution of any employment agreement, severance
arrangement, consulting arrangement or similar document or agreement, or
other changes in employee benefits or other compensation of employees of
SSC and LPC (excluding the Manteca Employees) except in the ordinary course
of business;
(g) any waiver of any rights that, singly or in the aggregate, would
have a Material Adverse Effect;
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(h) any labor strikes, union organizational activities or other
similar occurrence with respect to the employees and SSC and LPC (excluding
the Manteca Employees);
(i) any contract or commitment to do or cause to be done any of the
foregoing.
2.7 Fixed Assets. After giving effect to the actions described in Section
4.2, SSC owns two sugar production facilities, one located in Woodland,
California, and the other located in Mendota, California. LPC owns a limestone
quarry property located in Cool, California. SSC and LPC own fee simple title
to the real property located at each such location respectively, free and clear
of all mortgages, liens, pledges, security interests or encumbrances of any
nature whatsoever except for (a) the matters described in Schedule 2.7; (b)
those which do not, in the aggregate, materially impair the use of such real
property in the operation of their respective businesses; (c) any lien for taxes
not yet delinquent; (d) liens of landlords, carriers, warehousemen, mechanics,
materialmen and repairmen incurred in the ordinary course of business for sums
not yet delinquent; and (e) zoning laws and other land use restrictions that do
not impair the present or anticipated use of such real property (the foregoing
items in (a) through (e) collectively referred to as "Permitted Liens"). SSC
also leases office space at Pleasanton, California under the lease identified in
Schedule 2.7. SSC also leases real property under the other leases identified
in Schedule 2.7. SSC and LPC together own all of the equipment reflected on the
Balance Sheets (excluding the equipment owned by SSC and located at its Manteca
Facility), free and clear of all liens and claims of others, except such
equipment as has been disposed of in the ordinary course of business since
November 30, 1995 and except for such items as may be identified on Schedule
2.7. Such equipment is in condition typical for the ordinary conduct of the
respective businesses of SSC and LPC. SSC and LPC own or have the right to use
real property (including improvements and fixtures) and equipment necessary to
the operation of their respective businesses in accordance with past practices.
2.8 Inventory. The inventories of SSC and of LPC shown on their
respective Balance Sheets consisted of items of a quality typical of inventory
in their respective businesses. The amounts of such inventories shown on the
Balance Sheets have been determined in accordance with generally accepted
accounting principles and Seller's past practices with respect to preparation of
its financial statements.
2.9 Accounts Receivable. The accounts receivable reflected on the Balance
Sheets reflected amounts actually due and owing as of the date thereof. In
addition, the trade accounts receivable arose in the ordinary course of the
business of SSC and LPC.
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2.10 Litigation. Except as disclosed on Schedule 2.10 or in the Financial
Statements, there is no lawsuit or legal, administrative or regulatory
proceeding or investigation pending or threatened against SSC or LPC which
would, if adversely determined, reasonably be expected to have a Material
Adverse Effect. With respect to threatened actions and proceedings or
investigations for which Seller, SSC or LPC have not been served process, this
representation and warranty shall be to Seller's knowledge.
2.11 Employee Benefit Plans.
(a) Except for the plans and agreements listed in Schedule 2.11
(collectively, the "Plans"), neither SSC nor LPC maintains, is a party to,
contributes to or is obligated to contribute to, any of the following (whether
or not set forth in a written document):
(i) Any employee benefit plan, as defined in section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
(ii) Any bonus, deferred compensation, incentive, restricted stock,
stock purchase, stock option, stock appreciation right, phantom stock,
supplemental pension, profit-sharing, severance, termination pay or similar
plan or arrangement;
(iii) Any plan, program, agreement, policy, commitment or other
arrangement relating to the provision of any benefit described in section
3(1) of ERISA to former employees or directors or to their survivors, other
than procedures intended to comply with Part 6 of Title I of ERISA
("COBRA"); or
(iv) Any employment or termination agreement, or any consulting
agreement not terminable without penalty upon 60 days' notice.
(b) Neither SSC nor LPC has, since January 1, 1988, terminated, suspended,
discontinued contributions to or withdrawn from any employee pension benefit
plan, as defined in section 3(2) of ERISA, including (without limitation) any
multiemployer plan, as defined in section 3(37) of ERISA.
(c) With respect to each Plan that is an employee benefit plan (as defined
in section 3(3) of ERISA), the requirements of ERISA applicable to such Plan
have been satisfied, except to the extent that a failure to satisfy any of such
requirements would not have a Material Adverse Effect.
(d) Each Plan that is intended to qualify under section 401(a) of the Code
meets in all material respects the requirements for qualification under section
401(a) of the Code and the
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regulations thereunder, except to the extent that such requirements may be
satisfied by adopting retroactive amendments under section 401(b) of the Code
and the regulations thereunder. Each such Plan has been administered in
accordance with its terms (or, if applicable, such terms as will be adopted
pursuant to a retroactive amendment under section 401(b) of the Code) and the
applicable provisions of ERISA and the Code and the regulations thereunder,
except to the extent that a failure to be so administered would not have a
Material Adverse Effect.
(e) Except as disclosed on Schedule 2.11(e) and except with respect to the
Pension Plan Shortfall or as otherwise taken into account in determining the
Purchase Price, as of the most recent actuarial report of the Plan, neither SSC
nor LPC has any unfunded benefit liability under section 412 of the Code or
Title IV of ERISA and no termination or withdrawal liability under Title IV of
ERISA with respect to any Plan listed in Schedule 2.11, as measured by the
Plan's unfunded actuarial accrued liability.
(f) Except with respect to the Pension Plan Shortfall, all contributions,
premiums or other payments due from SSC or LPC to (or under) any Plan have been
fully paid or adequately provided for in the Financial Statements. All accruals
(including, where appropriate, proportional accruals for partial periods) have
been made in accordance with prior practices.
(g) Neither SSC nor LPC has any obligation to provide post-retirement
health benefits to its respective employees or former employees except an
obligation that is reflected on the Balance Sheets in accordance with generally
accepted accounting principles.
(h) True and complete copies of the following documents with respect to
each of the Plans (as applicable) have been delivered by Seller to Buyer: (i)
any current written plans, related trust documents and group annuity contracts,
if any, and all amendments thereto (or, if no written plan document exists, a
written description of the terms of the plan), (ii) the most recent summary plan
description, and (iii) the most recent actuarial report or valuation relating to
such employee benefit plan (in the event such plan is subject to Title IV of
ERISA).
(i) No Plan provides for payments from the general assets of SSC or LPC to
employees contingent in any respect upon a change of control of SSC or LPC.
(j) Seller will take all necessary actions to comply with the Worker
Adjustment and Retraining Notification Act (the "WARN Act") to the extent it is
subject to such Act, and none of Buyer, SSC or LPC shall have any disclosure or
announcement obligations or any other responsibilities prior to Closing under
the WARN Act as a result of the transactions contemplated by this Agreement.
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2.12 Liabilities. Except as reflected or set forth elsewhere in this
Agreement or on the Balance Sheets or on Schedule 2.12, to Seller's knowledge,
neither SSC nor LPC has any liabilities or obligations of any nature, whether
absolute, accrued, contingent or otherwise, that would be of a type and nature
that would be reported on a financial statement (including the notes thereto)
prepared in accordance with generally accepted accounting principles, excluding
liabilities and obligations arising in the ordinary course of business since
November 30, 1995 and excluding the matters described in Schedule 2.10.
2.13 Taxes. SSC and LPC, or Seller with respect to the consolidated or
combined returns in which SSC and LPC are included, have timely filed all Tax
Returns required to be filed and have paid all Taxes shown thereon as owing,
except where the failure to file or to pay Taxes would not have a Material
Adverse Effect. Seller is not a foreign person within the meaning of section
1445(b)(2) of the Code. Neither SSC nor LPC is a party to any agreement,
contract, arrangement, or plan, the performance of which resulted or would
result, separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of section 280G of the Code. None of the assets of
SSC and LPC 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 Code. None of the assets of SSC or LPC directly or indirectly
secures any debt, the interest on which is tax-exempt under section 103(a) of
the Code. None of the assets of SSC or LPC is "tax-exempt use property" within
the meaning of section 168(h) of the Code. Neither SSC nor LPC is a party to
any allocation or sharing agreement with respect to Taxes.
2.14 Compliance With Laws. Except as set forth on Schedule 2.14, (a) SSC
and LPC are in compliance with all statutes, orders, rules, ordinances and
regulations applicable to them or to the ownership of their assets or the
operation of their businesses, except where any failure to so be in compliance
would not have a Material Adverse Effect, and (b) neither SSC nor LPC has
received, since July 1, 1993, any written order, notice or other communication
from any federal, state or local governmental agency, of any violation of and/or
failure to comply with any such statute, order, rule, ordinance or regulation.
2.15 Contracts. Except as may be disclosed in Schedule 2.15, neither SSC
nor LPC is a party to any contracts or commitments entered outside the ordinary
course of business which would be reasonably likely to have a Material Adverse
Effect. Schedule 2.15 lists all contracts and commitments relating to
indebtedness for borrowed money (except for those which are in the aggregate
less than $100,000) and capitalized leases (except for those which are in the
aggregate less than $250,000); provided, however, that any indebtedness or
capitalized lease which is not included in Schedule 2.15 and constitutes a
breach of the representation contained in this sentence but which is none-
theless reflected in the December 31, 1995 pro forma balance sheet
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of SSC and LPC described in Section 1.2 shall constitute an indemnifiable event
only to the extent of the harm caused by Buyer's lack of knowledge of the
existence of the indebtedness or capitalized lease and not otherwise for the
entire amount of the indebtedness or the capitalized lease. Neither SSC nor LPC
is in default or alleged to be in default in any material respect under any of
its contracts or commitments where the reasonably foreseeable consequences of
any such default would be expected to have a Material Adverse Effect. Effective
as of Closing, SSC and LPC shall not be guarantors of any obligations under the
Indenture.
2.16 Environmental Matters. Except as set forth in Schedule 2.16 and
matters relating to the Manteca Facility (as defined below), neither SSC nor LPC
has received written notice from any governmental agency of any material
violation of environmental laws, where such violation would be reasonably
expected to have a Material Adverse Effect. There exists no writ, injunction,
decree, order or judgment, claim, suit, proceeding, citation, directive, summons
or investigation relating to potential violations of environmental laws as a
result of the use, maintenance or operation of any of the assets of SSC or LPC
(excluding the properties described in Section 4.2(a)-(e) of this Agreement),
except for any such matter as would not reasonably be expected to have a
Material Adverse Effect.
2.17 Labor Disagreements. Except as set forth in Schedule 2.17, and
excluding matters relating solely to the Manteca Employees, since June 30, 1993
neither SSC nor LPC has experienced any work stoppage or slowdowns due to labor
disagreements. Except as set forth in Schedule 2.17, (i) there is no unfair
labor practice charge or complaint against SSC or LPC before the National Labor
Relations Board; (ii) there is no labor strike, request for representation,
slowdown or stoppage actually pending by any employees of SSC or LPC; (iii) no
grievance or any arbitration proceeding arising out of or under any collective
bargaining agreement is pending which could reasonably be expected to have a
Material Adverse Effect; and (iv) no collective bargaining agreement that is
binding on SSC or on LPC restricts it from closing or relocating any of its
operations. Schedule 2.17 is a complete list of all unions which represent any
employees of SSC or LPC. Except as disclosed on Schedule 2.17, no union is
attempting to organize or otherwise become the bargaining representative for any
employees of SSC or LPC.
2.18 Governmental Authorizations. SSC and LPC have and are operating in
compliance with all licenses, permits or other authorizations from governmental,
regulatory or administrative agencies or authorities required for the conduct of
its business, except where the failure to have or operate in compliance with the
same would not reasonably be expected to have a Material Adverse Effect.
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2.19 Seller's 1934 Act Reports. The information concerning SSC and LPC in
Seller's filings, reports and submissions under the Securities Exchange Act of
1934, as amended, does not contain any untrue statement of a material fact or
omit a material fact necessary to make the statements therein not misleading
(materiality to be determined for this purpose with respect to Seller and its
subsidiaries taken as a whole).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
3.1 Corporate Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite corporate power and authority to enter into this Agreement
and to perform its obligations hereunder.
3.2 Authorization and Validity of Agreement. The execution and delivery
of this Agreement by Buyer and the performance of the transactions contemplated
hereby have been duly authorized by the Board of Directors of Buyer, which
constitutes all required corporate action of Buyer. This Agreement has been
duly executed and delivered by Buyer and, assuming due authorization, execution
and delivery by Seller, constitutes the valid and binding agreement of Buyer,
enforceable against it in accordance with the terms hereof except as the same
may be limited by bankruptcy, insolvency, reorganization or other laws affecting
the enforceability of creditors' rights generally and except for the application
of equitable principles.
3.3 No Conflict or Violation. Neither the execution and delivery of this
Agreement nor the performance of the transactions contemplated hereby by Buyer
will violate or conflict with any of the provisions of the corporate charter or
by-laws of Buyer or any agreement or other obligation binding upon Buyer.
3.4 Purchase for Investment. Buyer acknowledges that the Shares have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or under any state or foreign securities laws. Buyer is purchasing the
Shares solely for investment with no present intention to distribute any of the
Shares to any person, and Buyer will not sell or otherwise dispose of any of the
Shares, except in compliance with the registration requirements or exemption
provisions under the Securities Act and the rules and regulations promulgated
thereunder, and any other applicable securities laws.
3.5 Buyer's Inquiry. Buyer is knowledgeable about the sugar industry and
sugar companies. Buyer has carefully reviewed information supplied by Seller as
to the financial condition,
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results of operations, assets, liabilities, properties, operations and prospects
of SSC and LPC. In determining to enter into this Agreement and close the
transaction contemplated hereby, Buyer has relied on such review and the
representations and warranties of Seller set forth in this Agreement. EXCEPT
FOR THE REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN THIS AGREEMENT, BUYER
ACKNOWLEDGES THAT THERE ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR
IMPLIED, AS TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS,
LIABILITIES, PROPERTIES, OPERATIONS OR PROSPECTS OF SSC OR OF LPC.
ARTICLE 4
ACTIONS BEFORE THE CLOSING DATE
The parties covenant to take the following actions between the date hereof
and the Closing Date:
4.1 Conduct of Business. Except as otherwise contemplated by the
transactions provided for herein or the terms hereof, pending the Closing,
Seller shall comply, and Seller shall cause SSC and LPC to comply, with the
following provisions:
(a) SSC and LPC each shall operate its respective business in the
ordinary course;
(b) Seller shall promptly notify Buyer of, and furnish to Buyer any
information that Buyer may reasonably request with respect to, the
occurrence of any event or the existence of any state of facts that may
result in the representations and warranties of Seller not being true if
they were made at any time prior to or as of the date of the Closing;
(c) Except as required by the Plans and set forth on Schedule 4.1,
neither SSC nor LPC shall (i) grant or agree to grant any bonuses to any
employee of SSC or LPC, unless the amount thereof is paid by Seller or
Seller reimburses SSC or LPC for the amount of any such bonus, and such
paid or reimbursed amount shall not be considered a cash infusion for
purposes of calculating the Final Adjustment Amount, (ii) grant any general
increase in the rates of salaries or compensation of employees or any
specific increase to any employee of SSC and LPC; (iii) provide for any new
pension, retirement or other employment benefits to any employees of SSC
and LPC or any increase in any existing benefits or (iv) terminate or amend
in any respect or provide for any material increase in benefits under any
Plan, excluding in each case any matters relating solely to Manteca
Employees;
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(d) Neither SSC nor LPC shall amend its certificate of incorporation
or by-laws or enter into any merger or consolidation agreement;
(e) Neither SSC nor LPC shall authorize for issuance, issue, sell,
deliver or agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any capital stock of any class or any
other securities or equity equivalents or amend any of the terms of any
such securities or agreements;
(f) Seller shall, by contribution to capital or distribution in
respect of equity not involving any cash payment, cause the intercompany
payables and receivables of SSC and LPC to be cancelled as of the Closing
Date;
(g) SSC and LPC shall use best efforts to maintain and preserve the
business of SSC and LPC intact, to retain their present employees so that
they will be available after the Closing and to maintain existing
relationships with customers, suppliers and others so that those
relationships will be preserved after the Closing;
(h) Neither SSC nor LPC shall sell, assign or dispose of any of its
material assets or properties, tangible or intangible, or incur or assume
any liabilities or enter into any sale/leaseback or similar transaction,
except for sales and dispositions made, or liabilities incurred, in the
ordinary course of business consistent with past practices, except that
Seller may cause LPC to sell to a third party goodwill and assets (but
excluding real property) associated with LPC's sand business (the "Sand
Business Sale"). In connection with the Sand Business Sale: (i) Seller may
cause LPC to give the purchaser a non-competition agreement relating to the
conduct of a sand business from the quarry located on LPC's premises, which
non-competition agreement shall not restrict Buyer's or LPC's sales of sand
for internal purposes of Buyer and its Affiliates and shall be in such form
as reasonably consented to by Buyer, such consent not being unreasonably
withheld, and (ii) Seller may cause the net proceeds of the Sand Business
Sale to be distributed to Seller;
(i) Neither SSC nor LPC shall assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person or entity except in the ordinary
course of business consistent with past practices and in amounts not
material to SSC and LPC or make any loans, advances or capital
contributions to or
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investments in any other person or entity, other than in the ordinary
course of business consistent with past practices;
(j) Neither SSC nor LPC shall take, or agree in writing or otherwise
to take, any of the actions described in this Section 4.1 or any action
that would make any representation or warranty inaccurate or untrue or that
would result in any of the conditions set forth in Article 7 hereof not
being satisfied;
(k) SSC and LPC shall maintain the books of account and records in
the usual, regular and customary manner consistent with practices employed
prior to the date hereof;
(l) SSC and LPC shall not implement or adopt (i) any change in its
respective accounting methods or principles or the application thereof
(including depreciation lives) or (ii) any material change in its
respective tax methods or principles or the application thereof (including
depreciation lives); and
(m) SSC and LPC shall not transfer any of their respective assets to
Seller or its subsidiaries except for cash transfers that are reflected in
the Final Adjustment Amount.
4.2 Seller's Transfers. Notwithstanding anything in this Agreement to the
contrary (including without limitation, the agreements set forth in Section
4.1), at or prior to the Closing Seller shall cause the following to occur:
(a) All of the outstanding shares of Spreckels Development Company
("SDC") shall be distributed out of SSC; provided, however, that neither
Seller nor SSC shall have moved any assets of SSC into SDC after the date
hereof, except for any transfers to Seller or subsidiaries permitted by
this Section 4.2(a) through (f);
(b) All of the land, premises and fixed assets at the facility
located in Manteca, California (the "Manteca Facility") shall be
transferred out of SSC and all of the employees of SSC located at such
location (the "Manteca Employees") shall be hired by Seller or a subsidiary
of Seller other than SSC or LPC;
(c) The Tooby Land and any premises thereon shall be transferred out
of SSC;
(d) Ranch 440 in Mendota, California and any premises thereon shall
be transferred out of SSC;
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(e) The property, premises and equipment located in Spreckels,
California shall be transferred out of SSC (excluding SSC's beet seed
research equipment and processing equipment);
(f) Seller shall assume all workers' compensation claims asserted by
employees of SSC and LPC prior to the Closing Date; and
(g) SLC shall transfer to SSC fee simple interest in the Frusetta land
and premises.
Any liabilities and obligations associated with owning and operating the
properties described in items (a) through (e) above or the assets of SDC
(excluding pension obligations to the Manteca Employees accruing prior to the
Closing Date), the liabilities described in (f) above, and all obligations to
former employees of SSC or LPC who are retired as of the Closing Date and to
their dependents under the Major Medical Plan and any other obligations assumed
or retained by Seller under Sections 10.4, 10.5, or 10.6 shall be referred to in
this Agreement as the "Seller Retained Liabilities." All representations and
warranties of Seller shall be deemed to be modified to reflect the actions
described in this Section 4.2.
4.3 Access. Prior to the Closing Date, Seller shall provide Buyer and its
representatives with, during normal business hours and upon reasonable notice,
full access to, and will make available for inspection and review, all
properties, personnel, books, records and accounts of SSC and LPC in order that
Buyer may have full opportunity to make such investigation as it shall desire to
make of the affairs of SSC and LPC (excluding, however, meetings with growers).
It is understood that Buyer shall be permitted to maintain personnel on the
premises of SSC or LPC during customary business hours to observe all aspects of
the operations of SSC and LPC and to confer with its management. Buyer may not
conduct any underground soil or groundwater testing without Seller's prior
consent. Buyer shall use its best efforts to conduct its review in such a
manner so as to not unduly disrupt the operation of the businesses of SSC and
LPC.
4.4 Transition Lease. On the Closing Date, Seller or one of its
subsidiaries shall enter into a lease with SSC or Buyer with respect to the
following: (a) the real property interests located at Spreckels, California,
which are necessary for SSC to conduct its agricultural research and beet seed
operations (the "Spreckels Premises"), such lease to be on commercially
reasonable terms, with taxes, building insurance and utilities to be provided by
Seller and bearing rent at $2,000 per month; and (b) the storage facilities (the
"Storage Facilities") in the Manteca Facility and the Salinas, California
properties that were held by SSC immediately prior to the Closing, which lease
will have commercially reasonable rent terms based on per 100-weight amounts of
sugar stored therein by SSC or Buyer during the period starting
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sixty (60) days after the Closing Date and pursuant to which SSC or Buyer shall
provide all necessary services for storage of sugar. The Transition Lease with
respect to the Spreckels Premises will be for a minimum term of one year from
the Closing Date and shall on that date or thereafter be terminable upon six
months' prior written notice by either party given not earlier than six months
after the Closing Date. The Transition Lease with respect to the Storage
Facilities will be for a term of 20 years, and may be terminated with respect to
any Storage Facility (i) upon 30 days written notice by Buyer to Seller or (ii)
upon 30 days written notice by Seller to Buyer of its intent to convert any such
Storage Facility into a use other than storage of sugar or to cause any such
Storage Facility to be torn down (provided, however, that the lease shall
recommence with respect to such Storage Facility if such action described in the
notice does not occur within 90 days following such notice). The parties shall
act in good faith to negotiate the form of the Transition Lease prior to
Closing.
4.5 No Public Announcement. No party hereto shall make any public
announcement concerning the transactions contemplated by this Agreement without
the prior approval of the other party, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, in the event any such public
announcement is required by law to be made by the party proposing to make the
same, such party shall use its best efforts to consult in good faith with the
other party before the making of such public announcement.
4.6 Best Efforts. Seller and Buyer shall take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed
with respect to this Agreement, including the filings (the "HSR Filings")
required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"). Both parties shall use their best efforts to make their
respective HSR Filings as promptly as possible but in no event later than
January 12, 1996. Each party shall act in good faith to cause to be satisfied
all the conditions precedent to the Closing of this Agreement for which it is
responsible and to render accurate as of the Closing its representations and
warranties contained in this Agreement; notwithstanding the generality of the
foregoing, Buyer agrees to cooperate to obtain the consents of the lenders
referred to in Section 6.3, including, if necessary, a guarantee of the
financing on commercially reasonable terms by Buyer.
4.7 Determination of Environmental Remediation Amount. The Independent
Consultant (defined in Section 11.1), working under the joint direction of
Seller and Buyer, shall determine the Environmental Remediation Amount on or
before January 29, 1996. In the event that the Environmental Remediation Amount
is not determined by that date, the Environmental Remediation Amount shall be
deemed to be less than two million five hundred thousand dollars ($2,500,000).
Seller shall, and shall cause SSC to,
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extend all reasonable efforts to cooperate with the Buyer and the Independent
Consultant in order to facilitate the determination of the Environmental
Remediation Amount by January 29, 1996. Promptly upon determination of the
Environmental Remediation Amount, the Independent Consultant shall send written
notice thereof to Seller and to Buyer. If the Environmental Remediation Amount
exceeds two million five hundred thousand dollars ($2,500,000), then Seller
shall, within three (3) business days after receipt of written notice thereof,
notify Buyer whether Seller elects to waive the condition set forth in Section
7.5 hereof (such notice being hereinafter referred to as the "Election Notice").
If Seller elects to waive such condition, the Purchase Price shall be reduced by
an amount equal to the Excess Environmental Remediation Amount. If Seller does
not elect to waive such condition, then Buyer shall have the right, to be
exercised by written notice to Seller within three (3) business days of receipt
by Buyer of Seller's Election Notice, to require that Seller consummate the
transactions contemplated by this Agreement (notwithstanding that the condition
set forth in Section 7.4 hereof has not been satisfied or been waived by
Seller), in which event the Purchase Price shall not be reduced by the Excess
Environmental Remediation Amount. Notwithstanding anything in this Agreement to
the contrary, Seller shall have no liability to Buyer for any contamination or
environmental remediation costs associated with the matters upon which the
Environmental Remediation Amount is based. Each of Buyer and Seller shall pay
one-half of the fees and expenses of the Independent Consultant up to $10,000
and Buyer shall pay any fees and expenses in excess of $10,000.
ARTICLE 5
ACTIONS AFTER THE CLOSING DATE
The parties covenant to take the following actions after the Closing Date:
5.1 Guaranteed Obligations. From and after the Closing Date, Buyer shall
cause SSC and LPC fully to perform and observe all the obligations required to
be performed and observed by SSC and LPC under each contract, agreement, lease
or other obligation (including such obligations as may exist other than under a
contract or agreement) of SSC or LPC with respect to which Seller or any of its
Affiliates (other than SSC or LPC) are or may be obligated as a guarantor or
assignor or otherwise or identified as a party thereto, to the extent that all
such obligations are (a) less than $50,000 in the aggregate or (b) are listed on
Schedule 5.1.
5.2 Further Information. Following the Closing, each party shall afford,
and Buyer shall cause SSC and LPC to afford, to the other party, and their
respective counsel and accountants, during normal business hours, reasonable
access to the books, records and
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other data of SSC in its possession with respect to periods prior to the Closing
and the right to make copies and extracts therefrom, to the extent that such
access may be reasonably required by the requesting party (i) to facilitate the
investigation, litigation and final disposition of any claims which may have
been or may be made against any party or its Affiliates that relate to SSC, or
(ii) for any other reasonable business purpose.
5.3 Record Retention. Buyer agrees that for a period of not less than six
(6) years following the Closing Date it shall not, and shall not permit SSC or
LPC to, destroy or otherwise dispose of any of those books, records or other
documents held by SSC or LPC and relating to their respective properties,
liabilities or operations before the Closing Date except in a manner consistent
with policies approved by counsel for Seller in light of applicable statutes of
limitation. Buyer agrees that it shall, and it shall cause SSC and LPC to, make
available to Seller and its representatives and agents all such books, records
and documents, and permit Seller and its respective representatives and agents
to examine, make extracts from and, at their expense, copy such books, records
or documents at any time during normal business hours for any proper purpose.
Buyer shall have the right to destroy, or permit SSC and LPC to destroy, all or
part of such books, records and documents at a time earlier than the sixth (6th)
anniversary of the Closing Date permitted by such approved policies, by giving
Seller thirty (30) days' prior written notice of such intended disposition and
by offering to deliver to Seller, at Seller's expense, custody of such books,
records and documents as Buyer, SSC or LPC may intend to destroy; provided,
however, that, in any event, no such documents shall be destroyed unless Buyer
shall have received a written acknowledgment from Seller that such notice has
been received. Seller agrees to retain all books, records or other documents
held by Seller or its Affiliates relating to the properties, liabilities or
operations of SSC before the Closing Date in accordance with the approved
policies, and the provisions of this Section 5.3 shall apply thereto with Seller
having the rights and obligations of Buyer and Buyer having the rights and
obligations of Seller. All information obtained by Seller pursuant to this
Section 5.3 shall be held strictly confidential by Seller, subject only to
disclosure as required by applicable law or legal process. From and after the
Closing Date, Seller shall provide (and shall cause its agents, Affiliates and
accountants to provide) all information, access to information and cooperation
reasonably requested by Buyer to permit Buyer or its Affiliates and the
accountants appointed by them to cause the financial statements of SSC and LPC
for periods before Closing to be audited by a firm of certified public
accountants.
5.4 Insurance; Risk of Loss. Prior to the Closing Date, Seller shall be
responsible to maintain (or cause SSC and LPC to maintain) casualty, general
liability, product liability and other forms of insurance customarily maintained
by or for SSC and LPC in the ordinary course of their respective businesses. To
the extent
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requested by Buyer, Seller shall extend all reasonable cooperation to transfer
such insurance coverage to SSC or LPC. Effective as of and after the Closing
Date: (i) Seller shall no longer be obligated to maintain any insurance
coverage relating to the assets or business of SSC or LPC, and (ii) Buyer, SSC
and LPC shall become solely responsible to maintain (if they so choose) any or
all insurance coverage and shall bear the related risk of any occurrence covered
(or which would be covered) by such insurance.
5.5 Manteca Facility. Within a reasonable time after the Closing Date,
but in any case not later than sixty (60) days thereafter, Buyer shall cause SSC
to keep any and all inventory (including supplies) owned by SSC and that
continues to be located at the Manteca Facility in accordance with the terms of
the Transition Lease. Seller shall give all reasonable assistance to Buyer at
the Manteca Facility, without charge, to facilitate the removal of any such
inventory or the compliance by Buyer and SSC with the foregoing provision.
5.6 Further Assurances. Each party shall cooperate with the other, and
execute and deliver, or cause to be executed and delivered, all such other
instruments, including instruments of conveyance, assignment and transfer, and
take all such other actions as such party may reasonably be requested to take by
the other party hereto from time to time, consistent with the terms of this
Agreement, in order to effectuate the provisions and purposes of this Agreement.
5.7 Cooperation with Financial Reporting. Seller and Buyer each
acknowledge and understand that the other (or its parent) is subject to
reporting requirements under the Securities Exchange Act of 1934, as amended,
and is required to obtain certain information in periodic reports, registration
statements and other documents filed with the Securities and Exchange Commission
under the federal securities laws or in disclosure documents given investors in
certain securities offerings. Seller and Buyer each agree to use their
respective best efforts to cooperate fully and promptly with the other, and each
respectively shall cause its affiliates, accountants, counsel and other agents
and representatives to cooperate fully and promptly with the other, in
connection therewith and, in particular, in the preparation of all financial
statements required with respect to SSC and LPC by Regulation S-X on a timely
basis; provided, however, that any audit shall be conducted by accountants
engaged by the party conducting the audit.
5.8 Manteca Equipment. After the Closing, Seller and Buyer shall jointly
appoint a qualified appraiser who shall prepare an appraisal of the fair market
value of the major items of equipment at the Manteca Facility. For this
purpose, the appraiser shall consider that fair market value means the
successful bid at a public auction conducted by Seller upon reasonable notice,
which bid is made by a party who would remove the sale item from the
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Manteca Facility at its expense and utilize it generally for its intended
purpose at another location. Buyer shall have the option, which may be
exercised by written notice to Seller not later thirty (30) days after Buyer's
receipt of such appraisal, to purchase any or all such items for a price equal
to the fair market value as determined by the appraiser. As to any such items
so purchased, Seller shall credit Buyer, against the price thereof, with an
amount (the "Manteca Credit Amount") equal to one million seven hundred thousand
dollars ($1,700,000). As to any unused portion of the Manteca Credit Amount,
Buyer may utilize such unused portion in any other offer made to Seller to
purchase any other items of such equipment, and, if Seller elects to conduct a
public sale of such equipment, Buyer may bid on the same terms as other
prospective purchasers and shall have a credit for such unused portion against
any successful bid. If Seller elects to sell such equipment to a third party
(other than at an auction), Buyer shall have a right of first refusal to
purchase such equipment. In such event, Seller shall give Buyer written notice
of the price and terms of any such proposed sale and the identity of the
proposed Buyer (the "Sale Notice"), and Buyer shall have five (5) days following
receipt of the Sale Notice to exercise its right of first refusal by written
notice to Seller, in which case Buyer shall pay to Seller the purchase price for
such equipment within five (5) business days thereafter. If Buyer does not
exercise its right of first refusal within five (5) days following Buyer's
receipt of the Sale Notice, Seller may during a period of ninety (90) days after
expiration of such five-day period, sell such equipment to the buyer identified
in the Sale Notice for a price and terms no less favorable to Seller than set
forth in the Sale Notice. If Buyer elects to purchase such equipment pursuant
to the Sale Notice, Buyer shall have a credit for the unused portion of the
Manteca Credit Amount against Buyer's obligation to pay the purchase price. Any
items of equipment purchased by Buyer under this section shall be removed from
the Manteca Facility at Buyer's expense and at Buyer's risk. The cost of the
appraisal provided in this section shall be borne equally by Seller and Buyer.
ARTICLE 6
CONDITIONS TO CLOSING OF BUYER
The obligation of Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the following conditions:
6.1 Seller's Representations, Warranties and Performance. The
representations and warranties of Seller herein contained shall be true in all
material respects as of and at the Closing Date with the same effect as though
made at the Closing Date, except for changes permitted or contemplated by this
Agreement and except to the extent that any representation or warranty is made
herein as of a specified date, in which case such representation
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or warranty shall be true in all material respects as of such specified date.
Seller shall have performed in all material respects all obligations and
complied in all material respects with all covenants and other agreements
required by this Agreement to be performed or complied with by it before the
Closing Date. On the Closing Date, Seller shall have delivered to Buyer an
officer's certificate to the effect of the preceding two sentences.
6.2 Transfer of Shares. Seller shall have delivered the following items
to Buyer:
(a) Certificates representing the Shares, duly endorsed or
accompanied by stock powers duly executed in blank and otherwise in form
acceptable for transfer on the books of SSC and LPC;
(b) The stock books, stock ledgers, minute books and corporate seals
of SSC and LPC;
(c) Certificates and telegrams from appropriate authorities, dated
and most recent practicable date, as to the qualification to do business
and good standing of SSC and LPC, and payment of taxes by SSC and LPC, in
California; and
(d) The resignation of each director and officer of SSC and LPC.
6.3 Ion Exclusion Financing. To the extent required by the applicable
documents, (a) the consents of each lender/lessor under the applicable documents
for SSC's ion exclusion financing shall have been obtained and (b) such
applicable documents shall have been amended so that no default thereunder will
occur as a result of any default under the Indenture.
6.4 Release of Harris Bank Financing. Harris Trust and Savings Bank shall
have released all claims against SSC or LPC with respect to the Harris Bank
Financing and released all liens and security interests of Harris Trust and
Savings Bank on the Shares and any property belonging to SSC and LPC, all in
form and substance satisfactory to Buyer.
6.5 No Legal Action. All waiting periods under the HSR Act shall have
expired, or shall have been subject to early termination. There shall be no
action taken and outstanding, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the transactions contemplated by
this Agreement by any court or governmental authority, or any action or
proceeding seeking an injunction or order pending or threatened, which would (i)
prohibit the ownership or operation by Buyer or its Affiliates of all or a
material portion of its business, assets or properties following the Closing, or
compel Buyer or its Affiliates to dispose of or hold separate all or a material
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portion of its business, assets or properties following the Closing, as a result
of the transactions contemplated by this Agreement, or (ii) render Seller or
Buyer unable to consummate the transactions contemplated by this Agreement.
6.6 Transition Lease. Seller shall have provided Buyer with a signed copy
of the Transition Lease in a form reasonably acceptable to Buyer.
ARTICLE 7
CONDITIONS TO CLOSING OF SELLER
The obligation of Seller to consummate the transactions contemplated by
this Agreement shall be subject to the following conditions:
7.1 Buyer's Representations, Warranties and Performance. The
representations and warranties of Buyer herein contained shall be true in all
material respects as of and at the Closing Date with the same effect as though
made at the Closing Date, except for changes permitted or contemplated by this
Agreement and except to the extent that any representation or warranty is made
herein as of a specified date, in which case such representation or warranty
shall be true in all material respects as of such specified date. Buyer shall
have performed in all material respects all obligations and complied in all
material respects with all covenants and other agreements required by this
Agreement to be performed or complied with by it before the Closing Date. On
the Closing Date, Buyer shall have delivered to Seller an officer's certificate
to the effect of the preceding two sentences.
7.2 Purchase Price. Buyer shall have paid Seller the amount provided in
Section 1.4 hereof.
7.3 Ion Exclusion Financing. To the extent required by the applicable
documents, the consents of each lender/lessor under the applicable documents for
SSC's ion exclusion financing to transfer of SSC to Buyer without any ongoing
obligation of Seller shall have been obtained.
7.4 No Legal Action. All waiting periods under the HSR Act shall have
expired, or shall have been subject to early termination. There shall be no
action taken and outstanding, or any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the transactions contemplated by
this Agreement by any court or governmental authority, or any action or
proceeding seeking an injunction or order pending or threatened, which would
render Seller unable to consummate the transactions contemplated by this
Agreement.
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7.5 Environmental Remediation Amount. The Environmental Remediation
Amount shall not exceed two million five hundred thousand dollars ($2,500,000).
ARTICLE 8
TERMINATION AND REMEDIES
8.1 Termination. Notwithstanding anything in this Agreement to the
contrary:
(a) Default. If, notwithstanding the terms of this Agreement, a
party hereto shall intentionally fail or refuse to consummate the
transactions contemplated herein or to take any other action referred to
herein necessary to consummate the transactions contemplated herein, then
the nondefaulting party, after affording the defaulting party a ten (10)
day period after notice in which to cure such breach or default, shall have
the right, in addition to the other rights specified in Section 8.2 hereof,
to terminate this Agreement by written notice given to the other party
hereto.
(b) Upset Date. If the Closing Date shall not have occurred on or
before March 15, 1996, then, unless otherwise agreed to in writing between
the parties hereto, this Agreement shall terminate on or following such
date (as such date may be postponed pursuant hereto), upon written notice
given by one party to the other; provided that no party shall be entitled
to terminate this Agreement pursuant to this Section 8.1(b) if such party's
conduct or failure to act has prevented the Closing from having occurred.
(c) Legal Restraint. Any party may, by written notice to the other
party, terminate this Agreement if at the time the written notice of
termination is given, there is in effect a final, nonappealable injunction
enjoining the sale, transfer or delivery of the Shares or the payment of
the Purchase Price therefor.
8.2 Remedies.
(a) Specific Performance. Subject to compliance with the terms of Section
8.2(d) hereof, any party desiring to proceed with the Closing despite any
intentional failure or refusal of any other party hereto of the type described
in Section 8.1(a) hereof shall have the right to pursue the remedy of specific
performance.
(b) Damages. Subject to compliance with the terms of Section 8.2(d)
hereof, any party terminating this Agreement pursuant to Section 8.1(a) hereof
shall, if the failure or refusal referred to in Section 8.1(a) hereof
constituted a material breach
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of this Agreement, have the right to sue for damages and all reasonable out-of-
pocket costs and expenses theretofore suffered and sustained by the
nondefaulting party.
(c) Effect of Termination. Except as set forth in Section 8.2(b) hereof,
any termination of this Agreement by any party hereto shall have the effect of
causing this Agreement thereupon to become void and of no further force or
effect whatsoever, and thereupon no party hereto will have any rights, duties,
liabilities or obligations of any kind or nature whatsoever against any other
party hereto based upon either this Agreement or the transactions contemplated
hereby, except the obligations of each party with respect to confidentiality set
forth in Section 11.2 hereof.
(d) Cure Period. Any party seeking any form of relief referred to in
Section 8.2(a) or (b) hereof shall, as a condition to the right to seek such
relief, afford the defaulting party hereto a ten (10) day period to effect
reasonable cure of such breach or default.
(e) Attorneys' Fees. In any action, suit or other proceeding under or to
enforce any provision of this Agreement, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and other out-of-pocket expenses from
the losing party.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Seller. Except as otherwise limited by this
Article 9, from and after the Closing Date, Seller shall indemnify and hold
Buyer harmless from and against any and all losses, damages, costs and expenses
(including but not limited to court costs and reasonable outside attorneys' and
accountants' fees) actually suffered or incurred by Buyer or SSC or LPC or any
Affiliate of Buyer or any permitted assignee of or successor to any of the
foregoing (hereinafter "Loss") arising out of or resulting from the Seller
Retained Liabilities or any breach of (i) any representation or warranty of
Seller contained in this Agreement; provided, however, that such obligation to
indemnify and hold harmless shall not apply unless Buyer shall have given timely
written notice to Seller of such breach of representation or warranty in
accordance with Section 9.5 hereof, or (ii) any other covenant or agreement by
Seller contained in this Agreement.
9.2 Recoveries. There shall be netted from the amount of any payment
required under Section 9.1: (i) the amount of any indemnification received by
Buyer, SSC, LPC or any of Buyer's Affiliates from an unrelated party with
respect to such Loss and (ii) the amount of any insurance proceeds or other cash
receipts paid to Buyer, SSC, LPC or any of Buyer's Affiliates as an offset
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against such Loss (and no right of subrogation shall accrue to any insurer
hereunder). If the amount of any limitation pursuant to this Section 9.2 is
determined after payment by Seller of any amount otherwise required to be paid
pursuant to this Article 9, Buyer shall repay to Seller, promptly after such
determination, any amount that Seller would not have had to pay pursuant to this
Article 9 had such determination been made at the time of such payment.
9.3 Limitations on Indemnification.
(a) Dollar Limitations. Seller shall be required to indemnify and hold
harmless an indemnified party under Section 9.1 hereof with respect to Loss
incurred by any such indemnified party (excluding for all purposes of this
Section 9.3(a) any Loss indemnified pursuant to Sections 10.4, 10.5, 10.6 or
11.5) as a result of Seller's breach of any representation or warranty only if
(i) the amount of any such Loss based on any single item or related series of
items shall exceed $50,000 (it being understood that if the amount of such Loss
shall exceed $50,000, the indemnity shall extend to the entire amount of such
Loss, including the amounts up to $50,000, and if the item relates to a breach
of a representation which requires for a breach a Material Adverse Effect, then
the indemnity shall extend to the full liquidated amount of the item causing
such breach, subject, however, to clause (ii) below) and (ii) the cumulative and
aggregate amount of such Losses against which Seller is obligated to indemnify
under the preceding clause (i) shall exceed $1,000,000.
(b) Taxes. Buyer's rights to reimbursement for any Tax liability shall be
limited to the provisions of Article 10 hereof and not be subject to Section
9.3.
(c) Other Limitations. Seller shall not have any liability under any
provision of this Agreement for Losses to the extent that such Losses result
from actions taken by Buyer, SSC or LPC after the Closing Date and in no event
shall Seller be liable for unforeseen or consequential damages. Buyer shall
take and cause SSC and LPC to take all reasonable steps to mitigate Losses upon
becoming aware of any event which could reasonably be expected to give rise
thereto. Under no circumstances shall Seller be liable for Losses in an
aggregate amount exceeding the Purchase Price.
9.4 Indemnification by Buyer. Except as otherwise limited by this Article
9, from and after the Closing Date, Buyer shall indemnify and hold Seller
harmless from and against any and all losses, damages, costs and expenses
(including but not limited to court costs and reasonable outside attorneys' and
accountants' fees) actually suffered or incurred by it or any permitted assignee
or successor thereof arising out of or resulting from (a) any breach of (i) any
representation or warranty by Buyer to Seller contained in Article 3 hereof;
provided, however, that such obligation to indemnify and hold harmless shall not
apply unless Seller shall have given timely written notice to Buyer of such
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breach of representation or warranty in accordance with Section 9.5 hereof, or
(ii) any other covenant or agreement by Buyer contained in this Agreement, or
(b) excluding matters involving indemnification of Buyer by Seller pursuant to
Section 9.1 hereof, any and all actions, suits, claims and administrative or
other proceedings of every kind and nature instituted or pending against Seller
or any of its Affiliates at any time before or after the Closing Date that
relate to or arise out of or in connection with the assets, businesses,
operations, conduct, products and/or employees (including former employees) of
SSC or LPC (other than Taxes, which are the subject of Article 10 hereof),
whether relating to or arising out of or in connection with occurrences before
or after the Closing Date, including without limitation obligations of Seller,
SSC or LPC pursuant to Sections 10.4, 10.5 and 10.6 hereof (collectively, "Buyer
Assumed Liabilities"). Seller's rights to such indemnification shall be
governed and limited, however, by the provisions of Sections 9.2 and 9.3 hereof,
as if they had been restated in this Section 9.4 with references to Buyer
(and/or SSC and LPC) changed to Seller and vice versa.
9.5 Limitations on Survival; Written Notice. The representations,
warranties and indemnities made by the parties in this Agreement shall survive
the Closing to and until December 31, 1996 (at which date they shall terminate);
provided, however, that the representations, warranties and indemnities set
forth in Sections 2.13 and 11.5 hereof shall survive until termination of the
applicable statute of limitations, and indemnities for Seller Retained
Liabilities and for Buyer Assumed Liabilities shall survive without termination.
Notwithstanding anything in this Agreement to the contrary, no claim for
incorrect representation or breach of warranty under this Agreement may be
brought, and no litigation with respect thereto commenced, with respect to any
such representation or warranty, or any certificate relating to any such
representation or warranty, and the party making any such representation or
warranty shall not have any obligation with respect thereto, unless written
notice thereof specifying with particularity the incorrect representation or
breach of warranty claimed shall have been delivered to such party on or before
the end of such period.
9.6 General. The indemnification obligations under this Article 9 shall
apply regardless of whether any suit or action results solely or in part from
the active, passive or concurrent negligence of the indemnified party. The
rights of the parties to indemnification under this Article 9 shall not be
limited due to any investigations heretofore or hereafter made by such parties
or their representatives, regardless of negligence in the conduct of any such
investigations. All representations, warranties and covenants and agreements
made by the parties shall not be deemed merged into any instruments or
agreements delivered in connection with the Closing or otherwise in connection
with the transactions contemplated hereby.
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ARTICLE 10
TAX AND EMPLOYEE MATTERS
10.1 Taxes and Adjustments.
(a) Buyer will consult with Seller, or Seller's representatives, as to any
Tax matter involving or relating to SSC or LPC for such periods for which SSC or
LPC is includable in any of Seller's consolidated or combined federal and state
Tax Returns. Buyer shall cause SSC and LPC to prepare, not later than August
15, 1996, for the information and use of Seller, all information reasonably
necessary to prepare appropriate Tax Returns relating to SSC and LPC for taxable
periods ending on or prior to the Closing Date. All such Tax Returns shall be
prepared in a manner consistent with prior similar returns of Seller, SSC and
LPC except as required by law or to the extent any inconsistency would not
adversely affect the returns of Buyer. Promptly after filing, Seller shall
provide Buyer with a copy of such portion of the filed consolidated Tax Returns
as they relate solely to SSC and LPC, and a schedule indicating the tax basis,
net operating loss carryforwards and other material attributes for SSC and LPC
for the periods covered by such Tax Returns.
(b) Buyer and Seller agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information (including
access to books and records) and assistance relating to SSC and LPC as is
reasonably necessary for the preparation of any Tax Return, for preparation for
any audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any proposed adjustment.
(c) Whenever it is necessary for purposes of this Agreement to determine
the Tax liability of a taxable entity for a taxable year or period that begins
on or before and ends after the Closing Date, the determination shall be made
(i) in the case of Taxes that are not based on income or gross receipts (e.g.,
property taxes), by apportioning such Taxes on a per diem basis; and (ii) in the
case of Taxes based on income or on gross receipts, by apportioning the total
Tax liability for such taxable year or period on the assumption that there are
two taxable years or periods, one ended as of the close of the Closing Date and
another beginning as of the day after the Closing Date, taking into account the
actual taxable events occurring during each such assumed taxable year or period
(except that exemptions, allowances and deductions for taxable periods beginning
on or before and ending after the Closing Date that are calculated on an annual
or periodic basis, such as the deduction for depreciation, shall be apportioned
between the two years or periods ratably on a per diem basis).
(d) Seller and Buyer agree that SSC and LPC will be included in the
consolidated Federal income Tax Return and any combined state return or report
filed by Seller for Tax periods ending
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prior to or on the Closing Date. Buyer acknowledges and agrees that the rights
conferred upon Seller in connection with the filing of such returns includes,
without limitation, the right to elect under Prop. Reg. (S) 1.1502-20(g)(1) (or
successor provision) to allow for the Seller to reattribute any losses
attributable to SSC or LPC to Seller.
(e) Buyer shall be responsible for preparing and shall file or cause to be
filed when due all Tax returns for SSC and LPC for taxable years or periods
ending after the Closing Date (including Tax returns for those states that
require twelve (12) month returns covering the Closing Date) and shall pay or
cause to paid when due any Taxes in respect of such Tax returns. Buyer shall
file any such Tax returns in a manner consistent with the manner in which the
Seller filed the returns described in subsection 10.1(d) (except as required by
law or to the extent any inconsistency would not adversely affect the returns of
the Seller).
(f) Seller shall pay or cause to be paid the income taxes shown on the
returns described in subsection 10.1(d). Seller shall indemnify and hold
harmless the Buyer, SSC and LPC from (i) any liability for Taxes for which SSC
or LPC are or may be liable under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a result of being members
of an "affiliated group" (within the meaning of section 1504(a) of the Code, or
under similar principles of state, local or foreign law) on or prior to the
Closing Date, (ii) any liability for income Taxes reportable on the Tax Returns
described in 10.1(d), (iii) any liability for Taxes arising from the breach of
any warranty contained in Section 2.13 of this Agreement and (iv) any liability
for Taxes imposed on or with respect to SSC or LPC with respect to any period
ending on or prior to the Closing Date and the portion of any such Taxes for any
taxable year or period beginning before and ending after the Closing that is
attributable to the portion of such year or period prior to and including the
Closing Date (in each case, except to the extent that such liability is properly
reflected as a current liability in the Balance Sheet). Seller's obligation to
indemnify and hold harmless Buyer, SSC and LPC under clause (iv) of this
subsection 10(f) for a portion of the Taxes for a taxable year or period
beginning before and ending after the Closing shall be conditioned upon the
Seller being permitted to participate with Buyer in the defense or contest of
any Tax proceeding relating to such liability for Taxes.
(g) Buyer shall indemnify and hold Seller harmless from any Taxes imposed
on or with respect to SSC or LPC with respect to all periods beginning after the
Closing Date and the portion of any such income taxes for any taxable year or
period beginning before and ending after the Closing Date that is attributable
to the portion of such year or period beginning after the Closing Date.
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(h) After the Closing, (i) Buyer, SSC and LPC shall have the right to all
refunds of Taxes (including, without limitation, interest thereon) which relate
to the Taxes of SSC or LPC for any period or periods beginning after the
Closing, and (subject to the second sentence of Section 10.1(d)) to the benefit
of any net operating loss, capital loss, tax credit or similar tax attribute
which is in existence at closing and available to reduce Taxes of Buyer, SSC or
LPC for any period or periods beginning after the Closing (including, without
limitation, any Taxes determined in accordance with Section 10.1(c) by reason of
any taxable year or period beginning before and ending after the Closing Date),
and Seller shall execute all assignments of any refund claim or right to receive
a refund of such Taxes to Buyer which Buyer may request; and (ii) Seller shall
have the right to all refunds of Taxes (including, without limitation, interest
thereon) which relate to the Taxes of SSC or LPC for periods ending on or before
the Closing Date (including, without limitation, any Taxes determined in
accordance with Section 10.1(c) by reason of any taxable year or period
beginning before and ending after the Closing Date), and Buyer shall execute all
assignments of any refund claim or right to receive a refund of Taxes to Seller
which Seller shall request. In the event that SSC or LPC generates a net
operating loss, capital loss, tax credit or similar tax attribute that may be
carried back to tax periods of SSC or LPC ending on or prior to the Closing
Date, and such item entitles Buyer, Seller, SSC or LPC to a refund attributable
to a period ending on or prior to the Closing Date, the party receiving the
refund (Buyer or its Affiliates, on the one hand, or Seller or its Affiliates,
on the other hand) shall immediately pay 50% of such refund to the other party
(including any interest thereon).
(i) Any payments made to Seller, SSC, LPC or Buyer pursuant to this
Article 10 shall constitute an adjustment to the Purchase Price for tax
purposes.
(j) Seller shall be responsible for handling all Tax matters related to
SSC and LPC, including dealing with and resolving audit issues, for tax periods
ending prior to or on the Closing Date. If Seller makes a payment to a Taxing
authority as a result of an adjustment made by the Taxing authority for a period
ending on or before the Closing Date, Seller shall give notice of such payment
to Buyer and, if as a result of such adjustment, Buyer, SSC or LPC realizes a
Tax benefit in a period beginning after the Closing Date, Buyer shall pay to
Seller the amount of such Tax benefit within a reasonable period after such
benefit is realized. If Buyer makes a payment to a Taxing authority as a result
of an adjustment made by the Taxing authority for a period ending after the
Closing Date, Buyer shall give notice of such payment to Seller and, if as a
result of such adjustment, Seller realizes a Tax benefit in a period ending on
or prior to the Closing Date, Seller shall pay to Buyer the amount of such Tax
benefit within a reasonable period after such benefit is realized.
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(k) The provisions of this Section 10.1 shall survive without limitation as
to time notwithstanding Section 9.5.
10.2 Transfer of Pension Plan Assets.
(a) Pension Plan Disposition. Prior to or effective as of the Closing
Date, Seller shall cause SSC to amend the Pension Plan so that Seller no longer
is a participating employer in the Pension Plan and the Pension Plan provides no
future accruals to the active Seller employees (the "Seller Employees"). The
Seller Employees are listed in Schedule 10.2. After the Closing, Buyer shall
preserve all protected benefits (including optional forms of benefits) under the
Pension Plan as required by section 411(d)(6) of the Code with respect to such
additional accruals as accumulate after Closing prior to any date that Buyer or
SSC can amend the benefit structure of the Pension Plan in a valid amendment
satisfying the requirements of ERISA and the Code. As soon as reasonably
practicable after the Closing Date, Buyer and Seller shall cooperate to transfer
from the assets of the Pension Plan to a trust established by Seller which meets
the requirements for qualification under section 401 and related sections of the
Code (provided that such transfer shall be effected in a manner that satisfies
Section 414(l) of the Code), an amount (determined as of the Closing Date and
adjusted to reflect any benefits paid after the Closing Date but prior to the
transfer) equal to the percentage of the Pension Plan assets that the accrued
benefit obligation of the Pension Plan to the Seller Employees represents of the
aggregate accrued benefit obligations of the Pension Plan. Once such transfer
has been made, the sole and exclusive responsibility for providing the benefits
accrued by the Seller Employee under the Pension Plan shall be that of the
Seller. Buyer and Seller shall cooperate to make all necessary governmental
filings for the Pension Plan relating to the transactions contemplated by this
Agreement. On and after the Closing Date and prior to the date of transfer to
Seller, if benefits become payable to or on behalf of any Seller Employees under
the Pension Plan, Buyer shall cause current benefit payments to be made to such
Seller Employee (or any beneficiary of such Seller Employee) in accordance with
the terms of the Pension Plan. On and after the Closing Date, the sole and
exclusive responsibility for providing any benefits accrued by participants in
the Pension Plan, other than Seller Employees, but including participants who
terminated employment but have not incurred a permanent break in service,
deferred vested participants and retired participants, shall be that of the
Pension Plan and SSC.
(b) Asset Transfer. As the assets of the Pension Plan are currently held
and invested in the Spreckels Industries Master Retirement Trust (the "Master
Trust"), as soon as reasonably practicable, and in no event more than 60 days,
after the Closing Date, Buyer shall establish a trust to hold the assets of the
Pension Plan (the "Pension Plan Trust"). Buyer shall provide Seller with a copy
of the Pension Plan Trust promptly after its execution, and as soon as
reasonably practicable thereafter,
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Seller shall cause the assets of the Pension Plan to be transferred in cash from
the Master Trust to the Pension Plan Trust.
10.3 Spin-Off From Savings Plan.
(a) Incentive Savings Plan. SSC and LPC presently are participating
companies in the Spreckels Industries, Inc. Employees' Incentive Savings Plan
(the "Savings Plan"). Seller shall cause SSC and LPC to withdraw as
participating companies in the Savings Plan as of the Closing Date. The former
employees of SSC and LPC (including former employees who have not incurred a
permanent break in service and who had matching contribution accounts under the
Savings Plan which were closed and former employees who are entitled to deferred
vested benefits under the Savings Plan) and currently active employees of SSC
and LPC (together, the "ISP Employees") shall not accrue any benefits under the
Savings Plan after the Closing Date, unless they subsequently are reemployed by
Seller or one of its affiliates. Buyer shall cause SSC and LPC not to take any
action which would result in any benefit payments to any ISP Employee under the
Savings Plan or the New Savings Plan established under Section 10.3(b) solely on
account of the transactions contemplated by this Agreement. Seller represents
and warrants that the Savings Plan and the related trusts meet the requirements
for qualification under section 401 and related sections of the Code and shall
continue to meet such requirements as of the date of the transfer described in
Section 10.3(f).
(b) Buyer's Plan. As soon as reasonably practicable, and in no event more
than 30 days, after the Closing Date, Buyer shall adopt a new Savings Plan (the
"New Savings Plan") and establish a new Savings Plan Trust (the "New Savings
Plan Trust"). (Alternatively, Buyer may treat an existing 401(k) plan that it
maintains as the New Savings Plan and its 401(k) plan trust as the New Savings
Plan Trust.) As of the Closing Date, the ISP Employees shall participate in the
New Savings Plan. Buyer represents and warrants that the New Savings Plan and
the New Savings Plan Trust will meet the requirements for qualification under
section 401 and related sections of the Code and will meet such requirements as
of the date of the transfer described in Section 10.3(f). As soon as reasonably
practicable, and in no event more than 90 days after the Closing Date, Buyer
shall request a determination from the IRS that the New Savings Plan and New
Savings Plan Trust meet such qualification requirements. If the IRS declines to
make a favorable determination with respect to the New Savings Plan or New
Savings Plan Trust as newly submitted, Buyer shall adopt, in a timely manner,
such amendments as may be required by the IRS (and are not inconsistent with
this Agreement) to secure such favorable determination. Within five days after
Buyer receives such favorable determination, Buyer shall provide to Seller
copies of the New Savings Plan, the New Savings Plan Trust and the initial
determination letter issued by the IRS with respect to the
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New Savings Plan (or in the case of Buyer's amendment to an existing plan, with
respect to the plan as amended).
(c) New Savings Plan Provisions. Buyer shall cause the New Savings Plan
(i) to provide as of the Closing Date for the immediate eligibility in the New
Savings Plan of the ISP Employees who are then actively employed by SSC or LPC
as of the Closing Date and (ii) to recognize the past service of the ISP
Employees for vesting and eligibility purposes under the New Savings Plan to the
same extent as such past service is recognized for vesting and eligibility
purposes under the Savings Plan immediately prior to the Closing Date, and (iii)
to preserve protected benefits (including optional forms of benefit) as required
by section 411(d)(6) of the Code with respect to amounts transferred to the New
Savings Plan under Section 10.3(f) hereof, including amounts attributable to ISP
Employees who are not actively employed by SSC or LPC.
(d) Limitation on Forfeitures. No ISP Employee shall have his or her
nonvested matching contribution account under the Savings Plan closed or
forfeited merely on account of the Closing. In addition, with respect to any
ISP Employee who is a former employee and whose account is not subject to
forfeiture on account of a permanent break in service, but which account has
been closed as a result of the former employee's termination of employment (the
"Nonvested Former Participants"), upon the transfer described in Section
10.3(f), Buyer shall provide in the New Savings Plan that it will restore any
such account if the former employee is rehired by Buyer prior to a permanent
break in service. On or before the transfer described in Section 10.3(f),
Seller shall furnish Buyer with a list of Nonvested Former Participants.
(e) Benefit Payments Pending Transfer of Assets. Seller shall cause
current benefit payments to be made to the ISP Employees or their beneficiaries
if required by the provisions of the Savings Plan between the Closing Date and
the date of the transfer of assets described in Section 10.3(f).
(f) Transfer of Assets; Allocation of Forfeitures and Other Unallocated
Amounts. As soon as reasonably practicable after the provision of satisfactory
evidence pursuant to Section 10.3(b), the ISP Employees' account balances under
the Savings Plan (determined in accordance with Section 10.3(d) and reduced by
payments made under Section 10.3(e)) shall be transferred at the direction of
the Seller by the trustee of the Savings Plan to the trustee of the New Savings
Plan. Immediately prior to the transfer, Seller shall direct the trustee of the
Savings Plan to allocate to the accounts of participants in the Savings Plan all
unallocated forfeitures and any other unallocated amount (including any amount
in a section 415 suspense account). As of the transfer, Buyer shall direct the
plan administrator of the New Savings Plan to establish accounts for the ISP
Employees in the amount of the applicable transferred account balances. Seller
shall make the transfer herein described as follows:
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(i) Any promissory notes representing ISP Employee loans shall be
transferred in kind;
(ii) At Buyer's request, Seller will use all reasonable efforts to
engage the relevant insurance companies to transfer in kind the guaranteed
investment in which ISP Employees are invested under the Savings Plan;
(iii) At Buyer's request, Seller will use all reasonable efforts to
engage the relevant insurance companies or trustees to transfer in kind all
other investments in which ISP Employees are invested under the Savings
Plan; and
(iv) To the extent an in-kind distribution is not made under Section
10.3(f)(ii) or Section 10.3(f)(iii), the investments described therein
shall be transferred in cash.
With respect to those investments to be transferred in cash, prior to the
transfer, and no earlier than reasonably desirable to effect the transfer,
Seller shall cause the trustee of the Savings Plan to liquidate the investments.
(g) Union Savings Plan. The provision of paragraphs (a) through (f) of
this Section 10.3 shall be separately applied to the Spreckels Industries, Inc.
Incentive Savings Plan for Union Hourly Employees (the "Union Savings Plan"), by
replacing the term Savings Plan with Union Savings Plan each place that it
appears.
10.4 Major Medical Plan. Effective upon Closing, the Buyer shall cause
SSC to assume all obligations of Seller under the Major Medical Plan relating to
persons who are employees of SSC and LPC as of the Closing Date (excluding the
Manteca Employees) and their dependents. Seller shall retain all other
liabilities under the Major Medical Plan.
10.5 Severance Plan. Effective as of the Closing Date, Buyer shall assume
and be liable for all of the obligations of Seller under the Spreckels
Industries, Inc. Supplementary Executive Severance Plan and under the policy
described in Schedule 10.5 hereto with respect to all employees of SSC and LPC,
excluding Manteca Employees, and Seller shall assume and be liable for any
obligations of SSC to make any severance payments to Manteca Employees;
provided, however, that Buyer does not assume any obligation to make any special
compensation payment that is due on or prior to the Closing Date or that is not
conditioned upon termination of the applicable employee.
10.6 Pension Plan Shortfall. In the event and to the extent that the Net
Current Asset Value Amount reflects any current liabilities relating to the
Pension Plan Shortfall, as a result of Seller not making any necessary filings
or payments prior to
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Closing, Buyer agrees to make promptly any reports and payments required under
applicable law. Seller agrees to indemnify and hold harmless Buyer for any
Losses incurred as a result of such Pension Plan Shortfall to the extent not
included in the amount reflected as a current liability used in calculating the
Net Current Asset Value Amount.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Certain Definitions.
(a) Affiliate. As used in this Agreement, the term "Affiliate" when used
with respect to another person shall mean any person controlling, controlled by
or under common control with such person.
(b) Environmental Remediation Amount. As used in this Agreement, the term
"Environmental Remediation Amount" means the discounted present value (using a
discount rate equal to 10% per annum) of the aggregate cost, as determined by
the Independent Consultant, of remediating to a standard acceptable under
applicable law, all material soil or groundwater contamination located at any
facilities owned or used by SSC (other than leased office or warehouse space and
other than the Manteca Facility).
(c) Excess Environmental Remediation Amount. As used in this Agreement,
the term "Excess Environmental Remediation Amount" shall mean an amount equal to
the excess, if any, of the Environmental Remediation Amount over two million
five hundred thousand dollars ($2,500,000).
(d) Harris Bank Financing. As used in this Agreement, the term "Harris
Bank Financing" shall mean the credit extended pursuant to that certain Secured
Revolving Credit Agreement dated as of July 22, 1994 by and among Seller, SSC,
Duff-Norton Company, Inc., and Harris Trust and Savings Bank, as amended to
date.
(e) Indenture. As used in this Agreement, the term "Indenture" shall mean
that certain Indenture dated as of September 2, 1993 made by Seller to Chemical
Trust Company of California, as trustee, under which the Seller has issued its
11-1/2% Senior Secured Notes Due 2000.
(f) Independent Consultant. As used in this Agreement, the term
"Independent Consultant" means a consultant knowledgeable with regard to
environmental contamination and the remediation thereof, with no material
relationship to Seller, SSC or Buyer, to be designated jointly by Seller and
Buyer.
(g) Knowledge of Seller. As used in this Agreement, the terms "knowledge
of" Seller, or words to that effect, shall mean
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the actual knowledge of Gary L. Tessitore, Donald C. Roof, Robert L. Green,
Elizabeth J. Robison, John D. Hamilton, John A. Kolberg, Chris D. Rhoten, Keith
A. McKinnon, Robert Alcorn, Donald E. Gorsek and Ronald Friedman.
(h) Major Medical Plan. As used in this Agreement, the term "Major
Medical Plan" shall mean the Spreckels Industries Major Medical Plan for
Retirees and Eligible Dependents.
(i) Material Adverse Effect. As used in this Agreement, the term
"Material Adverse Effect" shall mean a material adverse effect on the business,
results of operations, and financial condition and prospects of SSC and LPC,
taken as a whole.
(j) Pension Plan. As used in this Agreement, the term "Pension Plan"
shall mean the Spreckels Sugar Company, Inc. Pension Plan.
(k) Tax. As used in this Agreement, the term "Tax" shall mean all taxes,
however denominated, including any interest or penalties that may become payable
in respect thereof, imposed by any federal, state, local or foreign government,
or any agency or political subdivision of such government, which taxes shall
include, without limiting the generality of the foregoing, all income taxes,
payroll and employee withholding taxes, other withholding taxes, value-added
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workmen's compensation,
and other obligations of the same or a similar nature, whether arising before,
on or after the Closing Date.
(l) Tax Returns. As used in this Agreement, the term "Tax Return" shall
mean all returns (including amended returns), information returns or statements,
reports or forms required to be filed with or submitted to any tax authority in
respect of any Taxes.
11.2 Confidentiality. All information given by any party hereto to any
other party shall be considered confidential and shall be used only for the
purposes intended. Seller and Buyer have previously entered into a letter
agreement dated March 30, 1995, the provisions of which are incorporated herein
by reference and shall continue to apply for the benefit of Seller and Buyer as
if entirely set forth herein; provided, however, that paragraphs 6 and 9 of such
letter shall be deemed terminated as of Closing.
11.3 Successors and Assigns; No Third-party Beneficiaries. This Agreement
shall inure to the benefit of, and be binding upon, the parties hereto and their
respective successors and assigns; provided, however, that no party shall assign
or delegate any of the obligations created under this Agreement without the
prior written consent of the other parties. Nothing in this Agreement shall
confer upon any person or entity not a party to this
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Agreement, or the legal representatives of such person or entity, any rights or
remedies of any nature or kind whatsoever under or by reason of this Agreement.
11.4 Disclaimer Regarding Projections; Conflicting Representations and
Warranties; Single Disclosure Sufficient. In connection with Buyer's
investigation of SSC and LPC, Buyer may have obtained projections and business
plan information. Buyer understands that any such projections were not prepared
with a view to complying with the published guidelines of the Securities and
Exchange Commission or with the American Institute of Certified Public
Accountants Guide for Prospective Financial Statements. Buyer acknowledges that
there are uncertainties inherent in attempting to make such projections and
other forecasts and plans, that Buyer is familiar with such uncertainties, that
Buyer is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all projections and other forecasts and plans so
furnished to it, and that Buyer shall not have any claim against Seller with
respect thereto. Accordingly, Seller does not make representation or warranty
of any type or nature whatsoever with respect to such projections and other
forecasts and plans. If any agreement, instrument or other information would
otherwise be required to be disclosed on more than one of the Schedules to this
Agreement, a single reference to such agreement, instrument or other information
on one Schedule shall be sufficient for purposes of this Agreement.
11.5 Brokers and Finders.
(a) Seller represents and warrants to Buyer that, other than Schroder
Wertheim & Co., Incorporated, it has not employed the services of a broker or
finder in connection with this Agreement or any of the transactions contemplated
hereby. Seller shall indemnify, defend and hold Buyer, SSC and LPC harmless
against and in respect of all claims, losses, liabilities and expenses which may
be asserted against Buyer (or any parent, subsidiary or affiliate of Buyer) by
any broker or other person who claims or shall claim to be entitled to a
broker's, finder's or similar fee or commission in respect of the execution of
this Agreement, or the consummation of the transactions contemplated hereby, by
reason of his acting at the request of Seller.
(b) Buyer represents and warrants to Seller that it has not employed the
services of a broker or finder in connection with this Agreement or any of the
transactions contemplated hereby. Buyer indemnifies and agrees to save and hold
Seller harmless against and in respect of all claims, losses, liabilities and
expenses which may be asserted against it by any broker or other person who
claims or shall claim to be entitled to a broker's, finder's or similar fee or
commission in respect of the execution of this Agreement or the consummation of
the transactions contemplated hereby, by reason of his acting at the request of
Buyer.
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11.6 Fees and Expenses. Except as otherwise provided in Section 4.7, 5.8
and 8.2(e) hereof, all legal and other fees, costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such fees, costs or expenses.
11.7 Notices. Except as otherwise set forth herein, all notices given in
connection with this Agreement shall be in writing and shall be delivered either
by personal delivery, by facsimile, by certified or registered mail, return
receipt requested, or by express courier or delivery service, addressed to the
parties hereto at the following addresses:
(a) If to Buyer, to:
Holly Sugar Corporation
One Imperial Square
8016 U.S. 90-A
P.O. Box 9
Sugar Land, Texas 77487
Attention: William F. Schwer, Esq.
Facsimile No.: (713) 490-9530
with a copy to:
Baker & Botts, L.L.P.
3000 One Shell Plaza
910 Louisiana
Houston, Texas
Attention: J. David Kirkland, Jr., Esq.
Facsimile No.: (713) 229-1522
(b) If to Seller, to:
Spreckels Industries, Inc.
One Morrocroft Centre
6805 Morrison Boulevard, Suite 450
Charlotte, NC 28211
Attention: Mr. Donald C. Roof
Facsimile No.: (704) 367-0953
with a copy to
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, CA 94104
Attention: Richard S. Grey, Esq.
Facsimile No.: (415) 983-1200
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner hereinabove
set forth. Notices shall be deemed given when received, if sent by facsimile
(confirmation of such receipt by confirmed facsimile transmission being deemed
receipt
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of communications sent by facsimile); and when delivered and receipted for (or
upon the date of attempted delivery where delivery is refused), if hand
delivered, sent by express courier or delivery service, or sent by certified or
registered mail, return receipt requested.
11.8 Entire Agreement. This Agreement, together with the exhibits hereto,
represents the entire agreement and understanding of the parties with reference
to the transactions set forth herein and no representations or warranties have
been made in connection with this Agreement other than those expressly set forth
herein or in the exhibits, certificates and other documents delivered in
accordance herewith. This Agreement supersedes all prior negotiations,
discussions, correspondence, communications, understandings and agreements
between the parties relating to the subject matter of this Agreement and all
prior drafts of this Agreement, all of which are merged into this Agreement.
11.9 Waivers and Amendments. Each of Seller and Buyer may by written
notice to the other (a) extend the time for the performance of any of the
obligations or other actions of the other; (b) waive any inaccuracies in the
representations or warranties of the other contained in this Agreement; (c)
waive performance of any of the covenants or obligations of the other created
under this Agreement; or (d) waive fulfillment of any of the conditions to its
own obligations under this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach, whether or not similar. This Agreement may be
amended, modified or supplemented only by a written instrument executed by the
parties hereto.
11.10 Severability. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable
term or provision, the parties hereto intend that there shall be added as a part
of this Agreement a provision as similar in terms to such invalid or
unenforceable provision as may be possible and be valid and enforceable.
11.11 Titles and Headings. The Article and Section headings contained in
this Agreement are solely for convenience of reference and shall not affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
11.12 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
11.13 Convenience of Forum; Consent to Jurisdiction. The parties to this
Agreement, acting for themselves and for their
39
<PAGE>
respective successors and assigns, without regard to domicile, citizenship or
residence, hereby agree to submit themselves to the nonexclusive jurisdiction of
the courts of the State of California located in San Francisco and of the United
States District Court for the Northern District of California, in respect of any
matter arising under this Agreement. Service of process, notices and demands of
such courts may be made upon any party to this Agreement by personal service at
any place where it may be found or giving notice to such party as provided in
Section 11.7 hereof.
11.14 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of California without
giving effect to the choice-of-law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
HOLLY SUGAR CORPORATION
By /s/ James C. Kempner
--------------------------
Its Chairman
----------------------
SPRECKELS INDUSTRIES, INC.
By /s/ Gary L. Tessitore
--------------------------
Its CEO
----------------------
40
<PAGE>
EXHIBIT 11
IMPERIAL HOLLY CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
December 31, December 31,
1995 1995
------------- -------------
(In Thousands of Dollars)
<S> <C> <C>
INCOME (LOSS) FOR PRIMARY AND FULLY DILUTED COMPUTATION:
Income (loss) before Extraordinary Item:
As reported $ (419) $ (1,183)
Adjustments - none - -
----------- -----------
As adjusted $ (419) $ (1,183)
=========== ===========
Net Income (Loss):
As reported $ (195) $ (579)
Adjustments - none - -
----------- -----------
As adjusted $ (195) $ (579)
=========== ===========
PRIMARY EARNINGS (LOSS) PER SHARE:
Weighted average shares of common stock outstanding 10,305,527 10,297,010
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 10,119 25,770
----------- -----------
Weighted average shares of common stock outstanding,
as adjusted 10,315,646 10,322,780
=========== ===========
Primary earnings (loss) per share:
Before extraordinary item $ (0.04) $ (0.12)
Net income (loss) (0.02) (0.06)
=========== ===========
FULLY DILUTED EARNINGS (LOSS) PER SHARE:
Weighted average shares of common stock outstanding 10,305,527 10,297,010
Incremental shares issuable from assumed exercise of
stock options under the treasury stock method 10,119 25,770
----------- -----------
Weighted average shares of common stock outstanding,
as adjusted 10,315,646 10,322,780
=========== ===========
Fully diluted earnings (loss) per share:
Before extraordinary item $ (0.04) $ (0.12)
Net income (loss) (0.02) (0.06)
=========== ===========
</TABLE>
_______________________________________
This calculation is submitted in accordance with Item 601(b)(11) of Regulation
S-K; the amount of dilution illustrated in this calculation is not required to
be disclosed pursuant to paragraph 14 of Accounting Principles Board Opinion
No. 15.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE
MONTHS ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,543
<SECURITIES> 34,842
<RECEIVABLES> 46,083
<ALLOWANCES> 0
<INVENTORY> 142,939
<CURRENT-ASSETS> 238,137
<PP&E> 267,142
<DEPRECIATION> 140,951
<TOTAL-ASSETS> 378,945
<CURRENT-LIABILITIES> 152,839
<BONDS> 89,800
32,241
0
<COMMON> 0
<OTHER-SE> 78,716
<TOTAL-LIABILITY-AND-EQUITY> 378,945
<SALES> 486,179
<TOTAL-REVENUES> 486,179
<CGS> 443,944
<TOTAL-COSTS> 443,944
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,445
<INCOME-PRETAX> (1,689)
<INCOME-TAX> (506)
<INCOME-CONTINUING> (1,183)
<DISCONTINUED> 0
<EXTRAORDINARY> 640
<CHANGES> 0
<NET-INCOME> (579)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
