AMENDED AND RESTATED MERGER AGREEMENT, DATED AS OF

Exhibit 2

 

EXECUTION COPY

 

 

AMENDED AND RESTATED

 

AGREEMENT AND PLAN OF MERGER

 

dated as of

 

July 7, 2004

 

by and among

 

H-LINES HOLDING CORP.,

 

H-LINES SUBCORP.,

 

HORIZON LINES HOLDING CORP.

 

and

 

TC GROUP, L.L.C.

 

TABLE OF CONTENTS

 

 

i

 

ii

 

iii

Schedules

 

Schedule 1.5 - Sample Net Working Capital

Schedule 2.1 - Foreign Qualifications of Holdings

Schedule 2.2 - Subsidiaries of Holdings

Schedule 2.3(a) - Exceptions to Due Authorization

Schedule 2.4 - Exceptions to No Conflict Representation

Schedule 2.5 - Governmental Authorities; Consents

Schedule 2.6(a) - Capitalization of Holdings

Schedule 2.6(b) - Options, Etc.

Schedule 2.6(c) - Agreements Related to Holdings Common Stock

Schedule 2.7 - Capitalization of Subsidiaries

Schedule 2.8 - Financial Statements

Schedule 2.9 - Exceptions to No Undisclosed Liabilities Representation

Schedule 2.10 - Litigation and Proceedings

Schedule 2.11 – Compliance with Laws Exceptions

Schedule 2.12(a) - Non-Customer Contracts

Schedule 2.12(b) - Customer Contracts

Schedule 2.12(c) – Exceptions to Material Contracts

Schedule 2.13 - Employee Benefits

Schedule 2.13(c)(ix) - Multiemployer Plan Exceptions

Schedule 2.13(c)(xi) - Acceleration of Benefits

Schedule 2.14 - Labor Relations

Schedule 2.16 - Broker’s Fees

Schedule 2.17 - Insurance

Schedule 2.18 - Licenses, Permits, and Authorizations

Schedule 2.19 - Dispositions of Machinery, Equipment and Other Property

Schedule 2.20(a) - Vessels

Schedule 2.20(b) - Vessel Matters

Schedule 2.21 - Leased Real Property

Schedule 2.22 - Intellectual Property

Schedule 2.23 - Environmental Matters

Schedule 2.26 - CSX Transactions

Schedule 4.1 - Conduct of Business

 

iv

Annexes

 

Annex A - Certificate of Merger

Annex B – Voting Agreement

Annex C – Adjustment Escrow Agreement

Annex D – Indemnification Escrow Agreement

Annex E – Form of L&W Legal Opinion

 

v

This Amended and Restated Agreement and Plan of Merger, dated as of July 7, 2004 (this “ Agreement ”), is entered into by and among H-LINES HOLDING CORP., a Delaware corporation (“ Acquiror ”), H-LINES SUBCORP., a Delaware corporation and a wholly-owned subsidiary of Acquiror (“ Merger Sub ”), HORIZON LINES HOLDING CORP., a Delaware corporation (“ Holdings ”), and TC GROUP, L.L.C. (“ TC Group ”), a Delaware limited liability company, solely in its capacity as the initial Holder Representative hereunder, and amends and restates in whole that certain Agreement and Plan of Merger, dated as of May 22, 2004 (the “ Initial Date ”), by and among Acquiror, Merger Sub, Holdings and TC Group (the “ Initial Agreement ”). All references herein to the “date hereof” and to the “date of this Agreement” and similar references shall be deemed to refer to the Initial Date.

 

PLAN OF MERGER

 

A. Holdings, through its wholly-owned Subsidiary HLH, LLC, a Delaware limited liability company, is the record and beneficial owner of (i) 100% of the issued and outstanding Senior Common Units of Horizon Lines, LLC (“ Horizon Lines ”), (ii) 90% of the issued and outstanding Common Units of Horizon Lines and (iii) none of the issued and outstanding Senior Preferred Units of Horizon Lines.

 

B. Acquiror, Merger Sub and Holdings (Merger Sub and Holdings sometimes being referred herein to as the “ Constituent Corporations ”) are hereby adopting a plan of merger, providing for the merger of Merger Sub with and into Holdings, with Holdings being the surviving corporation. This merger (the “ Merger ”) will be consummated in accordance with this Agreement and evidenced by a Certificate of Merger between the Constituent Corporations in substantially the form of Annex A hereto (the “ Certificate of Merger ”), such Merger to be consummated as of the Effective Time of the Merger (as defined below).

 

C. Upon consummation of the Merger, the separate corporate existence of Merger Sub shall cease and Holdings, as the surviving corporation in the Merger (hereinafter referred to for the periods on and after the Effective Time of the Merger as the “ Surviving Corporation ”), shall continue its corporate existence under the Delaware General Corporation Law (the “ DGCL ”) as a Subsidiary of Acquiror.

 

D. On and after the Effective Time of the Merger, the Surviving Corporation shall thereupon and thereafter possess all of the rights, privileges, powers and franchises, of a public as well as a private nature, of the Constituent Corporations, and shall become subject to all the restrictions, disabilities and duties of each of the Constituent Corporations; and all rights, privileges, powers and franchises of each Constituent Corporation, and all property, real, personal and mixed, and all debts due to each such Constituent Corporation, on whatever account, and all chooses in action belonging to each such corporation, shall become vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall become thereafter the property of the Surviving Corporation as they are of the Constituent Corporations; and the title to any real property vested by deed or otherwise or any other interest in real estate vested by any instrument or otherwise in either of such Constituent Corporations shall not revert or become in any way impaired by reason of the

 

1

Merger; but all Liens (as defined below) upon any property of either Constituent Corporation shall thereforth attach to the Surviving Corporation and shall be enforceable against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it; all of the foregoing in accordance with the applicable provisions of the DGCL.

 

E. Concurrently with the execution of the Initial Agreement, Acquiror and the holders of Common Stock who hold, in the aggregate, shares of Holdings Common Stock entitling such holders to cast votes in excess of 98% of the total number of votes held by all holders of Holdings Common Stock, entered into a voting agreement (the “ Voting Agreement ”) pursuant to which such holders have (i) consented to the adoption and approval of the Initial Agreement and the transactions contemplated hereby, (ii) agreed to vote all shares of Holdings Common Stock held by such stockholders in favor of approval and adoption of this Agreement and the transactions contemplated hereby in the event of any stockholders meeting relating to the adoption and approval of this Agreement and the transactions contemplated hereby, and (iii) agreed to exercise, if applicable, any rights to require stockholders of Holdings other than such stockholders to consent to this Agreement and the transactions contemplated hereby.

 

F. For certain limited purposes, and subject to the terms set forth herein, the Holder Representative shall serve as the representative of the holders of Holdings Common Stock and Options (in each case as defined below).

 

G. Certain capitalized terms used herein have the meanings ascribed to such terms in Article XI hereof.

 

AGREEMENT

 

In order to consummate the Merger, and in consideration of the mutual agreements hereinafter contained, Acquiror, Merger Sub, Holdings and the Holder Representative agree as follows:

 

ARTICLE I.

THE MERGER

 

1.1 Election with respect to Investment.

 

(a) Each holder of Holdings Common Stock or Options shall have the right, but not the obligation, by providing written notice (an “Election Notice”) to Acquiror on or before the date that is three (3) Business Days prior to the Closing Date (or, with the consent of Acquiror, at any time prior to the Effective Time), to elect with respect to any or all of such Options and/or Holdings Common Stock held by such holder, at the Effective Time of the Merger, (i) in the case of Holdings Common Stock, to receive shares of common stock, par value $0.01 per share, of Acquiror (the “ Acquiror Common Stock ”) and shares of redeemable preferred stock, par value $0.01 per share, of Acquiror (the “ Acquiror Preferred Stock ” and together with the Acquiror Common Stock, the “ Acquiror Shares ”) and (ii) in the case of Options, to retain any of such Options which shall entitle such holder from and after the Effective Time of the Merger to purchase the same number of shares of common stock, par value

 

2

$0.01 per share, of the Surviving Corporation (the “ Surviving Corporation Common Shares ”) as the number of shares of Holdings Common Stock into which such Options may be exercised. Each holder that properly delivers an Election Notice shall be referred to as a “Rollover Holder.” At the closing, the Holder Representative shall designate which holder of Holdings Common Stock or Options have provided an Election Notice. As a condition of making the election contemplated by this Section 1.1(a), at or following the Closing, each Rollover Holder shall be required to execute and deliver to Acquiror a (v) stockholders agreement (“ Stockholders Agreement ”), (w) voting trust agreement (“ Voting Trust Agreement ”), (x) put/call agreement (“ Put/Call Agreement ”), (y) Adjustment Note (as defined below) and (z) Indemnification Note (as defined below), and any other documents or instruments reasonably requested by Acquiror, (collectively, such other documents or instruments, together with the Stockholders Agreement, Voting Trust Agreement, Put/Call Agreement, Adjustment Note and Indemnification Note, the “Rollover Documents”), on terms acceptable to Acquiror and such holder. Any holder who fails to deliver to Acquiror duly executed Rollover Documents within five (5) Business Days of the date such holder receives the Rollover Documents from Acquiror shall forfeit his right to receive Acquiror Shares and/or retain any of his Options and shall instead receive from the Surviving Corporation an amount of cash equal to the applicable portion of the Merger Consideration which he otherwise would have received had he elected to receive cash in respect of the Rollover Securities held by such holder (subject to the escrows provided in this Agreement) and thereafter shall be treated and shall be subject to the provisions applicable to all holders who are not Rollover Holders.

 

(b) In the event that any such holder of Holdings Common Stock or Options fails to timely deliver an Election Notice with respect to any of such holder’s Holdings Common Stock or Options, such holder shall be deemed to have elected to receive cash consideration for such Holdings Common Stock or Options. Any Option for which no election is made and accepted by Acquiror in accordance with the terms of this Agreement shall be a “ Terminated Option ” and shall be terminated in consideration for a portion of the Merger Consideration as provided in this Article I. Each holder that properly delivers an Election Notice shall be referred to as a “ Rollover Holder ”.

 

(c) In the case of shares of Holdings Common Stock for which any holder timely delivers an Election Notice (each such elected share, a “ Roll-Over Share ”), subject to Section 1.1(d), at the Effective Time such Rollover Holder shall be entitled to receive for each One Hundred Fifty-Eight Dollars ($158) of Merger Consideration which such Rollover Holder would otherwise have been eligible to receive in respect of such Rollover Shares, (y) 15 shares of Acquiror Preferred Stock, and (z) 1 shares of Acquiror Common Stock (each such unit of 15 shares of Acquiror Preferred Stock and 1 shares of Acquiror Common Stock, an “ Acquiror Unit ”); provided that such Rollover Holder may only elect to receive Acquiror Shares in $158 increments. In the case of an Option, the holder of which timely delivers an Election Notice (such elected Option, a “ Roll-Over Option ”), subject to Section 1.1(d), Holdings shall take such action as may be necessary to fully vest such Roll-Over Option and such Roll-Over Option shall, upon exercise thereof from and after the Effective Time, entitle the holder to purchase one Surviving Corporation Common Share for each share of Holdings Common Stock for which such Roll-Over Option is exercisable, upon payment of the same per share exercise price as is payable with respect to, and otherwise on the same terms as, the Roll-Over Option as of the

 

3

Effective Date; provided, however, that any Surviving Corporation Common Share into which such Roll-Over Option is converted shall at all times be subject to transfer restrictions and the call and put rights as provided for in the Put/Call Agreement. No fractional Acquiror Units will be issued. To the extent any holder is entitled to a fractional Acquiror Unit, the amount of Merger Consideration represented thereby shall be paid in cash.

 

(d) Each Rollover Holder shall (i) deposit with the Acquiror a promissory note (each, an “ Adjustment Note ”) in a form acceptable to Acquiror in its sole discretion with a principal amount equal to (x) such Rollover Holder’s Applicable Percentage – Rollover/AFDS multiplied by (y) the Adjustment Escrow Amount, issued and delivered to the Acquiror upon consummation of the Merger and payable pursuant to the terms of this Agreement and the terms of the Adjustment Note, and (ii) deposit with Acquiror a promissory note (each, an “ Indemnification Note ”) in a form acceptable to Acquiror in its sole discretion with a principal amount equal to (x) such Rollover Holder’s Applicable Percentage – Rollover/AFDS multiplied by (y) the Indemnification Escrow Amount issued and delivered to the Acquiror upon consummation of the Merger and payable pursuant to the terms of this Agreement and the terms of the Indemnification Note. The obligations of holders under the Adjustment Notes and the Indemnification Notes in respect of such holders’ Roll-Over Shares and Roll-Over Options shall be in addition to any portion of the Net Adjustment Escrow Amount and the Net Indemnification Escrow Amount in respect of such holders’ Holdings Common Stock for which no Election Notice is properly given and Terminated Options.

 

1.2 Conversion of Holdings Shares and Options.

 

Subject to the satisfaction of the closing conditions set forth in Article VIII, at or prior to the Closing, the following actions shall be taken and the following transactions shall occur:

 

(a) At the Closing, (i) Acquiror shall contribute to Merger Sub an amount of cash (the “ Equity Amount ”) equal to (x) $168,000,000 minus (y) the Roll-Over Value Amount and (ii) Holdings shall, or shall cause one or more of its Subsidiaries to, purchase the Senior Preferred Units and the Common Units of Horizon Lines held of record as of the date hereof by CSX Residual Company and CSX Domestic Shipping Corporation in accordance with the terms and conditions set forth in a purchase agreement in a form acceptable to Holdings, Acquiror and the holders of such Senior Preferred Units and Common Units for an aggregate purchase price equal to the amount that would otherwise be payable to CSX Residual Company and to CSX Domestic Shipping Corporation if all of their Senior Preferred Units and Common Units of Horizon Lines were to be redeemed in accordance with Article VIII of the LLC Agreement (the “ CSX Purchase ”).

 

(b) At the Closing, (i) Holdings and its Subsidiaries will consummate the Financing Transactions and (ii) Holdings will cause one or more of its Subsidiaries to consummate the CSX Purchase and will distribute such amount of cash, if any, as may be necessary so that the Surviving Corporation has sufficient cash available to pay the Funding Amount, the amount of the Holder Allocable Expenses and all other amounts required to be paid by it at the Closing in accordance with this Agreement to Delian which shall in turn distribute such amount to Holdings.

 

4

(c) At the Effective Time of the Merger, by virtue of the Merger and without any action on the part of any holder of common stock, par value $0.01 per share, of Holdings (“ Holdings Common Stock ”), (x) each share (a “ Common Share ”) of Holdings Common Stock that is then issued and outstanding (other than (i) shares of Holdings Common Stock, if any, held in the treasury of Holdings, which treasury shares shall be canceled as part of the Merger, (ii) Roll-Over Shares and (iii) shares of Holdings Common Stock held by Persons who have not consented to the Merger (“Dissenting Common Shareholders”), which shares of Dissenting Common Shareholders, treasury shares and Roll-Over Shares shall not constitute “Common Shares” hereunder and (y) each unexercised option to purchase Holdings Common Stock (whether or not vested) that is then outstanding (the “ Options ”) (other than Roll-Over Options), shall thereupon be converted into and become the right to receive the applicable portion of the Merger Consideration, as determined pursuant to Section 1.2(f). For the avoidance of doubt, the defined term “Common Shares” shall not include any Roll-Over Shares and the defined term “Terminated Options” (as hereinafter defined) shall not include any Roll-Over Options.

 

(d) At the Effective Time of the Merger, by virtue of the Merger and without any action on the part of Acquiror or Merger Sub (i) each share of common stock, par value $0.001 per share, of Merger Sub shall be converted into such number of Surviving Corporation Common Shares so that, following such conversion, Acquiror shall be the sole record and beneficial holder of 800,000 Surviving Corporation Common Shares.

 

(e) The term “ Merger Consideration ” shall mean an amount equal to (i) the Holdings Equity Amount minus (ii) the amount of Holder Allocable Expenses paid by the Surviving Corporation to the Holder Representative at Closing in accordance with Section 1.7 minus (iii) the Roll-Over Value Amount, minus (iv) the aggregate amount of any of the Vessel charter or rolling stock lease payments scheduled to be made on or about July 1, 2004 and described on Schedule 1.1(c) (the “ July 1 Lease Payments ”) that have not been made on or before the Closing Date (whether the Closing Date is before, on or after July 1, 2004). For purposes of this Agreement, including the calculation of the Merger Consideration, the following terms shall have the following meanings:

 

“ Aggregate Fully-Diluted Shares ” shall mean (i) the sum of the aggregate number of shares of Holdings Common Stock that are issued and outstanding immediately prior to the Effective Time of the Merger, plus (ii) the aggregate number of shares of Holdings Common Stock that are issuable upon the exercise in full of all Options (whether vested or unvested) that are outstanding immediately prior to the Effective Time of the Merger.

 

“ Aggregate Option Exercise Price ” shall mean the sum of the cash exercise prices payable upon exercise in full of all Options (including, for the avoidance of doubt, the Roll-Over Options) (whether vested or unvested) that are outstanding immediately prior to the Effective Time of the Merger.

 

5

“ Applicable Percentage – Non-Rollover/Non-Rollover ” shall mean, with respect to any holder of Common Shares and/or Terminated Options an amount expressed as a percentage equal to (i) the sum of (A) the aggregate number of Common Shares held by such holder immediately prior to the Effective Time, plus (B) the aggregate number of shares of Holdings Common Stock that are issuable upon the exercise in full of all Terminated Options that are held by such holder immediately prior to the Effective Time, divided by (ii) the sum of (A) the aggregate number of Common Shares held by all holders immediately prior to the Effective Time plus (B) the aggregate number of shares of Holdings Common Stock that are issuable upon the exercise in full of all Terminated Options that are held by all holders immediately prior to the Effective Time.

 

“ Applicable Percentage – Non-Rollover/AFDS ” shall mean, with respect to any holder of Common Shares and/or Terminated Options, an amount expressed as a percentage equal to (i) the sum of (A) the aggregate number of Common Shares held by such holder immediately prior to the Effective Time, plus (B) the aggregate number of shares of Holdings Common Stock that are issuable upon the exercise in full of all Terminated Options that are held by such holder immediately prior to the Effective Time, divided by (ii) the Aggregate Fully-Diluted Shares.

 

“ Applicable Percentage – Rollover/AFDS ” shall mean, with respect to any holder of Roll-Over Shares and/or Roll-Over Options, an amount expressed as a percentage equal to (i) the sum of (A) the aggregate number of Roll-Over Shares held by such holder immediately prior to the Effective Time, plus (B) the aggregate number of shares of Holdings Common Stock issuable upon exercise of the Roll-Over Options held by such Rollover Holder immediately prior to the Effective Time divided by (ii) the Aggregate Fully-Diluted Shares.

 

“ Applicable Percentage – Rollover/Rollover ” shall mean, with respect to any holder of Roll-Over Shares and/or Roll-Over Options, an amount expressed as a percentage equal to (i) the sum of (A) the aggregate number of Roll-Over Shares held by such holder immediately prior to the Effective Time plus (B) the aggregate number of shares of Holdings Common Stock that are issuable upon the exercise of the Roll-Over Options held by such holder immediately prior to the Effective Time divided by (ii) the sum of (A) the aggregate number of Roll-Over Shares held by all holders immediately prior to the Effective Time plus (B) the aggregate number of shares of Holdings Common Stock that are issuable upon the exercise in full of all Roll-Over Options held by all holders immediately prior to the Effective Time.

 

“ Applicable Total Percentage ” shall mean, with respect to any holder of Holdings Common Stock and/or Options, an amount expressed as a percentage equal to the sum of (i) such holder’s Applicable Percentage – Non-Rollover/AFDS and (ii) such holder’s Applicable Percentage – Rollover/AFDS.

 

“ Cash Per Fully-Diluted Common Share ” shall mean (i) an amount equal to (A) the Holdings Equity Amount, minus (B) the amount of Holder Allocable Expenses paid

 

6

by the Surviving Corporation to the Holder Representative in accordance with Section 1.7 plus (C) the Aggregate Option Exercise Price, divided by (ii) the Aggregate Fully-Diluted Shares.

 

“ Holdings Equity Amount ” shall mean an amount equal (i) $650,000,000, minus (ii) the Closing Date Net Debt, minus (iii) the amounts payable to CSX Residual Company and CSX Domestic Shipping Corporation in order to consummate the CSX Purchase in accordance with Section 1.2(a).

 

“ Roll-Over Value Amount ” shall mean (i) an amount equal to (A) the Cash Per Fully-Diluted Common Share multiplied by (B) an amount equal to the sum of (x) the aggregate number of Roll-Over Shares outstanding immediately prior to the Effective Time of the Merger plus (y) the aggregate number of shares of Holdings Common Stock issuable upon exercise in full of all Roll-Over Options outstanding immediately prior to the Effective Time of the Merger minus (ii) the aggregate cash exercise price payable upon exercise of all Roll-Over Options.

 

(f) Subject to the provisions of this Article and Article IX, each holder of Common Shares shall be entitled to receive a portion of the Merger Consideration equal to (x) the Cash Per Fully-Diluted Common Share, multiplied by (y) the number of Common Shares held by such holder as of the Effective Time of the Merger (but not including any Common Shares issuable upon the exercise of any Options held by such holder at the Effective Time of the Merger). Each holder of Terminated Options shall be entitled to receive a portion of the Merger Consideration equal to (i) the Cash Per Fully-Diluted Common Share, multiplied by the aggregate number of shares of Holdings Common Stock issuable upon exercise in full of all Terminated Options held by such holder as of the Effective Time of the Merger, minus (ii) the aggregate cash exercise price payable upon exercise of all Terminated Options held by such holder.

 

1.3 Payment and Exchange of Certificates . (a) As promptly as practicable after the date hereof, Holdings shall mail to each record holder of Holdings Common Stock or Options a letter of transmittal and instructions for use in surrendering certificates representing such shares of Holdings Common Stock or Options and receiving the consideration to which such holder shall be entitled therefore pursuant to Section 1.2 hereof.

 

(b) At the Closing, the Surviving Corporation will pay to an exchange agent (the “ Exchange Agent ”) selected by Holdings and reasonably acceptable to Acquiror, by wire transfer of immediately available funds, an amount (the “ Funding Amount ”) equal to (i) the Merger Consideration, minus (ii) the product of (x) the number of shares of Holdings Common Shares held by all Dissenting Common Shareholders and (y) the Cash Per Fully-Diluted Common Share, plus (iii) the Estimated Adjustment Amount if such number is positive. For purposes of calculating the Funding Amount, the Merger Consideration shall be calculated using the Estimated Closing Date Net Debt in lieu of the Closing Date Net Debt.

 

(c) Upon payment of the Funding Amount to the Exchange Agent in accordance with Section 1.3(b), the Surviving Corporation shall be deemed to have satisfied its

 

7

obligations to make payments in respect of the Merger Consideration other than the obligation of the Surviving Corporation to make payments to Dissenting Shareholders, if any, following the Effective Time of the Merger. The Exchange Agent, as escrow agent, shall hold the Net Adjustment Escrow Amount and the Net Indemnification Escrow Amount pursuant to the terms of this Agreement, the Adjustment Escrow Agreement, and the Indemnification Escrow Agreement.

 

(d) Holdings shall give Acquiror and the Holder Representative prompt notice of any demands for appraisal pursuant to Section 262 of the DGCL received by Holdings, withdrawals of such demands and any other instruments served pursuant to the DGCL and received by Holdings. Following the Closing, Holder Representative shall, at its sole cost and expense, have the right to control or participate in any appraisal proceeding. In the event that the amount payable to any Dissenting Common Shareholder on account of such Dissenting Common Shareholder’s holdings of Holdings Common Stock exceeds the amount to which such Dissenting Common Shareholders would be entitled on account of such Dissenting Common Shareholder’s holdings of Holdings Common Stock hereunder, such excess amount, together with Holding’s out-of-pocket costs and expenses incurred in connection with such appraisal proceeding, shall be paid pro rata (i) by each holder of Common Shares (other than Roll-Over Shares) and Terminated Options from the Indemnification Escrow Amount in accordance with each such holder’s Applicable Percentage – Non-Rollover/AFDS and (ii) by each Rollover Holder from amounts payable to Acquiror pursuant to the Indemnification Notes in accordance with such Rollover Holder’s Applicable Percentage – Rollover/AFDS.

 

(e) After the Effective Time of the Merger, each holder of an outstanding certificate or certificates for Common Shares (collectively, the “ Certificates ”), and/or Terminated Options, upon surrender of such Certificates to the Exchange Agent (or, in the case of a holder of Terminated Options, upon delivery of a Holder Acknowledgment to the Exchange Agent), shall be entitled to receive from Acquiror (or from the Exchange Agent on Acquiror’s behalf) in exchange therefor (subject to the provision of Sections 1.5,1.6 and 1.8 below) such portion of the Merger Consideration into which such holder’s Common Shares and/or Terminated Options shall have been converted as a result of the Merger; provided , however , that any payment with respect to Terminated Options held by employees of Holdings or its Subsidiaries shall be reduced by the amount of any Taxes required to be withheld under applicable law with respect to such payments and amounts so withheld shall be paid by the Exchange Agent to Holdings for disbursement to the applicable taxing authority; provided , further , a portion of the Merger Consideration otherwise payable to each holder of Common Shares and/or Terminated Options equal to the Adjustment Escrow Amount multiplied by such holder’s Applicable Percentage – Non-Rollover/AFDS with respect to the Common Shares and Terminated Options held by such holder shall be held in escrow in accordance with Section 1.6(d); and provided , further , a portion of the Merger Consideration otherwise payable to each holder of Common Shares and/or Terminated Options equal to the Indemnification Escrow Amount multiplied by such holder’s Applicable Percentage – Non-Rollover/AFDS with respect to the Common Shares and Terminated Options held by such holder shall be held in escrow in accordance with Section 1.8. Pending such surrender and exchange (or, in the case of a holder of Terminated Options, upon such delivery of a Holder Acknowledgment), a holder’s certificate or certificates for Common Shares, and/or Terminated Options shall be deemed for all purposes

 

8

(other than the exchange contemplated by this Section 1.3) to evidence such holder’s portion of the Merger Consideration into which such Common Shares and/or Terminated Options shall have been converted by the Merger.

 

1.4 Effective Time of Merger .

 

(a) Subject to the satisfaction or waiver of all conditions precedent set forth in ARTICLE VIII of this Agreement, on the Closing Date, Acquiror, Merger Sub and Holdings shall cause the Certificate of Merger to be executed and filed with the Secretary of State of Delaware as provided in Section 251 of the DGCL. For purposes of this Agreement, the “ Effective Time of the Merger ” shall mean the time at which the Certificate of Merger has been duly filed in the Office of the Secretary of State of Delaware and has become effective in accordance with the DGCL.

 

(b) Pursuant to the Merger, (x) the certificate of incorporation of Holdings, as in effect immediately prior to the Effective Time shall become the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein and by law, and (y) the bylaws of Merger Sub, as in effect immediately prior to the Effective Time shall become the bylaws of the Surviving Corporation until thereafter amended in accordance with their terms and the certificate of incorporation of the Surviving Corporation and as provided by law.

 

(c) At the Effective Time, the Surviving Corporation shall cause (x) the directors of the Merger Sub, from and after the Effective Time, to be the directors of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation and (y) the officers of Holdings at the Effective Time, other than those who have resigned to remain as the officers of the Surviving Corporation until their successors shall have been duly elected or appointed or until their earlier death, resignation or removal in accordance with the bylaws of the Surviving Corporation.

 

1.5 Estimated Working Capital Adjustment .

 

(a) Within ten (10) Business Days prior to the Closing Date, and in no event less than three (3) Business Days before the Closing Date, Holdings shall deliver to Acquiror a certificate signed by the chief executive officer and chief financial officer of Horizon Lines and an officer of Holdings setting forth Holdings’ good faith estimates of (i) the Closing Date Net Working Capital (as defined below) (the “ Estimated Closing Date Net Working Capital ”) and (ii) the Closing Date Net Debt (the “ Estimated Closing Date Net Debt ”).

 

(b) The “ Estimated Adjustment Amount ,” which may be positive or negative, shall mean an amount equal to (i) the Estimated Closing Date Net Working Capital, minus (ii) $43,500,000. If the Estimated Adjustment Amount is a positive number, then at the Closing, Acquiror shall pay to the Exchange Agent as part of the Funding Amount the Estimated Adjustment Amount for distribution to all holders of Holdings Common Stock and Options (including, for avoidance of doubt, the Rollover Holders) (all such holders, collectively, the

 

9

“ Equity Participants ”) pro rata in accordance with their respective Applicable Total Percentages net of withholding taxes, if applicable. If the Estimated Adjustment Amount is a negative number, the Exchange Agent shall pay to the Acquiror on the Closing Date from the Merger Consideration deposited with it, the amount to which the Equity Participants would otherwise be entitled and credit as to each Equity Participant an amount equal to (x) the absolute value of the Estimated Adjustment Amount multiplied by (y) such Equity Participant’s Applicable Total Percentage, and the amount to be received by such Equity Participant from the Exchange Agent pursuant to Section 1.3(e) shall be reduced by such amount.

 

1.6 Working Capital Adjustment .

 

(a) As soon as reasonably practicable following the Closing Date, and in any event within ninety (90) calendar days thereof, Acquiror shall prepare and deliver to the Holder Representative (i) a consolidated balance sheet of Holdings and its consolidated Subsidiaries as of the Closing but not reflecting any impact of purchase accounting (the “ Closing Balance Sheet ”), (ii) a calculation of Net Working Capital (defined below) of Holdings and its consolidated Subsidiaries (“ Closing Date Net Working Capital ”) as set forth on the Closing Balance Sheet, and (iii) a calculation of Net Debt of Holdings and its consolidated Subsidiaries as of the Closing (the “ Closing Date Net Debt ”) as reflected on the Closing Balance Sheet. The Closing Balance Sheet shall be prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) consistent with the preparation of the Latest Audited Financial Statements, and shall fairly present the consolidated financial position of Holdings and its consolidated Subsidiaries as of the Closing. Following the Closing, Acquiror shall provide the Holder Representative and its accountants access to the records and employees of the Surviving Corporation and its Subsidiaries to the extent necessary for the review of the Closing Balance Sheet or the resolution of any dispute with respect thereto and shall cause the employees of the Surviving Corporation to cooperate with the Holder Representative and its accountants in connection with its review of the Closing Balance Sheet or the resolution of any dispute with respect to the Closing Balance Sheet. For purposes of this Agreement, “ Net Working Capital ” as of any date shall mean (i) the consolidated current assets (excluding (A) cash and cash equivalents (other than cash aboard the Vessels to the extent accrued as “prepaid advance masters”), (B) the current portion of any deferred Taxes) of Holdings and its consolidated Subsidiaries as of such date and (C) any account receivable accrued with respect to the “container royalty assessment” provided for in the Collective Bargaining Agreement with the ILA), minus (ii) the consolidated current liabilities (excluding (A) the current portion of Funded Debt, (B) the current portion of any deferred Taxes and (C) the current portion of any accrued “rolling stock” lease expense and any “vessel rent”) of Holdings and its consolidated Subsidiaries as of such date. For purposes of illustrating the calculation of Net Working Capital (including the exclusions therefrom included in the definition thereof), attached as Schedule 1.5 hereto is a calculation of the Net Working Capital of Holdings and its consolidated Subsidiaries as of March 21, 2004. For the avoidance of doubt, no asset or liability arising out of the termination of the Terminated Options and the payment of consideration therefore shall be included in the calculation of Net Working Capital or the Closing Date Net Debt including (x) any cash or cash equivalents withheld from any payment to the holders of Terminated Options in respect of any Taxes payable by such holder, (y) any liability to pay any amounts so withheld to the applicable Taxing authority or to pay the employer portion of any Taxes on account of any

 

10

such payment of consideration (including Medicare and FICA), and (z) any Tax deduction on account of any such payment of consideration (whether reflected as a decrease in any Tax liability or an increase in any Tax asset).

 

(b) Upon delivery of the Closing Balance Sheet, Acquiror will use commercially reasonable efforts to provide the Holder Representative and its accountants access to the work papers used to prepare the Closing Balance Sheet, to the extent reasonably related to Holder Representative’s evaluation of the Closing Balance Sheet and the calculation of Closing Date Net Working Capital and the Closing Date Net Debt. If the Holder Representative disagrees with the calculation of Closing Date Net Working Capital and/or the Closing Date Net Debt, it shall notify Acquiror of such disagreement in writing, setting forth in reasonable detail the particulars of such disagreement, within thirty (30) days after its receipt of the Closing Balance Sheet. In the event that the Holder Representative does not provide such a notice of disagreement within such thirty (30) day period, the Holder Representative shall be deemed to have accepted the Closing Balance Sheet and the calculation of the Closing Date Net Working Capital and Closing Date Net Debt delivered by the Acquiror, which shall be final, binding and conclusive for all purposes hereunder. In the event any such notice of disagreement is timely provided, Acquiror and the Holder Representative shall use commercially reasonable efforts for a period of thirty (30) days (or such longer period as they may mutually agree) to resolve any disagreements with respect to the calculation of Closing Date Net Working Capital and/or the Closing Date Net Debt. If, at the end of such period, they are unable to resolve such disagreements, then KPMG LLP (or such other independent accounting firm of recognized national standing as may be mutually selected by Acquiror and the Holder Representative) (the “ Auditor ”) shall resolve any remaining disagreements. The Auditor shall determine as promptly as practicable, but in any event within thirty (30) days of the date on which such dispute is referred to the Auditor, whether the Closing Balance Sheet was prepared in accordance with the standards set forth in Section 1.6(a) and (only with respect to the remaining disagreements submitted to the Auditor) whether and to what extent (if any) Closing Date Net Working Capital and/or the Closing Date Net Debt requires adjustment. The fees and expenses of the Auditor shall be paid one-half by Acquiror and one-half by the Holder Representative as a Holder Allocable Expense pursuant to Section 1.6 hereof. The determination of the Auditor shall be final, conclusive and binding on the parties. The date on which Closing Date Net Working Capital and the Closing Date Net Debt is finally determined in accordance with this Section 1.5(b) is hereinafter referred as to the “ Determination Date .”

 

(c) The “ Adjustment Amount ,” which may be positive or negative, shall mean (i) the Closing Date Net Working Capital, minus (ii) the Estimated Closing Date Net Working Capital minus (iii) the Closing Date Net Debt plus (iv) the Estimated Closing Date Net Debt.

 

(d) Notwithstanding the foregoing provisions of this ARTICLE I, on the Closing Date, $5,000,000 of the Funding Amount (the “ Adjustment Escrow Amount ”) less an amount equal to the sum of all the Applicable Percentages – Roll-Over/AFDS of all Equity Participants multiplied by the Adjustment Escrow Amount (such net amount, the “ Net Adjustment Escrow Amount ”) shall be paid to the Exchange Agent to be held in escrow pending determination of the Adjustment Amount. The Net Adjustment Escrow Amount shall be held

 

11

and invested by the Exchange Agent as “ Escrow Agent ” in accordance with the terms of the Adjustment Escrow Agreement. Upon final determination of the Adjustment Amount in accordance with Section 1.6(b) hereof, each of Acquiror and Holder Representative shall execute joint written instructions to the Escrow Agent instructing the Escrow Agent to disburse the Net Adjustment Escrow Amount as set forth in this Section 1.6(d).

 

(i) If the Adjustment Amount is a positive number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, (A) the Escrow Agent shall pay to each holder of Common Shares and Terminated Options (each, an “ Escrow Participant ”) cash from the Net Adjustment Escrow Amount in an amount equal to the product of (I) such Escrow Participant’s Applicable Percentage – Non-Rollover/AFDS multiplied by (II) the Adjustment Amount, together with all interest earned on that portion of the Net Adjustment Escrow Amount, and (B) the Surviving Corporation shall, or shall cause Horizon Lines to, pay to the Escrow Participants cash in an amount equal to the product of (I) such Escrow Participant’s Applicable Percentage – Non-Rollover/AFDS multiplied by (II) the Adjustment Amount, together with interest thereon from the Closing Date to the date of payment at the rate of interest published in the “Money Rates” column of the Eastern Edition of The Wall Street Journal (on the average of such rates if more than one rate is indicated) on the Closing Date (the “ Money Rates Rate ”).

 

(ii) If the Adjustment Amount is a negative number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, (A) the Escrow Agent shall pay to Acquiror out of the Net Adjustment Escrow Amount an amount equal to (x) the sum of the Applicable Percentages – Non-Rollover/AFDS of all Equity Participants multiplied by (y) the absolute value of the Adjustment Amount, together with all interest earned on that portion of the Net Adjustment Escrow Amount, and (B) if the absolute value of the Adjustment Amount is less than the Adjustment Escrow Amount, the Escrow Agent shall pay to the Escrow Participants (pro rata, in accordance with their respective Applicable Percentages – Non-Rollover/Non-Rollover) the balance of the Net Adjustment Escrow Amount, together with any interest earned on that portion of the Net Adjustment Escrow Amount. Except as set forth in this Agreement, in no event shall the Holder Representative or any Escrow Participant have any liability under this Section 1.6(d) in excess of such Escrow Participant’s allocable share of the Net Adjustment Escrow Amount, plus all interest earned thereon. In no event shall Acquiror be entitled to payment pursuant to this Section 1.6(d) of any amount in excess of the Net Adjustment Escrow Amount, plus all interest earned thereon.

 

(e) Upon final determination of the Adjustment Amount in accordance with Section 1.6(b) hereof, all principal and interest payable under the Adjustment Notes shall become immediately due and shall be terminated as follows:

 

(i) If the Adjustment Amount is a positive number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, Acquiror shall reduce the amount of principal and interest payable under each Adjustment Note to zero so that no principal or interest is payable under each Adjustment Note; and the Surviving Corporation shall, or shall cause Horizon Lines to, pay to the Rollover

 

12

Holders (pro rata, in accordance with such holder’s respective Applicable Percentage – Rollover/Rollover), an amount equal to the sum of all the Applicable Percentages – Rollover/AFDS multiplied by the Adjustment Amount, together with interest thereon from the Closing Date to the date of payment at the Money Rates Rate.

 

(ii) If the Adjustment Amount is a negative number, then, promptly following the Determination Date, and in any event within five (5) Business Days of the Determination Date, (A) if the absolute value of the Adjustment Amount is less than the Adjustment Escrow Amount, Acquiror shall reduce the amount of principal payable under each Adjustment Note such that the principal and interest under such Adjustment Note outstanding immediately following such reduction shall be an amount equal to (I) the Applicable Percentage – Rollover/AFDS of the issuer of an Adjustment Note multiplied by (II) the absolute value of the Adjustment Amount and (B) if the absolute value of the Adjustment Amount is equal to or greater than the Adjustment Escrow Amount, the amount of principal and interest payable under the Adjustment Note shall not be modified in any manner. After adjustments to amounts of principal due under the Adjustment Notes are made in accordance with this Section 1.6(e)(ii), all principal and accrued interest payable attributable to such principal under the Adjustment Notes shall be immediately due and payable. Except as set forth in this Agreement, in no event shall any Rollover Holder have any liability under this Section 1.6(e) in excess of the original principal amount of such Rollover Holder’s Adjustment Note, plus the accrued interest due thereon. In no event shall Acquiror be entitled to payment pursuant to this Section 1.6(e) of any amount in excess of the Rollover Holder’s Adjustment Note, plus the accrued interest due thereon.

 

1.7 Holder Allocable Expenses . On the third Business Day prior to the Closing Date, the Holder Representative will provide to Acquiror an estimate (which estimate shall include such reserves as the Holder Representative determines in good faith to be reasonably appropriate for any Holder Allocable Expenses that are not then known or determinable) of the following fees and expenses that may be incurred by the Holder Representative on behalf of Holdings and the holders of the Common Shares and/or Options in connection with the preparation, negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby: (i) the fees and disbursements of special outside counsel to Holdings and/or the Holding Representative incurred in connection with the transactions contemplated hereby, (ii) the fees and expenses of any other agents, advisors, consultants and experts employed by Holdings and/or the Holder Representative in connection with the Merger, (iii) any transaction fee payable to one or more Affiliates of the Holder Representative in connection with the Merger and (iv) the expenses of the Holder Representative incurred in such capacity (the “ Holder Allocable Expenses ”). On the Closing Date, the Surviving Corporation shall pay to the Holder Representative cash in the amount of such estimated Holder Allocable Expenses and the Holder Representative shall use such cash to pay the Holder Allocable Expenses. In no event will Acquiror, the Surviving Corporation or any of its Subsidiaries be responsible for payment of Holder Allocable Expenses in excess of the cash amounts paid to the Holder Representative by Acquiror under this Section 1.7.

 

13

1.8 Indemnification Escrow Amount . Notwithstanding the foregoing provisions of this ARTICLE I, on the Closing Date, an aggregate amount equal to $40,000,000 (the “ Indemnification Escrow Amount ”) less an amount equal to the sum of all the Applicable Percentages – Roll-Over/AFDS of all Equity Participants multiplied by the Indemnification Escrow Amount (such net amount, the “ Net Indemnification Escrow Amount ”) shall be paid to the Escrow Agent to be held in escrow in accordance with the terms of the Indemnification Escrow Agreement. The Net Indemnification Escrow Amount shall be held, invested and distributed in accordance with the terms of the Indemnification Escrow Agreement and in accordance with Article IX hereof. Any adjustments, payments or termination of Indemnification Notes shall be made in accordance with Article IX hereof.

 

1.9 Effective Time . The directors of Acquiror at the Effective Time shall, from and after the Effective Time, be the directors of the Surviving Corporation until their successors shall have been duly elected or appointed or qualified or until their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation. The officers of Holdings at the Effective Time, other than those who have resigned, shall, from and after the Effective Time, remain as the officers of the Surviving Corporation until their successors shall have been duly elected or appointed or until their earlier death, resignation or removal in accordance with the bylaws of the Surviving Corporation.

 

1.10 Post-Closing Payment . On the date that is 90 days after the Closing Date, Acquiror shall cause the Surviving Corporation or its Subsidiaries to pay to the Holder Representative by wire transfer of immediately available funds an amount in cash equal to $6,130,000 for distribution to the Escrow Participants and the Rollover Holders, pro rata in accordance with their respective Applicable Percentages – Non-Rollover/AFDS and Applicable Percentages – Rollover/AFDS.

 

1.11 Treatment of Certain Payments; Withholding . Notwithstanding the foregoing, any distributions to the holders of Options pursuant to this Agreement shall be net of the amount of any Taxes required to be withheld from such distributions under applicable law, and the amounts so withheld shall be paid over to the Surviving Corporation for payment by the Surviving Corporation to the applicable Governmental Authority as required by law. Any payment to or by (including any amounts distributed from the Net Indemnification Escrow Amount or the Net Adjustment Escrow Amount and any amounts payable under the Adjustment Notes or the Indemnification Notes) any holder of Holdings Common Stock or Options in that capacity under this Agreement shall be treated as an adjustment to the consideration given by the parties for income tax purposes.

 

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF HOLDINGS

 

Holdings represents and warrants to Acquiror and Merger Sub as of the date of this Agreement as follows:

 

2.1 Corporate Organization of Holdings . Holdings has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware

 

14

and has the corporate power and authority to own or lease its properties and to conduct its business as it is now being conducted. The copies of the Certificate of Incorporation and Bylaws of Holdings previously made available by Holdings to Acquiror are true, correct and complete. Holdings is duly licensed or qualified and in good standing as a foreign corporation in each jurisdiction in which the ownership of its property or the character of its activities is such as to require it to be so licensed or qualified as set forth on Schedule 2.1, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect. The minute books of Holdings and its Subsidiaries heretofore made available to the Acquiror are complete in all material respects and accurately reflect in all material respects all proceedings of the shareholders or members and directors and all committees of Holdings and its Subsidiaries to the extent applicable.

 

2.2 Corporate Organization of Subsidiaries . Set forth on Schedule 2.2 is a true and complete list of all Subsidiaries of Holdings. Each Subsidiary of Holdings has been duly formed and is validly existing under the laws of the State of Delaware and has the corporate or other organizational power and authority to own or lease its properties and to conduct its business as it is now being conducted. Holdings has previously provided to Acquiror copies of the organizational documents of all Subsidiaries of Holdings. Such copies are true, correct and complete in all material respects. Each Subsidiary of Holdings is duly licensed or qualified and in good standing as a foreign corporation or limited liability company in each jurisdiction in which its ownership of property or the character of its activities is such as to require it to be so licensed or qualified as set forth in Schedule 2.2, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect.

 

2.3 Due Authorization . (a) Except as set forth on Schedule 2.3(a), Holdings has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized and approved by the Board of Directors of Holdings, and, except for approval of this Agreement and the transactions contemplated hereby by the stockholders of Holdings in accordance with the DGCL, no other corporate proceeding on the part of Holdings is necessary to authorize this Agreement. This Agreement has been duly and validly executed and delivered by Holdings and constitutes a legal, valid and binding obligation of Holdings, enforceable against Holdings in accordance with its terms, subject to (i) approval of this Agreement and the transactions contemplated hereby in accordance with the DGCL by the stockholders of Holdings and (ii) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity.

 

(b) The affirmative vote of the holders of a majority of the shares of Holdings Common Stock outstanding on the record date of such vote is the only vote of the holders of any class or series of the capital stock of Holdings necessary (under applicable law or otherwise) to approve this Agreement and the Merger and such affirmative vote is represented by a written consent of holders of Common Stock as set forth in the Voting Agreement. At the Effective Time, the Merger will be effective in accordance with the terms set forth herein.

 

15

2.4 No Conflict . Except as set forth in Schedule 2.4, the execution and delivery of this Agreement by Holdings and the consummation of the transactions contemplated hereby does not and will not violate (a) any material provision of, or result in the material breach of, any applicable law, rule or regulation of any governmental body, (b) the certificate of incorporation, bylaws or other organizational documents of Holdings or any of its Subsidiaries, or (c) any agreement, indenture or other instrument to which Holdings or any of its Subsidiaries is a party or by which Holdings or any of its Subsidiaries may be bound, or of any order, judgment or decree applicable to any of them, or terminate or result in the termination of any such agreement, indenture or instrument, or result in the creation of any Lien upon any of the properties or assets of Holdings or any of its Subsidiaries, or constitute an event which, after notice or lapse of time or both, would result in any such violation, breach, acceleration, termination or creation of a Lien or result in a violation or revocation of any required license, permit or approval from any Governmental Authority or other third party, except to the extent that, in the case of the occurrence thereof under clause (c) above, such occurrence would not reasonably be expected to have a Material Adverse Effect or a material adverse effect on the ability of Holdings to enter into and perform its obligations under this Agreement.

 

2.5 Governmental Authorities; Consents . Assuming the truth and completeness of the representations and warranties of Acquiror contained in this Agreement, no consent, approval or authorization of, or designation, declaration or filing with, any Governmental Authority is required on the part of Holdings with respect to Holdings’ execution or delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) applicable requirements of the HSR Act or any similar foreign law, (ii) any consents under Contracts which are not Material Contracts and (iii) as otherwise disclosed in Schedule 2.5.

 

2.6 Capitalization of Holdings .

 

(a) The authorized capital stock of Holdings consists of 1,000,000 shares of Holdings Common Stock, of which, as of the date hereof, 800,000 shares of Holdings Common Stock are issued and outstanding. All of the issued and outstanding shares of Holdings Common Stock have been duly authorized and validly issued and are fully paid and nonassessable. Schedule 2.6(a) sets forth a true and correct list of the record, and to the knowledge of Holdings, beneficial holders of shares of Holdings Common Stock as of the date hereof and the number of shares of Holdings Common Stock held by each of them. All issued and outstanding shares of Holdings Common Stock (x) are duly authorized, validly issued, fully paid and nonassessable, and are free of any preemptive or other similar rights and (y) were issued in compliance with all applicable laws, including federal and applicable state securities laws.

 

(b) Except as set forth on Schedule 2.6(b), Holdings has not granted any outstanding options, rights or other securities convertible into or exchangeable or exercisable for shares of Holdings Common Stock or other equity securities of Holdings, or made or entered into any other commitments or agreements providing for the issuance of additional shares, the sale of treasury shares or for the repurchase or redemption of shares of Holdings Common Stock or other equity securities of Holdings, and there are no agreements of any kind which may obligate Holdings to issue, purchase, redeem or otherwise acquire any shares of Holdings Common Stock or other equity securities of Holdings.

 

16

(c) Except for the Voting Agreement and except as set forth on Schedule 2.6(c), there are no stockholder agreements, voting trusts, proxies or other agreements or understandings with respect to or concerning the purchase, sale or voting of the Holdings Common Stock to which Holdings or, to the knowledge of Holdings, any other Person is a party or by which Holdings or, to the knowledge of Holdings, any other Person is bound.

 

2.7 Capitalization of Subsidiaries . Schedule 2.7 sets forth the capitalization of each of the Subsidiaries of Holdings listed on Schedule 2.2, including (i) for each such Subsidiary that is a corporation, the number of shares of authorized capital stock, the par value of such stock, and the number of shares which are issued and outstanding for each such Subsidiary and held by Holdings or its Subsidiaries and each other record, and to the knowledge of Holdings, beneficial holder thereof and (ii) for each such Subsidiary that is a limited liability company a description of each class of membership interests that is authorized, and the number or percentage of such class of membership interests that are held by Holdings or its Subsidiaries and each other record, and to the knowledge of Holdings, beneficial holder thereof. The outstanding shares of capital stock or other equity securities of each Subsidiary of Holdings have been duly authorized and validly issued and are fully paid and nonassessable. Except as set forth on Schedule 2.7, Holdings or one or more of its Subsidiaries owns of record and beneficially all the issued and outstanding shares of capital stock or other equity securities of all of its Subsidiaries free and clear of any Liens other than Permitted Liens. Except as set forth on Schedule 2.7 or in the LLC Agreement, there are no outstanding options, warrants, rights or other securities exercisable or exchangeable for any capital stock of any Subsidiary of Holdings, any other commitments or agreements providing for the issuance of additional shares, the sale of treasury shares or for the repurchase or redemption of shares of any capital stock of any Subsidiary of Holdings, or any agreements of any kind which may obligate any Subsidiary of Holdings to issue, purchase, register for sale, redeem or otherwise acquire any of its capital stock.

 

2.8 Financial Statements . Attached as Schedule 2.8 hereto are, as restated, (i) the audited consolidated balance sheet of CSX Lines, LLC (the predecessor of Horizon Lines) and its wholly-owned subsidiaries and the Domestic Liner Business of SL Service, Inc. (collectively, as described in the notes to the Audit Report thereon, the “ Predecessor ”) as of December 23, 2001, and the related consolidated statements of operations, changes in owner’s equity and cash flows of the Predecessor for the fiscal year ended December 23, 2001, together with the auditor’s report thereon (collectively, the “ 2001 Audited Financial Statements ”), (ii) the audited consolidated balance sheet of the Predecessor (referred to in the audit report thereon as CSX Lines, LLC and its wholly-owned subsidiaries and the Domestic Liner Business of CSX Corporation) as of December 22, 2002 and February 26, 2003, and the related consolidated statements of operations, changes in owner’s equity and cash flows of the Predecessor for the fiscal year ended December 22, 2002 and for the period from December 23, 2002 to February 26, 2003, together with the auditor’s report thereon (collectively, with the 2001 Audited Financial Statements, the “ Predecessor Audited Financial Statements ”), (iii) the audited consolidated balance sheet of Holdings and its consolidated Subsidiaries as of December 21, 2003, and the

 

17

related consolidated statements of operations, changes in owner’ equity and cash flows for the period from February 27, 2003 to December 21, 2003, together with the auditor’s report thereon (the “ Latest Audited Financial Statements ”, and together with the Predecessor Audited Financial Statements, the “ Audited Financial Statements ”), and (iv) the unaudited consolidated balance sheet of Holdings and its consolidated Subsidiaries as of March 21, 2004, and the related consolidated statements of operations, and cash flows for the period from December 22, 2003 to March 21, 2004 (the “ Interim Financial Statements ” and together with the Audited Financial Statements, the “ Financial Statements ”). Except as set forth in the notes thereto or as disclosed in Schedule 2.8, the Financial Statements (including the footnotes thereto) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby and fairly present in all material respects the consolidated financial condition, results of operations and changes in cash flows and stockholders equity of Holdings and its consolidated Subsidiaries (or the Predecessor as the case may be) as of the respective dates thereof and for the respective periods covered thereby, subject to, in the case of the Interim Financial Statements, normal recurring year-end adjustments and the absence of footnotes.

 

2.9 Undisclosed Liabilities . Except as set forth in Schedule 2.9, as of the date hereof, there is no liability and the transactions contemplated by this Agreement do not result in the creation of any, liability (whether absolute or contingent), debt (including an obligation in respect of a capital lease), or obligation of or claim against Holdings or its Subsidiaries of a type normally reflected or reserved for on a balance sheet prepared in accordance with GAAP, except for liabilities and obligations (i) reflected or reserved for on the Financial Statements or disclosed in the notes thereto, (ii) that have arisen since the date of the Interim Financial Statements in the ordinary course of the operation of business and consistent with past practice of Holdings and its Subsidiaries, or (iii) which individually, or combined with any series of related transactions would not reasonably be expected to have a Material Adverse Effect. For purposes of this Agreement, the parties agree that the following types of claims are “ ordinary course ” and therefore would not constitute a breach of the representation set forth in this Section 2.9 (w) cargo claims covered by insurance maintained by or on behalf of Holdings and/or its Subsidiaries (subject to deductibles and self-retention amounts), (x) workers compensation claims covered by insurance maintained by or on behalf of Holdings and/or its Subsidiaries (subject to deductibles and self-retention amounts), (y) employee claims for injuries under the Jones Act covered by insurance maintained by or on behalf of Holdings and/or its Subsidiaries (subject to deductibles and self-retention amounts) and (z) other third party claims covered by auto liability and general liability insurance policies or on behalf of Holdings and/or its Subsidiaries (subject to deductibles and self-retention amounts.

 

2.10 Litigation; Orders . Except as disclosed in Schedule 2.10, there are no lawsuits, actions, or administrative, arbitral or other proceedings, or to the knowledge of Holdings, investigations, before or by any Governmental Authority pending or, to the knowledge of Holdings, threatened against Holdings or its Subsidiaries except as would not reasonably be expected to have a Material Adverse Effect. Except as disclosed in Schedule 2.10, as of the date hereof there are no unsatisfied judgments or orders, injunctions, decrees, stipulations or awards (whether rendered by a court or administrative agency, or by arbitration), outstanding and requiring payment in excess of $200,000 or any open injunction binding upon Holdings or any of its Subsidiaries.

 

18

2.11 Compliance with Laws . Except with respect to (i) matters set forth on Schedule 2.11, and (ii) compliance with Environmental Laws (as to which certain representations and warranties are made pursuant to Section 2.23), Holdings and its Subsidiaries are in compliance with all laws (including rules and regulations thereunder) of federal, state, local and foreign governments (and all agencies thereof) applicable thereto, except where such instances of non-compliance as would not reasonably be expected to have a Material Adverse Effect.

 

2.12 Material Contracts . (a) Schedule 2.12(a) lists the following Contracts to which Holdings or any of its Subsidiaries are a party or by which any of them or their assets may be bound (the contracts described in (i) to (xi) below and Section 2.12(b) below, “ Material Contracts ”) in effect as of the date of this Agreement:

 

(i) each Vessel Lease;

 

(ii) each lease of personal property (other than Vessel Leases) with an annual base rental obligation of more than $500,000;

 

(iii) each note, mortgage, indenture and other obligation and agreement and other instrument for or relating to any lending or borrowing of Holdings or its Subsidiaries or to which any assets of Holdings or its Subsidiaries are subject (except with respect to any such lending or borrowing among Holdings and its Subsidiaries);

 

(iv) each acquisition and/or disposition agreement, including any option to acquire (other than by lease) or sell any assets or properties of any Person (other than the purchases or sales of inventory, fuel or supplies in the ordinary course of business) with a purchase price over $500,000 other than those contracts that have been fully performed;

 

(v) each joint venture agreement, partnership agreement, or limited liability company operating agreement or other agreements involving a sharing with any Person of profits, losses, costs or liabilities of the business activities of any other Person by Holdings or its Subsidiaries with such first Person (but excluding any agency agreement entered into in the ordinary course of business);

 

(vi) each Contract limiting in any way Holdings’ or its Subsidiaries’ ability to compete with any Person in any geographic location or any line of business;

 

(vii) each other Contract, other than Collective Bargaining Agreements or Contracts with customers of Holdings or its Subsidiaries for goods or services to be provided by Holdings or its Subsidiaries, which Holdings reasonably anticipates will involve future payment or payments by or to Holdings or its Subsidiaries in excess of $1,000,000 per year;

 

(viii) each employment agreement set forth on Schedule 2.13(b);

 

(ix) each Collective Bargaining Agreement set forth on Schedule 2.14;

 

19

(x) each Intellectual Property license agreement or Computer Software license agreement, involving annual license fees of more than $500,000; and

 

(xi) each material container interchange agreement.

 

(b) Schedule 2.12(b) sets forth the top 10 revenue-generating customer Contracts (without revealing the actual identity of any specific customer) or customer relationships for the fiscal year ended December 21, 2003 and the fiscal quarter ended March 21, 2004 for each of the Alaska, Hawaii/Guam, and Puerto Rico tradelanes in which Holdings and its Subsidiaries do business. Except as disclosed in Schedule 2.12(b), as of the date hereof, no senior officer of Holdings or its Subsidiaries has received any written communication from any customer listed on Schedule 2.12(b) of any intention to terminate or materially reduce purchases from Holdings or any of its Subsidiaries.

 

(c) With respect to each Material Contract, except as disclosed on Schedule 2.12(c) and except for such Material Contracts which expire by their terms on or prior to the Closing Date, and except for such Material Contracts as may be terminated or materially amended consistent with Section 4.1 after the date hereof, such Material Contracts are valid, binding and enforceable in all material respects and neither Holdings nor its relevant Subsidiary, nor, to the knowledge of Holdings, any other party thereto, is in breach thereof or default thereunder, and there does not exist under any provision thereof any event that, with the giving of notice or the lapse of time or both, would constitute such a breach or default, except (i) in each case where enforceability may be limited by bankruptcy, insolvency or other similar laws affecting creditors’ rights generally and except where enforceability is subject to the application of equitable principles or remedies and (ii) as would not reasonably be expected to have a Material Adverse Effect. Holdings has prior to the execution of this Agreement made available to Acquiror or its representatives copies of all such Material Contracts which are true and complete in all material respects.

 

2.13 Employee Benefit Plans . (a) Definitions.

 

The following terms, when used in this Section 2.13, shall have the following meanings. Any of these terms may, unless the context otherwise requires, be used in the singular or the plural depending on the reference.

 

(i) Benefit Arrangement. “ Benefit Arrangement ” shall mean (i) any employment, consulting, severance, retention, change-in-control, or other similar agreement, arrangement or policy, whether or not written, and (ii) any employee benefit plan, arrangement or policy, including any “voluntary employees’ beneficiary association” as defined in Section 501(c)(9) of the Code, or any stock option, stock purchase, stock award, stock appreciation, phantom stock, deferred compensation, pension, retirement, post-retirement, savings, profit sharing, incentive, bonus, health insurance, life insurance, fringe benefit, disability, accident, vacation pay, holiday pay, sick pay, severance, employee loan or educational assistance, plan, arrangement, or policy, whether or not insured or self-insured, which (A) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into, maintained, contributed to or required to be contributed to, as the case may be, by Holdings or any of its Subsidiaries, and

 

20

(C) covers any current or former employees, consultants, or directors of Holdings or any of its Subsidiaries or their beneficiaries or dependents (with respect to their relationship with any such entity).

 

(ii) Employee Plans. “ Employee Plans ” shall mean all Benefit Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans.

 

(iii) ERISA . “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

(iv) ERISA Affiliate . “ ERISA Affiliate ” shall mean any trade or business (whether or not incorporated) that is part of the same controlled group, or under common control with, or part of an affiliated service group that includes Holdings, within the meaning of Code Section 414(b), (c), (m), or (o) or ERISA Section 4001(a)(14).

 

(v) Multiemployer Plan . “ Multiemployer Plan ” shall mean any “multiemployer plan,” as defined in Section 4001(a)(3) of ERISA, (A) to which Holdings or any of its Subsidiaries maintains, administers, contributes or is required to contribute and (B) which covers any current or former employees, consultants, or directors of Holdings or any of its Subsidiaries or their beneficiaries or dependents (with respect to their relationship with such entities).

 

(vi) PBGC . “ PBGC ” shall mean the Pension Benefit Guaranty Corporation.

 

(vii) Pension Plan. “ Pension Plan ” shall mean any “employee pension benefit plan” as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (A) which Holdings or any of its Subsidiaries maintains, administers, contributes to or is required to contribute to and (B) which covers any current or former employees, consultants, or directors of Holdings or any of its Subsidiaries or their beneficiaries or dependents (with respect to their relationship with such entities).

 

(viii) Welfare Plan . “ Welfare Plan ” shall mean any “employee benefit plan” as defined in Section 3(3) of ERISA, (A) which Holdings or any of its Subsidiaries maintains, administers, contributes to or is required to contribute to, and (B) which covers any current or former employees, consultants, or directors of Holdings or any of its Subsidiaries or their beneficiaries or dependents (with respect to their relationship with such entities).

 

(b) Disclosure . Schedule 2.13 contains a complete and accurate list of all material Employee Plans which cover any current or former employees, consultants, or directors of Holdings or any of its Subsidiaries or their beneficiaries or dependents (with respect to their relationship with such entities).

 

(c) Representations .

 

(i) Except as set forth on Schedule 2.13(c), Holdings has delivered or made available to Acquiror complete and correct copies of each Employee Plan, or

 

21

written summaries of any unwritten material Employee Plan, the only employee handbook applicable to employees of Holdings, which is the handbook for employees employed in the Dallas/Fort Worth Metropolitan area, and with respect to each Employee Plan (other than any Multiemployer Plan), if applicable, the current summary plan description, related trust agreements or insurance contracts, the latest Internal Revenue Service (IRS) determination letter (if any), the most recent annual financial statements (if any), the most recent annual reports on IRS Form 5500 (including all required schedules and accountant’s opinions) (if any), the most recent actuarial reports and the last three PBGC Forms 1 (and, if applicable, PBGC Forms 1ES) (if any).

 

(ii) Except as set forth on Schedule 2.13(c) or as would not reasonably be expected to have a Material Adverse Effect, each Employee Plan (other than any Multiemployer Plan) has been operated and administered in accordance with its terms, the terms of any applicable Collective Bargaining Agreement, and all applicable laws at all times during the six years immediately preceding the date of this Agreement.

 

(iii) Except as set forth on Schedule 2.13(c), each Pension Plan (and each Employee Plan maintained by Holdings for employees employed in Puerto Rico that would, if it were maintained for employees in the United States, be deemed to be a Pension Plan) and each related, respectively, trust agreement, annuity contract or other funding instrument has been determined by the Internal Revenue Service to be qualified and tax-exempt under the provisions of Sections 401(a) and 501(a) of the Code (or the Puerto Rico Internal Revenue Code, as applicable), or application for such determination has been made, and no event has occurred that would reasonably be expected to result in the plan failing to be so qualified.

 

(iv) To their knowledge, neither Holdings nor its Subsidiaries have any liability with respect to any transaction in violation of Sections 404 or 406 of ERISA or any “prohibited transaction,” as defined in Section 4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code to which any Welfare Plan or Pension Plan is subject. To their knowledge, neither Holdings nor its Subsidiaries have participated in a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan and neither Holdings nor its Subsidiaries have any unpaid civil penalty under Section 502(1) of ERISA.

 

(v) Except as set forth on Schedule 2.13(b), no Benefit Arrangement, Collective Bargaining Agreement, or Welfare Plan provides health, life insurance or other welfare benefits to retirees or other terminated employees of Holdings or any of its Subsidiaries, other than continuation coverage required by Section 4980B of the Code or Sections 601-608 of ERISA (“ COBRA ”).

 

(vi) Except as set forth on Schedule 2.13(b), Holdings does not maintain or contribute to any Pension Plan that is subject to Title IV of ERISA, and, to the knowledge of Holdings, Holdings has no outstanding liability with respect to any such plan previously maintained or contributed to by Holdings.

 

22

(vii) With respect to any “defined benefit plan”, within the meaning of Section 3(35) of ERISA maintained by Holdings or any of its Subsidiaries: (A) no liability to the PBGC has been incurred (other than for premiums not yet due) that has not been satisfied; (B) no “accumulated funding deficiency,” within the meaning of Section 302 of ERISA or Section 412 of the Code, whether or not waived, has been incurred; (C) to the knowledge of Holdings, no “reportable event” within the meaning of Section 4043 of ERISA (for which the 30-day notice requirement has not been waived by regulation or otherwise by the PBGC) has occurred within the last six years; and (D) no lien has arisen under ERISA or the Code, or is reasonably expected to arise, on the assets of Holdings and its Subsidiaries.

 

(viii) Except as set forth on Schedule 2.13(c), with respect to any Multiemployer Plan: (A) neither Holdings nor any of its Subsidiaries or ERISA Affiliates has incurred any withdrawal liability which has not been satisfied and there is no event or condition which is reasonably expected to occur that would cause Holdings or any of its Subsidiaries to incur any such withdrawal liability which would reasonably be expected to result in a Material Adverse Effect; (B) Holdings has timely made all contributions required by the terms of any Multiemployer Plan or any Collective Bargaining Agreement, (C) to the knowledge of Holdings, no such plan is in reorganization, within the meaning of Section 4241 of ERISA, is, or to the knowledge of Holdings is reasonably expected to become, insolvent within the meaning of Section 4245 of ERISA, is in the process of terminating, or is a party to any pending merger or transfer of assets and liabilities, (D) to the knowledge of Holdings, each such plan has been operated and administered in all material respects in accordance with its terms and all applicable laws at all times during the six years immediately preceding the date of this Agreement, and (E) to the knowledge of Holdings, no such plan has incurred any liability to the PBGC (other than for premiums not yet due) that has not been satisfied.

 

(ix) No Employee Plan (other than any Multiemployer Plan) is currently under governmental investigation or audit and, to the knowledge of Holdings, no such investigation or audit is contemplated or under consideration. To the knowledge of Holdings, except as set forth on Schedule 2.13(c)(ix), no Multiemployer Plan is currently under governmental investigation or audit and, to the knowledge of Holdings, no such investigation or audit is contemplated or under consideration.

 

(x) None of Holdings’ purposes for engaging in the transactions contemplated by this Agreement is for evasion of liability under Section 4069 of ERISA.

 

(xi) Except as otherwise set forth on Schedule 2.13(c)(xi), the consummation of the transactions contemplated by this Agreement, either alone or in combination with another event, will not materially increase any benefits or result in the acceleration or creation of any rights of any Person to benefits under any Employee Plans (including the acceleration of the vesting or exercisability of any stock options, the acceleration of the vesting of any restricted stock, the acceleration of the accrual or vesting of any benefits under Employee Plans or the acceleration or creation of any rights under any severance or change in control agreement). As of the Closing Date, no payment or benefit to be provided to any employee of Holdings or its Subsidiaries in connection with the consummation of the

 

23

transactions contemplated by this Agreement, either alone or in combination with another reasonably expected event, would reasonably be expected to constitute an “excess parachute payment” (within the meaning of Section 280G of the Code).

 

(xii) Except as would not reasonably be expected to result in a Material Adverse Effect, with respect to any Employee Plan, no event has occurred and no condition exists that would subject Holdings or its Subsidiaries, either directly or by reason of their affiliation with any member of their “Controlled Group” (defined as any organization which is a member of a controlled group of organizations within the meaning of Code Section 414(b), (c), (m) or (o)or ERISA Section 4001(a)(14)), to any tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other applicable laws, rules and regulations.

 

2.14 Labor Relations . (a) Schedule 2.14 sets forth a list of each Collective Bargaining Agreement to which Holdings or any of its Subsidiaries is a party as of the date hereof applicable to employees of Holdings or any of its Subsidiaries. Holdings has delivered or made available to Acquiror a copy of each such Collective Bargaining Agreement which is complete and correct in all material respects. Except as would not reasonably be expected to have a Material Adverse Effect, each Collective Bargaining Agreement set forth on Schedule 2.14 has been administered by Holdings and its Subsidiaries in accordance with its terms and all applicable laws. To the knowledge of Holdings, no employee organizing efforts are pending with respect to nonunionized employees of Holdings or any of its Subsidiaries. Within the last three years, there has been no strike, work slowdown or other material labor dispute with respect to employees of Holdings or any of its Subsidiaries, nor, to the knowledge of Holdings, is any strike, work slowdown or other material labor dispute pending.

 

(b) Except as disclosed on Schedule 2.10, there are no grievances, arbitrations, or unfair labor practice, employment discrimination, immigration, equal pay, employee safety and health, or sexual harassment charges, complaints or claims (or other charges, complaints or claims related to employment practices) against Holdings or any of its Subsidiaries pending, or to the knowledge of Holdings, threatened, in each case, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(c) No event that would reasonably be expected to give rise to the requirement that notice be given to any employee of Holdings or any of its Subsidiaries under the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §2101, et. seq., has occurred during the 90-day period ending on the date hereof.

 

24

2.15 Taxes . (a) Holdings and its Subsidiaries and each affiliated group (within the meaning of Section 1504 of the Code) or consolidated, combined or unitary group (under state or local Tax law) of which Holdings or any of its Subsidiaries is or has been a member (each, an “ Affiliated Group ”) have timely filed all material federal, state, local and foreign returns, reports, statements and forms required to be filed under the Code or applicable state, local or foreign Tax laws (“ Tax Returns ”) except for those Tax Returns for which the time for filing has been validly extended.

 

(b) All Taxes required to be paid with respect to the periods covered by the Tax Returns have been paid in full. In the case of any period or portion thereof with respect to which a Tax Return has not yet been filed by Holdings, any Subsidiary of Holdings or any Affiliated Group, any Tax due in respect of such period or portion thereof has either been paid or will be accrued as a liability on the Closing Balance Sheet.

 

(c) No Tax liens have been filed and no claims are being asserted with respect to any Taxes of Holdings, any Subsidiary of Holdings or any Affiliated Group, and no examination, audit or inquiry is currently being conducted by any Taxing authority, including any examination, audit or inquiry which could result in a Tax liability for which Holdings or any of its Subsidiaries could be severally liable under Treasury Regulations § 1.1502-6 or any comparable state, local or foreign Tax provisions.

 

(d) Holdings and each of its Subsidiaries has withheld and paid over to the proper taxing authority all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party.

 

(e) Holdings and each of its Subsidiaries have not been included in any affiliated, combined, consolidated or unitary groups for federal, state or local income Tax purposes.

 

(f) There are no outstanding waivers of or consents to extend the statute of limitations with respect to any Taxes or Tax Returns of Holdings, any Subsidiary of Holdings or any Affiliated Group.

 

(g) Neither Holdings nor any of its Subsidiaries are a party to any agreement or understanding providing for the allocation or sharing of Taxes other than with respect to each other.

 

(h) Neither Holdings nor any of its Subsidiaries are required to include in income any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary change in accounting method initiated by Holdings or any of its Subsidiaries and the Internal Revenue Service has not proposed in writing any such adjustment or change in accounting method.

 

25

(i) Neither Holdings nor any of its Subsidiaries have filed with respect to any item a disclosure statement pursuant to Section 6662 of the Code or any comparable disclosure with respect to foreign, state and/or local Tax statutes.

 

(j) There have been no federal income Tax audits that have ended within three years of the date of this Agreement that have been completed by the Internal Revenue Service.

 

(k) None of the assets and properties of Holdings or its Subsidiaries is an asset or property that Acquiror or any of its Affiliates is or will be required to treat as being (i) owned by any other Person pursuant to the provisions of Section 168(f)(8) of the Code as amended, and in effect immediately before the enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property within the meaning of Section 168(h)(l) of the Code.

 

The representations in this Section 2.15 are to be construed in all cases to be limited with respect to the time as to which they speak to any period of time that began on or after February 28, 2003 including, without limitation, in the case of any taxable period that includes but does not end on February 27, 2003, the portion of any such taxable period that begins on February 28, 2003 and ends on the last day of such taxable period.

 

2.16 Brokers’ Fees . Except for the fees described on Schedule 2.16 (which fees shall be paid by the Holder Representative as a Holder Allocable Expense), no broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements or agreements made by or on behalf of Holdings, its Subsidiaries, or their Affiliates.

 

2.17 Insurance . Schedule 2.17 contains a summary description as of the date hereof of all policies or binders of insurance maintain