FIRST AMENDMENT TO
ASSET PURCHASE AGREEMENT
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT dated as of March 8, 2000,
by and between CLIFFSTAR CORPORATION, a Delaware corporation ("Cliffstar") and
NORTHLAND CRANBERRIES, INC., a Wisconsin corporation ("Northland").
RECITALS
A. Cliffstar and Northland have entered into that certain Asset
Purchase Agreement dated as of January 5, 2000 (the "Asset Purchase Agreement").
B. Cliffstar and Northland have agreed that the closing of the
transactions contemplated in the Asset Purchase Agreement shall occur on March
8, 2000 (the "Closing").
C. In order to address the transition of the operation and management
of the Private Label Juice Business to be acquired by Cliffstar pursuant to the
Asset Purchase Agreement, Cliffstar and Northland have agreed to enter into a
Transition Agreement at the Closing (the "Transition Agreement").
D. Cliffstar and Northland desire to amend the Asset Purchase
Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and mutual agreements
and covenants set forth herein, the parties hereto agree as follows:
1. Definitions. Any and all capitalized terms used herein shall have
the meanings ascribed to them in the Asset Purchase Agreement unless
specifically defined herein.
2. Amendment of Section 1.1.
(a) Section 1.1 of the Asset Purchase Agreement is hereby
amended by adding the following phrase after the parenthetical at the end
of the fourth line thereof:
"provided, however, that the transfer, sale and purchase of
Raw Materials Inventory and Work-In-Process Inventory (as
defined below) shall occur at the Termination Date as
defined and set forth in Section 13 of the Transition
Agreement:"
-1-
(b) Section 1.1.(a)(iv) is hereby amended by replacing the
amount of 150,000 gallons with the amount of 135,000 gallons.
3. Amendment of Section 3.2.(b). Section 3.2.(b) of the Asset
Purchase Agreement is hereby amended by substituting the form of Promissory Note
attached as Exhibit A thereto with the form of Promissory Note attached hereto
as Exhibit A.
4. Amendment of Section 3.2.(c). Section 3.2.(c) of the Asset
Purchase Agreement is hereby amended by deleting the first two sentences thereof
and replacing them with the following:
"Within 10 business days after the final determination of
the Annual Earnout Payment pursuant to Section 3.3.(c)
below, Cliffstar shall pay to Northland an amount equal to
the Annual Earnout Amount reduced by principal payments made
to Northland on the Promissory Note due during such Earnout
Year. Earnout Amount payments with respect to an Earnout
Year in excess of principal payments made to Northland on
the Promissory Note due during such Earnout Year will be
credited against future principal payments due on the
Promissory Note in inverse order of maturity as provided in
the Promissory Note."
5. Amendment of Section 3.2.(d).
(a) Section 3.2.(d)(i) of the Asset Purchase Agreement is hereby
replaced with the following:
(i) Interim Inventory Amount. At the Closing, Cliffstar
shall deliver to Northland, by wire transfer of immediately available
funds (in accordance with appropriate wire transfer instructions
previously delivered by Northland to Cliffstar), an amount equal to
80% of the Finished Goods Inventory Purchase Price as shown on the
books of Northland as of the Effective Time. Such amount (the "Interim
Inventory Amount") shall be mutually agreed to by the parties on or
before the Closing Date; and
-2-
(b) Section 3.2.(d)(ii) is hereby amended by inserting the words
"Finished Goods" before the word "Inventory" in the second line thereof.
6. Amendment of Section 3.3.(a)(vii). Section 3.3.(a)(vii) of the
Asset Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 3.3.(a)(vii):
(vii) [Intentionally Left Blank]
7. Amendment of Section 3.3.(a)(viii). Section 3.3.(a)(viii) of the
Asset Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 3.3.(a)(viii):
(viii) [Intentionally Left Blank]
8. Amendment of Section 3.3.(c)(i). Section 3.3.(c)(i) of the Asset
Purchase Agreement is hereby amended by deleting the words "the greater of (A)
the Minimum Annual Earnout Amount for such Year or (B)" from the second and
third lines thereof.
9. Amendment of Section 3.3.(c)(iii). Section 3.3.(c)(iii) is hereby
deleted in its entirety and replaced with the following:
"If Northland disagrees with any items on the Cranberry
Profits Statement or Annual Earnout Amount Statement,
Northland shall notify Cliffstar in writing of such
disagreement (such notice setting forth the basis for such
disagreement in reasonable detail) within 30 days of receipt
by Northland of the Cranberry Profits Statement and
Northland may request during such 30-day period any
additional information related thereto. Northland and
Cliffstar shall thereafter negotiate in good faith to
resolve any such disagreements. If Northland and Cliffstar
are unable to resolve any such disagreements within 15 days
of notification to Cliffstar of such disagreements, the
disagreement shall be submitted to an accounting firm of
nationally recognized standing to be mutually selected by
Northland and Cliffstar, or if no agreement on such firm is
reached, to such a firm selected by Northland's Accountants
and Cliffstar's Accountants (the accounting firm so
selected, shall be referred to herein as the "Resolving
Accounting Firm"). The resolution of such disagreements by
the Resolving Accounting Firm shall be final and binding on
Northland and Cliffstar. In the event that the final
determination of the Annual Earnout Amount by the Resolving
Accounting Firm differs from the
-3-
Annual Earnout Amount Statement (the "Statement
Differential") by five percent or less, Northland shall pay
the fees and expenses of the Resolving Accounting Firm
relating to the resolution of any such disagreements. In the
event that the Statement Differential is greater than five
percent, such fees and expenses shall be paid by Cliffstar.
Within five days of resolution of the disagreements by the
Resolving Accounting Firm, Cliffstar or Northland, as the
case may be, shall pay to the other the additional amounts,
if any, determined to be owing as a result of such
resolution."
10. Amendment to Section 3.3.(e). Section 3.3.(e) of the Asset
Purchase agreement is hereby amended by deleting the words "Minimum Earnout
Amount less" in the sixth line thereof.
11. Amendment of Section 3.4.(a). Section 3.4.(a) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following:
3.4.(a) "Option. Provided that all payments of
principal and interest on the Promissory Note and all
payment of the Earnout Amount due Northland have been made,
Cliffstar shall have a one-time option to terminate the
Earnout Period. Such option shall be exercisable and
effective after exercise at any time on or before the last
day of the 30th calendar month of the Earnout Period and all
remaining obligations to make future payments of the Earnout
Amount upon written notice as provided below and payment to
Northland of the "Earnout Termination Payment." The Earnout
Termination Payment shall be an amount equal to $50,000,000
less the sum of all principal payments made on the
Promissory Note prior to the date of the Earnout Termination
Payment. In the event that Cliffstar elects to terminate the
Earnout Period and makes the Earnout Termination Payment to
Northland pursuant to this Section 3.4, no payment of the
Annual Earnout Amount shall be due for the Earnout Year
during which termination occurs or any succeeding Earnout
Year and this Agreement and all obligations of Cliffstar
under Sections 3.2.(b) and (c) and Section 3.6 hereof shall
terminate."
-4-
12. Amendment of Section 3.5.
(a) Section 3.5.(a) is hereby deleted in its entirety and
replaced with the following:
3.5.(a) Inventory Purchase Price Defined. The
purchase price for the Inventory (the "Inventory Purchase
Price") shall be the lower of Northland's cost basis (on a
first-in, first-out ("FIFO") basis) or market determined in
accordance with generally accepted accounting principles
consistently applied for (i) the Finished Goods Inventory,
determined as of the Effective Time (the "Finished Goods
Inventory Purchase Price") and (ii) the Raw Materials and
Work-In-Process Inventory, determined as of the Termination
Date as provided in the Transition Agreement (the "Raw
Materials and WIP Inventory Purchase Price").
(b) Section 3.5.(b) of the Asset Purchase Agreement is hereby
deleted in its entirety and replaced with the following:
3.5.(b) Determination of Inventory Purchase Price.
(i) Finished Goods Inventory. A physical
inventory of the Finished Goods Inventory shall be
taken as of the Effective Time by representatives
of Northland, Cliffstar and Deloitte & Touche LLP.
Within 30 days following the Closing Date,
Cliffstar shall deliver to Northland an updated
detailed schedule of its calculation of the
Finished Goods Inventory Purchase Price based on
such physical inventory and a copy of the
workpapers used in the preparation of the
inventory and calculation of the Finished Goods
Inventory Purchase Price.
(ii) Raw Materials Inventory and
Work-In-Process Inventory. A physical inventory of
the Raw Materials Inventory and Work-In-Process
Inventory shall be taken at the time and in the
manner as provided in the Transition Agreement.
Within 30 days of the completion of such physical
inventory, Cliffstar shall deliver to Northland a
detailed schedule of its calculation of the Raw
Materials Inventory and Work-In-Process Inventory
Purchase Price based on such physical inventory
and a copy of the workpapers used in the taking of
the inventory
-5-
and calculation of the Raw Materials and
Work-In-Process Inventory Purchase Price.
(iii) Resolution of Disputes. Northland
may notify Cliffstar in writing within 20 business
days following receipt of Cliffstar's calculation
of the Finished Goods Inventory Purchase Price
and/or for the Raw Materials and Work-In-Process
Inventory Purchase Price that it does not agree
with any values set forth thereon, in which case
Northland and Cliffstar will use good faith
efforts during the 30-day period following receipt
of such written notice or notices to resolve any
differences they may have as to the calculations
thereof. Any such written notice shall identify
with specificity the items or amounts with which
Northland disagrees. If Northland and Cliffstar
cannot reach agreement during such 30-day period,
their disagreements shall be promptly submitted to
Deloitte & Touche, which shall conduct such
additional review as is necessary to resolve the
specific disagreements referred to it. The review
of Deloitte & Touche will be restricted as to
scope to address only those specific disagreements
referred to it by Northland and Cliffstar. The
final form of the determination of the Purchase
Price for the inventories referred to in this
Section 3.5.(b) shall be determined by Deloitte &
Touche as promptly as practicable following its
engagement, shall confirmed in writing to, and
shall be final and binding upon, Northland and
Cliffstar for purposes of this Article 3. In the
event that Northland and Cliffstar agree on either
component of the Inventory Purchase Price, or
both, without submission of disagreements to
Deloitte & Touche, Cliffstar shall provide
Northland with written confirmation of the final
purchase price so agreed to, which, upon written
acknowledgement by Northland, shall become the
purchase price thereof for purposes of this
Section 3.5.
-6-
(c) Section 3.5.(c) of the Asset Purchase Agreement is hereby
amended by replacing the amounts of $4,350,000 and $435,000 in the third
line thereof with the amounts of $3,915,000 and $391,500, respectively.
13. Amendment of Section 6.1. Section 6.1 of the Asset Purchase
Agreement is hereby amended by substituting the form of Noncompetition Agreement
attached hereto as Exhibit B thereto with the form of Noncompetition Agreement
attached hereto as Exhibit B.
14. Amendment of Section 6.7. Section 6.7 of the Asset Purchase
Agreement is hereby amended by substituting the form of Cranberry Purchase and
Supply Agreement attached as Exhibit C thereto with the form of Cranberry
Purchase and Supply Agreement attached hereto as Exhibit C.
15. Amendment of Section 6.8. Section 6.8 of the Asset Purchase
Agreement is hereby deleted in its entirety and replaced with the following new
Section 6.8:
6.8 Transition Agreement. At the Closing,
Northland and Cliffstar shall execute and deliver a
Transition Agreement ("Transition Agreement") in
substantially the form of Exhibit F attached hereto.
16. Amendment of Section 6.10. Section 6.10 of the Asset Purchase
Agreement is hereby amended by substituting the form of Co-Packing Agreement
attached as Exhibit E thereto with the form of Co-Packing Agreement attached
hereto as Exhibit E.
17. Amendment of Section 6.11. Section 6.11 of the Asset Purchase
Agreement is hereby amended by deleting the phrase "Prior to Closing," and
replacing it with the phrase "As soon as is reasonably practical following the
Closing,".
18. Creation of a New Section 6.13. A new Section 6.13 of the Asset
Purchase Agreement is created to read as follows:
6.13 Subordination Agreement. At the Closing,
Northland and Cliffstar shall enter into a Subordination
Agreement with HSBC Bank USA substantially in the form of
Exhibit G attached hereto (the "Subordination Agreement").
-7-
19. Amendment of Section 11.1.(i). Section 11.1.(i) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.1.(i):
11.1.(i) Transition Agreement. The Transition
Agreement referred to in Section 6.8 duly executed by
Northland.
20. Amendment of Section 11.1.(l). Section 11.1.(l) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.1.(l):
11.1.(l) Subordination Agreement. The
Subordination Agreement referred to in Section 6.13, duly
executed by Northland.
21. Amendment of Section 11.2.(h). Section 11.2.(h) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.2.(h):
11.2.(h) Transition Agreement. The Transition
Agreement referred to in Section 6.8 duly executed by
Cliffstar.
22. Amendment of Section 11.2.(k). Section 11.2.(k) of the Asset
Purchase Agreement is hereby deleted in its entirety and replaced with the
following new Section 11.2.(k):
11.2.(k) Subordination Agreement. The
Subordination Agreement referred to in Section 6.13, duly
executed by Cliffstar and HSBC Bank USA.
23. Effective Time. The effective time for all legal, accounting and
tax purposes for the transactions contemplated by the Asset Purchase Agreement
shall be 11:59 p.m. on March 8, 2000.
24. Amendment of Section 14.13. Section 14.13 of the Asset Purchase
Agreement is hereby amended by deleting the definitions of "Minimum Annual
Earnout Amount" and "Minimum Earnout Amount".
8-
25. No Other Amendment. Except as expressly amended hereby, the Asset
Purchase Agreement shall remain unchanged and in full force and effect. To the
extent any words or provisions of the Amendment conflict with those of the Asset
Purchase Agreement, the terms and provisions of this Amendment shall control.
This Amendment shall be deemed a part of and hereby incorporated in the Asset
Purchase Agreement.
26. Counterparts. This Amendment may be executed by the parties
hereto by separate counterparts, each of which when so executed and delivered
shall be an original, but such counterparts shall together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first above written.
NORTHLAND CRANBERRIES, INC.
By: /s/ John Swendrowski
---------------------------------------
John Swendrowski
Chairman and Chief Executive Officer
CLIFFSTAR CORPORATION
By: /s/ Robert D. Gioia
---------------------------------------
Robert D. Gioia
Chairman