Exhibit 2.1
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ASSET PURCHASE AGREEMENT
by and among
DARLING INTERNATIONAL INC.,
DARLING NATIONAL LLC,
and
NATIONAL BY-PRODUCTS, LLC
Dated as of December 19, 2005
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TABLE OF CONTENTS
PAGE
Article I DEFINITIONS...........................................................................1
1.1 Certain Definitions...................................................................1
1.2 Terms Defined Elsewhere in this Agreement.............................................9
1.3 Other Definitional and Interpretive Matters..........................................11
Article II PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES...............................12
2.1 Purchase and Sale of Assets..........................................................12
2.2 Excluded Assets......................................................................14
2.3 Assumption of Liabilities............................................................14
2.4 Excluded Liabilities.................................................................15
2.5 Further Conveyances and Assumptions; Consent of Third Parties........................16
2.6 Bulk-Sales Laws......................................................................16
2.7 Purchase Price Allocation............................................................17
2.8 Right to Control Payment.............................................................17
2.9 Proration of Certain Expenses........................................................17
2.10 Accounts Receivable..................................................................17
Article III CONSIDERATION........................................................................18
3.1 Consideration........................................................................18
3.2 Payment of Purchase Price............................................................18
3.3 Indemnity Escrow.....................................................................18
3.4 Closing Statement....................................................................19
3.5 Purchase Price Adjustment............................................................20
3.6 Additional Contingent Consideration..................................................22
Article IV CLOSING AND TERMINATION..............................................................23
4.1 Closing Date.........................................................................23
4.2 Termination of Agreement.............................................................23
4.3 Procedure upon Termination...........................................................26
4.4 Effect of Termination................................................................26
4.5 Termination Fee......................................................................26
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
Article V REPRESENTATIONS AND WARRANTIES OF SELLER.............................................27
5.1 Organization and Good Standing; No Subsidiaries......................................27
5.2 Authorization of Agreement...........................................................28
5.3 Conflicts; Consents of Third Parties.................................................29
5.4 Financial Statements.................................................................29
5.5 No Undisclosed Liabilities...........................................................30
5.6 Title to Purchased Assets; Sufficiency...............................................31
5.7 Absence of Certain Developments......................................................31
5.8 Taxes................................................................................32
5.9 Real Property........................................................................35
5.10 Tangible Personal Property...........................................................37
5.11 Intellectual Property................................................................37
5.12 Material Contracts...................................................................39
5.13 Employee Benefits....................................................................41
5.14 Labor................................................................................45
5.15 Litigation...........................................................................45
5.16 Compliance with Laws; Permits........................................................46
5.17 Environmental Matters................................................................46
5.18 Insurance............................................................................48
5.19 Inventories..........................................................................48
5.20 Accounts and Notes Receivable and Payable............................................48
5.21 Related Party Transactions...........................................................49
5.22 Customers and Suppliers..............................................................49
5.23 Product Warranty; Product Liability..................................................49
5.24 Banks................................................................................50
5.25 Full Disclosure......................................................................50
5.26 Financial Advisors...................................................................50
5.27 Certain Payments.....................................................................50
5.28 Information Supplied.................................................................51
5.29 Seller's Financial Condition.........................................................51
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TABLE OF CONTENTS
(CONTINUED)
PAGE
5.30 Limitation of Representations and Warranties.........................................51
Article VI REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER...............................52
6.1 Organization and Good Standing.......................................................52
6.2 Capital Structure....................................................................52
6.3 Authorization of Agreement...........................................................53
6.4 Conflicts; Consents of Third Parties.................................................53
6.5 Litigation...........................................................................54
6.6 Financial Advisors...................................................................54
6.7 Voting Requirements..................................................................54
6.8 Parent SEC Documents.................................................................54
6.9 Information Supplied.................................................................55
6.10 Environmental Matters................................................................55
6.11 Financing............................................................................56
6.12 Full Disclosure......................................................................57
Article VII COVENANTS............................................................................57
7.1 Access to Information................................................................57
7.2 Conduct of the Business Pending the Closing..........................................58
7.3 Consents.............................................................................60
7.4 Regulatory Approvals.................................................................61
7.5 Further Assurances...................................................................62
7.6 No Solicitation by Seller; Etc.......................................................62
7.7 Non-Competition; Non-Solicitation; Confidentiality...................................65
7.8 Preservation of Records..............................................................66
7.9 Publicity............................................................................66
7.10 Use of Name..........................................................................67
7.11 Environmental Matters................................................................67
7.12 Cooperation with Financing...........................................................67
7.13 Monthly Financial Statements.........................................................68
7.14 Notification of Certain Matters......................................................68
iii
TABLE OF CONTENTS
(CONTINUED)
PAGE
7.15 Parent Board of Directors............................................................68
7.16 Preparation of the Form S-4 and the Joint Proxy Statement; Stockholder Meetings......68
7.17 Dividends............................................................................70
7.18 Amendment of Rights Plan.............................................................70
7.19 No Dissolution of Seller.............................................................70
7.20 Transfer of Certificates of Title....................................................70
7.21 Agreements of Rule 145 Affiliates....................................................70
7.22 Updating of Schedules................................................................71
7.23 Engagement of Actuary................................................................71
Article VIII EMPLOYEES AND EMPLOYEE BENEFITS......................................................71
8.1 Employment...........................................................................71
8.2 Standard Procedure...................................................................72
8.3 Employee Benefits....................................................................72
8.4 Withdrawal Liability.................................................................72
Article IX CONDITIONS TO CLOSING................................................................73
9.1 Conditions Precedent to Obligations of Parent and Purchaser..........................73
9.2 Conditions Precedent to Obligations of Seller........................................77
Article X INDEMNIFICATION......................................................................78
10.1 Survival of Representations and Warranties...........................................78
10.2 Indemnification......................................................................79
10.3 Indemnification Procedures...........................................................80
10.4 Limitations on Indemnification for Breaches of Representations and Warranties........81
10.5 Tax Treatment of Indemnity Payments..................................................82
Article XI TAXES................................................................................82
11.1 Transfer Taxes.......................................................................82
11.2 Prorations...........................................................................82
11.3 Cooperation on Tax Matters...........................................................83
Article XII RISK OF LOSS.........................................................................83
iv
TABLE OF CONTENTS
(CONTINUED)
PAGE
Article XIII MISCELLANEOUS........................................................................84
13.1 Expenses.............................................................................84
13.2 Specific Performance.................................................................84
13.3 Submission to Jurisdiction; Consent to Service of Process; Arbitration...............84
13.4 Entire Agreement; Amendments and Waivers.............................................85
13.5 Governing Law........................................................................86
13.6 Notices..............................................................................86
13.7 Severability.........................................................................87
13.8 Binding Effect; Assignment...........................................................87
13.9 Non-Recourse.........................................................................87
13.10 Counterparts.........................................................................88
v
Exhibits
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Exhibit A Form of Escrow Agreement
Exhibit B Form of Rule 145 Affiliate Agreement
Exhibit C Form of Noncompetition and Nonsolicitation Agreement
Exhibit D Form of Xxxx of Sale
Exhibit E Form of Assignment and Assumption Agreement
Exhibit F Form of Power of Attorney
Exhibit G Form of Opinion of Seller's Counsel
Exhibit H Form of Opinion of Parent's Counsel
vi
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of
December 19, 2005, by and among DARLING INTERNATIONAL INC., a Delaware
corporation ("Parent"), DARLING NATIONAL LLC, a Delaware limited liability
company and a wholly-owned subsidiary of Parent ("Purchaser"), and NATIONAL
BY-PRODUCTS, LLC, an Iowa limited liability company ("Seller").
W I T N E S S E T H:
WHEREAS, Seller presently conducts the Business;
WHEREAS, Seller desires to sell, transfer and assign to Purchaser,
and Purchaser desires to acquire and assume from Seller, all of the Purchased
Assets and Assumed Liabilities, all as more specifically provided herein (the
"Transaction");
WHEREAS, the Board of Managers of Seller and the Board of Directors
of Parent on behalf of Parent and Purchaser have approved this Agreement and the
Transaction;
WHEREAS, certain terms used in this Agreement are defined in Section
1.1;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions.
For purposes of this Agreement, the following terms shall have the
meanings specified in this Section 1.1:
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person, and the term
"control" (including the terms "controlled by" and "under common control with")
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
"Business" means the business of Seller, including (i) the collection
and conversion of animal and poultry by-products from the meat processing and
restaurant industries into fats and protein meal products, (ii) the collection,
processing and marketing of animal hides, and (iii) the sale of the processed
products to livestock and pet food manufacturers, among other customers,
throughout the United States and internationally.
1
"Business Day" means any day of the year on which national banking
institutions in Dallas, Texas are open to the public for conducting business and
are not required or authorized to close.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986 and the regulations
promulgated thereunder, as amended from time to time.
"commercially reasonable efforts" means the efforts, time and costs a
prudent person desirous of achieving a result would use, expend or incur in
similar circumstances to achieve such results as expeditiously as possible;
provided that such person is not required to expend funds or assume liabilities
beyond those that are (i) commercially reasonable in nature and amount in the
context of the transaction or (ii) otherwise required to be expended or assumed
pursuant to the terms of this Agreement.
"Contract" means any written or oral contract, agreement, indenture,
note, bond, debenture, mortgage, loan, instrument, lease, license, commitment or
other obligation.
"Documents" means all files, documents, instruments, papers, books,
reports, records, tapes, microfilms, photographs, letters, budgets, forecasts,
ledgers, journals, title policies, lists of past, present and/or prospective
customers, supplier lists, regulatory filings, operating data and plans,
technical documentation (design specifications, functional requirements,
operating instructions, logic manuals, flow charts, etc), user documentation
(installation guides, user manuals, training materials, release notes, working
papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web
pages, etc.), and other similar materials related to the Business and the
Purchased Assets, in each case whether or not in electronic form.
"Employee" means all individuals (including common law employees,
independent contractors and individual consultants), as of the date hereof, who
are employed or engaged by Seller in connection with the Business, together with
individuals who are hired in respect of the Business after the date hereof.
"Environmental Costs and Liabilities" means, with respect to any
Person, all Liabilities and Remedial Actions incurred as a result of any claim
or demand by any other Person or in response to any violation of Environmental
Law or to the extent based upon, related to, or arising under or pursuant to any
Environmental Law, Environmental Permit, order or agreement with any
Governmental Body or other Person, or which relates to any environmental, health
or safety condition, violation of Environmental Law or a Release or threatened
Release of Hazardous Materials, whether known or unknown, accrued or contingent,
whether based in contract, tort, implied or express warranty, strict liability,
criminal or civil statute.
2
"Environmental Law" means any foreign, federal, state or local law
(including common law), statute, code, ordinance, rule, regulation or other
legal requirement or obligation in any way relating to pollution, odors, noise,
or the protection of human health and safety, the environment or natural
resources, including the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. App. ss. 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C.
ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational
Safety and Health Act (29 U.S.C. ss. 651 et seq.), as each has been amended and
the regulations promulgated pursuant thereto.
"Environmental Permit" means any Permit required by Environmental
Laws for the operation of the Business.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Contracts" means the following Contracts and any amendments
thereto: (i) the Letter Agreement, by and between First Union Securities, Inc.
and Seller, dated as of August 1, 2001; (ii) the Matching Service Agreement, by
and between XX Xxxxx & Company and Seller, dated as of August 9, 2002; (iii) the
Unit Appreciation Agreement; (iv) the Seller's Rights Agreement, dated as of
January 1, 1999; and (v) any Contract that cannot be assigned by law or its
terms.
"Former Employee" means all individuals (including common law
employees, independent contractors and individual consultants) who were employed
or engaged by Seller in connection with the Business but who are no longer so
employed or engaged on the date hereof.
"Fully Diluted Basis" means accounting for all outstanding securities
generally entitled to vote in the election of directors of Parent on a fully
diluted basis, after giving effect to the exercise or conversion of all options,
warrants, rights and other securities exercisable or convertible into such
voting securities, which shall include any shares of Parent Common Stock to be
issued to Seller on the Closing Date, but not include any stock options for
which the exercise price exceeds the Closing Share Price.
"Furniture and Equipment" means all furniture, furnishings,
equipment, vehicles, leasehold improvements not deemed real estate by applicable
Laws, and other tangible personal property, including all artwork, desks,
chairs, tables, Hardware, copiers, telephone lines and numbers, telecopy
machines and other telecommunication equipment, cubicles and miscellaneous
office furnishings and supplies, including but not limited to those assets
listed on Company Disclosure Schedule 1.1.
3
"GAAP" means generally accepted accounting principles in the United
States as of the date hereof.
"Governmental Body" means any government or governmental or
regulatory body thereof, or political subdivision thereof, whether foreign,
federal, state, or local, or any agency, instrumentality or authority thereof,
or any court or arbitrator (public or private).
"Hardware" means any and all computer and computer-related hardware,
including, but not limited to, computers, file servers, facsimile servers,
scanners, color printers, laser printers and networks.
"Hazardous Material" means any substance, material or waste that is
regulated, classified, or otherwise characterized under or pursuant to any
Environmental Law as "hazardous," "toxic," "pollutant," "contaminant,"
"radioactive," or words of similar meaning or effect, including petroleum and
its by-products, asbestos, polychlorinated biphenyls, radon, mold or other fungi
and urea formaldehyde insulation.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Indebtedness" of any Person means, without duplication, (i) the
principal, accreted value, accrued and unpaid interest, prepayment and
redemption premiums or penalties (if any), unpaid fees or expenses and other
monetary obligations in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising
in the Ordinary Course of Business); (iii) all obligations of such Person under
leases required to be capitalized in accordance with GAAP; (iv) all obligations
of such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction that has been drawn upon,
including any fees related to such obligations whether or not drawn upon; (v)
all obligations of such Person under interest rate or currency swap transactions
(valued at the termination value thereof); (vi) the liquidation value, accrued
and unpaid dividends and prepayment or redemption premiums and penalties (if
any), unpaid fees or expense and other monetary obligations in respect of any
and all redeemable preferred stock of such Person; (vii) all checks issued by
Seller prior to the Closing Date that remain outstanding as of the Closing Date;
(viii) all obligations of the type referred to in clauses (i) through (vii) of
any Persons for the payment of which such Person is responsible or liable,
directly or indirectly, as obligor, guarantor, surety or otherwise, including
guarantees of such obligations; and (ix) all obligations of the type referred to
in clauses (i) through (viii) of other Persons secured by (or for which the
holder of such obligations has an existing right, contingent or otherwise, to be
secured by) any Lien on any property or asset of such Person (whether or not
such obligation is assumed by such Person).
4
"Intellectual Property" means all right, title and interest in or
relating to intellectual property, whether protected, created or arising under
the laws of the United States or any other jurisdiction, including: (i) all
patents and applications therefor, including all continuations, divisionals and
continuations-in-part and patents issuing thereon, along with all reissues,
reexaminations, substitutions and extensions thereof (collectively, "Patents");
(ii) all trademarks, service marks, trade names, trade dress, logos, corporate
names and other source or business identifiers, together with the goodwill
associated with any of the foregoing, along with all applications,
registrations, renewals and extensions thereof (collectively, "Marks"); (iii)
all Internet domain names; (iv) all copyrights, works of authorship and moral
rights, and all registrations, applications, renewals, extensions and reversions
of any of the foregoing (collectively, "Copyrights"); (v) trade secrets ("Trade
Secrets"); and (vi) all other intellectual property rights arising from or
relating to Technology.
"Intellectual Property Licenses" means (i) any grant by Seller to
another Person of any right, permission, consent or non-assertion relating to or
under any of the Purchased Intellectual Property and (ii) any grant by another
Person to Seller of any right, permission, consent or non-assertion relating to
or under any third Person's Intellectual Property.
"IRS" means the United States Internal Revenue Service and, to the
extent relevant, the United States Department of Treasury.
"Knowledge of Parent" means the knowledge that Xxxx XxXxxxxx has or
could reasonably be expected to have acquired in the course of performance of
his duties for Parent.
"Knowledge of Seller" means the knowledge that Xxxx Xxxxx, Xxxxx
Xxxx, Xxxx Xxxxxxx and Xxxxx Xxxxxxx have or could reasonably be expected to
have acquired in the course of performance of their respective duties for
Seller.
"Law" means any foreign, federal, state or local law (including
common law), statute, code, ordinance, rule, regulation or other legal
requirement or obligation.
"Legal Proceeding" means any judicial, administrative or arbitral
actions, suits, mediations, investigations, inquiries, proceedings or claims
(including counterclaims) by or before a Governmental Body.
"Liability" means any debt, loss, damage, adverse claim, fines,
penalties, liability or obligation (whether direct or indirect, known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
matured or unmatured, determined or determinable, disputed or undisputed,
liquidated or unliquidated, or due or to become due, and whether in contract,
tort, strict liability or otherwise), and including all costs and expenses
relating thereto (including all fees, disbursements and expenses of legal
counsel, experts, engineers and consultants and costs of investigation).
5
"Lien" means any lien, encumbrance, pledge, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, servitude, proxy, voting trust or agreement, transfer restriction
under any shareholder or similar agreement, encumbrance or any other restriction
or limitation whatsoever.
"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, properties, prospects, results of operations or financial
condition of Seller or of the Business; (ii) the value of the Purchased Assets
or a material increase in the amount of Assumed Liabilities; or (iii) the
ability of Seller to consummate the transactions contemplated by this Agreement
or perform its obligations under this Agreement or the Seller Documents, except
Material Adverse Effect shall not include matters affecting the rendering
business generally or general economic conditions.
"Order" means any order, injunction, judgment, doctrine, decree,
ruling, writ, assessment or arbitration award of a Governmental Body.
"Ordinary Course of Business" means the ordinary and usual course of
normal day-to-day operations of the Business, as conducted by Seller, through
the date of determination consistent with past practice.
"Parent Common Stock" means the common stock, par value $0.01 per
share, of Parent.
"Parent Material Adverse Effect" means a material adverse effect on
(i) the business, assets, properties, prospects, results of operations or
financial condition of Parent or of the business of Parent; or (ii) the ability
of Parent or Purchaser to consummate the transactions contemplated by this
Agreement or perform its obligations under this Agreement or the Purchaser
Documents, except Parent Material Adverse Effect shall not include matters
affecting the rendering business generally or general economic conditions.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates of a Governmental Body.
"Permitted Exceptions" means (i) statutory liens for current Taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings,
provided an appropriate reserve has been established therefor in the Financial
Statements in accordance with GAAP; (ii) mechanics', carriers', workers' and
repairers' Liens that do not, individually or in the aggregate, have a Material
Adverse Effect and which if filed are being contested in a timely manner
pursuant to applicable Law and are properly reserved against in Seller's books
and records in accordance with GAAP; (iii) zoning, entitlement and other land
use and environmental regulations by any Governmental Body, provided that if
such regulations have been violated, such violations, individually or in the
aggregate, do not have a Material Adverse Effect; and (iv) easements, covenants,
restrictions and encumbrances which do not, individually or in the aggregate,
have a Material Adverse Effect.
6
"Person" means any individual, corporation, limited liability
company, partnership, firm, joint venture, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"Purchased Contracts" means all Contracts of Seller related to the
Business other than the Excluded Contracts.
"Purchased Intellectual Property" means all Intellectual Property (i)
owned by Seller and related to the Business or (ii) used by Seller in connection
with the Business.
"Purchased Technology" means all Technology (i) owned by Seller and
related to the Business or (ii) used by Seller in connection with the Business,
including, without limitation, all Software and other Technology developed by
Seller and relating to employees and payroll.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, deposit, dumping, emptying, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment, or into or out of
any property.
"Remedial Action" means all actions including any capital
expenditures undertaken to (i) clean up, remove, treat or in any other way
address any Hazardous Material; (ii) prevent the Release or threat of Release,
or minimize the further Release of any Hazardous Material so it does not
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment; (iii) perform pre-remedial studies and investigations or
post-remedial monitoring and care; or (iv) correct a condition of noncompliance
with Environmental Laws.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Software" means any and all (i) computer programs, including any and
all software implementations of algorithms, models and methodologies, whether in
source code or object code; (ii) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise; (iii)
descriptions, flow-charts and other work product used to design, plan, organize
and develop any of the foregoing, screens, user interfaces, report formats,
firmware, development tools, templates, menus, buttons and icons; and (iv) all
documentation, including user manuals and other training documentation, related
to any of the foregoing.
"Subsidiary" means, with respect to any Person, any other Person of
which (i) a majority of the outstanding share capital, voting securities or
other equity interests are owned, directly or indirectly, by such Person or (ii)
such Person is entitled, directly or indirectly, to appoint a majority of the
board of directors or managers or comparable supervisory body of the other
Person.
7
"Tax" or "Taxes" means (i) any and all federal, state, local or
foreign taxes, charges, fees, imposts, levies or other assessments, including,
without limitation, all net income, gross receipts, capital, sales, use, ad
valorem, value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever; (ii) all interest,
penalties, fines, additions to tax or additional amounts of any kind imposed by
any Taxing Authority in connection with any item described in clause (i); and
(iii) any liability in respect of any items described in clauses (i) and/or (ii)
payable by reason of Contract, assumption, transferee liability, operation of
law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or successor
thereof or any analogous or similar provision under law) or otherwise.
"Taxing Authority" means the IRS and any other Governmental Body
responsible for the administration of any Tax.
"Tax Return" means any return, report or statement filed or required
to be filed with respect to any Tax (including any elections, declarations,
schedules or attachments thereto, and any amendment thereof), including any
information return, claim for refund, amended return or declaration of estimated
Tax, and including, where permitted or required, combined, consolidated or
unitary returns for any group of entities that includes Seller or any of its
Affiliates.
"Technology" means, collectively, all Software, information, designs,
formulae, algorithms, procedures, methods, techniques, ideas, know-how, research
and development, technical data, programs, subroutines, tools, materials,
specifications, processes, inventions (whether patentable or unpatentable and
whether or not reduced to practice), apparatus, creations, improvements, works
of authorship and other similar materials, and all recordings, graphs, drawings,
reports, analyses, and other writings, and other tangible embodiments of the
foregoing, in any form whether or not specifically listed herein, and all
related technology, that are used in, incorporated in, embodied in, displayed by
or related to, or are used in connection with the foregoing.
"Unit Appreciation Agreement" means that certain letter agreement,
dated as of December 12, 2001, from Seller to certain employees of Seller,
whereby Seller agreed to, among other things, pay a lump sum payment to each
such employee upon the termination of his or her employment with Seller for any
reason in the amount of (i) the difference between the market value of one
membership unit of Seller at the time of such termination and $23, multiplied by
(ii) the number of shares of Seller's capital stock such employee was required
to sell as a result of Seller's conversion from a corporation to a limited
liability company on January 11, 2002, as such agreement may have been amended
or supplemented.
8
"WARN" means the Worker Adjustment and Retraining Notification Act of
1988, as amended, and the rules and regulations promulgated thereunder.
1.2 Terms Defined Elsewhere in this Agreement. For purposes of this
Agreement, the following terms have meanings set forth in the sections
indicated:
Term Section
---- -------
AAA 13.3(a)
Adjusted Closing Cash Payment 3.4
Agreed Principles 3.4
Agreement Introductory Paragraph
Antitrust Division 7.4(a)
Antitrust Laws 7.4(b)
Asset Acquisition Statement 2.7
Assumed Liabilities 2.3
Balance Sheet 5.4(a)
Balance Sheet Date 5.4(a)
Basket 10.4(a)
Cash Escrow Amount 3.3
Closing 4.1
Closing Balance Sheet 3.5(a)
Closing Cash Payment 3.1(a)
Closing Date 4.1
Closing Issued Shares 3.1(a)
Closing Share Price 3.1(b)
Closing Statement 3.5(a)
Closing Working Capital 3.5(a)
Company Disclosure Schedule Article V Introductory Paragraph
Confidential Information 7.7(c)
Confidentiality Agreement 7.1
Copyrights 1.1 (in Intellectual Property definition)
Employee Benefit Plans 5.13(a)
ERISA Affiliate 5.13(a)
ERISA Affiliate Plans 5.13(a)
Escrow Agent 3.3
Escrow Agreement 3.3
Escrowed Shares 3.3
Estimate Statement 3.4
Estimate Statement Delivery Date 3.4
Estimated Closing Balance Sheet 3.4
Excluded Assets 2.2
Excluded Liabilities 2.4
Excluded Properties 5.9(a)
Expenses 4.5(a)
Final Closing Balance Sheet 3.5(e)
Final Working Capital 3.5(e)
9
Term Section
---- -------
Financial Statements 5.4(a)
Financing 9.1(q)
FIRPTA Affidavit 9.1(n)
Form S-4 5.28
FTC 7.4(a)
Indemnity Escrow Amount 3.3
Independent Accountant 3.5(c)
Initial Closing Working Capital 3.4
Joint Proxy Statement 5.28
Labor Contracts 5.14(a)
Loss and Losses 10.2(a)
Marks 1.1 (in Intellectual Property definition)
Material Contracts 5.12(a)
Monthly Financial Statements 7.13
Multiemployer Plans 5.13(a)
Multiple Employer Plans 5.13(a)
Negative Adjustment 3.4
Net Working Capital 3.4
Nonassignable Assets 2.5(b)
Owned Property and Owned Properties 5.9(a)
Parent Introductory Paragraph
Parent Disclosure Schedule Article VI Introductory Paragraph
Parent's Environmental Assessment 7.11(a)
Parent Indemnified Parties 10.2(a)
Parent Preferred Stock 6.2
Parent SEC Documents 6.8
Parent Stock Plan 6.2
Parent Stockholder Approval 6.7
Parent Stockholders Meeting 7.16(c)
Patents 1.1 (in Intellectual Property definition)
PBGC 5.13(e)
Payoff Indebtedness Amount 3.1(a)
Personal Property Leases 5.10(b)
Plan 8.4(a)
Positive Adjustment 3.4
Purchase Price 3.1(a)
Purchased Assets 2.1
Purchaser Introductory Paragraph
Purchaser Documents 6.3
Purchaser Plans 8.3
Qualified Plans 5.13(c)
Real Property Lease and Real Property Leases 5.9(a)
Related Persons 5.21
Remaining Issued Shares 3.6(b)(ii)
Representatives 7.6(a)
10
Term Section
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Restricted Business 7.7(a)
Rule 145 Affiliate 7.21
Seller Introductory Paragraph
Seller's Environmental Assessment 7.11(b)
Seller Adverse Recommendation Change 7.6(c)
Seller Adverse Recommendation Notice 7.6(c)
Seller Board Recommendation 7.16(b)
Seller Documents 5.2(a)
Seller Indemnified Parties 10.2(b)
Seller Marks 7.10
Seller Permits 5.16(b)
Seller Property and Seller Properties 5.9(a)
Seller Unitholder Approval 5.2(b)
Seller Unitholders Meeting 7.16(b)
Superior Proposal 7.6(d)
Survival Period 10.1
Takeover Proposal 7.6(d)
Target Share Price 3.6(b)(i)
Target Working Capital 3.4
Term Sheet 6.11
Termination Date 4.2(a)
Termination Fee 4.5(a)
Third Party Claim 10.3(b)
Total Consideration 3.1(a)
Trade Secrets 1.1 (in Intellectual Property definition)
Transaction Recitals
Transfer Taxes 11.1
Transferred Employees 8.1
True-Up Date 3.6(a)
True-Up Market Price 3.6(a)
True-Up Shares 3.6(b)(iii)
Unitholders 3.2(b)
Unresolved Claims 3.3
Value Gap 3.6(b)(ii)
1.3 Other Definitional and Interpretive Matters.
(a) Unless otherwise expressly provided, for purposes of this
Agreement, the following rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of time
before which, within which or following which, any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
11
Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
Gender and Number. Any reference in this Agreement to gender shall
include all genders, and words imparting the singular number only shall include
the plural and vice versa.
Headings. The provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof," and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
(unless the context of its usage requires otherwise) "including, but not limited
to," and shall not be construed to limit any general statement that it follows
to the specific or similar items or matters immediately following it.
(b) The parties hereto have participated jointly in the negotiation
and drafting of this Agreement and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
ARTICLE II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Purchase and Sale of Assets. On the terms and subject to the
conditions set forth in this Agreement, at the Closing Purchaser shall purchase,
acquire and accept from Seller, and Seller shall sell, transfer, assign, convey
and deliver to Purchaser all of Seller's right, title and interest in, to and
under the Purchased Assets, free and clear of all Liens except for Permitted
Exceptions. "Purchased Assets" shall mean all of the business, assets,
properties, contractual rights, goodwill, going concern value, rights and claims
of Seller related to the Business on the Closing Date, wherever situated and of
whatever kind and nature, real or personal, tangible or intangible, whether or
not reflected on the books and records of Seller (other than the Excluded
Assets), including each of the following assets.
(a) all cash and accounts receivable of Seller;
(b) all inventory used or useful in the Business;
(c) all tangible personal property used or useful in the Business,
including Furniture and Equipment;
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(d) all deposits (including customer deposits and security for rent,
electricity, telephone, hedging contracts or otherwise) and prepaid charges and
expenses, including any prepaid rent, of Seller;
(e) all rights of Seller under all Owned Property and each Real
Property Lease, together with all improvements, fixtures and other appurtenances
thereto and rights in respect thereof;
(f) the Purchased Intellectual Property and the Purchased Technology;
(g) all rights of Seller under the Purchased Contracts including all
claims or causes of action with respect to the Purchased Contracts;
(h) all Documents that are related to the Business, including
Documents relating to products, services, marketing, advertising, promotional
materials, Purchased Intellectual Property, Purchased Technology, personnel
files for Employees and all files, customer files and documents (including
credit information), supplier lists, records, literature and correspondence,
whether or not physically located on any of the premises referred to in clause
(e) above, but excluding those documents referenced in Section 2.2(b) below;
(i) all assets of any trust attributable to Employees and Former
Employees in connection with any Employee Benefit Plan;
(j) all Permits, including Environmental Permits, used by Seller in
the Business (which includes all Permits necessary to conduct the Business as
currently conducted) and all rights, and incidents of interest therein;
(k) all raw materials and supplies owned by Seller and used in
connection with the Business;
(l) all rights of Seller under non-disclosure or confidentiality,
non-compete, or non-solicitation agreements with Former Employees, Employees and
agents of Seller or with third parties to the extent relating to the Business or
the Purchased Assets (or any portion thereof);
(m) all rights of Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
to the extent relating to products sold or services provided to Seller or to the
extent affecting any Purchased Assets;
(n) all work-in-process;
(o) all assets of the type reflected on the Balance Sheet;
(p) all claims, choses-in-action and rights in litigation and
settlements in respect thereof;
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(q) Seller's rights to the name "National By-Products";
(r) all third-party property and casualty insurance proceeds, and all
rights to third-party property and casualty insurance proceeds, in each case to
the extent received or receivable in respect of the Business; and
(s) all goodwill and other intangible assets associated with the
Business, including the goodwill associated with the Purchased Intellectual
Property.
2.2 Excluded Assets. Nothing herein contained shall be deemed to
sell, transfer, assign or convey the Excluded Assets to Purchaser, and Seller
shall retain all right, title and interest to, in and under the Excluded Assets.
"Excluded Assets" shall mean each of the following assets:
(a) the Excluded Contracts;
(b) all minute books, organizational documents, stock registers and
such other books and records of Seller as pertain to ownership, organization or
existence of Seller and duplicate copies of such records as are necessary to
enable Seller to file tax returns and reports;
(c) except as set forth on Company Disclosure Schedule 2.2(c), all
shares of capital stock or other equity securities of Seller or held by Seller
with respect to any other Person;
(d) the real estate in Denver, Colorado referred to by Seller as the
"closed Pepcol plant," which is described more fully on Company Disclosure
Schedule 2.2(d);
(e) a limited partnership interest in the Marriott Hotel located at
7th and Grand, Des Moines, Iowa, which is described more fully on Company
Disclosure Schedule 2.2(e); and
(f) all ownership interests in International By Products, S. de X.X.
de C.V.
2.3 Assumption of Liabilities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing Purchaser shall assume,
effective as of the Closing, the following liabilities of Seller (collectively,
the "Assumed Liabilities"):
(a) all liabilities of Seller under the Purchased Contracts;
(b) all accounts payable incurred in the Ordinary Course of Business;
(c) all Liabilities arising out of, under or in connection with any
Indebtedness of Seller and accounted for in the calculation of Final Working
Capital hereunder; and
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(d) all Liabilities reflected, including reserves therefor, on the
Final Closing Balance Sheet, excluding all Liabilities referred to in Section
2.4.
2.4 Excluded Liabilities. Purchaser will not assume or be liable for
any Excluded Liabilities. Seller shall timely perform, satisfy and discharge in
accordance with their respective terms all Excluded Liabilities. "Excluded
Liabilities" shall mean all Liabilities of Seller arising out of, relating to or
otherwise in respect of the Business on or before the Closing Date and all other
Liabilities of Seller other than the Assumed Liabilities. Excluded Liabilities
shall include the following Liabilities and in no event shall Purchaser assume
any liability for the matters set out in this Section 2.4 except those
Liabilities reflected, including reserves therefor, on the Final Closing Balance
Sheet:
(a) all Liabilities in respect of any products sold and/or services
performed by Seller on or before the Closing Date;
(b) except to the extent specifically provided in Article VIII, all
Liabilities arising out of, relating to or with respect to (i) the employment or
performance of services, or termination of employment or services by Seller or
any of its Affiliates of any individual on or before the Closing Date, (ii)
workers' compensation claims against Seller that relate to the period on or
before the Closing Date, irrespective of whether such claims are made prior to
or after the Closing, (iii) any Employee Benefit Plan, (iv) Seller's Long-Term
Incentive Plan;
(c) all Liabilities arising out of, under or in connection with
Excluded Contracts and, with respect to Purchased Contracts, Liabilities in
respect of a breach by or default of Seller accruing under such Contracts with
respect to any period prior to Closing;
(d) all Liabilities for (i) Seller's portion of Transfer Taxes, (ii)
Taxes of Seller or any Subsidiary (or any predecessor thereof), (iii) Taxes that
relate to the Purchased Assets or the Assumed Liabilities for taxable periods
(or portions thereof) ending on or before the Closing Date, including, without
limitation, Taxes allocable to Seller pursuant to Section 11.2, and (iv)
payments under any Tax allocation, sharing or similar agreement (whether oral or
written);
(e) all Liabilities in respect of any pending or threatened Legal
Proceeding, or any claim arising out of, relating to or otherwise in respect of
(i) the operation of the Business to the extent such Legal Proceeding or claim
relates to such operation on or prior to the Closing Date, or (ii) any Excluded
Asset;
(f) all Liabilities relating to any dispute with any client or
customer of the Business existing as of the Closing Date or based upon, relating
to or arising out of events, actions, or failures to act prior to the Closing
Date; and
(g) all Liabilities or obligations of Seller relating to the
business, operations, assets or Liabilities of any Subsidiary or former
Subsidiary of Seller based upon, relating to or arising out of events, actions
or failures to act prior to the Closing Date.
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2.5 Further Conveyances and Assumptions; Consent of Third Parties.
(a) From time to time following the Closing, Seller and Purchaser
shall, and shall cause their respective Affiliates to, execute, acknowledge and
deliver all such further conveyances, notices, assumptions, releases and
aquittances and such other instruments, and shall take such further actions, as
may be reasonably necessary or appropriate to assure fully to Purchaser and its
successors or assigns, all of the properties, rights, titles, interests,
estates, remedies, powers and privileges intended to be conveyed to Purchaser
under this Agreement and the Seller Documents and to assure fully to Seller and
its successors and assigns, the assumption of the liabilities and obligations
intended to be assumed by Purchaser under this Agreement and the Purchaser
Documents, and to otherwise make effective the transactions contemplated hereby
and thereby.
(b) Nothing in this Agreement nor the consummation of the
transactions contemplated hereby shall be construed as an attempt or agreement
to assign any Purchased Asset, including any Contract, Permit, certificate,
approval, authorization or other right, which by its terms or by Law is
nonassignable without the consent of a third party or a Governmental Body or is
cancelable by a third party in the event of an assignment ("Nonassignable
Assets") unless and until such consent shall have been obtained. Seller shall
use its commercially reasonable efforts to obtain such consents promptly. To the
extent permitted by applicable Law, in the event consents to the assignment
thereof cannot be obtained, such Nonassignable Assets shall be held, as of and
from the Closing Date, by Seller in trust for Purchaser and the covenants and
obligations thereunder shall be performed by Purchaser in Seller's name and all
benefits and obligations existing thereunder shall be for Purchaser's account.
Seller shall take or cause to be taken at Seller's expense such actions in its
name or otherwise as Purchaser may reasonably request so as to provide Purchaser
with the benefits of the Nonassignable Assets and to effect collection of money
or other consideration that becomes due and payable under the Nonassignable
Assets, and Seller shall promptly pay over to Purchaser all money or other
consideration received by it in respect of all Nonassignable Assets. As of and
from the Closing Date, Seller authorizes Purchaser, to the extent permitted by
applicable Law and the terms of the Nonassignable Assets, at Purchaser's
expense, to perform all the obligations and receive all the benefits of Seller
under the Nonassignable Assets and appoints Purchaser its attorney-in-fact to
act in its name on its behalf with respect thereto.
2.6 Bulk-Sales Laws. Purchaser hereby waives compliance by Seller
with the requirements and provisions of any "bulk-transfer" Laws of any
jurisdiction that may otherwise be applicable with respect to the sale of any or
all of the Purchased Assets to Purchaser; provided, however, that, except with
respect to the Assumed Liabilities, Seller agrees (a) to pay and discharge when
due or to contest or litigate all claims of creditors which are asserted against
Purchaser or the Purchased Assets by reason of such noncompliance, (b) to
indemnify, defend and hold harmless Purchaser from and against any and all such
claims in the manner provided in Article X and (c) to take promptly all
necessary action to remove any Lien which is placed on the Purchased Assets by
reason of such noncompliance. Any "bulk-transfer" Law that addresses Taxes shall
be governed by Article XI and not by this Section 2.6.
16
2.7 Purchase Price Allocation. Not later than ninety days after the
Closing Date, Purchaser and Seller will work together in good faith to prepare
and deliver a copy of Form 8594 and any required exhibits thereto (the "Asset
Acquisition Statement") allocating the Total Consideration among the Purchased
Assets. If Seller and Purchaser cannot agree to an Asset Acquisition Statement,
each shall prepare its own proposed Asset Acquisition Statement, and such
disagreement shall be resolved in accordance with the same procedures set forth
in Sections 3.5(b) and 3.5(c). The Total Consideration paid by Purchaser for the
Purchased Assets shall be allocated in accordance with the Asset Acquisition
Statement as finalized pursuant to this Section 2.7, and all income Tax Returns
and reports filed by Purchaser and Seller relating to the Business or the
Purchased Assets shall be prepared consistently with such allocation. For
purposes of this Section 2.7, the Purchased Assets include the covenant not to
compete as set forth in Section 7.7.
2.8 Right to Control Payment. Purchaser shall have the right, but not
the obligation, to make any payment due from Seller with respect to any Excluded
Liabilities which are not paid by Seller within five Business Days following
written request for payment from Purchaser; provided, however, that if Seller
advises Purchaser in writing during such five Business Day period that a good
faith payment dispute exists or Seller has valid defenses to non-payment with
respect to such Excluded Liability, then Purchaser shall not have the right to
pay such Excluded Liability. Seller agrees to reimburse Purchaser promptly and
in any event within five Business Days following written notice of such payment
by Purchaser for the amount of any payment made by Purchaser pursuant to this
Section 2.8. Payment under this Section 2.8 shall be made promptly and in full,
without regard to Article X.
2.9 Proration of Certain Expenses. Subject to Section 2.4(d) and
Section 11.2 with respect to Taxes, all expenses and other payments in respect
of the Owned Property and all rents and other payments (including any prepaid
amounts) due under the Real Property Leases and any other leases constituting
part of the Purchased Assets shall be prorated between Seller, on the one hand,
and Purchaser, on the other hand, as of the Closing Date. Seller shall be
responsible for all rents (including any percentage rent, additional rent and
any accrued tax and operating expense reimbursements and escalations), charges
and other payments of any kind accruing during any period under the Real
Property Leases or any such other leases up to and including the Closing Date.
Purchaser shall be responsible for all such rents, charges and other payments
accruing during any period under the Real Property Leases or any such other
leases after the Closing Date. Purchaser shall pay the full amount of any
invoices received by it and shall submit a request for reimbursement to Seller
for Seller's share of such expenses and Seller shall pay the full amount of any
invoices received by it and Purchaser shall reimburse Seller for Purchaser's
share of such expenses.
2.10 Accounts Receivable. Seller shall provide reasonable assistance
to Purchaser in the collection of accounts receivable. If Seller shall receive
payment in respect of accounts receivable that are included in the Purchased
Assets, then Seller shall promptly forward such payment to Purchaser.
17
ARTICLE III
CONSIDERATION
3.1 Consideration.
(a) The aggregate consideration for the Purchased Assets shall be (i)
(A) an amount in cash (the "Closing Cash Payment") equal to (x) $70.5 million,
less (y) the amount of Indebtedness related to Seller's credit facilities
outstanding immediately prior to the Closing Date (the "Payoff Indebtedness
Amount"), plus (B) that number of shares of Parent Common Stock (the "Closing
Issued Shares") equal to 20% of the outstanding shares of Parent Common Stock as
of 8 a.m. Central Time on the Closing Date, calculated on a Fully Diluted Basis
(the "Purchase Price"), and (ii) the assumption of the Assumed Liabilities
(together with the Purchase Price, the "Total Consideration"). The Purchase
Price will be subject to adjustment pursuant to Sections 3.4, 3.5 and 3.6.
(b) For purposes of this Agreement, the "Closing Share Price" shall
be an amount equal to the per share closing price of Parent Common Stock on the
American Stock Exchange (as reported by The Wall Street Journal, Eastern
Edition, or if not reported thereby, any other authoritative source) for the
trading day immediately preceding the Closing Date.
3.2 Payment of Purchase Price.
(a) On the Closing Date, Parent shall pay the Adjusted Closing Cash
Payment (as defined below), less the Cash Escrow Amount, to Seller, which amount
shall be paid by wire transfer of immediately available funds into an account
designated by Seller in writing not fewer than three Business Days prior to the
Closing Date.
(b) As soon as reasonably practicable after the Closing Date, Parent
shall deliver to Seller certificates representing the Closing Issued Shares,
less the Escrowed Shares (as defined below), registered in the names of the
holders of record of the outstanding membership units of Seller set forth on
Company Disclosure Schedule 3.2(b) (the "Unitholders"), pro rata in accordance
with their ownership interests, and Seller shall promptly distribute such
certificates to the Unitholders.
(c) On the Closing Date, Parent shall pay the Payoff Indebtedness
Amount on behalf of Seller by wire transfer of immediately available funds as
directed by the holders of such Indebtedness.
(d) Promptly after Closing, Seller shall pay all amounts owed under
the Unit Appreciation Agreement to the beneficiaries of the Unit Appreciation
Agreement and all amounts owed under Seller's Long-Term Incentive Plan, in each
case less applicable withholding and employment taxes.
18
3.3 Indemnity Escrow. On the Closing Date, Parent shall, on behalf of
Seller, deliver to U.S. Bank, National Association, as agent to Parent and
Seller (the "Escrow Agent"), to an account designated by the Escrow Agent, an
amount in immediately available funds equal to $3.5 million (the "Cash Escrow
Amount") and that number of shares of Parent Common Stock equal to the quotient
of $6.5 million divided by the Closing Share Price (the "Escrowed Shares" and
together with the Cash Escrow Amount, the "Indemnity Escrow Amount"), in
accordance with the terms of this Agreement and the Escrow Agreement in
substantially the form attached hereto as Exhibit A, which will be executed at
the Closing, by and among Parent, Seller and the Escrow Agent (the "Escrow
Agreement"). Any payment Seller is obligated to make to any Parent Indemnified
Parties pursuant to Article X shall be paid, to the extent there are sufficient
funds in the Indemnity Escrow Account, by release of funds to the Parent
Indemnified Parties from the Indemnity Escrow Account by the Escrow Agent in
accordance with the terms set forth in the Escrow Agreement. The Escrow Agent
shall release the Indemnity Escrow Amount (to the extent not utilized to pay
Purchaser for any indemnification claim) to Seller in accordance with the terms
set forth in the Escrow Agreement. The Indemnity Escrow Amount retained by the
Escrow Agent for any claims for indemnification under Article X asserted but not
settled before the applicable release date under the Escrow Agreement
("Unresolved Claims") shall be released by the Escrow Agent (to the extent not
utilized to pay Purchaser for any such claims resolved in favor of Purchaser)
upon their resolution in accordance with Article X and the Escrow Agreement.
3.4 Closing Statement. At least two (2) Business Days before Closing
(the "Estimate Statement Delivery Date"), Seller shall cause to be prepared and
delivered to Parent an estimated balance sheet of Seller as of the end of
business on the Closing Date and prior to the consummation of the transactions
contemplated hereby (the "Estimated Closing Balance Sheet") and a statement (the
"Estimate Statement") setting forth Seller's good faith estimate of Net Working
Capital (as defined below) derived from the Estimated Closing Balance Sheet
("Initial Closing Working Capital") and the corresponding Adjusted Closing Cash
Payment to be paid at Closing, if any. Seller shall provide Parent with copies
of or reasonable access to such books and records as are reasonably necessary
for purposes of verifying the amounts set forth in the Estimated Closing Balance
Sheet and the Estimate Statement. "Net Working Capital" means, at the time of
determination, the current assets of the Business (less Excluded Assets included
in such current assets), reduced by the current liabilities of the Business
(which shall include all Indebtedness, whether current or long-term, and any
Liabilities related to employees such as projected workers' compensation claims
and, to the extent not paid before Closing, all amounts owed by Seller under
the Unit Appreciation Agreement to the beneficiaries of the Unit Appreciation
Agreement and all amounts owed under Seller's Long-Term Incentive Plan,
but shall exclude the Payoff Indebtedness Amount and Excluded Liabilities
included in such current liabilities), in each case as determined in accordance
with GAAP, and the accounting principles set forth on Company Disclosure
Schedule 3.4 (the "Agreed Principles"). An example, for illustrative purposes
only, of the calculation of Net Working Capital as of October 1, 2005 is set
forth on Company Disclosure Schedule 3.4. Seller shall use the latest available
information as of the Estimate Statement Delivery Date to prepare the Estimated
Closing Balance Sheet and to calculate the Initial Closing Working Capital and
the Adjusted Closing Cash Payment. The preparation of the Estimate Statement
shall be for the purpose of determining the difference between Initial Closing
Working Capital and Target Working Capital. If Initial Closing Working Capital
exceeds $250,000 ("Target Working Capital"), the Closing Cash Payment shall be
increased by the amount of such excess (such increase, a "Positive Adjustment")
and, if Target Working Capital exceeds Initial Closing Working Capital, the
Closing Cash Payment shall be reduced by the amount of such excess (such
reduction, a "Negative Adjustment"). "Adjusted Closing Cash Payment" means the
Closing Cash Payment plus any Positive Adjustment or the Closing Cash Payment
minus any Negative Adjustment, as applicable.
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3.5 Purchase Price Adjustment.
(a) As promptly as practicable, but no later than sixty days after
the Closing Date, Parent shall cause to be prepared and delivered to Seller an
unaudited balance sheet of Seller (the "Closing Balance Sheet") and a closing
statement (the "Closing Statement") and a certificate based on such Closing
Statement setting forth Parent's calculation of Net Working Capital derived from
the Closing Balance Sheet ("Closing Working Capital"). The preparation of the
Closing Statement shall be for the purpose of determining the difference between
Initial Closing Working Capital and Closing Working Capital.
(b) If Seller disagrees with the amounts reflected on the Closing
Balance Sheet or Parent's calculation of Closing Working Capital delivered
pursuant to Section 3.5(a), Seller may, within thirty (30) days after delivery
of the Closing Statement, deliver a notice to Parent disputing such amounts
reflected on the Closing Balance Sheet and/or disagreeing with such calculation
of Closing Working Capital and setting forth Seller's calculation of such
amounts. Any such notice of dispute or disagreement shall specify those items or
amounts as to which Seller disagrees, and Seller shall be deemed to have agreed
with all other items and amounts contained in the Closing Balance Sheet, the
Closing Statement and the calculation of Closing Working Capital delivered
pursuant to Section 3.5(a).
(c) If a notice of disagreement shall be duly delivered pursuant to
Section 3.5(b), Parent and Seller shall, during the fifteen (15) days following
such delivery, use their commercially reasonable efforts to reach agreement on
the disputed items or amounts in order to determine, as may be required, the
proper amounts set forth on the Closing Balance Sheet and the amount of Closing
Working Capital, which amount shall not be less than the amount thereof shown in
Parent's calculation delivered pursuant to Section 3.5(a) nor more than the
amount thereof shown in Seller's calculation delivered pursuant to Section
3.5(b). If the parties so resolve all disputes, the Closing Balance Sheet and
the computation of Closing Working Capital, as amended to the extent necessary
to reflect the resolution of the dispute, shall be conclusive and binding on the
parties. If during such period, Parent and Seller are unable to reach an
agreement, they shall promptly thereafter cause Ernst & Young LLP (or if Ernst &
Young LLP is unable or unwilling to accept its mandate, an independent
nationally recognized accounting firm to be mutually agreed upon by Parent and
Seller, in either such case, the "Independent Accountant") to review this
Agreement and the disputed items or amounts for the purpose of determining the
proper amounts on the Closing Balance Sheet and calculating Closing Working
Capital (it being understood that in making such determination and calculation,
the Independent Accountant shall be functioning as an expert and not as an
20
arbitrator). In making such determination and calculation, the Independent
Accountant shall consider only those items or amounts in the Closing Balance
Sheet, the Closing Statement and Parent's calculation of Closing Working Capital
as to which Seller has disagreed. The Independent Accountant shall deliver to
Parent and Seller, as promptly as practicable (but in any case no later than
thirty days from the date of engagement of the Independent Accountant), a report
setting forth such determination and calculation, which amount shall not be less
than the amount thereof shown in Parent's calculation delivered pursuant to
Section 3.5(a) nor more than the amount thereof shown in Seller's calculation
delivered pursuant to Section 3.5(b). Such report shall be final and binding
upon Parent and Seller. The fees, costs and expenses of the Independent
Accountant's review and report shall be borne equally by Parent and Seller.
(d) Parent and Seller shall, and shall cause their respective
representatives to, cooperate and assist in the preparation of the Closing
Balance Sheet, the Closing Statement and the calculation of Closing Working
Capital and in the conduct of the review referred to in this Section 3.5,
including the making available to the extent necessary of books, records, work
papers and personnel.
(e) If Initial Closing Working Capital exceeds Final Working Capital,
Seller shall pay to Parent, in the manner and with interest as provided in
Section 3.5(f), the amount of such excess as an adjustment to the Purchase
Price, to the extent there are sufficient funds in the Indemnity Escrow Account,
by release of funds to Parent from the Indemnity Escrow Account by the Escrow
Agent in accordance with the Escrow Agreement. If Final Working Capital exceeds
Initial Closing Working Capital, Parent shall pay to Seller, in the manner and
with interest as provided in Section 3.5(f), the amount of such excess as an
adjustment to the Purchase Price. "Final Closing Balance Sheet" and "Final
Working Capital" mean, respectively, the Closing Balance Sheet and Closing
Working Capital (i) as shown in Parent's calculation delivered pursuant to
Section 3.5(a) if no notice of disagreement with respect thereto is duly
delivered pursuant to Section 3.5(b); or (ii) if such a notice of disagreement
is delivered, (A) as agreed by Parent and Seller pursuant to Section 3.5(c) or
(B) in the absence of such agreement, as shown in the Independent Accountant's
calculation delivered pursuant to Section 3.5(c); provided, however, that in no
event shall Final Working Capital be more than Seller's calculation of Closing
Working Capital delivered pursuant to Section 3.5(b) or less than Parent's
calculation of Closing Working Capital delivered pursuant to Section 3.5(a).
(f) Any payment pursuant to Section 3.5(e) shall be made within three
Business Days after Final Working Capital has been determined by wire transfer
by Parent or Seller, as the case may be, of immediately available funds to the
account of such other party as may be designated in writing by such other party
prior to such transfer. The amount of any payment to be made pursuant to this
Section 3.5 shall bear interest from and including the Closing Date to but
excluding the date of payment at a rate per annum equal to the rate of interest
published from time to time by The Wall Street Journal, Eastern Edition (under
the heading "Money Rates"), as the "prime rate" during the period from the
Closing Date to the date of payment. Such interest shall be payable at the same
time as the payment to which it relates and shall be calculated daily on the
basis of a year of 365 days and the actual number of days elapsed.
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3.6 Additional Contingent Consideration.
(a) In addition to the Purchase Price paid to Seller on the Closing
Date (as it may be adjusted), depending upon the market price of the Parent
Common Stock on the True-Up Date (as hereinafter defined), Parent shall, if
required hereunder, deliver to Seller additional consideration in the form of
certificates representing shares of Parent Common Stock registered in the names
of the Unitholders who hold, directly or as Escrowed Shares, Remaining Issued
Shares (as hereinafter defined), pro rata in accordance with their respective
percentage of Remaining Issued Shares held by them, directly or as Escrowed
Shares, immediately prior to the True-Up Date, and Seller shall promptly
distribute such certificates to such Unitholders. For purposes of determining
whether any such additional consideration shall be paid by Parent hereunder, on
the last day of the 13th full consecutive month following the Closing Date (the
"True-Up Date"), Parent shall deliver to Seller a schedule setting forth the
True-Up Market Price of the Parent Common Stock. For purposes hereof, "True-Up
Market Price" shall mean, with respect to the Parent Common Stock, on a per
share basis (as adjusted for any stock split, stock dividend, combination or
recapitalization), an amount equal to the average of the per share closing price
of Parent Common Stock on the American Stock Exchange (as reported by The Wall
Street Journal, Eastern Edition, or if not reported thereby, any other
authoritative source), for each of the trading days included in the ninety (90)
prior consecutive calendar days, ending with the calendar day immediately
preceding the True-Up Date.
(b) In the event that the product of (i) the True-Up Market Price and
(ii) the aggregate number of Closing Issued Shares (as adjusted for any stock
split, stock dividend, combination or recapitalization) is less than $70.5
million, Parent will issue to Seller certificates representing an additional
number of shares of Parent Common Stock registered in the names of the
Unitholders who hold, directly or as Escrowed Shares, Remaining Issued Shares,
which number of shares shall be calculated by Parent as follows:
(i) First, the "Target Share Price" shall be determined by
dividing (A) $70.5 million by (B) the aggregate number of Closing
Issued Shares (as adjusted for any stock split, stock dividend,
combination or recapitalization);
(ii) Second, the "Value Gap" shall be determined by multiplying
(A) the aggregate number of Closing Issued Shares (including without
duplication the Escrowed Shares, but excluding any Escrowed Shares
released to Parent in accordance with the terms of the Escrow
Agreement, and as adjusted for any stock split, stock dividend,
combination or recapitalization), less the number of any such Closing
Issued Shares (as so adjusted) transferred by the Unitholders (except
transfers by gift or into trust) on or after the Closing Date (the
"Remaining Issued Shares") by (B) the difference between (x) the
Target Share Price and (y) the higher of the True-Up Market Price or
$3.60 (as adjusted for any stock split, stock dividend, combination or
recapitalization); provided that the difference in subclause (B) is a
positive number, if not, then the "Value Gap" shall be zero; and
22
(iii) Third, the number of additional shares of Parent Common
Stock to be issued in accordance with this Section 3.6 (the "True-Up
Shares") shall be determined by dividing (A) the Value Gap by (B) the
higher of (x) the True-Up Market Price and (y) $3.60 (as adjusted for
any stock split, stock dividend, combination or recapitalization),
rounded to the nearest whole number.
(c) Certificates representing the True-Up Shares registered in the
names of the Unitholders who hold, directly or as Escrowed Shares, Remaining
Issued Shares shall be delivered by Parent to Seller no later than the 20th
Business Day following the True-Up Date and allocated among all of the
Unitholders who hold, directly or as Escrowed Shares, Remaining Issued Shares in
accordance with their respective percentage of Remaining Issued Shares held by
them immediately prior to the True-Up Date; provided, however, that no
fractional shares of Parent Common Stock will be issued hereunder; and, provided
further, however, that the total number of True-Up Shares to be registered in
the name of each Unitholder who holds, directly or as Escrowed Shares, Remaining
Issued Shares shall be rounded to the nearest whole number. Seller shall
promptly distribute the certificates representing such True-Up Shares to the
appropriate Unitholders.
ARTICLE IV
CLOSING AND TERMINATION
4.1 Closing Date. The consummation of the purchase and sale of the
Purchased Assets and the assumption of the Assumed Liabilities provided for in
Article II hereof (the "Closing") shall take place at the offices of Weil,
Gotshal & Xxxxxx LLP located at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx
00000 (or at such other place as the parties may designate in writing) at 10:00
a.m. (Dallas time) on a date to be specified by the parties (the "Closing
Date"), which date shall be no later than the third Business Day after
satisfaction or waiver of the conditions set forth in Article IX (other than
conditions that by their nature are to be satisfied at Closing, but subject to
the satisfaction or waiver of those conditions at such time), unless another
time, date or place is agreed to in writing by the parties hereto.
4.2 Termination of Agreement. This Agreement may be terminated prior
to the Closing as follows:
(a) At the election of Seller or Parent on or after May 15, 2006
(such date, as it may be extended under this Section 4.2(a), the "Termination
Date") if the Closing shall not have occurred by the close of business on such
date; provided, that the terminating party is not in material default of any of
its obligations hereunder; and provided further, that (A) either Parent or
Seller shall have the option to extend, from time to time, the Termination Date
for additional periods of time, not to exceed 60 days in the aggregate (or such
longer period as Parent and Seller may mutually agree) if all other conditions
to the Closing are satisfied or capable of then being satisfied and the sole
reason that the Closing has not been consummated is that the condition set forth
in Section 7.4 has not been satisfied due to the failure to obtain the necessary
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consents and approvals under applicable Laws or an Order of a Governmental Body
of competent jurisdiction shall be in effect and Parent, Purchaser or Seller are
still attempting to obtain such necessary consents and approvals under
applicable Laws, or are contesting (x) the refusal of the relevant Governmental
Body to give such consents or approvals, or (y) the entry of any such Order, in
court or through other applicable proceedings; and (B) the right to terminate
this Agreement pursuant to this Section 4.2(a) shall not be available to any
party whose breach of any provision of this Agreement has been the cause of, or
resulted, directly or indirectly, in, the failure of the Closing to be
consummated by the Termination Date;
(b) by mutual written consent of Seller and Parent;
(c) by written notice (i) from Parent to Seller that there has been
an event, change, occurrence or circumstance that, individually or in the
aggregate, with any other events, changes, occurrences or circumstances, has had
or could reasonably be expected to have a Material Adverse Effect or (ii) from
Seller to Parent that there has been an event, change, occurrence or
circumstance that, individually or in the aggregate, with any other events,
changes, occurrences or circumstances, has had or could reasonably be expected
to have a Parent Material Adverse Effect;
(d) by Seller or Parent if there shall be in effect a final
nonappealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; provided, however, that the right to terminate
this Agreement under this Section 4.2(d) shall not be available to a party if
such Order was primarily due to the failure of such party to perform any of its
obligations under this Agreement;
(e) by Parent, if Seller shall have breached or failed to perform any
of its representations, warranties, covenants or agreements set forth in this
Agreement, or if any representation or warranty of Seller shall have become
untrue, in either case such that the conditions set forth in Section 9.1(a) or
9.1(b) would not be satisfied and such breach is incapable of being cured or, if
capable of being cured, shall not have been cured within fifteen days following
receipt by Seller of notice of such breach from Parent;
(f) by Seller, if Parent shall have breached or failed to perform any
of its representations, warranties, covenants or agreements set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 9.2(a) or
9.2(b) would not be satisfied and such breach is incapable of being cured or, if
capable of being cured, shall not have been cured within fifteen days following
receipt by Parent of notice of such breach from Seller;
(g) by Parent if (i) a Seller Adverse Recommendation Change shall
have occurred or (ii) the Board of Managers of Seller or any committee thereof
(x) shall not have rejected any Takeover Proposal within fifteen (15) Business
Days of the making thereof (including, for these purposes, by taking no position
with respect to the acceptance by Seller's unitholders of a tender offer or
exchange offer, which shall constitute a failure to reject such Takeover
Proposal) or (y) shall have failed to publicly reconfirm the Seller Board
Recommendation within fifteen (15) Business Days after receipt of a written
request from Parent that it do so if such request is made following the making
by any Person of a Takeover Proposal;
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(h) by Seller or Parent if the Seller Unitholder Approval shall not
have been obtained at the Seller Unitholders Meeting duly convened therefor or
at any adjournment or postponement thereof; provided, however, that the right of
Seller to terminate this Agreement under this Section 4.2(h) shall not be
available to it if it has failed to comply in all material respects with its
obligations under Section 7.6 or 7.16(b);
(i) by Seller or Parent if the Parent Stockholder Approval shall not
have been obtained at the Parent Stockholders Meeting duly convened therefor or
at any adjournment or postponement thereof; provided, however, that the right of
Parent to terminate this Agreement under this Section 4.2(i) shall not be
available to it if it has failed to comply in all material respects with its
obligations under Section 7.16(c);
(j) by Parent on or before February 28, 2006, if (i) Parent's
Environmental Assessment (as defined in Section 7.11(a) below) at Seller's
properties shall have revealed any circumstances that could reasonably be
expected to result in (A) the criminal prosecution of Seller or any director,
officer or employee of Seller under Environmental Laws, (B) any suspension or
closure of operations at Seller's properties or facilities or the revocation or
termination of any material Environmental Permits or (C) any Environmental Costs
and Liabilities that, individually or in the aggregate, will or could reasonably
be expected to result in expenditures to cure in excess of the amounts reserved
therefor on the Balance Sheet by at least $2.75 million, or (ii) Parent's
operational due diligence review of Seller shall have revealed any deficiencies
in the Purchased Assets that indicate that Parent would not be able to continue
to operate the combined businesses of Parent and Seller for the year following
Closing at a capital expenditure cost equal to or less than 150% of the current
annual capital expenditure budgets of Parent and Seller, on a combined basis; or
(k) by Seller on or before February 28, 2006, if (i) Seller's
Environmental Assessment (as defined in Section 7.11(b) below) at Parent's
properties shall have revealed any circumstances that could reasonably be
expected to result in (A) the criminal prosecution of Parent or any director,
officer or employee of Parent under Environmental Laws, (B) any suspension or
closure of operations at Parent's properties or facilities or the revocation or
termination of any material Environmental Permits or (C) any Environmental Costs
and Liabilities that, individually or in the aggregate, will or could reasonably
be expected to result in expenditures to cure in excess of the amounts reserved
therefor on Parent's balance sheet as at October 1, 2005 by at least $2.75
million, or (ii) Seller's operational due diligence review of Parent shall have
revealed any deficiencies in Parent's assets that indicate that Parent would not
be able to continue to operate the combined businesses of Parent and Seller for
the year following Closing at a capital expenditure cost equal to or less than
150% of the current annual capital expenditure budgets of Parent and Seller, on
a combined basis.
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4.3 Procedure upon Termination. In the event of termination and
abandonment by Parent or Seller, or both, pursuant to Section 4.2 hereof,
written notice thereof shall forthwith be given to the other party or parties,
and this Agreement shall terminate, and the purchase of the Purchased Assets
hereunder shall be abandoned, without further action by Parent, Purchaser or
Seller.
4.4 Effect of Termination. In the event that this Agreement is
validly terminated as provided herein, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to
Parent, Purchaser or Seller; provided, however, that (a) if this Agreement is
terminated by Parent pursuant to Section 4.2(e), Seller, in addition to any
other Liabilities accruing hereunder shall be liable for and shall pay within
five Business Days of such termination the cost of (i) all filing or other fees
paid by Parent or Purchaser to any Governmental Body in respect of the
transactions contemplated by this Agreement and (ii) all out-of-pocket expenses
incurred by Parent or Purchaser in connection with the transactions contemplated
hereby; (b) if this Agreement is terminated by Parent pursuant to Section
4.2(g), Seller, in addition to any other Liabilities accruing hereunder or
otherwise, shall be liable as set forth in Section 4.5 hereof; (c) if this
Agreement is terminated by either Parent or Seller pursuant to Section 4.2(a)
and all other conditions to the Closing have been satisfied or are capable of
then being satisfied and the sole reason that the Closing has not been
consummated is that the condition set forth in Section 9.1(q) has not been
satisfied due to the failure of Purchaser to obtain the necessary Financing or
if this Agreement is terminated by Seller pursuant to Section 4.2(f), Parent, in
addition to any other Liabilities accruing hereunder shall be liable for and
shall pay within five (5) Business Days of such termination the cost of (i) all
filing or other fees paid by Seller to any Governmental Body in respect of the
transactions contemplated by this Agreement and (ii) all out-of-pocket expenses
incurred by Seller in connection with the transactions contemplated hereby; (d)
the obligations of the parties set forth in this Section 4.4, Section 4.5 and
Articles XIII hereof shall survive any such termination and shall be enforceable
hereunder; and (d) nothing in this Section 4.4 shall relieve Parent or Seller of
any Liability for a willful breach of this Agreement prior to the effective date
of such termination.
4.5 Termination Fee.
(a) In the event that this Agreement is terminated by Parent pursuant
to Section 4.2(g), then Seller shall pay to Parent a termination fee of $4.23
million in cash (the "Termination Fee"). In addition, Seller shall pay to Parent
all of the expenses of Parent, including all out-of-pocket fees and expenses
(including all reasonable fees and expenses of counsel, accountants, financial
advisors and investment bankers to a party hereto and its Affiliates), up to
$1.0 million in the aggregate, incurred by Parent in connection with or related
to the legal, financial and regulatory diligence of Seller and the
authorization, preparation, negotiation, execution and performance of this
Agreement, the preparation, printing, filing and mailing of the Joint Proxy
Statement and the Form S-4 and the prospectus contained therein, the filing of
any required notices under applicable Antitrust Laws or other regulations and
all other matters related to the transactions contemplated by this Agreement
(the "Expenses"). Such Expenses shall include, without limitation, fees and
related charges of accountants and consultants.
26
(b) Any payment required to be made pursuant to Section 4.5(a) shall
be made to Parent promptly following termination of this Agreement by Parent
pursuant to Section 4.2(g) (and in any event not later than two Business Days
after delivery to Seller of notice of demand for payment); and, with regard to
Expenses payable pursuant to Section 4.5(a) above, such payment shall be made to
Parent not later than two Business Days after delivery to Seller of an
itemization setting forth in reasonable detail all such Expenses of Parent
(which itemization may be supplemented and updated from time to time by such
party until the 60th day after such party delivers such notice of demand for
payment). All such payments shall be made by wire transfer of immediately
available funds to an account to be designated by Parent.
(c) In the event that Seller shall fail to pay the Termination Fee
and/or Expenses required pursuant to this Section 4.5 when due, such fee and/or
Expenses, as the case may be, shall accrue interest for the period commencing on
the date such Termination Fee and/or Expenses, as the case may be, became due,
at a rate equal to the rate of interest publicly announced by Citibank, in the
City of New York, from time to time during such period, as such bank's Prime
Lending Rate, plus 2%. In addition, if Seller shall fail to pay such fee and/or
Expenses, as the case may be, when due, Seller shall also pay to Parent all of
Parent's costs and expenses (including attorneys' fees and related charges) in
connection with efforts to collect such Termination Fee and/or Expenses, as the
case may be. Seller acknowledges that the Termination Fee, Expense and the other
provisions of this Section 4.5 are an integral part of this Agreement and that,
without these agreements, Parent would not enter into this Agreement.
(d) Seller acknowledges and agrees that in the event of a breach of
this Agreement, the payment of the Termination Fee and/or Expenses shall not
constitute the exclusive remedies available to Parent, and that Parent shall be
entitled to the remedies set forth in Section 13.2, including injunction and
specific performance, and all additional and other remedies available at law or
in equity to which Parent may be entitled.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Parent and Purchaser that,
except as set forth in the disclosure schedule (with specific reference to the
Section or subsection of this Agreement to which the information stated in such
disclosure schedule relates) delivered by Seller to Parent and Purchaser
simultaneously with the execution of this Agreement (the "Company Disclosure
Schedule"):
5.1 Organization and Good Standing; No Subsidiaries.
(a) Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Iowa and has all
requisite limited liability company power and authority to own, lease and
operate its properties and to carry on its business as now conducted and as
currently proposed to be conducted. Seller is duly qualified or authorized to do
27
business and is in good standing under the laws of each jurisdiction in which it
owns or leases real property and each other jurisdiction in which the conduct of
its business or the ownership of its properties requires such qualification or
authorization, except where the failure to be so qualified or authorized could
not have or reasonably be expected to have a Material Adverse Effect. Seller has
delivered to Parent true, complete and correct copies of its operating agreement
and By-laws as in effect on the date hereof.
(b) Except as set forth on Company Disclosure Schedule 5.1(b), Seller
does not, directly or indirectly, own any stock or other equity interest in any
other Person. No former Subsidiary of Seller had any operations, business,
Liabilities or other activities that would create a Liability on the part of
Seller.
5.2 Authorization of Agreement.
(a) Seller has all requisite power, authority and legal capacity to
execute and deliver this Agreement and Seller has all requisite power, authority
and legal capacity to execute and deliver each other agreement, document, or
instrument or certificate contemplated by this Agreement or to be executed by
Seller in connection with the transactions contemplated by this Agreement (the
"Seller Documents"), and, subject to obtaining the Seller Unitholder Approval,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and each of the Seller Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and approved by Seller's Board of Managers, and except for obtaining
the Seller Unitholder Approval, no other action on the part of Seller as an Iowa
limited liability company is necessary to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby. This
Agreement has been, and each of the Seller Documents will be, at or prior to the
Closing, duly and validly executed and delivered by Seller and (assuming the due
authorization, execution and delivery by Parent and Purchaser) this Agreement
constitutes, and each of the Seller Documents when so executed and delivered
will constitute, legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(b) The affirmative vote (in person or by proxy) of the holders of a
majority of the outstanding membership units of Seller at the Seller Unitholders
Meeting or any adjournment or postponement thereof in favor of the adoption of
this Agreement (the "Seller Unitholder Approval") is the only vote or approval
of the holders of any class or series of equity of Seller which is necessary to
adopt this Agreement and approve the transactions contemplated hereby.
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5.3 Conflicts; Consents of Third Parties.
(a) Except as set forth on Company Disclosure Schedule 5.3(a), and
assuming the Seller Unitholder Approval is obtained and the filings referred to
in Sections 5.3(b)(ii)(A) & (B) are made, none of the execution and delivery by
Seller of this Agreement or by Seller of the Seller Documents, the consummation
of the transactions contemplated hereby or thereby, or compliance by Seller with
any of the provisions hereof or thereof will conflict with, or result in any
violation or breach of, or conflict with or cause a default (with or without
notice or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or give rise to any obligation of Seller to make any payment under, or to
the increased, additional, accelerated or guaranteed rights or entitlements of
any Person under, or result in the creation of any Liens upon any of the
properties or assets of Seller under, any provision of (i) the operating
agreement and by-laws of Seller; (ii) any Contract or Permit to which Seller is
a party or by which any of the properties or assets of Seller are bound, except
as could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; (iii) any Order applicable to Seller or by which any of
the properties or assets of Seller are bound; or (iv) any applicable Law, except
as could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) No consent, waiver, approval, Permit or authorization of or
filing with, or notification to, any Person or Governmental Body is required on
the part of Seller in connection with (i) the execution and delivery of this
Agreement or the Seller Documents, the compliance by Seller with any of the
provisions hereof and thereof, the consummation of the transactions contemplated
hereby and thereby or the taking by Seller of any other action contemplated
hereby or thereby, or (ii) the continuing validity and effectiveness immediately
following the Closing of any Contract or Permit of Seller, except (A) for the
filing with the SEC of the Form S-4 and other filings required under, and
compliance with other applicable requirements of, the Securities Act and the
Exchange Act, (B) for filings required under and compliance with the applicable
requirements of the HSR Act, (C) as set forth on Company Disclosure Schedule
5.3(b) and (D) as could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect.
5.4 Financial Statements.
(a) Seller has delivered to Parent copies of (i) the audited balance
sheets of Seller as at January 1, 2005, January 3, 2004 and December 28, 2002
and the related audited statements of income and of cash flows of Seller for the
years then ended and (ii) the unaudited balance sheet of Seller as at October 1,
2005 and the related statement of income and cash flows of Seller for the nine
month period then ended (such audited and unaudited statements, including the
related notes and schedules thereto, are referred to herein as the "Financial
Statements"). Each of the Financial Statements is complete and correct in all
material respects, has been prepared in accordance with GAAP consistently
applied (except with respect to the unaudited financial statements for normal
recurring year-end adjustments that, individually or in the aggregate, would not
29
be material) without modification of the accounting principles used in the
preparation thereof throughout the periods presented and presents fairly in all
material respects the consolidated financial position, results of operations and
cash flows of Seller as at the dates and for the periods indicated.
For the purposes hereof, the unaudited balance sheet of Seller as at
October 1, 2005 is referred to as the "Balance Sheet" and October 1, 2005 is
referred to as the "Balance Sheet Date."
(b) Seller makes and keeps books, records and accounts which, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of its assets. Seller maintains systems of internal accounting
controls sufficient to provide reasonable assurances that: (i) transactions are
executed in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with GAAP and to maintain accountability for assets;
(iii) access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
(c) Seller's principal executive officer and its principal financial
officer have disclosed, based on their most recent evaluation, to Seller's
auditors and the audit committee of the Board of Managers of Seller (i) all
significant deficiencies in the design or operation of internal controls which
could adversely affect Seller's ability to record, process, summarize and report
financial data and have identified for Seller's auditors any material weaknesses
in internal controls and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in Seller's internal
controls.
(d) Seller has established and maintains disclosure controls and
procedures designed to ensure that material information relating to Seller is
made known to Seller's principal executive officer and its principal financial
officer by others within those entities; and, to the Knowledge of Seller, such
disclosure controls and procedures are effective in timely alerting Seller's
principal executive officer and its principal financial officer to material
information.
(e) Seller's records, systems, controls, data and information are
recorded, stored, maintained and operated under the exclusive ownership and
direct control of it and Seller's accountants. Seller maintains a system of
internal accounting controls sufficient to provide reasonable assurances
regarding the reliability of financial reporting and the preparation of
financial statements in accordance with GAAP.
5.5 No Undisclosed Liabilities. Except as set forth on Company
Disclosure Schedule 5.5, Seller has no Indebtedness or Liabilities (whether or
not required under GAAP to be reflected on a balance sheet or the notes thereto)
other than those (i) specifically reflected in, fully reserved against or
otherwise described in the Balance Sheet or the notes thereto, (ii) incurred in
the Ordinary Course of Business since the Balance Sheet Date, or (iii) that are
immaterial, individually or in the aggregate, to Seller.
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5.6 Title to Purchased Assets; Sufficiency. Seller owns and has good
title to each of the Purchased Assets (except as could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect)
free and clear of all Liens other than Permitted Exceptions. The Purchased
Assets constitute all of the Properties used in or held for use in the Business
and are sufficient for Purchaser to conduct the Business from and after the
Closing Date without interruption and in the Ordinary Course of Business, as it
has been conducted by Seller.
5.7 Absence of Certain Developments. Except as expressly contemplated
by this Agreement or as set forth on Company Disclosure Schedule 5.7, since the
Balance Sheet Date, (a) Seller has conducted the Business only in the Ordinary
Course of Business and (b) there has not been any event, change, occurrence or
circumstance that, individually or in the aggregate, with any other events,
changes, occurrences or circumstances, has had or could reasonably be expected
to have a Material Adverse Effect. Without limiting the generality of the
foregoing, since the Balance Sheet Date or as set forth on Company Disclosure
Schedule 5.7:
(i) there has not been any damage, destruction or loss, whether
or not covered by insurance, with respect to the Purchased Assets
having a replacement cost of more than $500,000 for any single loss or
$1.0 million for all such losses;
(ii) other than in the Ordinary Course of Business, Seller has
not awarded or paid any bonuses to Former Employees or Employees of
Seller, except to the extent accrued on the Balance Sheet, or entered
into any employment, deferred compensation, long-term incentive,
severance, stay bonus, bonus, or similar agreement (nor amended any
such agreement) or agreed to increase the compensation payable or to
become payable by it to any of Seller's directors, officers,
employees, agents or representatives or agreed to increase the
coverage or benefits available under any severance pay, termination
pay, vacation pay, company awards, salary continuation for disability,
sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with such directors, officers,
employees, agents or representatives;
(iii) there has not been any change by Seller in accounting or
Tax reporting principles, methods or policies;
(iv) Seller has not failed to promptly pay and discharge current
Liabilities except for Liabilities not material in amount that are
disputed in good faith by appropriate proceedings and for which proper
reserve has been made on the Balance Sheet;
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(v) Seller has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person,
other than advances to Employees in the Ordinary Course of Business;
(vi) Seller has not mortgaged, pledged or subjected to any Lien
any of its assets, or acquired any assets or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets of
Seller, except for assets acquired or sold, assigned, transferred,
conveyed, subjected to any Lien or otherwise disposed of in the
Ordinary Course of Business;
(vii) Seller has not discharged or satisfied any Lien, or paid
any Liability, except in the Ordinary Course of Business;
(viii) Seller has not canceled or compromised any debt or claim
or amended, modified, canceled, terminated, relinquished, waived or
released any Contract or right except in the Ordinary Course of
Business and which, in the aggregate, would not be material to Seller;
(ix) Seller has not issued, created, incurred, assumed or
guaranteed any Indebtedness, except in the Ordinary Course of
Business;
(x) Seller has not made or committed to make any capital
expenditures (a) in excess of planned capital expenditures budgeted
for the current fiscal year and as reasonably deemed to be necessary
by Seller for next fiscal year consistent with prior practice or (b)
which require any payment that may or will extend beyond the Closing
Date;
(xi) Seller has not instituted or settled any material Legal
Proceeding resulting in a loss of revenue in excess of $50,000
individually or in amounts exceeding $100,000 in the aggregate;
(xii) Seller has not granted any license or sublicense of any
rights under or with respect to any Purchased Intellectual Property or
Purchased Technology;
(xiii) Seller has not made any loan to, or entered into any other
transaction with, any of its Unitholders, Affiliates, officers,
directors, partners or employees, except for any advances made to
Employees in the Ordinary Course of Business; and
(xiv) Seller has not agreed, committed, arranged or entered into
any understanding to do anything set forth in this Section 5.7.
5.8 Taxes.
(a) (i) All income, franchise and all other material Tax Returns
required to be filed by or on behalf of Seller, any Subsidiary or any
affiliated, consolidated, combined or unitary group of which Seller or any
Subsidiary is or was a member have been duly and timely filed with the
appropriate Taxing Authority in all jurisdictions in which such Tax Returns are
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required to be filed (after giving effect to any valid extensions of time in
which to make such filings), and all such Tax Returns are true, complete and
correct in all material respects; and (ii) all income, franchise and other
material Taxes payable by or on behalf of Seller, any Subsidiary or any
affiliated, consolidated, combined or unitary group of which Seller or any
Subsidiary is or was a member have been fully and timely paid. With respect to
any period for which Taxes are not yet due or owing, Seller has made due and
sufficient accruals for such Taxes in the Financial Statements and its books and
records. All required estimated Tax payments sufficient to avoid any material
underpayment penalties or interest have been made by or on behalf of Seller.
(b) Purchaser has received complete copies of (i) all income,
franchise and all other material Tax Returns of or including Seller and any
Subsidiary relating to the taxable periods ending on or after December 31, 2001
and (ii) any audit report issued after December 31, 2001 relating to any Taxes
due from or with respect to Seller or any Subsidiary.
(c) Company Disclosure Schedule 5.8 lists (i) all material types of
Taxes paid, and all types of Tax Returns filed by or on behalf of Seller or any
Subsidiary, and (ii) all of the jurisdictions that impose such Taxes or with
respect to which Seller or any Subsidiary has a duty to file such Tax Returns.
No claim has been made by a Taxing Authority in a jurisdiction where Seller or
any Subsidiary does not file Tax Returns such that it is or may be subject to
taxation by that jurisdiction.
(d) All deficiencies asserted or assessments made as a result of any
examinations by any Taxing Authority of the Tax Returns of, or including, Seller
or any Subsidiary have been fully paid, and there are no audits or
investigations of Seller or any Subsidiary by any Taxing Authority in progress,
nor has Seller or any Subsidiary received any written notice from any Taxing
Authority that it intends to conduct such an audit or investigation. No issue
has been raised by a Taxing Authority in any prior examination of Seller or any
Subsidiary that, by application of the same or similar principles, could
reasonably be expected to result in a material proposed deficiency for any
subsequent taxable period.
(e) Seller has complied in all material respects with all applicable
Laws relating to the payment and withholding of Taxes and has duly and timely
withheld and paid over to the appropriate Taxing Authority all amounts required
to be so withheld and paid under all applicable Laws.
(f) Neither Seller nor any Subsidiary nor any other Person on its
behalf has (i) executed or entered into a closing agreement pursuant to Section
7121 of the Code or any similar provision of Law with respect to Seller or any
Subsidiary that would be binding on the Purchaser after the Closing Date, (ii)
requested any extension of time within which to file any income, franchise or
other material Tax Return, which Tax Return has since not been filed, (iii)
granted any extension for the assessment or collection of any income, franchise
or other material Taxes, which Taxes have not since been paid, or (iv) granted
to any Person any power of attorney that is currently in force with respect to
any Tax matter that would be binding on the Purchaser after the Closing Date.
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(g) Neither Seller nor any Subsidiary is a party to any tax sharing,
allocation, indemnity or similar agreement or arrangement (whether or not
written) pursuant to which it will have any obligation to make any payments
after the Closing.
(h) No Contract is a contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by Purchaser, Seller or any
of their respective Affiliates by reason of Section 280G of the Code or be
subject to Section 4999 of the Code.
(i) There are no Liens for Taxes upon the Purchased Assets, except
for Permitted Exceptions.
(j) National By-Products, Inc., a C corporation, ceased to exist when
it merged with and into Seller on January 11, 2002. Since January 11, 2002,
Seller has (i) been properly treated as a partnership for Federal, state and
local income Tax purposes, and has not made an election, by IRS Form 8832 or
otherwise, to be treated as a corporation and (ii) has not been a "publicly
traded partnership" within the meaning of Section 7704 of the Code.
(k) Seller is not a "foreign person" within the meaning of Section
1445 of the Code.
(l) Neither Seller nor any Subsidiary is subject to any private
letter ruling of the IRS or any comparable ruling of any Taxing Authority that
would be binding on Purchaser after the Closing Date.
(m) None of the Purchased Assets is (i) property required to be
treated as being owned by another Person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
"tax-exempt use property" within the meaning of Section 168(h)(1) of the Code,
(iii) "tax-exempt bond financed property" within the meaning of Section 168(g)
of the Code, (iv) "limited use property" within the meaning of Rev. Proc.
2001-28, (v) subject to Section 168(g)(1)(A) of the Code, or (vi) subject to any
provision of state, local or foreign Law comparable to any of the provisions
listed above.
(n) Neither Seller nor any Subsidiary has ever been a member of any
consolidated, combined, affiliated or unitary group of corporations for any Tax
purposes other than a group in which Seller is the common parent.
(o) Neither Seller nor any Subsidiary has constituted either a
"distributing corporation" or a "controlled corporation" (within the meaning of
Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (A) in the two years prior to
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the date of this Agreement or (B) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in conjunction with the transactions
contemplated by this Agreement.
(p) Seller and each Subsidiary has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code.
(q) Neither Seller nor any Subsidiary has or has ever had a permanent
establishment in any jurisdiction other than the United States, or has engaged
in a trade or business in any jurisdiction other than the United States that
subjected it to tax in such country.
(r) Seller has not participated in any "reportable transaction" as
defined in Treasury regulation Section 1.6011-4(b).
Notwithstanding the foregoing, for purposes of this Section 5.8, any
reference to Seller or any Subsidiary shall be deemed to include any Person that
merged with or was liquidated into Seller or any Subsidiary.
5.9 Real Property.
(a) Company Disclosure Schedule 5.9(a)(i)(A) sets forth a complete
list of (i) all real property and interests in real property, including
improvements thereon and easements appurtenant thereto, owned in fee by Seller
(individually, an "Owned Property" and collectively, the "Owned Properties"),
and (ii) all real property and interests in real property leased, licensed or
subleased by Seller (individually, a "Real Property Lease" and collectively, the
"Real Property Leases" and, together with the Owned Properties, being referred
to herein individually as a "Seller Property" and collectively as the "Seller
Properties") as lessee or lessor, licensee or licensor, including a description
of each such Real Property Lease (including the name of the third party lessor
or lessee, the date of the lease or sublease and all amendments thereto and the
manner in which such interest is held) and the property encumbered thereby. The
properties listed on Company Disclosure Schedule 5.9(a)(i)(B) are referred to
herein as the "Excluded Properties." Seller has good and marketable fee title to
all Owned Property (other than the owned Excluded Properties), free and clear of
all Liens of any nature whatsoever, except (A) those Liens set forth on Company
Disclosure Schedule 5.9(a)(i)(A) and (B) Permitted Exceptions. The Seller
Properties and the Excluded Properties constitute all interests in real property
currently used, occupied or currently held for use in connection with the
Business of Seller and which are necessary for the continued operation of the
Business of Seller as the Business is currently conducted. All of the Seller
Properties and the Excluded Properties and buildings, fixtures and improvements
thereon owned or leased by Seller taken as a whole (i) are in reasonably good
operating condition (ordinary wear and tear excepted), and all mechanical and
other systems located thereon, taken as a whole, are in reasonably good
operating condition, in each case in all material respects, except for repairs,
35
maintenance and replacements necessary in the Ordinary Course of Business, and
(ii) were constructed and have been operated in compliance with applicable Law,
except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Except as set forth on Company Disclosure
Schedule 5.9(a)(ii) and except as could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, none of the
improvements located on the Seller Properties constitute a legal non-conforming
use or otherwise require any special dispensation, variance or special permit
under any Laws. Seller has delivered to Parent true, correct and complete copies
of (i) all deeds, title reports and surveys for the Owned Properties and (ii)
the Real Property Leases, together with all amendments, modifications or
supplements, if any, thereto. Seller Properties are not subject to any leases,
rights of first refusal, options to purchase or rights of occupancy, except the
Real Property Leases and those set forth on Company Disclosure Schedule
5.9(a)(iii).
(b) Except as set forth on Company Disclosure Schedule 5.9(b), (i)
Seller has a valid, binding and enforceable leasehold interest or license under
each of the Real Property Leases (other than the leased Excluded Properties)
under which it is a lessee or licensee, free and clear of all Liens other than
Permitted Exceptions, (ii) each of the Real Property Leases is in full force and
effect, (iii) Seller is not in default under any Lease, and no event has
occurred and no circumstance exists which, if not remedied, and whether with or
without notice or the passage of time or both, would result in such a default,
and (iv) Seller has not received or given any notice of any default or event
that with notice or lapse of time, or both, would constitute a default by Seller
under any of the Real Property Leases and, to the Knowledge of Seller, no other
party is in default thereof, and no party to any Real Property Lease has
exercised any termination rights with respect thereto.
(c) Seller has all material certificates of occupancy and Permits of
any Governmental Body necessary or useful for the current use and operation of
each Seller Property, and Seller has fully complied with all material conditions
of the Permits applicable to them. No material default or violation, or event
that with the lapse of time or giving of notice or both would become a material
default or violation, has occurred in the due observance of any Permit. Seller
has not received any notice that any certificate of occupancy or Permit will not
be renewed at the end of its current term, and Seller is not aware of any facts
that would cause a denial of any renewal application.
(d) There does not exist any actual or, to the Knowledge of Seller,
threatened or contemplated condemnation or eminent domain proceedings that
affect any Seller Property or any part thereof, and Seller has not received any
notice, oral or written, of the intention of any Governmental Body or other
Person to take or use all or any part thereof.
(e) Seller has not received any notice from any insurance company
that has issued a policy with respect to any Seller Property requiring
performance of any structural or other repairs or alterations to such Seller
Property.
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(f) Except as to the Excluded Assets, Seller does not own, hold, and
is not obligated under and is not a party to, any option, right of first refusal
or other contractual right to purchase, acquire, sell, assign or dispose of any
real estate or any portion thereof or interest therein. None of the Seller
Properties is subject to any option, right of first refusal or other contractual
right to purchase, acquire, sell or dispose of same.
5.10 Tangible Personal Property.
(a) Seller has good and marketable title to all of the items of
tangible personal property used in the Business by Seller (except as sold or
disposed of subsequent to the date hereof in the Ordinary Course of Business and
not in violation of this Agreement), free and clear of any and all Liens, other
than Permitted Exceptions. All such items of tangible personal property taken as
a whole are in reasonably good operating condition (ordinary wear and tear
excepted) and are suitable for the purposes used, in each case in all materials
respects, except for repairs, maintenance and replacements necessary in the
Ordinary Course of Business.
(b) Company Disclosure Schedule 5.10 sets forth all leases of
personal property ("Personal Property Leases") involving annual payments in
excess of $25,000 relating to personal property used by Seller in the Business
or to which Seller is a party or by which the properties or assets of Seller is
bound. All of the items of personal property under the Personal Property Leases
taken as a whole are in reasonably good operating condition and repair (ordinary
wear and tear excepted) and are suitable for the purposes used, and such
property is in all material respects in the condition required of such property
by the terms of the lease applicable thereto during the term of the lease, in
each case, except for repairs, maintenance and replacements necessary in the
Ordinary Course of Business. Seller has delivered to the Parent true, correct
and complete copies of the Personal Property Leases, together with all
amendments, modifications or supplements thereto.
(c) Except as could not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, (i) Seller has a valid, binding
and enforceable leasehold interest under each of the Personal Property Leases
under which it is a lessee and (ii) each of the Personal Property Leases is in
full force and effect and Seller has not received or given any notice of any
default or event that with notice or lapse of time, or both, would constitute a
default by Seller under any of the Personal Property Leases. To the Knowledge of
Seller, no other party is in default under any of the Personal Property Leases,
and no party to any of the Personal Property Leases has exercised any
termination rights with respect thereto.
5.11 Intellectual Property.
(a) Company Disclosure Schedule 5.11(a) sets forth an accurate and
complete list of all Patents, registered Marks, pending applications for
registration of Marks, unregistered Marks, registered Copyrights, pending
applications for registration of Copyrights and Internet domain names owned or
filed by Seller and included in the Purchased Intellectual Property. Company
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Disclosure Schedule 5.11(a) lists (i) the record owner of each such item of
Purchased Intellectual Property, (ii) the jurisdictions in which each such item
of Purchased Intellectual Property has been issued or registered or in which any
such application for issuance or registration has been filed and (iii) the
registration or application date, as applicable.
(b) Except as disclosed in Company Disclosure Schedule 5.11(b),
Seller is the sole and exclusive owner of all right, title and interest in and
to, or has the valid and continuing right to use, all of the Purchased
Intellectual Property listed or that should be listed in Company Disclosure
Schedule 5.11(a). To the Knowledge of Seller, Seller is the sole and exclusive
owner of, or has valid and continuing rights to use, sell, license and otherwise
commercially exploit, as the case may be, all other Purchased Intellectual
Property and all Purchased Technology as the same are used, sold, licensed and
otherwise commercially exploited in the Business as presently conducted, free
and clear of all Liens or obligations to others (except for those specified
Intellectual Property Licenses included in Company Disclosure Schedule 5.12(a)).
(c) The Purchased Intellectual Property, the Purchased Technology,
the manufacturing, licensing, marketing, importation, offer for sale, sale or
use of any products and services in connection with the Business as presently
and as currently proposed to be conducted, and the present and currently
proposed business practices, methods and operations of Seller do not infringe,
constitute an unauthorized use or misappropriation of, dilute or violate any
Intellectual Property or other right of any Person. The Purchased Intellectual
Property, the Purchased Technology and the Intellectual Property Licenses
include all of the Intellectual Property and Technology necessary and sufficient
to enable Seller to conduct the Business in the manner in which such Business is
currently being conducted.
(d) To the Knowledge of Seller, no Person is infringing, violating,
misusing, diluting or misappropriating any Purchased Intellectual Property or
Purchased Technology, and no such claims have been made against any Person by
Seller.
(e) No Trade Secret material to the Business as presently conducted
has been authorized to be disclosed or has been actually disclosed by Seller to
any of its Former Employees, Employees or any third Person other than pursuant
to a non-disclosure agreement restricting the disclosure and use of the
Purchased Intellectual Property and Purchased Technology. Seller has taken
adequate security measures to protect the confidentiality and value of all the
material Trade Secrets included in the Purchased Intellectual Property and any
other non-public, proprietary information included in the Purchased Technology,
which measures are reasonable in the industry in which the Business operates.
(f) As of the date hereof, Seller is not the subject of any pending
or, to the Knowledge of Seller, threatened Legal Proceedings which involve a
claim of infringement, unauthorized use, misappropriation, dilution or violation
by any Person against Seller or challenging the ownership, use, validity or
enforceability of any Purchased Intellectual Property or Purchased Technology.
Seller has not received written (including by electronic mail) notice of any
38
such threatened claim and, to the Knowledge of Seller, there are no facts or
circumstances that would form the basis for any such claim or challenge. The
Purchased Intellectual Property and the Purchased Technology, and all of
Seller's rights in and to the Purchased Intellectual Property and Purchased
Technology, are valid and enforceable.
(g) The consummation of the transactions contemplated hereby will not
result in the loss or impairment of Purchaser's right to own or use any of the
Purchased Intellectual Property or Purchased Technology.
(h) Neither this Agreement nor any transaction contemplated by this
Agreement will result in the grant of any license with respect to any Purchased
Intellectual Property or Purchased Technology to any third Person pursuant to
any Contract to which Seller is a party or by which any assets or properties of
Seller is bound.
(i) Company Disclosure Schedule 5.11(i) sets forth a complete and
accurate list of (i) all Software included in the Purchased Technology developed
by or for Seller, (ii) all Software exclusively owned by Seller that is not
included in the Purchased Technology but is incorporated, embedded or bundled
with any Software listed in subclause (i) above and (iii) all Software not
exclusively owned by Seller and incorporated, embedded or bundled with any
Software listed in subclause (i) above (excluding such Software licensed to
Seller under a shrink-wrap or click-through agreement on reasonable terms
through commercial distributors or in consumer retail stores for a license fee
of no more than $10,000). Seller has not incorporated any "open source,"
"freeware," "shareware" or other Software having similar licensing or
distribution models in any Software developed, licensed, distributed or
otherwise exploited by or for Seller and included in the Purchased Technology.
(j) Seller has not licensed or provided to any third Person, or
otherwise permitted any third Person to access or use, any source code or
related materials for any Software developed by or for Seller and included in
the Purchased Technology. Seller is not currently a party to any source code
escrow agreement or any other agreement (or a party to any agreement obligating
Seller to enter into a source code escrow agreement or other agreement)
requiring the deposit of source code or related materials for any such Software.
5.12 Material Contracts.
(a) Company Disclosure Schedule 5.12(a) sets forth, by reference to
the applicable subsection of this Section 5.12(a), all of the following
Contracts to which Seller is a party or by which it or its assets or properties
are bound (collectively, the "Material Contracts"):
(i) Contracts with any current or former officer, director,
member or Affiliate of Seller;
(ii) Contracts with any labor union or association representing
any Employee of Seller;
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(iii) Contracts for the sale of any of the assets of Seller other
than in the Ordinary Course of Business or for the grant to any Person
of any preferential rights to purchase any of its assets;
(iv) Contracts for joint ventures, strategic alliances,
partnerships, or sharing of profits or proprietary information;
(v) Contracts containing covenants of Seller not to compete in
any line of business or with any Person in any geographical area or
not to solicit or hire any Person with respect to employment or
covenants of any other Person not to compete with Seller in any line
of business or in any geographical area or not to solicit or hire any
Person with respect to employment;
(vi) Contracts relating to the acquisition (by merger, purchase
of stock or assets or otherwise) by Seller of any operating business
or material assets or the capital stock of any other Person;
(vii) Contracts relating to the incurrence, assumption or
guarantee of any Indebtedness or imposing a Lien on any of the assets
of Seller, including indentures, guarantees, loan or credit
agreements, sale and leaseback agreements, purchase money obligations
incurred in connection with the acquisition of property, mortgages,
pledge agreements, security agreements, or conditional sale or title
retention agreements;
(viii) each purchase Contract giving rise to Liabilities of
Seller in excess of $100,000;
(ix) each Contract providing for payments by or to Seller in
excess of $100,000 in any fiscal year or $250,000 in the aggregate
during the term thereof;
(x) all Contracts obligating Seller to provide or obtain products
or services for a period of one year or more or requiring Seller to
purchase or sell a stated portion of its requirements or outputs;
(xi) Contracts under which Seller has made advances or loans to
any other Person, except advances to Employees of Seller in the
Ordinary Course of Business;
(xii) Contracts providing for severance, retention, change in
control or other similar payments;
(xiii) Contracts for the employment of any individual on a
full-time, part-time or consulting or other basis providing annual
compensation in excess of $100,000;
(xiv) management Contracts and Contracts with independent
contractors or consultants (or similar arrangements) in excess of
$100,000 that are not cancelable without penalty or further payment
and without more than 30 days' notice;
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(xv) outstanding Contracts of guaranty, surety or
indemnification, direct or indirect, by Seller;
(xvi) Contracts (or group of related contracts) which involve the
expenditure of more than $100,000 annually or $250,000 in the
aggregate or require performance by any party more than one year from
the date hereof;
(xvii) All Intellectual Property Licenses, royalty Contracts and
other Contracts relating to any Intellectual Property (except licenses
pertaining to "off-the-shelf" commercially available Software used
pursuant to shrink-wrap or click-through license grants on reasonable
terms for a license fee of no more than $10,000); and
(xviii) Contracts that are otherwise material to Seller.
(b) Each of the Material Contracts is in full force and effect and is
the legal, valid and binding obligation of Seller, and of the other parties
thereto, enforceable against each of them in accordance with its terms and, upon
consummation of the transactions contemplated by this Agreement, shall, except
as otherwise stated in Company Disclosure Schedule 5.12(b), continue in full
force and effect without penalty or other adverse consequence. Seller is not in
material default under any Material Contract, nor, to the Knowledge of Seller,
is any other party to any Material Contract in breach of or default thereunder,
and no event has occurred that with the lapse of time or the giving of notice or
both would constitute a material breach or default by Seller or any other party
thereunder. No party to any of the Material Contracts has exercised any
termination rights with respect thereto, and no such party has given notice of
any significant dispute with respect to any Material Contract. Seller has, and
will transfer to Purchaser at the Closing, good and valid title to the Material
Contracts, free and clear of all Liens other than Permitted Exceptions. Seller
has delivered to Parent true, correct and complete copies of all of the Material
Contracts, together with all amendments, modifications or supplements thereto.
(c) Company Disclosure Schedule 5.12(c) sets forth a complete and
accurate list of all consents, waivers, approvals or authorizations of any
Person required to transfer the Material Contracts.
5.13 Employee Benefits.
(a) Company Disclosure Schedule 5.13(a) sets forth a complete and
correct list of: (i) all "employee benefit plans", as defined in Section 3(3) of
ERISA, and all other employee benefit arrangements or payroll practices,
including bonus plans, consulting or other compensation agreements, incentive,
equity or equity-based compensation, or deferred compensation arrangements,
stock purchase, severance pay, sick leave, vacation pay, salary continuation,
disability, hospitalization, medical insurance, life insurance, scholarship
programs maintained by Seller or to which Seller contributed or is obligated to
41
contribute thereunder for current or former employees of Seller or that cover
Employees of Seller (the "Employee Benefit Plans"), and (ii) all "employee
pension plans", as defined in Section 3(2) of ERISA, subject to Title IV of
ERISA or Section 412 of the Code, maintained by Seller and any trade or business
(whether or not incorporated) which are or have ever been under common control,
or which are or have ever been treated as a single employer, with Seller under
Sections 414(b), (c), (m) or (o) of the Code ("ERISA Affiliate") or to which
Seller and any ERISA Affiliate contributed or has ever been obligated to
contribute thereunder (the "ERISA Affiliate Plans"). Company Disclosure Schedule
5.13(a) separately sets forth each Seller or ERISA Affiliate Plan which is a
multiemployer plan as defined in Section 3(37) of ERISA ("Multiemployer Plans"),
or has been subject to Sections 4063 or 4064 of ERISA ("Multiple Employer
Plans").
(b) True, correct and complete copies of the following documents,
with respect to each of the Employee Benefit Plans and ERISA Affiliate Plans (as
applicable), have been delivered to Parent (A) any plans and related trust
documents, and all amendments thereto, (B) the most recent Forms 5500 for the
past three (3) years and schedules thereto, (C) the most recent financial
statements and actuarial valuations for the past three (3) years, (D) the most
recent IRS determination letter, (E) the most recent summary plan descriptions
(including letters or other documents updating such descriptions) and (F)
written descriptions of all non-written agreements relating to the Employee
Benefit Plans and ERISA Affiliate Plans.
(c) Each of the Employee Benefit Plans and ERISA Affiliate Plans
intended to qualify under Section 401 of the Code ("Qualified Plans") so qualify
and the trusts maintained thereto are exempt from federal income taxation under
Section 501 of the Code, and, except as disclosed on Company Disclosure Schedule
5.13(c), nothing has occurred with respect to the operation of any such plan
which could cause the loss of such qualification or exemption or the imposition
of any liability, penalty or tax under ERISA or the Code.
(d) Except as reserved against or accrued on the Balance Sheet and
the Estimated Closing Balance Sheet, all contributions and premiums required by
Law or by the terms of any Employee Benefit Plan or ERISA Affiliate Plan or any
agreement relating thereto have been timely made (without regard to any waivers
granted with respect thereto) to any funds or trusts established thereunder or
in connection therewith, and no accumulated funding deficiencies exist in any of
such plans subject to Section 412 of the Code, which are single employer plans,
and all contributions for any period ending on or before the Closing Date which
are not yet due will have been paid or accrued on the Estimated Closing Balance
Sheet.
(e) The benefit liabilities, as defined in Section 4001(a)(16) of
ERISA, of each of the Employee Benefit Plans and ERISA Affiliate Plans subject
to Title IV of ERISA using the actuarial assumptions that would be used by the
Pension Benefit Guaranty Corporation (the "PBGC") in the event it terminated
each such plan, do not exceed the combination of the fair market value of the
assets of each such plan plus the liabilities accrued on the Balance Sheet and
the Estimated Closing Balance Sheet. The liabilities of each Employee Benefit
42
Plan that has been terminated or otherwise wound up have been fully discharged
in full compliance with applicable Law. To the Knowledge of Seller, the amount
of withdrawal liability that Seller and its ERISA Affiliates would incur, in the
aggregate, as a result of a complete withdrawal from each of the Multiemployer
Plans set forth on Company Disclosure Schedule 5.13(a) would not exceed
$3,000,000 for all such plans.
(f) There has been no "reportable event" as that term is defined in
Section 4043 of ERISA and the regulations thereunder with respect to any of the
Employee Benefit Plans or ERISA Affiliate Plans subject to Title IV of ERISA
which would require the giving of notice, or any event requiring notice to be
provided under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(g) Neither Seller nor any ERISA Affiliate or any organization to
which Seller or any ERISA Affiliate is a successor or parent corporation, within
the meaning of Section 4069(b) of ERISA, has engaged in any transaction, within
the meaning of Section 4069 of ERISA.
(h) None of the Employee Benefit Plans which are "welfare benefit
plans" within the meaning of Section 3(1) of ERISA provide for continuing
benefits or coverage for any participant or any beneficiary of a participant
post-termination of employment except as may be required under COBRA and at the
expense of the participant or the participant's beneficiary. Each of Seller and
any ERISA Affiliate which maintains a "group health plan" within the meaning of
Section 5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder.
(i) There has been no violation of ERISA or the Code with respect to
the filing of applicable returns, reports, documents and notices regarding any
of the Employee Benefit Plans or ERISA Affiliate Plans with the Secretary of
Labor or the Secretary of the Treasury or the furnishing of such notices or
documents to the participants or beneficiaries of the Employee Benefit Plans or
ERISA Affiliate Plans.
(j) There are no pending Legal Proceedings which have been asserted
or instituted against any of the Employee Benefit Plans or ERISA Affiliate
Plans, the assets of any such plans or Seller, or the plan administrator or any
fiduciary of the Employee Benefit Plans or ERISA Affiliate Plans with respect to
the operation of such plans (other than routine, uncontested benefit claims),
and, to the Knowledge of Seller, there are no facts or circumstances which could
form the basis for any such Legal Proceeding.
(k) Each of the Employee Benefit Plans and ERISA Affiliate Plans has
been maintained, in all material respects, in accordance with its terms and all
provisions of applicable Law. All amendments and actions required to bring each
of the Employee Benefit Plans and ERISA Affiliate Plans into conformity in all
material respects with all of the applicable provisions of ERISA and other
applicable Laws have been made or taken except to the extent that such
amendments or actions are not required by law to be made or taken until a date
after the Closing Date and are disclosed on Company Disclosure Schedule 5.13(j).
43
(l) Seller and any ERISA Affiliate which maintains a "benefits plan"
within the meaning of Section 5000(b)(1) of ERISA, have complied with the notice
and continuation requirements of Section 4980B of the Code or Part 6 of Title I
of ERISA and the applicable regulations thereunder.
(m) Neither Seller nor any ERISA Affiliate or any organization to
which any is a successor or parent corporation, has divested any business or
entity maintaining or sponsoring a defined benefit pension plan having unfunded
benefit liabilities (within the meaning of Section 4001(a)(18) of ERISA) or
transferred any such plan to any person other than Seller or any ERISA Affiliate
during the five-year period ending on the Closing Date.
(n) Neither Seller nor any "party in interest" or "disqualified
person" with respect to the Employee Benefit Plans or ERISA Affiliate Plans has
engaged in a non-exempt "prohibited transaction" within the meaning of Section
4975 of the Code or Section 406 of ERISA.
(o) Neither Seller nor any ERISA Affiliate has terminated any
Employee Benefit Plan or ERISA Affiliate Plan subject to Title IV of ERISA, or
incurred any outstanding liability under Section 4062 of ERISA to the Pension
Benefit Guaranty Corporation or to a trustee appointed under Section 4042 of
ERISA.
(p) Except as set forth on Company Disclosure Schedule 5.13(p),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any Employee of Seller; (ii) increase any benefits otherwise payable under any
Employee Benefit Plan or ERISA Affiliate Plan; or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(q) Seller is not a party to any contract, plan or commitment,
whether legally binding or not, to create any additional Employee Benefit Plan
or ERISA Affiliate Plan, or to modify any existing Employee Benefit Plan or
Pension Plan.
(r) No stock or other security issued by Seller forms or has formed a
material part of the assets of any Employee Benefit Plan or ERISA Affiliate
Plan.
(s) Any individual who performs services for Seller (other than
through a contract with an organization other than such individual) and who is
not treated as an employee for federal income tax purposes by Seller is not an
employee for such purposes.
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5.14 Labor.
(a) Except as set forth on Company Disclosure Schedule 5.14(a) (the
"Labor Contracts"), Seller is not a party to any labor or collective bargaining
agreement and there are no labor or collective bargaining agreements which
pertain to Employees of Seller. Seller has delivered or otherwise made available
to Parent true, correct and complete copies of the labor or collective
bargaining agreements listed on Company Disclosure Schedule 5.14(a), together
with all amendments, modifications or supplements thereto.
(b) Except as set forth on Company Disclosure Schedule 5.14(b), no
Employees are represented by any labor organization. No labor organization or
group of Employees of Seller has made a pending demand for recognition, and
there are no representation proceedings or petitions seeking a representation
proceeding presently pending or, to the Knowledge of Seller, threatened to be
brought or filed, with the National Labor Relations Board or other labor
relations tribunal. There is no organizing activity involving Seller pending or,
to the Knowledge of Seller, threatened by any labor organization or group of
Employees.
(c) There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations or (ii) material grievances or other labor disputes pending or, to
the Knowledge of Seller, threatened against or involving Seller involving any
Employee. There are no unfair labor practice charges, grievances or complaints
pending or, to the Knowledge of Seller, threatened by or on behalf of any
Employee or Former Employee.
(d) There are no complaints, charges or claims against Seller pending
or, to Knowledge of Seller, threatened that could be brought or filed with any
Governmental Body or based on, arising out of, in connection with or otherwise
relating to, the employment or termination of employment or failure to employ
any individual by Seller. Seller is in compliance with all Laws relating to the
employment of labor, including all such Laws relating to wages, hours, WARN and
any similar state or local "mass layoff" or "plant closing" Law, collective
bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax except as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. There has
been no "mass layoff" or "plant closing" (as defined by WARN) with respect to
Seller within the six months prior to Closing.
5.15 Litigation. Except as set forth in Company Disclosure Schedule
5.15, there is no Legal Proceeding pending or, to the Knowledge of Seller,
threatened against Seller (or to the Knowledge of Seller, pending or threatened
against any of the officers, directors or key Employees of Seller with respect
to their business activities on behalf of Seller), or to which Seller is
otherwise a party, before any Governmental Body; nor to the Knowledge of Seller
is there any reasonable basis for any such Legal Proceeding. Except as set forth
on Company Disclosure Schedule 5.15, Seller is not subject to any Order,
settlement agreement or stipulation and Seller is not in breach or violation of
any Order, settlement agreement or stipulation. Except as set forth on Company
Disclosure Schedule 5.15, Seller is not engaged in any legal action to recover
45
monies due it or for damages sustained by it. There are no Legal Proceedings
pending or, to the Knowledge of Seller, threatened against Seller or to which
Seller is otherwise a party relating to this Agreement or any Seller Document or
the transactions contemplated hereby or thereby.
5.16 Compliance with Laws; Permits.
(a) To the Knowledge of Seller, Seller is in compliance with all Laws
applicable to its operations or assets or the Business. Seller has not received
any written or other notice of or been charged with the violation of any Laws.
To the Knowledge of Seller, Seller is not under investigation with respect to
the violation of any Laws and there are no facts or circumstances which could
form the basis for any such violation.
(b) Company Disclosure Schedule 5.16(b) contains a list of all
material Permits which are required for the operation of the Business as
presently conducted and as presently intended to be conducted ("Seller
Permits"). Seller currently has all material Permits which are required for the
operation of the Business as presently conducted and as presently intended to be
conducted. Seller is not in default or violation, and no event has occurred
which, with notice or the lapse of time or both, would constitute a default or
violation, in any material respect of any term, condition or provision of any
Seller Permit and, to the Knowledge of Seller, there are no facts or
circumstances which could form the basis for any such default or violation.
There are no Legal Proceedings pending or, to the Knowledge of Seller,
threatened, relating to the suspension, revocation or modification of any of the
Seller Permits. Except as set forth on Company Disclosure Schedule 5.3(b), none
of the Seller Permits will be impaired or in any way affected by the
consummation of the transactions contemplated by this Agreement and the Seller
Permits are assignable or otherwise transferable without delay or the payment of
fees or expenses that are more than de minimis in nature.
5.17 Environmental Matters. Except as set forth on Company Disclosure
Schedule 5.17 hereto and except as could not reasonably be expected to have a
Material Adverse Effect:
(a) the operations of Seller, with respect to the Business, are and
have been in compliance with all applicable Environmental Laws, which compliance
includes obtaining, maintaining in good standing and complying with all
Environmental Permits necessary to operate the Business except for
non-compliance that would not reasonably be expected to result in the Business
incurring material Environmental Costs and Liabilities and no action or
proceeding is pending or, to the Knowledge of Seller, threatened to revoke,
modify or terminate any such Environmental Permit, which is necessary and
material to the operation of the Business, and, to the Knowledge of Seller, no
facts, circumstances or conditions currently exist that could adversely affect
such continued material compliance with Environmental Laws and Environmental
Permits or require currently unbudgeted capital expenditures to achieve or
maintain such continued material compliance with Environmental Laws and
Environmental Permits;
46
(b) with respect to the Business, Seller is not the subject of any
outstanding written Order or Contract with any Governmental Body or Person
respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of a Hazardous Material;
(c) no claim is pending or to the Knowledge of Seller, threatened
against Seller, alleging, with respect to the Business, that Seller may be in
violation of any Environmental Law or any Environmental Permit or may have any
Liability under any Environmental Law including, but not limited to, claims
relating to noise or odors, other than such claims that are routine in nature
and would not, individually or in the aggregate, result in the Business
incurring material Environmental Costs and Liabilities;
(d) to the Knowledge of Seller, no facts, circumstances or conditions
exist with respect to the Business or any property currently or formerly owned,
operated or leased by Seller or any property to which Seller arranged for the
disposal or treatment of Hazardous Materials that could reasonably be expected
to result in the Business incurring unbudgeted material Environmental Costs or
Liabilities;
(e) to the Knowledge of Seller, there are no investigations of the
Business, or currently or previously owned, operated or leased property of
Seller pending or threatened which could reasonably be expected to lead to the
imposition of any material Environmental Costs or Liabilities or Liens under
Environmental Law;
(f) The transactions contemplated hereunder do not require the
consent of or filings with any Governmental Body with jurisdiction over Seller
and environmental matters, and none of the Owned Property or Real Property
Leases is located in New Jersey or Connecticut;
(g) there is not located at any of the Owned Property or Real
Property Leases, or at any property previously owned, operated or leased by
Seller during Seller's ownership, operation or lease, any (i) underground
storage tanks, (ii) landfill, (iii) surface impoundment, (iv)
asbestos-containing material or (v) equipment containing polychlorinated
biphenyls;
(h) Seller with respect to the Business has no residual liability
with respect to abandoned or former properties, including any obligation to
remove or demolish on-site structures or close wastewater lagoons or ponds, and,
to the Knowledge of Seller, no Owned Property or Real Property Leases have any
structures or features, including abandoned buildings or wastewater lagoons or
ponds (other than those being used in compliance with Environmental Laws)
requiring removal, demolition, or closure; and
(i) Seller has made or will make available to Parent prior to January
15, 2006 all material environmentally related audits, studies, reports, analyses
and results of investigations that have been performed with respect to any
currently or previously owned, leased or operated properties of Seller or
material documentation relating to pending or threatened claims or
investigations pursuant to Environmental Laws, to the extent such materials are
in the possession, custody or control of Seller.
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5.18 Insurance. Seller has insurance policies in full force and
effect (a) for such amounts as are sufficient for all requirements of Law and
all agreements to which Seller is a party or by which it is bound and (b) which
are in such amounts, with such deductibles and against such risks and losses, as
a reasonable for the business, assets and properties of Seller. Set forth in
Company Disclosure Schedule 5.18 is a list of all insurance policies and all
fidelity bonds held by or applicable to Seller setting forth, in respect of each
such policy, the policy name, policy number, carrier, term, type and amount of
coverage, annual premium, and deductibles, whether the policies may be
terminated upon consummation of the transactions contemplated hereby and if and
to what extent events being notified to the insurer after the Closing Date are
generally excluded from the scope of the respective policy. Except as set forth
on Company Disclosure Schedule 5.18, no event relating to Seller has occurred
which could reasonably be expected to result in a retroactive upward adjustment
in premiums under any such insurance policies or which could reasonably be
expected to result in a prospective upward adjustment in such premiums.
Excluding insurance policies that have expired and been replaced in the Ordinary
Course of Business, no insurance policy has been cancelled within the last two
years and, to the Knowledge of Seller, no threat has been made to cancel any
insurance policy of Seller during such period. Except as noted on Company
Disclosure Schedule 5.18, all such insurance will remain in full force and
effect and all such insurance is assignable or transferable to Purchaser. No
event has occurred, including the failure by Seller to give any notice or
information, or Seller giving any inaccurate or erroneous notice or information,
which limits or impairs the rights of Seller under any such insurance policies.
5.19 Inventories. The inventories of Seller reflected on the Balance
Sheet or acquired since the Balance Sheet Date are in all material respects in
good and marketable condition, and are saleable in the Ordinary Course of
Business. The inventories of Seller set forth in the Balance Sheet were valued
at the lower of cost or market and were properly stated therein in accordance
with GAAP consistently applied. Adequate reserves have been reflected in the
Balance Sheet for excess, damaged, or other inventory not readily marketable in
the Ordinary Course of Business, which reserves were calculated in a manner
consistent with past practice and in accordance with GAAP consistently applied.
The inventories of Seller constitute sufficient quantities for the normal
operation of business in accordance with past practice.
5.20 Accounts and Notes Receivable and Payable.
(a) All accounts and notes receivable of Seller have arisen from bona
fide transactions in the Ordinary Course of Business and are payable on ordinary
trade terms. All accounts and notes receivable of Seller reflected on the
Balance Sheet are in all material respects good and collectible at the aggregate
recorded amounts thereof, net of any applicable reserve for returns or doubtful
accounts reflected thereon, which reserves are adequate and were calculated in a
manner consistent with past practice and in accordance with GAAP. All accounts
and notes receivable arising after the Balance Sheet Date are in all material
respects good and collectible at the aggregate recorded amounts thereof, net of
48
any applicable reserve for returns or doubtful accounts, which reserves are
adequate and were calculated in a manner consistent with past practice and in
accordance with GAAP. None of the accounts or the notes receivable of Seller (i)
are subject to any setoffs or counterclaims in any material respect or (ii)
represent obligations for goods sold on consignment or on sale-or-return basis
or subject to any other repurchase or return arrangement.
(b) All accounts payable of Seller reflected in the Balance Sheet or
arising after the date thereof are the result of bona fide transactions in the
Ordinary Course of Business.
5.21 Related Party Transactions. Except as set forth on Company
Disclosure Schedule 5.21, no Employee, officer, Unitholder or member of the
Board of Managers of Seller, any member of his or her immediate family or any of
their respective Affiliates ("Related Persons") (i) owes any amount to Seller
nor does Seller owe any amount to, or has Seller committed to make any loan or
extend or guarantee credit to or for the benefit of, any Related Person, (ii) is
involved in any business arrangement or other relationship with Seller (whether
written or oral), (iii) owns any property or right, tangible or intangible, that
is used by Seller, (iv) to the Knowledge of Seller, has any claim or cause of
action against Seller or (v) to the Knowledge of Seller, owns any direct or
indirect interest of any kind in, or controls or is a director, officer,
employee or partner of, or consultant to, or lender to or borrower from, or has
the right to participate in the profits of, any Person which is a competitor,
supplier, customer, landlord, tenant, creditor or debtor of Seller.
5.22 Customers and Suppliers.
(a) Company Disclosure Schedule 5.22 sets forth a list of the ten
largest customers and the ten largest suppliers of Seller by facility, as
measured by the dollar amount of purchases therefrom or thereby, during each of
the fiscal years ended January 1, 2005 and January 3, 2004, showing the
approximate total sales by Seller to each such customer and the approximate
total purchases by Seller from each such supplier during such period.
(b) Since the Balance Sheet Date, no customer or supplier listed on
Company Disclosure Schedule 5.22 has terminated its relationship with Seller or
materially reduced or changed the pricing or other terms of its business with
Seller and, to the Knowledge of Seller, no customer or supplier listed on
Company Disclosure Schedule 5.22 has notified Seller that it intends to
terminate or materially reduce or change the pricing or other terms of its
business with Seller.
5.23 Product Warranty; Product Liability.
(a) Except as set forth on Company Disclosure Schedule 5.23, the
products produced, sold or delivered by Seller in conducting the Business have
been in all material respects in conformity with all product specifications and
all applicable Laws. To Seller's Knowledge, Seller has no material Liability for
damages in connection therewith or any other customer or product obligations not
reserved against on the Balance Sheet.
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(b) Seller has no material Liability arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product produced, delivered or sold, or services rendered, by or on behalf of
Seller. Seller has not committed any act or failed to commit any act which would
result in, and there has been no occurrence which would give rise to or form the
basis of, any material product liability or material liability for breach of
warranty (whether covered by insurance or not) on the part of Seller with
respect to products produced or delivered, sold or installed or services
rendered by or on behalf of Seller.
5.24 Banks. Company Disclosure Schedule 5.24 contains a complete and
correct list of (a) the names and locations of all banks in which Seller has
accounts or safe deposit boxes, (b) the account numbers of all such accounts and
(c) the names of all persons authorized to draw thereon or to have access
thereto. Except as set forth on Company Disclosure Schedule 5.24, no person
holds a power of attorney to act on behalf of Seller.
5.25 Full Disclosure. No representation or warranty of Seller
contained in this Agreement or any of the Seller Documents and no written
statement made by or on behalf of Seller to Parent, Purchaser or any of their
Affiliates pursuant to this Agreement or any of the Seller Documents contains an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein not misleading. There is no
fact or circumstance which Seller has not disclosed to Parent or Purchaser in
writing which could reasonably be expected to lead Parent or Purchaser to
conclude that a Material Adverse Effect had occurred or was imminent.
5.26 Financial Advisors. Except as set forth on Company Disclosure
Schedule 5.26, no Person has acted, directly or indirectly, as a broker, finder
or financial advisor for Seller in connection with the transactions contemplated
by this Agreement and no Person is or will be entitled to any fee or commission
or like payment in respect thereof. Any fees and expenses payable to Persons
listed on Company Disclosure Schedule 5.26 shall be paid by Seller.
5.27 Certain Payments. Neither Seller nor, to the Knowledge of
Seller, any director, officer, employee, or other Person associated with or
acting on behalf of Seller, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of form, whether in money,
property, or services (i) to obtain favorable treatment in securing business for
Seller, (ii) to pay for favorable treatment for business secured by Seller,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of Seller, or (iv) in violation of any Law, or (b) established
or maintained any fund or asset with respect to Seller that has not be recorded
in the books and records of Seller.
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5.28 Information Supplied. Subject to the accuracy of the
representations and warranties of Parent and Purchaser set forth in Section 6.9,
none of the information supplied (or to be supplied) in writing by or on behalf
of Seller specifically for inclusion in (a) the registration statement on Form
S-4 to be filed with the SEC by Parent in connection with the issuance of shares
of Parent Common Stock hereunder (as amended or supplemented from time to time,
the "Form S-4") will, at the time the Form S-4, or any amendments or supplements
thereto, are filed with the SEC or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not misleading, and (b) the joint proxy statement relating to the Seller
Unitholders Meeting and Parent Stockholders Meeting (as amended or supplemented
from time to time, the "Joint Proxy Statement") will, on the date it is first
mailed to unitholders of Seller and the stockholders of Parent, and at the time
of the Seller Unitholders Meeting and the Parent Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Seller shall cooperate with Parent in order that the Joint Proxy
Statement will comply as to form in all material respects with the applicable
requirements of the Exchange Act. Notwithstanding the foregoing, Seller makes no
representation or warranty with respect to information supplied by or on behalf
of Parent or Purchaser for inclusion or incorporation by reference in any of the
foregoing documents.
5.29 Seller's Financial Condition. No insolvency proceedings of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, in respect of Seller or any of its assets or properties are
pending, or to the Knowledge of Seller, threatened, and Seller has not made any
assignment for the benefit of creditors, nor taken any action with a view to, or
that would constitute a basis for, the institution of any such insolvency
proceedings. Seller shall use the proceeds received under this Agreement to pay
or to make appropriate provision for the payment of any and all creditors of
Seller that Seller determines, in its reasonable and independent business
judgment, should be paid prior to making any distribution to its Unitholders.
5.30 Limitation of Representations and Warranties. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V OF THIS AGREEMENT, (A) THE
PROPERTY IS SOLD, ASSIGNED, TRANSFERRED AND CONVEYED TO PURCHASER IN "AS IS,
WHERE IS" CONDITION, (B) SELLER MAKES NO EXPRESS OR IMPLIED REPRESENTATION OR
WARRANTY AS TO THE CONDITION, OPERABILITY, MERCHANTABILITY, FITNESS FOR ANY
PARTICULAR PURPOSE, TITLE OR ANY OTHER ASPECT OF THE PROPERTY, (C) SELLER HEREBY
DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES REGARDING
THE PROPERTY, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND (D) NO SUCH
REPRESENTATION OR WARRANTY HAS BEEN OR WILL BECOME A BASIS OF THE BARGAIN
BETWEEN THE PARTIES, NOR HAS BEEN OR WILL BE RELIED UPON BY PURCHASER.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Each of Parent and Purchaser hereby represents and warrants to Seller
that, except as set forth in the disclosure schedule (with specific reference to
the Section or subsection of this Agreement to which the information stated in
such disclosure schedule relates) delivered by Parent and Purchaser to Seller
simultaneously with the execution of this Agreement (the "Parent Disclosure
Schedule"):
6.1 Organization and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted and as
currently proposed to be conducted. Purchaser is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite limited liability company power and
authority to own, lease and operate its properties and to carry on its business
as now conducted and as currently proposed to be conducted. Each of Parent and
Purchaser is duly qualified or authorized to do business and is in good standing
under the laws of each jurisdiction in which it owns or leases real property and
each other jurisdiction in which the conduct of its business or the ownership of
its properties requires such qualification or authorization, except where the
failure to be so qualified or authorized could not have, or reasonably be
expected to have, a Parent Material Adverse Effect.
6.2 Capital Structure. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock and 1,000,000 shares of
preferred stock, par value $.01 per share (the "Parent Preferred Stock"),
100,000 shares of which have been designated Series A Preferred Stock. At the
close of business on December 16, 2005, (i) 64,437,410 shares of Parent Common
Stock were issued and outstanding, (ii) 21,000 shares of Parent Common Stock
were held by Parent in its treasury, (iii) 5,547,405 shares of Parent Common
Stock were reserved for issuance under Parent's 2004 Omnibus Incentive Plan (the
"Parent Stock Plan") (of which 1,751,005 shares of Parent Common Stock were
subject to outstanding options to purchase shares of Parent Common Stock granted
under the Parent Stock Plan), and (iv) no shares of Parent Preferred Stock were
issued or outstanding. All shares of Parent Common Stock deliverable pursuant to
this Agreement have been duly authorized (subject to obtaining the Parent
Stockholder Approval) and, when issued as contemplated by this Agreement, will
be validly issued, fully paid, nonassessable and free and clear of any lien,
pledge, charge, security interest, restriction, adverse claim, proxy or option
(except as provided in Section 7.21 with respect to Rule 145 under the
Securities Act) and free of preemptive rights. Except as set forth above in this
Section 6.2, as of the date of this Agreement there are not any shares of
capital stock, voting securities or equity interests of Parent issued and
outstanding or any subscriptions, options, warrants, calls, convertible or
exchangeable securities, rights, commitments or agreements of any character
providing for the issuance of any shares of capital stock, voting securities or
equity interests of Parent, including any representing the right to purchase or
otherwise receive any Parent Common Stock.
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6.3 Authorization of Agreement. Each of Parent and Purchaser has full
corporate or limited liability company power and authority, as the case may be,
to execute and deliver this Agreement and each other agreement, document,
instrument or certificate contemplated by this Agreement or to be executed by
Parent or Purchaser in connection with the consummation of the transactions
contemplated hereby and thereby (the "Purchaser Documents"), and, subject to
obtaining the Parent Stockholder Approval, to consummate the transactions
contemplated hereby and thereby. The execution, delivery and performance by
Parent and Purchaser of this Agreement and each Purchaser Document have been
duly authorized by the Board of Directors of each of Parent and Purchaser, and
except for obtaining the Parent Stockholder Approval, no other corporate action
on behalf of Parent or Purchaser is necessary to authorize the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. This Agreement has been, and each Purchaser Document will be at or prior
to the Closing, duly executed and delivered by Parent and Purchaser, as
applicable, and (assuming the due authorization, execution and delivery by the
other parties hereto and thereto and receipt of the Parent Stockholder Approval)
this Agreement constitutes, and each Purchaser Document when so executed and
delivered will constitute, the legal, valid and binding obligations of Parent
and Purchaser, as applicable, enforceable against them in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally, and
subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
6.4 Conflicts; Consents of Third Parties.
(a) Except as set forth on Parent Disclosure Schedule 6.4, and
assuming the Parent Stockholder Approval is obtained and the filings referred to
in Sections 6.4(b)(i) & (ii) are made, none of the execution and delivery by
Parent or Purchaser of this Agreement and of the Purchaser Documents, the
consummation of the transactions contemplated hereby or thereby, or the
compliance by Parent and Purchaser with any of the provisions hereof or thereof
will conflict with, or result in violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination or
cancellation under any provision of (i) the certificate of incorporation and
by-laws (or similar organizational documents) of Parent or Purchaser; (ii) any
Contract or Permit to which Parent or Purchaser is a party or by which any of
the properties or assets of Parent or Purchaser are bound; (iii) any Order of
any Governmental Body applicable to Parent or Purchaser or by which any of the
properties or assets of Parent or Purchaser are bound; or (iv) any applicable
Law.
(b) No consent, waiver, approval, Order, Permit or authorization of,
or declaration or filing with, or notification to, any Person or Governmental
Body is required on the part of Parent or Purchaser in connection with the
execution and delivery of this Agreement or the Purchaser Documents or the
compliance by Parent or Purchaser with any of the provisions hereof or thereof,
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except for (i) the filing with the SEC of the Form S-4 and other filings
required under, and compliance with other applicable requirements, of the
Securities Act, the Exchange Act and the rules of the American Stock Exchange,
(ii) filings required under and compliance with the applicable requirements of
the HSR Act and (iii) such other consents, waivers, approvals, Orders, Permits,
authorizations, declarations, filings or notifications that, if not obtained,
made or given, would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
6.5 Litigation. There are no Legal Proceedings pending or, to the
Knowledge of Parent and Purchaser, threatened that are reasonably likely to
prohibit or restrain the ability of Parent or Purchaser to enter into this
Agreement or consummate the transactions contemplated hereby.
6.6 Financial Advisors. Except for Xxxxxx Xxxxxxx Corp. (whose fees
and expenses shall be paid by Parent), no Person has acted, directly or
indirectly, as a broker, finder or financial advisor for Parent or Purchaser in
connection with the transactions contemplated by this Agreement and no Person is
entitled to any fee or commission or like payment in respect thereof.
6.7 Voting Requirements. The affirmative vote (in person or by proxy)
of the holders of a majority of the shares of Parent Common Stock cast at the
Parent Stockholders Meeting or any adjournment or postponement thereof to
approve the issuance of shares of Parent Common Stock as consideration for the
Purchased Assets (the "Parent Stockholder Approval") is the only vote of the
holders of any class or series of the capital stock of Parent necessary to
approve the issuance of shares of Parent Common Stock in connection with the
transactions contemplated hereby.
6.8 Parent SEC Documents. Parent has filed and furnished all required
reports, schedules, forms, prospectuses, and registration, proxy and other
statements with the SEC on or since March 17, 2005, including, but not limited
to, the Form 10-K filed by Parent on March 17, 2005 (collectively, and in each
case including all exhibits and schedules thereto and documents incorporated by
reference therein, the "Parent SEC Documents"). As of their respective effective
dates (in the case of Parent SEC Documents that are registration statements
filed pursuant to the requirements of the Securities Act) and as of their
respective SEC filing dates (in the case of all other Parent SEC Documents), the
Parent SEC Documents complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as the case may be, applicable to such
Parent SEC Documents, and none of the Parent SEC Documents as of such respective
dates contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements of Parent included in the
Parent SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except, in the case
of unaudited statements, as indicated in the notes thereto) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the financial
position of Parent and its consolidated Subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments).
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6.9 Information Supplied. Subject to the accuracy of the
representations and warranties of Seller set forth in Section 5.28, none of the
information supplied (or to be supplied) in writing by or on behalf of Parent or
Purchaser specifically for inclusion or incorporation by reference in (a) the
Form S-4 will, at the time the Form S-4 or any amendments or supplements thereto
are filed with the SEC or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they are
made, not misleading, and (b) the Joint Proxy Statement will, on the date it is
first mailed to unitholders of Seller and stockholders of Parent, and at the
time of the Seller Unitholders Meeting and the Parent Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Form S-4 and the Joint Proxy Statement will comply as to form in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act. Notwithstanding the foregoing, neither Parent nor Purchaser
makes any representation or warranty with respect to any information supplied by
or on behalf of Seller for inclusion in any of the foregoing documents.
6.10 Environmental Matters. Except as set forth on Parent Disclosure
Schedule 6.10 hereto and except as could not reasonably be expected to have a
Parent Material Adverse Effect:
(a) the operations of Parent, with respect to its business, are and
have been in compliance with all applicable Environmental Laws, which compliance
includes obtaining, maintaining in good standing and complying with all
Environmental Permits necessary to operate its business except for
non-compliance that would not reasonably be expected to result in the Business
incurring material Environmental Costs and Liabilities and no action or
proceeding is pending or, to the Knowledge of Parent, threatened to revoke,
modify or terminate any such Environmental Permit, which is necessary and
material to the operation of the Business, and, to the Knowledge of Parent, no
facts, circumstances or conditions currently exist that could adversely affect
such continued material compliance with Environmental Laws and Environmental
Permits or require currently unbudgeted capital expenditures to achieve or
maintain such continued material compliance with Environmental Laws and
Environmental Permits;
(b) with respect to its business, Parent is not the subject of any
outstanding written Order or Contract with any Governmental Body or Person
respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of a Hazardous Material;
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(c) no claim is pending or to the Knowledge of Parent, threatened
against Parent, alleging, with respect to its business, that Parent may be in
violation of any Environmental Law or any Environmental Permit or may have any
Liability under any Environmental Law including, but not limited to, claims
relating to noise or odors, other than such claims that are routine in nature
and would not, individually or in the aggregate, result in the Business
incurring material Environmental Costs and Liabilities;
(d) to the Knowledge of Parent, no facts, circumstances or conditions
exist with respect to its business or any property currently or formerly owned,
operated or leased by Parent or any property to which Parent arranged for the
disposal or treatment of Hazardous Materials that could reasonably be expected
to result in Parent's business incurring unbudgeted material Environmental Costs
or Liabilities;
(e) to the Knowledge of Parent, there are no investigations of its
business, or currently or previously owned, operated or leased property of
Parent pending or threatened which could reasonably be expected to lead to the
imposition of any material Environmental Costs or Liabilities or Liens under
Environmental Law;
(f) there is not located at any of Parent's owned or leased real
property, or at any property previously owned, operated or leased by Parent
during Parent's ownership, operation or lease, any (i) underground storage
tanks, (ii) landfill, (iii) surface impoundment, (iv) asbestos-containing
material or (v) equipment containing polychlorinated biphenyls;
(g) Parent with respect to its business has no residual liability
with respect to abandoned or former properties, including any obligation to
remove or demolish on-site structures or close wastewater lagoons or ponds, and,
to the Knowledge of Parent, none of Parent's owned or leased real property have
any structures or features, including abandoned buildings or wastewater lagoons
or ponds (other than those being used in compliance with Environmental Laws)
requiring removal, demolition, or closure; and
(h) Parent has made or will make available to Seller prior to January
15, 2006 all material environmentally related audits, studies, reports, analyses
and results of investigations that have been performed with respect to any
currently or previously owned, leased or operated properties of Parent or
material documentation relating to pending or threatened claims or
investigations pursuant to Environmental Laws, to the extent such materials are
in the possession, custody or control of Parent.
6.11 Financing. Purchaser is not aware of any facts or circumstances
that would cause Purchaser to be unable to obtain financing in accordance with
the terms of the term sheet previously provided to Seller (the "Term Sheet").
The amount of debt financing, if obtained in accordance with the terms of the
Term Sheet, together with the equity financing to be provided by Parent, will
provide sufficient funds for Purchaser to consummate the Transaction.
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6.12 Full Disclosure. No representation or warranty of Parent
contained in this Agreement or any of the Purchaser Documents and no written
statement made by or on behalf of Parent to Seller pursuant to this Agreement or
any of the Purchaser Documents contains an untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading. There is no fact or circumstance which Parent
has not disclosed to Seller in writing which could reasonably be expected to
lead Seller to conclude that a Parent Material Adverse Effect had occurred or
was imminent.
ARTICLE VII
COVENANTS
7.1 Access to Information. Seller shall afford to Parent and its
accountants, counsel, financial advisors, environmental consultants and other
representatives, and to prospective lenders, placement agents and other
financing sources and each of their respective representatives, reasonable
access, during normal business hours upon reasonable notice throughout the
period prior to the Closing, to their respective properties and facilities
(including all real property and the buildings, structures, fixtures,
appurtenances and improvements erected, attached or located thereon), books,
financial information (including working papers and data in the possession of
Seller or its independent public accountants, internal audit reports, and
"management letters" from such accountants with respect to Seller's systems of
internal control), Contracts, commitments and records and, during such period,
shall furnish promptly such information concerning its businesses, properties
and personnel of Seller as Parent shall reasonably request in connection with
the transactions contemplated herein, including preparation of the Form S-4;
provided, however, such investigation shall not unreasonably disrupt Seller's
operations. Prior to the Closing, Seller shall generally keep Parent informed as
to all material matters involving the operations and businesses of Seller.
Seller shall authorize and direct the appropriate directors, managers and
employees of Seller to discuss matters involving the operations and business of
Seller with representatives of Parent and its prospective lenders or placement
agents and other financial sources. All nonpublic information provided to, or
obtained by, Parent in connection with the transactions contemplated hereby
shall be "Confidential Information" for purposes of the Confidentiality
Agreement dated May 25, 2005 among Parent and Seller (the "Confidentiality
Agreement"), the terms of which shall continue in force until the Closing;
provided that Parent and Seller may disclose such information as may be
necessary in connection with seeking necessary consents and approvals as
contemplated hereby and in connection with the Financing. Notwithstanding the
foregoing, Seller shall not be required to disclose any information if such
disclosure would contravene any applicable Law. No information provided to or
obtained by Parent pursuant to this Section 7.1 shall limit or otherwise affect
the remedies available hereunder to Parent (including, but not limited to,
Parent's right to seek indemnification pursuant to Article X), or the
representations or warranties of, or the conditions to the obligations of, the
parties hereto.
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7.2 Conduct of the Business Pending the Closing.
(a) Except as otherwise expressly provided by this Agreement or with
the prior written consent of Parent, between the date hereof and the Closing,
Seller shall:
(i) conduct the Business only in the Ordinary Course of Business;
(ii) use its commercially reasonable efforts to (A) preserve the
present business operations, organization (including officers and
Employees) and goodwill of Seller and (B) preserve the present
relationships with Persons having business dealings with Seller
(including customers and suppliers);
(iii) maintain (A) all of the assets and properties of, or used
by, Seller consistent with past practice, and (B) insurance upon all
of the assets and properties of Seller in such amounts and of such
kinds comparable to that in effect on the date of this Agreement;
(iv) (A) maintain the books, accounts and records of Seller in
the Ordinary Course of Business, (B) continue to collect accounts
receivable and pay accounts payable utilizing normal procedures and
without discounting or accelerating payment of such accounts, and (C)
comply with all contractual and other obligations of Seller;
(v) comply with the capital expenditure plan of Seller for 2005
set forth on Company Disclosure Schedule 7.2(a)(v), including making
such capital expenditures in the amounts and at the times set forth in
such plan;
(vi) comply in all material respects with all applicable Laws;
(vii) take steps to renew all Permits in a timely manner prior to
their lapse; and
(viii) pay all maintenance and similar fees and take all other
appropriate actions as necessary to prevent the abandonment, loss or
impairment of all Purchased Intellectual Property.
(b) Without limiting the generality of the foregoing, except as
otherwise expressly provided by this Agreement or with the prior written consent
of Parent, Seller shall not:
(i) (A) increase the salary or other compensation of any director
or Employee of Seller except for normal year-end increases in the
Ordinary Course of Business, (B) grant any bonus, benefit or other
direct or indirect compensation to any Employee or director, (C)
increase the coverage or benefits available under any (or create any
new) severance pay, termination pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other
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employee benefit plan or arrangement made to, for, or with any of the
directors, officers, Employees, agents or representatives of Seller or
otherwise modify or amend or terminate any such plan or arrangement or
(D) enter into any employment, deferred compensation, stay bonus,
severance, special pay, consulting, non-competition or similar
agreement or arrangement with any directors or officers of Seller (or
amend any such agreement) to which Seller is a party;
(ii) (A) create, incur, assume, guarantee, endorse or otherwise
become liable or responsible with respect to (whether directly,
contingently or otherwise) any Indebtedness except as set forth on
Company Disclosure Schedule 5.7; (B) except in the Ordinary Course of
Business, pay, repay, discharge, purchase, repurchase or satisfy any
Indebtedness issued or guaranteed by Seller; (C) modify the terms of
any Indebtedness or other Liability; or (D) make any loans, advances
of capital contributions to, or investments in, any other Person;
(iii) subject to any Lien or otherwise encumber or, except for
Permitted Exceptions, permit, allow or suffer to be subjected to any
Lien or otherwise encumbered, any of the properties or assets (whether
tangible or intangible) of Seller;
(iv) acquire any material properties or assets or sell, assign,
license, transfer, convey, lease or otherwise dispose of any of the
Purchased Assets (except for fair consideration in the Ordinary Course
of Business) of Seller;
(v) enter into or agree to enter into any merger or consolidation
with any Person, and not engage in any new business or invest in, make
a loan, advance or capital contribution to, or otherwise acquire the
securities of any Person;
(vi) cancel or compromise any debt or claim, or waive or release
any material right of Seller except in the Ordinary Course of
Business;
(vii) enter into, modify or terminate any labor or collective
bargaining agreement or, through negotiation or otherwise, make any
commitment or incur any Liability to any labor organization with
respect to any Employee;
(viii) introduce any material change with respect to the
operation of the Business, including any material change in the types,
nature, composition or quality of products or services, or, other than
in the Ordinary Course of Business, make any change in product
specifications or prices or terms of distributions of such products;
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(ix) enter into any transaction or enter into, modify or renew
any Contract which by reason of its size or otherwise is not in the
Ordinary Course of Business;
(x) enter into any Contract, understanding or commitment that
restrains, restricts, limits or impedes the ability of the Business,
or the ability of Parent or Purchaser, to compete with or conduct any
business or line of business in any geographic area or solicit the
employment of any persons;
(xi) terminate, amend, restate, supplement or waive any rights
under any (A) Material Contract, Real Property Lease, Personal
Property Lease or Intellectual Property License, other than in the
Ordinary Course of Business or (B) Permit;
(xii) settle or compromise any pending or threatened Legal
Proceeding or any claim or claims for, or that would result in a loss
of revenue of, an amount that could, individually or in the aggregate,
reasonably be expected to be greater than $25,000;
(xiii) change or modify its credit, collection or payment
policies, procedures or practices, including acceleration of
collections or receivables (whether or not past due) or fail to pay or
delay payment of payables or other liabilities;
(xiv) take any action which would adversely affect the ability of
the parties to consummate the transactions contemplated by this
Agreement;
(xv) amend the operating agreement or By-laws of Seller; or
(xvi) agree to do anything (A) prohibited by this Section 7.2,
(B) that would make any of the representations and warranties of
Seller in this Agreement or any of the Seller Documents untrue or
incorrect in any material respect or could result in any of the
conditions to the Closing not being satisfied or (C) that could be
reasonably expected to have a Material Adverse Effect.
7.3 Consents. Seller shall use its commercially reasonable efforts to
obtain at the earliest practicable date all consents, waivers, approvals and
notices that are required to consummate, or in connection with, the transactions
contemplated by this Agreement as set forth on Company Disclosure Schedule 7.3,
including the consents, waivers, approvals and notices referred to in Section
5.3(b) hereof (except for such matters covered by Section 7.4, which are covered
in that Section). All such consents, waivers, approvals and notices shall be in
writing and in form and substance reasonably satisfactory to Parent, and
executed counterparts of such consents, waivers and approvals shall be delivered
to Parent promptly after receipt thereof, and copies of such notices shall be
delivered to Parent promptly after the making thereof.
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7.4 Regulatory Approvals.
(a) Each of Parent and Seller shall use their respective commercially
reasonable efforts to (i) make or cause to be made all filings required of each
of them or any of their respective Subsidiaries or Affiliates under the HSR Act
or other Antitrust Laws with respect to the transactions contemplated hereby as
promptly as practicable and, in any event, within ten Business Days after the
date of this Agreement in the case of all filings required under the HSR Act and
within four weeks in the case of all other filings required by other Antitrust
Laws, (ii) comply at the earliest practicable date with any request under the
HSR Act or other Antitrust Laws for additional information, documents, or other
materials received by either of them or any of their respective Subsidiaries or
Affiliates from the U.S. Federal Trade Commission ("FTC"), the Antitrust
Division of the U.S. Department of Justice (the "Antitrust Division") or any
other Governmental Body in respect of such filings or such transactions, and
(iii) cooperate with each other in connection with any such filing (including,
to the extent permitted by applicable law, providing copies of all such
documents to the non-filing parties prior to filing and considering all
reasonable additions, deletions or changes suggested in connection therewith)
and in connection with resolving any investigation or other inquiry of any of
the FTC, the Antitrust Division or other Governmental Body under any Antitrust
Laws with respect to any such filing or any such transaction. Parent shall be
responsible for all filing fees and expenses associated with the required
filings under the HSR Act; provided, however, in the event of a second request
by the FTC, the Antitrust Division or any other Governmental Body in respect of
such filings, all expenses incurred in connection with responding to such
requests shall be borne one-third by Seller and two-thirds by Parent. Each such
party shall use commercially reasonable efforts to furnish to each other all
information required for any application or other filing to be made pursuant to
any applicable law in connection with the transactions contemplated by this
Agreement. Each such party shall promptly inform the other parties hereto of any
oral communication with, and provide copies of written communications with, any
Governmental Body regarding any such filings or any such transaction and permit
the other party to review in advance any proposed communication by such party to
any Governmental Body. No party hereto shall independently participate in any
formal meeting with any Governmental Body in respect of any such filings,
investigation, or other inquiry without giving the other parties hereto prior
notice of the meeting and, to the extent permitted by such Governmental Body,
the opportunity to attend and/or participate. Subject to applicable Law, the
parties hereto shall consult and cooperate with one another in connection with
the matters described in this Section 7.4, including in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto relating to
proceedings under the HSR Act or other Antitrust Laws.
(b) Each of Parent and Seller shall use commercially reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Body with respect to the transactions contemplated by this
Agreement under the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, and any other Laws that
are designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade (collectively, the "Antitrust
61
Laws"). In connection therewith, if any Legal Proceeding is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as in violation of any Antitrust Law, Seller and Parent shall use
commercially reasonable efforts to contest and resist any such Legal Proceeding,
and to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order whether temporary, preliminary or permanent, that is
in effect and that prohibits, prevents or restricts consummation of the
transactions contemplated by this Agreement, including by pursuing all available
avenues of administrative and judicial appeal, unless, by mutual agreement,
Parent and Seller decide that litigation is not in their respective best
interests. Each of Parent and Seller shall use commercially reasonable efforts
to take such action as may be required to cause the expiration of the notice
periods under the HSR Act or other Antitrust Laws with respect to such
transactions as promptly as possible after the execution of this Agreement.
Notwithstanding anything to the contrary provided herein, neither Parent or
Seller nor any of their respective Affiliates shall be required, in connection
with the matters covered by this Section 7.4, (i) to pay any amounts (other than
the payment of filing fees and expenses and fees of counsel), (ii) to commence
litigation (as opposed to defend litigation), (iii) to hold separate (including
by trust or otherwise) or divest any of its or its Affiliates' businesses,
product lines or assets, or any of the Purchased Assets, (iv) to agree to any
limitation on the operation or conduct of the Business, or (v) to waive any of
the conditions to this Agreement set forth in Section 9.1.
7.5 Further Assurances. Subject to, and not in limitation of, Section
7.4, each of Seller, Parent and Purchaser shall use its commercially reasonable
efforts to take, or cause to be taken, all actions necessary or appropriate to
fulfill its obligations under this Agreement.
7.6 No Solicitation by Seller; Etc.
(a) Seller shall, and shall cause its directors, officers, employees,
investment bankers, financial advisors, attorneys, accountants, agents and other
representatives (collectively, "Representatives") to, immediately cease and
cause to be terminated any discussions or negotiations with any Person conducted
heretofore with respect to a Takeover Proposal, and shall use commercially
reasonable efforts to obtain the return from all such Persons or cause the
destruction of all copies of confidential information previously provided to
such parties by Seller or its Representatives. Seller shall not, and shall cause
its Representatives not to, directly or indirectly (i) solicit, initiate, cause,
facilitate or encourage (including by way of furnishing information) any
inquiries or proposals that constitute, or may reasonably be expected to lead
to, any Takeover Proposal, (ii) participate in any discussions or negotiations
with any third party regarding any Takeover Proposal or (iii) enter into any
agreement related to any Takeover Proposal; provided, however, that if after the
date hereof the Board of Managers of Seller receives an unsolicited, bona fide
written Takeover Proposal made after the date hereof in circumstances not
involving a breach of this Agreement, and the Board of Managers of Seller
reasonably determines in good faith that such Takeover Proposal constitutes or
is reasonably likely to lead to a Superior Proposal, and with respect to which
such Board determines in good faith, after considering applicable provisions of
state law and after consulting with and receiving the advice of outside counsel,
62
that the taking of such action is necessary in order for such Board to comply
with its fiduciary duties to Seller's unitholders under Iowa law, then Seller
may, at any time prior to obtaining the Seller Unitholder Approval (but in no
event after obtaining the Seller Unitholder Approval) and after providing Parent
not less than two Business Days written notice of its intention to take such
actions (A) furnish information with respect to Seller to the Person making such
Takeover Proposal, but only after such Person enters into a customary
confidentiality agreement with Seller (which confidentiality agreement must be
no less favorable to Seller (i.e., no less restrictive with respect to the
conduct of such Person) than the Confidentiality Agreement), provided that (1)
such confidentiality agreement may not include any provision calling for an
exclusive right to negotiate with Seller and (2) Seller advises Parent of all
such non-public information delivered to such Person concurrently with its
delivery to such Person and concurrently with its delivery to such Person the
Company delivers to Parent all such information not previously provided to
Parent, and (B) participate in discussions and negotiations with such Person
regarding such Takeover Proposal. Without limiting the foregoing, it is
understood that any violation of the foregoing restrictions by Seller's
Representatives shall be deemed to be a breach of this Section 7.6 by Seller.
Seller shall provide Parent with a correct and complete copy of any
confidentiality agreement entered into pursuant to this paragraph within 24
hours after the execution thereof.
(b) In addition to the other obligations of Seller set forth in this
Section 7.6, Seller shall promptly advise Parent orally, and within 24 hours
advise Parent in writing after receipt, if any proposal, offer, inquiry or other
contact is received by, any information is requested from, or any discussions or
negotiations are sought to be initiated or continued with, Seller in respect of
any Takeover Proposal, and shall, in any such notice to Parent, indicate the
identity of the Person making such proposal, offer, inquiry or other contact and
the terms and conditions of any proposals or offers or the nature of any
inquiries or contacts (and shall include with such notice copies of any written
materials received from or on behalf of such Person relating to such proposal,
offer, inquiry or request), and thereafter shall promptly keep Parent fully
informed of all material developments affecting the status and terms of any such
proposals, offers, inquiries or requests (and Seller shall provide Parent with
copies of any additional written materials received that relate to such
proposals, offers, inquiries or requests) and of the status of any such
discussions or negotiations.
(c) Except as expressly permitted by this Section 7.6(c), neither the
Board of Managers of Seller nor any committee thereof shall (i)(A) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to Parent
or Purchaser, the Seller Board Recommendation or the approval or declaration of
advisability by such Board of Managers of this Agreement and the transactions
contemplated hereby or (B) approve or recommend, or propose publicly to approve
or recommend, any Takeover Proposal (any action described in this clause (i)
being referred to as a "Seller Adverse Recommendation Change") or (ii) approve
or recommend, or propose publicly to approve or recommend, or cause or authorize
Seller to enter into, any letter of intent, agreement in principle, memorandum
of understanding, merger, acquisition, purchase or joint venture agreement or
other agreement related to any Takeover Proposal (other than a confidentiality
agreement in accordance with Section 7.6(a)). Notwithstanding the foregoing, the
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Board of Managers of Seller may withdraw or modify the Seller Board
Recommendation, or recommend a Takeover Proposal, if such Board determines in
good faith that such Takeover Proposal is a Superior Proposal; provided,
however, that no Seller Adverse Recommendation Change may be made in response to
a Superior Proposal until after the fifth Business Day following Parent's
receipt of written notice (unless at the time such notice is otherwise required
to be given there are less than five Business Days prior to the Seller
Unitholders Meeting, in which case Seller shall provide as much notice as is
reasonably practicable) from Seller (a "Seller Adverse Recommendation Notice")
advising Parent that the Board of Managers of Seller intends to make such Seller
Adverse Recommendation Change and specifying the terms and conditions of such
Superior Proposal (it being understood and agreed that any amendment to the
financial terms or other material terms of such Superior Proposal shall require
a new Seller Adverse Recommendation Notice and a new five Business Day period
(unless at the time such notice is otherwise required to be given there are less
than five Business Days prior to the Seller Unitholders Meeting, in which case
Seller shall provide as much notice as is reasonably practicable)). In
determining whether to make a Seller Adverse Recommendation Change in response
to a Superior Proposal, the Board of Managers of Seller shall take into account
(i) any changes to the terms of this Agreement proposed by Parent (in response
to a Seller Adverse Recommendation Notice or otherwise) and (ii) the amount of
the Termination Fee and Expenses payable to Parent hereunder in determining
whether such third party Takeover Proposal still constitutes a Superior
Proposal.
(d) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or offer from any
Person or "group" (as defined in Section 13(d) of the Exchange Act), other than
Parent and its Subsidiaries, relating to any (i) direct or indirect acquisition
(whether in a single transaction or a series of related transactions) of assets
of Seller equal to 15% or more of Seller's assets or to which 15% or more of
Seller's revenues or earnings are attributable, (ii) direct or indirect
acquisition (whether in a single transaction or a series of related
transactions) of 15% or more of any class of equity securities of Seller, (iii)
tender offer or exchange offer that if consummated would result in any Person or
"group" (as defined in Section 13(d) of the Exchange Act) beneficially owning
15% or more of any class of equity securities of Seller or (iv) merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Seller; in each case,
other than the transactions contemplated by this Agreement.
"Superior Proposal" means a bona fide written offer, obtained after
the date hereof and not in breach of this Agreement, to acquire, directly or
indirectly, for consideration consisting of cash and/or securities, all of the
equity securities of Seller or all or substantially all of the assets of Seller,
made by a third party, which is otherwise on terms and conditions which the
Board of Managers of Seller determines in its good faith and reasonable judgment
(after consultation with outside counsel and a financial advisor) to be more
favorable to Seller's unitholders from a financial point of view than the
transactions contemplated by this Agreement, taking into account at the time of
determination any changes to the terms of this Agreement that as of that time
had been proposed by Parent in writing and the ability of the Person making such
proposal to consummate the transactions contemplated by such proposal (based
upon, among other things, the availability of financing and the expectation of
obtaining required approvals).
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7.7 Non-Competition; Non-Solicitation; Confidentiality.
(a) For a period from the Closing Date until the fifth anniversary of
the Closing Date, Seller shall not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management, operation or
control of any business, whether in corporate, proprietorship or partnership
form or otherwise, engaged in the Business or that otherwise competes with the
Business (a "Restricted Business"). The parties hereto specifically acknowledge
and agree that the remedy at law for any breach of the foregoing will be
inadequate and that Parent, in addition to any other relief available to it,
shall be entitled to temporary and permanent injunctive relief without the
necessity of proving actual damage or posting any bond whatsoever.
(b) For a period from the Closing Date to the fifth anniversary of
the Closing Date, Seller shall not: (i) cause, solicit, induce or encourage any
Employees of Seller to leave such employment or hire, employ or otherwise engage
any such individual; or (ii) cause, induce or encourage any material actual or
prospective client, customer, supplier or licensor of the Business (including
any existing or former customer of Seller and any Person that becomes a client
or customer of the Business after the Closing) or any other Person who has a
material business relationship with the Business, to terminate or modify any
such actual or prospective relationship.
(c) From and after the date hereof, Seller shall not and shall cause
its Affiliates and their respective officers and directors not to, directly or
indirectly, disclose, reveal, divulge or communicate to any Person other than
authorized officers, directors and employees of Parent or use or otherwise
exploit for its own benefit or for the benefit of anyone other than the Parent,
any Confidential Information (as defined below). Seller and its officers,
directors and Affiliates shall not have any obligation to keep confidential any
Confidential Information if and to the extent disclosure thereof is specifically
required by law; provided, however, that in the event disclosure is required by
applicable Law, Seller shall, to the extent reasonably possible, provide Parent
with prompt notice of such requirement prior to making any disclosure so that
Parent may seek an appropriate protective order. For purposes of this Section
7.7(c), "Confidential Information" means any information with respect to the
Business, including methods of operation, customers, customer lists, products,
prices, fees, costs, Technology, inventions, Trade Secrets, know-how, Software,
marketing methods, plans, personnel, suppliers, competitors, markets or other
specialized information or proprietary matters. Confidential Information does
not include, and there shall be no obligation hereunder with respect to,
information that (i) is generally available to the public on the date of this
Agreement or (ii) becomes generally available to the public other than as a
result of a disclosure not otherwise permissible hereunder.
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(d) The covenants and undertakings contained in this Section 7.7
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 7.7 will cause irreparable
injury to Parent, the amount of which will be impossible to estimate or
determine and which cannot be adequately compensated. Accordingly, the remedy at
law for any breach of this Section 7.7 will be inadequate. Therefore, Parent
will be entitled to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction in the event of any breach of this
Section 7.7 without the necessity of proving actual damages or posting any bond
whatsoever. The rights and remedies provided by this Section 7.7 are cumulative
and in addition to any other rights and remedies which Parent may have hereunder
or at law or in equity. In the event that Parent were to seek damages for any
breach of this Section 7.7, the portion of the Purchase Price which is allocated
by the parties to the foregoing covenant shall not be considered a measure of or
limit on such damages.
(e) The parties hereto agree that, if any court of competent
jurisdiction in a final nonappealable judgment determines that a specified time
period, a specified geographical area, a specified business limitation or any
other relevant feature of this Section 7.7 is unreasonable, arbitrary or against
public policy, then a lesser time period, geographical area, business limitation
or other relevant feature which is determined by such court to be reasonable,
not arbitrary and not against public policy may be enforced against the
applicable party.
7.8 Preservation of Records. Parent agrees that it shall preserve and
keep the records held by it or its Affiliates relating to the Business for a
period equal to the same period as it determines to be prudent for its own
records of a similar type, but in no event less than the applicable statutes of
limitation for federal and state income tax purposes with respect to tax records
used or useful for tax and accounting purposes, and shall make such records and
personnel available to Seller or its members as may be reasonably required by
Seller or its members in connection with, among other things, preparation and
filing of tax returns and related matters, any insurance claims by, legal
proceedings against or governmental investigations of Seller or any of its
Affiliates or members or in order to enable Seller to comply with its
obligations under this Agreement and each other agreement, document or
instrument contemplated hereby or thereby. In the event Parent wishes to destroy
(or permit to be destroyed) such records after that time, Parent shall first
give ninety days prior written notice to Seller and Seller shall have the right
at its option and expense, upon prior written notice given to Parent within that
ninety-day period, to take possession of the records within 180 days after the
date of such notice.
7.9 Publicity. Neither Seller, Parent nor Purchaser shall issue any
press release or public announcement concerning this Agreement or the
transactions contemplated hereby without obtaining the prior written approval of
the other party hereto, which approval will not be unreasonably withheld or
delayed, unless, in the sole judgment of Parent or Seller, as applicable,
disclosure is otherwise required by applicable Law or by the applicable rules of
any stock exchange on which Parent or Seller lists securities; provided that, to
the extent required by applicable Law, the party intending to make such release
shall use its commercially reasonable efforts consistent with such applicable
Law to consult with the other party with respect to the timing and content
thereof.
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7.10 Use of Name. Seller hereby agrees that upon the Closing,
Purchaser shall have the sole right to the use of the name "National
By-Products" or similar names, and any service marks, trademarks, trade names,
d/b/a names, fictitious names, identifying symbols, logos, emblems or signs
containing or comprising the foregoing, or otherwise used in the Business,
including any name or xxxx confusingly similar thereto (collectively, the
"Seller Marks") and Seller shall not, and shall not permit any Affiliate to, use
such name or any variation or simulation thereof. After closing, Seller shall
promptly amend its charter to change its name to be in compliance with this
covenant.
7.11 Environmental Matters.
(a) Seller shall permit Parent and Parent's environmental consultant
to conduct such investigations (including investigations known as "Phase I"
environmental Site Assessments and, only if mutually agreed to by Seller and
Parent, "Phase II environmental Site Assessments) of the environmental
conditions of any real property owned, operated or leased by or for Seller and
the operations thereat (subject to any limitations contained in valid,
previously executed leases) as Parent, in its reasonable discretion, shall deem
necessary or prudent ("Parent's Environmental Assessment"). Parent's
Environmental Assessment shall be conducted by a qualified environmental
consulting firm, possessing reasonable levels of insurance, in compliance with
applicable Laws and in a manner that minimizes the disruption of the operations
of Seller.
(b) Parent shall permit Seller and Seller's environmental consultant
to conduct such investigations (including investigations known as "Phase I"
environmental Site Assessments and, only if mutually agreed to by Seller and
Parent, "Phase II environmental Site Assessments) of the environmental
conditions of any real property owned, operated or leased by or for Parent and
the operations thereat (subject to any limitations contained in valid,
previously executed leases) as Seller, in its reasonable discretion, shall deem
necessary or prudent ("Seller's Environmental Assessment"). Seller's
Environmental Assessment shall be conducted by a qualified environmental
consulting firm, possessing reasonable levels of insurance, in compliance with
applicable Laws and in a manner that minimizes the disruption of the operations
of Parent.
(c) Seller shall promptly file all materials required by
Environmental Laws as a result of or in furtherance of the transactions
contemplated hereunder, including, but not limited to any notifications or
approvals required under environmental property transfer laws such as the New
Jersey Industrial Site Recovery Act, N.J. Stat. Xxx. ss. 13:1K-6 et seq., or the
Connecticut Property Transfer Act, Gen. Stat. Xxx. ss. 22a-134, and all requests
required or necessary for the transfer or re-issuance of Environmental Permits
required to conduct the Business after the Closing Date. Parent shall cooperate
in all reasonable respects with Seller with respect to such filings and
Environmental permit activities.
7.12 Cooperation with Financing. In order to assist with obtaining
the Financing (as defined in Section 9.1(q) below), Seller shall provide such
assistance and cooperation as Parent and its Affiliates may reasonably request,
including (a) making senior management of Seller reasonably available for
customary syndication presentations and meetings and presentations with rating
agencies and lenders or other proposed financing sources and (b) cooperating
with prospective lenders or other proposed financing sources in performing their
due diligence.
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7.13 Monthly Financial Statements. As soon as reasonably practicable,
but in no event later than 30 days after the end of each calendar month during
the period from the date hereof to the Closing, Seller shall provide Parent with
(a) unaudited monthly financial statements (such statements to be prepared by
Seller in accordance with GAAP consistent with past practice in each case
without footnotes) and (b) operating or management reports (such reports to be
in the form prepared by Seller in the Ordinary Course of Business) of Seller for
such preceding month (such financial statements, the "Monthly Financial
Statements").
7.14 Notification of Certain Matters. Seller shall give notice to
Parent and Parent shall give notice to Seller, as promptly as reasonably
practicable upon becoming aware of (a) any fact, change, condition,
circumstance, event, occurrence or non-occurrence that has caused or is
reasonably likely to cause any representation or warranty in this Agreement made
by it to be untrue or inaccurate in any respect at any time after the date
hereof and prior to the Closing, (b) any material failure on its part to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder or (c) the institution of or the threat of institution
of any Legal Proceeding against Seller related to this Agreement or the
transactions contemplated hereby; provided, that the delivery of any notice
pursuant to this Section 7.14 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice, or the representations
or warranties of, or the conditions to the obligations of, the parties hereto.
7.15 Parent Board of Directors. On the Closing Date, Parent shall
take such actions as are reasonably necessary to elect Xxxx Xxxxxxx and one
other nominee of Seller, acceptable to Parent, to Parent's Board of Directors,
to serve until Parent's next annual meeting of stockholders and until his
successor is elected and qualified, or if earlier, until his earlier death,
resignation or removal.
7.16 Preparation of the Form S-4 and the Joint Proxy Statement;
Stockholder Meetings.
(a) As soon as practicable following the date of this Agreement,
Seller and Parent shall prepare and file with the SEC the Joint Proxy Statement
and Seller and Parent shall prepare and Parent shall file with the SEC the Form
S-4, in which the Joint Proxy Statement will be included as a prospectus. Each
of Seller and Parent shall, and shall cause their accountants and lawyers to use
its reasonable best efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing and keep the Form
S-4 effective for so long as necessary to consummate the transactions
contemplated by this Agreement, including causing their accountants to deliver
necessary or required instruments such as opinions, consents, certificates and
comfort letters, each in customary form and covering such matters of the type
customarily covered by such documents. Seller shall use its reasonable best
efforts to cause the Joint Proxy Statement to be mailed to the unitholders of
Seller and Parent shall use its reasonable best efforts to cause the Joint Proxy
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Statement to be mailed or otherwise delivered in accordance with Law to the
stockholders of Parent, in each case as promptly as practicable after the Form
S-4 is declared effective under the Securities Act. Parent shall also take any
action (other than qualifying to do business in any jurisdiction in which it is
not now so qualified or filing a general consent to service of process) required
to be taken under any applicable state securities Laws in connection with the
issuance of shares of Parent Common Stock, and Seller shall furnish all
information concerning Seller and the Unitholders of Seller as may be reasonably
requested by Parent in connection with any such action. No filing of, or
amendment or supplement to, the Form S-4 will be made by Parent, and no filing
of, or amendment or supplement to, the Joint Proxy Statement will be made by
Seller or Parent, in each case without providing the other party a reasonable
opportunity to review and comment thereon. If at any time prior to the time the
Form S-4 is declared effective under the Securities Act any information relating
to Seller or Parent, or any of their respective Affiliates, directors or
officers, should be discovered by Seller or Parent which should be set forth in
an amendment or supplement to either the Form S-4 or the Joint Proxy Statement,
so that either such document would not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the party which discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
Law, disseminated to the unitholders of Seller and the stockholders of Parent.
The parties shall notify each other promptly of the receipt of any comments from
the SEC or the staff of the SEC and of any request by the SEC or the staff of
the SEC for amendments or supplements to the Joint Proxy Statement or the Form
S-4 or for additional information and shall supply each other with copies of (i)
all correspondence between it or any of its Representatives, on the one hand,
and the SEC or the staff of the SEC, on the other hand, with respect to the
Joint Proxy Statement, the Form S-4 or the transactions contemplated by this
Agreement and (ii) all orders of the SEC relating to the Form S-4.
(b) Seller shall, as soon as practicable following the date of this
Agreement, establish a record date for, duly call, give notice of, convene and
hold a special meeting of its unitholders (the "Seller Unitholders Meeting")
solely for the purpose of obtaining the Seller Unitholder Approval. Subject to
Section 7.6(c) hereof, Seller shall, through its Board of Managers, recommend to
its unitholders adoption of this Agreement (the "Seller Board Recommendation").
The Joint Proxy Statement shall include a copy of the Seller Board
Recommendation. Without limiting the generality of the foregoing, Seller's
obligations pursuant to the first sentence of this Section 7.16(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to Seller of any Takeover Proposal or (ii) the withdrawal or
modification by the Board of Managers of Seller or any committee thereof of the
Seller Board Recommendation or such Board of Managers' or such committee's
approval of this Agreement. Seller shall use its reasonable best efforts to
cause the Seller Unitholders Meeting to occur on the same date as the Parent
Stockholders Meeting.
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(c) Parent shall, as soon as practicable following the date of this
Agreement, establish a record date for, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Parent Stockholders Meeting") for the
purpose of obtaining the Parent Stockholder Approval. Parent shall, through its
Board of Directors, recommend to its stockholders that they vote in favor of the
Transaction and this Agreement; provided, however, that the Board of Directors
of Parent may withdraw or modify such recommendation if they determine that such
withdrawal or modification is necessary in the exercise of their fiduciary
duties; provided, further, however, that if the Board of Directors of Parent
withdraws or modifies such recommendation due to any reason other than a reason
or reasons arising from a Material Adverse Effect, Parent shall pay Seller a
Termination Fee and Expenses to the same extent as provided for Parent in
Section 4.5. Parent shall use its reasonable best efforts to cause the Parent
Stockholders Meeting to occur on the same date as the Seller Unitholders
Meeting.
(d) Parent and Seller hereby agree that any Unitholder of Seller
that, prior to the True-Up Date, transfers his, her or its shares of Parent
Common Stock received at Closing (and any transferee thereof except transfers by
gift or into trust) shall be prohibited from receiving any True-Up Shares as to
the shares transferred. Certificates evidencing shares of the Closing Issued
Shares shall include a legend to that effect.
7.17 Dividends. All cash dividends made by Seller to its Unitholders
after the date hereof and prior to Closing shall be made in the Ordinary Course
of Business; provided, however, that, on the Closing Date, the amount of Closing
Working Capital must be equal to at least the amount of Target Working Capital;
provided, further, however, that to the extent Seller has cash on hand at
Closing in excess of the amount required, if any, for Closing Working Capital to
equal at least the amount of Target Working Capital, then Seller may make a
special dividend of all such excess cash to its unitholders immediately prior to
Closing.
7.18 Amendment of Rights Plan. Seller has amended its Rights
Agreement, dated as of January 1, 1999, to provide that such Rights Agreement
shall terminate immediately prior to the Closing.
7.19 No Dissolution of Seller. Seller hereby agrees that (a) no
action shall be taken to dissolve Seller or otherwise terminate its limited
liability company existence and (b) it will withhold sufficient funds to meet
its obligations under this Agreement, until the later to occur of the date that
is fifteen months following the Closing Date and the date upon which all
Unresolved Claims, if any, have been resolved in accordance with Article X and
the Escrow Agreement.
7.20 Transfer of Certificates of Title. At Closing, Seller shall
deliver to Purchaser certificates of title to the assets listed on Company
Disclosure Schedule 7.20 to be transferred to Purchaser.
7.21 Agreements of Rule 145 Affiliates. At least five Business Days
prior to the Closing Date, Seller shall cause to be prepared and delivered to
Parent a list identifying all persons who it believes may be deemed to be
"affiliates" of Seller, as that term is used in paragraphs (c) and (d) of Rule
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145 under the Securities Act (the "Rule 145 Affiliates"). Seller shall use its
commercially reasonable efforts to cause each person who is identified as its
Rule 145 Affiliate in such list to deliver to Parent, at or prior to the Closing
Date, a written agreement, in substantially the form attached hereto as Exhibit
B. Parent shall be entitled to place restrictive legends on any shares of Parent
Common Stock issued (i) to such Rule 145 Affiliates and (ii) to any other
Persons who it reasonably believes may be deemed to be "affiliates" of Seller,
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act, pursuant to the Transaction.
7.22 Updating of Schedules. From time to time prior to the Closing
Date, Seller shall promptly amend or supplement the Company Disclosure Schedule
to reflect any events or circumstances that occur or arise between the date
hereof and the Closing Date and that, if existing or occurring on the date of
this Agreement, would have been required to be disclosed on such Schedule in
order to make the representations and warranties of Seller true and correct;
provided, however, that no such amendment or supplement made by Seller shall
have any effect for the purpose of determining the satisfaction of the
conditions to the obligations of Parent and Purchaser hereunder or excuse the
breach of a covenant of Seller hereunder; and provided further, however, that
following receipt of the amended or supplemented Company Disclosure Schedule,
Parent shall have the option of either (a) terminating this Agreement or (b)
proceeding with the Closing and waiving any claim for indemnification for the
additional matter(s) so disclosed.
7.23 Engagement of Actuary. Seller shall use its insurance company's
actuary to value, at Seller's expense, Seller's Liabilities related to potential
workers' compensation claims for Seller's fiscal year ending 2005. Prior to
Closing, Parent shall engage a reputable third-party actuary, at Parent's
expense, to value such Liabilities and the difference, if any, between the
amount determined by Seller's actuary and the actuary engaged by Parent shall be
reflected in the Final Working Capital; provided that if the actuary engaged by
Parent determines a range of such Liabilities, the parties will use the
mid-point amount and not the high- or low-end of such range.
ARTICLE VIII
EMPLOYEES AND EMPLOYEE BENEFITS
8.1 Employment. Purchaser shall assume all liabilities arising out
of, relating to, or with respect to, the Labor Contracts with labor unions or
associations representing Employees of Seller disclosed in Company Disclosure
Schedule 5.14(b), and the Employees covered by the Labor Contracts shall become
employees of Purchaser after the Closing without interruption in employment.
Prior to the Closing, Purchaser shall deliver, in writing, an offer of
employment on an "at will" basis to the Employees of Seller who are not covered
by any of the Labor Contracts disclosed in Company Disclosure Schedule 5.14(a).
Each such offer of employment shall be at the same salary or hourly wage rate
and position in effect immediately prior to the Closing Date. The Employees of
Seller covered by the Labor Contracts disclosed in Company Disclosure Schedule
5.14(a) and the individuals who accept Purchaser's "at will" employment offer by
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the Closing Date are hereinafter referred to as the "Transferred Employees."
Subject to applicable Laws and to any terms, conditions, or limitations
contained in the Labor Contracts disclosed in Company Disclosure Schedule
5.14(a), after the Closing Date, Purchaser shall have the right to dismiss any
or all Transferred Employees at any time, with or without cause, and to change
the terms and conditions of their employment (including compensation and
employee benefits provided to them).
8.2 Standard Procedure. Pursuant to Section 4 of Revenue Procedure
2004-53 I.R.B. 2004-34, (a) Purchaser and Seller shall report on a
predecessor/successor basis as set forth therein, (b) Seller will not be
relieved from filing a Form W-2 with respect to any Transferred Employees, and
(c) Purchaser will undertake to file (or cause to be filed) a Form W-2 for each
such Transferred Employee only with respect to the portion of the year during
which such Employees are employed by the Purchaser that includes the Closing
Date, excluding the portion of such year that such Employee was employed by
Seller.
8.3 Employee Benefits. Following the Closing, Purchaser shall provide
the Transferred Employees who are not covered by a collective bargaining
agreement with benefits under Purchaser's existing employee benefit plans or
employee benefit plans of Seller that are assumed by Purchaser ("Purchaser
Plans") that are comparable, in the aggregate, to the benefits provided by
Seller immediately prior to the Closing. Transferred Employees who are covered
by a collective bargaining agreement shall be provided with benefits in
compliance with such agreement. Purchaser shall cause Transferred Employees to
be credited with service with Seller for vesting and eligibility (including any
earned vacation time to the extent reflected on the Final Closing Balance Sheet)
under the Purchaser Plans and solely under Seller's defined benefit plan for
benefit accruals with respect to accrued benefit obligations. Notwithstanding
anything to the contrary in this Agreement, nothing in this Agreement shall be
construed as requiring any compensation or employee benefit plans, programs or
arrangements to continue to be maintained by Purchaser with respect to the
Transferred Employees for any specified period after the Closing Date.
8.4 Withdrawal Liability.
(a) To avoid the imposition of withdrawal liability on Seller, Parent
and Purchaser agree that, with respect to the Multiemployer Plans set forth on
Company Disclosure Schedule 5.13(a) to which Seller contributes (each, a
"Plan"), they will: (i) contribute to each Plan for substantially the same
number of contribution base units (as defined in ERISA Section 4001(a)(11)) for
which Seller has an obligation to contribute prior to the Closing Date with
respect to the applicable collective bargaining agreement and (ii) provide to
each Plan for a period of five consecutive plan years commencing with the first
plan year beginning after the Closing Date, a bond to be obtained by Purchaser
issued by a corporate surety corporation that is an acceptable surety for
purposes of ERISA Section 412, or a sum to be provided by Purchaser held in
escrow by a bank or similar financial institution, or an irrevocable letter of
credit to be obtained by Purchaser, equal to the greater of (x) the average
annual contribution required to be made by Seller with respect to the operations
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under the Plans for the three plan years immediately preceding the plan year in
which the Closing Date occurs or (y) the annual contribution that Seller was
required to make under each Plan with respect to the operations for the last
plan year prior to the plan year in which the Closing Date occurs, or shall
obtain a waiver of the requirements to provide any of the foregoing or shall
comply with alternatives acceptable to the Plan or Plans, in order to ensure
compliance with Section 4204 of ERISA. Unless and until such a waiver of the
bonding, escrow, or letter of credit requirements is granted, or alternatives
acceptable to the Plan or Plans are satisfied, Parent and Purchaser shall comply
with the bond, escrow or letter of credit requirements, except to the extent
provided in PBGC Regulation 4204(11)(d). If at any time during the first five
plan years beginning after the Closing Date, Purchaser withdraws from, or fails
to make a required contribution to, one of the Plans, the bond, escrow, or
letter of credit obtained with respect to such Plan, if any, shall be paid to
such Plan. In addition, if Seller is required to provide a bond or an amount in
escrow pursuant to ERISA Section 4204(a)(3), Parent and Purchaser, on behalf of
Seller, shall provide such bond or such amount in escrow, the costs of which
shall be borne equally by Purchaser and Seller, for the period of time, and in a
form that complies with ERISA Section 4204(a)(3) (or obtain a variance from such
bonding or escrow requirements from the Plan) and furnish proof of such
compliance to Seller.
(b) Secondary Liability. If Purchaser effects a complete or partial
withdrawal from a Plan during the first five plan years following the Closing
Date and Purchaser fails to make any withdrawal liability payment to the Plan
when due, then Seller shall be secondarily liable to the Plan for any unpaid
withdrawal liability to the extent that Seller would have incurred such
liability following the Closing Date had Purchaser not agreed to the provisions
of this Section 8.4. Seller's obligations set forth in this Section 8.4(b) shall
continue with respect to events that occurred prior to the last day of the five
plan year period referred to in this Section 8.4 (regardless of when notice of
such liability is received by either Purchaser or Seller). Purchaser and Seller
shall promptly notify the other party of any demand for payment of withdrawal
liability received by Purchaser or Seller with respect to events that occurred
within five (5) years following the Closing Date. Purchaser and Seller agree to
take all such further actions as may be necessary to satisfy the sale of assets
exception requirements set forth in Section 4204 of ERISA. If Seller incurs
secondary liability under this Section 8.4, Parent and Purchaser shall
indemnify, defend, protect and hold harmless Seller for any such payments made
by Seller in satisfaction of such obligation.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions Precedent to Obligations of Parent and Purchaser. The
obligations of Parent and Purchaser to consummate the transactions contemplated
by this Agreement is subject to the fulfillment, on or prior to the Closing
Date, of each of the following conditions (any or all of which may be waived by
Parent and Purchaser in whole or in part to the extent permitted by applicable
Law):
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(a) the representations and warranties of Seller set forth in this
Agreement qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, as of the date
of this Agreement and as of the Closing as though made at and as of the Closing,
except to the extent such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, on and as of such earlier date); provided,
however, in the event of any breach of a representation or warranty of Seller
set forth in this Agreement, the condition set forth in this Section 9.1(a)
shall be deemed satisfied unless the effect of all such breaches of
representations and warranties taken together could reasonably be expected to
have a Material Adverse Effect.
(b) Seller shall have performed and complied in all material respects
with all obligations and agreements required in this Agreement to be performed
or complied with by it on or prior to the Closing Date;
(c) there shall not have been or occurred any event, change,
occurrence or circumstance that, individually or in the aggregate, with any
other events, changes, occurrences or circumstances, has had or which could
reasonably be expected to have a Material Adverse Effect;
(d) Parent shall have received a certificate signed by the Chief
Executive Officer of Seller, in form and substance reasonably satisfactory to
Parent, dated the Closing Date, to the effect that each of the conditions
specified above in Sections 9.1(a)-(c) have been satisfied in all respects;
(e) With respect to each Owned Property, Parent shall have received a
binding commitment from a title company of Parent's choice , the costs of which
will be borne one-half by Parent and one-half by Seller, to issue a policy of
title insurance on such Owned Property, which shall show title thereto to be in
the condition represented by Seller herein, and shall otherwise be reasonably
satisfactory to Parent, shall contain exceptions only for Permitted Exceptions
(all Liens, other than Permitted Exceptions, including all Liens set forth on
Company Disclosure Schedule 5.9(a)(i)(A)), being satisfied by Seller prior to
Closing, and satisfactory evidence thereof provided to Parent and its title
company on or before Closing), and shall show no rights of occupancy or use by
third parties other than tenants under Real Property Leases, no encroachments,
and no gaps in the chain of title, the cost of the cure of which shall be borne
by Seller;
(f) Parent shall have received, from Parent's surveyor, an ALTA/ACSM
Class A Land Title Survey with respect to each Owned Property, which does not
reveal any fact or condition which has not been previously disclosed to Parent
and which is otherwise reasonably satisfactory to Parent, the cost of which
surveys shall be borne equally by Seller and Parent;
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(g) Seller shall have delivered to Parent's title company any
certifications, gap and lien indemnities and title and survey affidavits,
commonly delivered in transactions involving the sale of real property in which
title insurance is purchased, as may be requested by the title company in
connection with the issuance of title insurance for Parent or its lenders,
together with copies of formation documents, incumbency certificates,
certificates of good standing and consents or resolutions as are requested by
said title company;
(h) there shall not be in effect any Order by a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;
(i) (i) the waiting period under the HSR Act shall have expired and
Seller shall have obtained any consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Body set forth on
Company Disclosure Schedule 5.3(b) required to be obtained or made in connection
with the execution and delivery of this Agreement or the performance of the
transactions contemplated hereby and (ii) Seller shall have obtained all
consents waivers and approvals under all Antitrust Laws and those consents,
waivers and approvals referred to in Section 5.3(b) hereof in a form
satisfactory to Parent;
(j) the Form S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Form S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC;
(k) the Seller Unitholder Approval shall have been obtained in
accordance with applicable Law and the operating agreement and By-laws of
Seller;
(l) the Parent Stockholder Approval shall have been obtained in
accordance with applicable Law and the certificate of incorporation and by-laws
of Parent;
(m) the shares of Parent Common Stock deliverable to the Unitholders
as contemplated by this Agreement shall have been approved for listing on The
American Stock Exchange, subject to official notice of issuance;
(n) Seller shall have provided Parent with an affidavit of
non-foreign status of Seller that complies with Section 1445 of the Code (a
"FIRPTA Affidavit");
(o) Each of Xxxx Xxxxx, Xxxxx Xxxx and Xxxxx Xxxxxxx shall have
entered into an employment agreement on terms satisfactory to Parent, and such
employment agreements shall be in full force and effect;
(p) Xxxx Xxxxxxx shall have executed and delivered a noncompetition
and nonsolicitation agreement substantially in the form attached hereto as
Exhibit C;
(q) Purchaser shall have obtained proceeds from the financing set
forth in the Term Sheet on the terms and conditions set forth therein (or
otherwise reasonably satisfactory to Parent) (the "Financing");
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(r) Parent shall have received the appropriate consents required
under Parent's senior credit facility and subordinated debt facility;
(s) Seller shall have delivered, or caused to be delivered, to
Purchaser a duly executed xxxx of sale in the form of Exhibit D hereto and other
documents and instruments of transfer reasonably requested by Purchaser or
Purchaser's title company;
(t) Seller shall have delivered, or cause to be delivered, to
Purchaser duly executed general warranty deeds in forms appropriate for each
state in which Owned Real Property is located (other than for the Excluded
Properties) and, if requested by Purchaser, separate assignments for the Real
Property Leases; provided, however, that Seller may deliver special warranty
deeds in lieu of general warranty deeds for certain Owned Real Property if title
insurance has been obtained for such Owned Real Property;
(u) Seller shall have obtained the issuance, reissuance or transfer
of all Permits (including Environmental Permits) set forth on Company Disclosure
Schedule 5.16(b) for Purchaser to conduct the operations of Business as of the
Closing Date, and Seller shall have satisfied all property transfer requirements
arising under Law, including Environmental Laws;
(v) Seller shall have delivered, or caused to be delivered, to
Purchaser a duly executed assignment and assumption agreement in the form of
Exhibit E hereto and duly executed assignments of the registrations and
applications included in the Purchased Intellectual Property, in a form
reasonably acceptable to Purchaser and suitable for recording in the U.S. Patent
and Trademark Office, U.S. Copyright Office or equivalent foreign agency, as
applicable, and general assignments of all other Purchased Intellectual
Property;
(w) Seller shall have delivered, or caused to be delivered, to
Purchaser, a duly executed power of attorney in the form of Exhibit F hereto;
(x) Seller shall have delivered, or caused to be delivered, to Parent
an opinion of Nyemaster, Goode, West, Xxxxxxx & O'Brien PC, counsel to Seller,
in substantially the form of Exhibit G hereto and permitting reliance thereupon
by Parent's lenders;
(y) Seller shall have delivered all instruments and documents
necessary to release any and all Liens, other than Permitted Exceptions, on the
Purchased Assets, including appropriate UCC financing statement amendments
(termination statements);
(z) appropriate payoff letters relating to the Payoff Indebtedness
Amount in form and substance reasonably satisfactory to Parent;
(aa) the opinion of Xxxxxx Xxxxxxx Corp. dated as of December 16,
2005 delivered to the Board of Directors of Parent shall not have been withdrawn
or materially modified due solely to a Material Adverse Effect;
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(bb) Seller shall have delivered, or caused to be delivered, to
Purchaser copies of all consents, waivers and approvals referred to in Section
9.1(i)(ii); and
(cc) Seller shall have delivered, or caused to be delivered, to
Parent such other documents as Parent may reasonably request.
9.2 Conditions Precedent to Obligations of Seller. The obligations of
Seller to consummate the transactions contemplated by this Agreement are subject
to the fulfillment, prior to or on the Closing Date, of each of the following
conditions (any or all of which may be waived by Seller in whole or in part to
the extent permitted by applicable Law):
(a) the representations and warranties of Parent and Purchaser set
forth in this Agreement qualified as to materiality shall be true and correct,
and those not so qualified shall be true and correct in all material respects,
as of the date of this Agreement and as of the Closing as though made at and as
of the Closing, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of
such earlier date); provided, however, in the event of any breach of a
representation or warranty of Parent or Purchaser set forth in this Agreement,
the condition set forth in this Section 9.2(a) shall be deemed satisfied unless
the effect of all such breaches of representations and warranties taken together
could reasonably be expected to have a Parent Material Adverse Effect;
(b) Parent and Purchaser shall have performed and complied in all
material respects with all obligations and agreements required by this Agreement
to be performed or complied with by Parent and Purchaser on or prior to the
Closing Date;
(c) there shall not have occurred any event, change, occurrence or
circumstance that, individually or in the aggregate with any other events,
changes, occurrences or circumstances, has had or which could reasonably be
expected to have a Parent Material Adverse Effect;
(d) Seller shall have received certificates signed by the Chief
Executive Officer of each of Parent and Purchaser, in form and substance
reasonably satisfactory to Seller, dated the Closing Date, to the effect that
each of the conditions specified above in Sections 9.2(a)-(c) have been
satisfied in all respects;
(e) there shall not be in effect any Order by a Governmental Body of
competent jurisdiction restraining, enjoining or otherwise prohibiting the
consummation of the transactions contemplated hereby;
(f) the waiting period under the HSR Act shall have expired and
Parent shall have obtained or made any other consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Body set forth on Parent Disclosure Schedule 6.4 required to be obtained or made
by it in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby;
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(g) the Form S-4 shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Form S-4 shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC;
(h) the Seller Unitholder Approval shall have been obtained in
accordance with applicable Law and the operating agreement and by-laws of
Seller;
(i) the Parent Stockholder Approval shall have been obtained in
accordance with applicable Law and the certificate of incorporation and by-laws
of Parent;
(j) the shares of Parent Common Stock deliverable to the Unitholders
as contemplated by this Agreement shall have been approved for listing on The
American Stock Exchange, subject to official notice of issuance;
(k) Parent shall have delivered, or caused to be delivered, to Seller
evidence of the wire transfer referred to in Section 3.2 hereof;
(l) Purchaser shall have delivered, or caused to be delivered, to
Seller a duly executed assignment and assumption agreement in the form attached
hereto as Exhibit E hereto;
(m) Parent and Purchaser shall have delivered, or caused to be
delivered, to Seller an opinion of Weil, Gotshal & Xxxxxx LLP, counsel to Parent
and Purchaser, in substantially the form of Exhibit I hereto; and
(n) the opinion of Xxxxxx Xxxxxxxxx & Associates, Inc. dated as of
December 16, 2005 delivered to the Board of Managers of Seller shall not have
been withdrawn or materially modified due solely to a Parent Material Adverse
Effect.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations and Warranties. The representations
and warranties of the parties contained in this Agreement, any certificate
delivered pursuant hereto or any Seller Document or Purchaser Document shall
survive the Closing through and including the True-Up Date; provided, however,
that the representations and warranties of Seller set forth in Section 5.8
(taxes) shall survive the Closing until ninety days following the expiration of
tha applicable statute of limitations with respect to the particular matter
thereof (in each case, the the "Survival Period"); provided, however, that any
obligations under Sections 10.2(a)(i) and 10.2(b)(i) shall not terminate with
respect to any Losses as to which the Person to be indemnified shall have given
notice (stating in reasonable detail the basis of the claim for indemnification)
to the indemnifying party in accordance with Section 10.3(a) before the
termination of the Survival Period.
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10.2 Indemnification.
(a) Subject to Sections 10.1, 10.4 and 10.5 hereof, Seller hereby
agrees to indemnify and hold Parent and its Affiliates and their respective
directors, officers, employees, stockholders, members, partners, agents,
attorneys, representatives, successors and assigns (collectively, the "Parent
Indemnified Parties") harmless from and against, and pay to the applicable
Parent Indemnified Parties the amount of, any and all losses, liabilities,
claims, obligations, deficiencies, demands, judgments, damages (including
incidental and consequential damages), interest, fines, penalties, claims,
suits, actions, causes of action, assessments, awards, costs and expenses
(including reasonable costs of investigation and defense and attorneys' and
other professionals' fees and related charges), or any diminution in value,
whether or not involving a third party claim (individually, a "Loss" and,
collectively, "Losses"):
(i) based upon, attributable to or resulting from the failure of
any of the representations or warranties made by Seller in this
Agreement or in any Seller Document to be true and correct in all
respects at and as of the date hereof and at and as of the Closing
Date;
(ii) based upon, attributable to or resulting from the breach of
any covenant or other agreement on the part of Seller under this
Agreement or in any Seller Document;
(iii) any Liability of Seller under WARN arising on or before the
Closing Date; and
(iv) arising out of, based upon or relating to any Excluded Asset
or any Excluded Liability.
(b) Subject to Sections 10.1 and 10.4, Parent and Purchaser hereby
agree to indemnify and hold Seller and its Affiliates and their respective
stockholders, directors, officers, employees, Unitholders, partners, agents,
attorneys, representatives, successors and permitted assigns (collectively, the
"Seller Indemnified Parties") harmless from and against, and pay to the
applicable Seller Indemnified Parties the amount of, any and all Losses:
(i) based upon, attributable to or resulting from the failure of
any of the representations or warranties made by Parent or Purchaser
in this Agreement or in any Purchaser Document to be true and correct
in all respects at the date hereof and as of the Closing Date;
(ii) based upon, attributable to or resulting from the breach of
any covenant or other agreement on the part of Parent or Purchaser
under this Agreement or any Purchaser Document; and
(iii) arising out of, based upon or relating to any Assumed
Liability.
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For greater clarity and subject to the limitations contained in this Article X,
Losses can be recovered on behalf of the Unitholders by Seller.
(c) The right to indemnification or any other remedy based on
representations, warranties, covenants and agreements in this Agreement, any
Seller Document or Purchaser Document shall not be affected by any investigation
conducted at any time, or any knowledge acquired (or capable of being acquired)
at any time, whether before or after the execution and delivery of this
Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or agreement. The
waiver of any condition based on the accuracy of any representation or warranty,
or on the performance of or compliance with any such covenant or agreements,
will not affect the right to indemnification or any other remedy based on such
representations, warranties, covenants and agreements.
10.3 Indemnification Procedures.
(a) A claim for indemnification for any matter not involving a third
party claim shall be asserted by prompt written notice to the party from whom
indemnification is sought; provided, however, that failure to so notify the
indemnifying party shall not preclude the indemnified party from any
indemnification which it may claim in accordance with this Article X unless the
indemnifying party is materially prejudiced by the failure to give prompt
written notice of the claim for indemnification.
(b) In the event that any Legal Proceedings shall be instituted or
that any claim or demand shall be asserted by any third party in respect of
which indemnification may be sought under Section 10.2 hereof (regardless of the
limitations set forth in Section 10.4) ("Third Party Claim"), the indemnified
party shall promptly cause written notice of the assertion of any Third Party
Claim of which it has knowledge which is covered by this indemnity to be
forwarded to the indemnifying party. The failure of the indemnified party to
give reasonably prompt notice of any Third Party Claim shall not release, waive
or otherwise affect the indemnifying party's obligations with respect thereto
except to the extent that the indemnifying party can demonstrate actual loss and
prejudice as a result of such failure. Subject to the provisions of this Section
10.3, the indemnifying party shall have the right, at its sole expense, to be
represented by counsel of its choice, which must be reasonably satisfactory to
the indemnified party, and to defend against, negotiate, settle or otherwise
deal with any Third Party Claim which relates to any Losses indemnified against
by it hereunder; provided that the indemnifying party shall have acknowledged in
writing to the indemnified party its unqualified obligation to indemnify the
indemnified party as provided hereunder. If the indemnifying party elects to
defend against, negotiate, settle or otherwise deal with any Third Party Claim
which relates to any Losses indemnified against by it hereunder, it shall within
ten (10) days of the indemnified party's written notice of the assertion of such
Third Party Claim (or sooner, if the nature of the Third Party Claim so
requires) notify the indemnified party of its intent to do so; provided that the
indemnifying party must conduct its defense of the Third Party Claim actively
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and diligently thereafter in order to preserve its rights in this regard. If the
indemnifying party elects not to defend against, negotiate, settle or otherwise
deal with any Third Party Claim which relates to any Losses indemnified against
by it hereunder, fails to notify the indemnified party of its election as herein
provided or contests its obligation to indemnify the indemnified party for such
Losses under this Agreement, the indemnified party may defend against,
negotiate, settle or otherwise deal with such Third Party Claim. If the
indemnified party defends any Third Party Claim, then the indemnifying party
shall reimburse the indemnified party for the expenses of defending such Third
Party Claim upon submission of periodic bills. If the indemnifying party shall
assume the defense of any Third Party Claim, the indemnified party may
participate, at his or its own expense, in the defense of such Third Party
Claim; provided, however, that such indemnified party shall be entitled to
participate in any such defense with separate counsel at the expense of the
indemnifying party if (i) so requested by the indemnifying party to participate
or (ii) in the reasonable opinion of counsel to the indemnified party a conflict
or potential conflict exists between the indemnified party and the indemnifying
party that would make such separate representation advisable; and provided,
further, that the indemnifying party shall not be required to pay for more than
one such counsel (plus any appropriate local counsel) for all indemnified
parties in connection with any Third Party Claim. Each party hereto agrees to
provide reasonable access to each other party to such documents and information
as may reasonably by requested in connection with the defense, negotiation or
settlement of any such Third Party Claim. Notwithstanding anything in this
Section 10.3 to the contrary, neither the indemnifying party nor the indemnified
party shall, without the written consent of the other party, settle or
compromise any Third Party Claim or permit a default or consent to entry of any
judgment unless the claimant (or claimants) and such party provide to such other
party an unqualified release from all Liability in respect of the Third Party
Claim. If the indemnifying party makes any payment on any Third Party Claim, the
indemnifying party shall be subrogated, to the extent of such payment, to all
rights and remedies of the indemnified party to any insurance benefits or other
claims of the indemnified party with respect to such Third Party Claim.
(c) After any final decision, judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction and the expiration of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or the indemnified party and the indemnifying party shall have
arrived at a mutually binding agreement, in each case with respect to an Third
Party Claim hereunder, the indemnified party shall forward to the indemnifying
party notice of any sums due and owing by the indemnifying party pursuant to
this Agreement with respect to such matter and the indemnifying party shall pay
all of such remaining sums so due and owing to the indemnified party in
accordance with Section 10.5.
10.4 Limitations on Indemnification for Breaches of Representations
and Warranties.
(a) An indemnifying party shall not have any Liability under Section
10.2(a)(i) or Section 10.2(b)(i) hereof unless the aggregate amount of Losses
incurred by the indemnified parties and indemnifiable thereunder based upon,
attributable to or resulting from the failure of any of the representations or
warranties to be true and correct exceeds $1,400,000 (the "Basket") and, in such
event, the indemnifying party shall be required to pay the entire amount of all
such Losses.
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(b) The liability of Seller, Parent, and Purchaser under this Article
X shall not exceed the Indemnity Escrow Amount.
(c) For purposes of determining the failure of any representations or
warranties to be true and correct, the breach of any covenants or agreements,
and calculating Losses hereunder any materiality or Material Adverse Effect
qualifications in the representations, warranties, covenants and agreements
shall be disregarded.
10.5 Tax Treatment of Indemnity Payments. Seller and Parent agree to
treat any indemnity payment made pursuant to this Article X as an adjustment to
the Purchase Price for all Tax purposes. If, notwithstanding the treatment
required by the preceding sentence, any indemnification payment under Article X
(including this Section 10.5) is determined to be taxable to the party receiving
such payment by any Taxing Authority, the paying party shall also indemnify the
party receiving such payment for any Taxes incurred by reason of the receipt of
such payment and any Losses incurred by the party receiving such payment in
connection with such Taxes (or any asserted deficiency, claim, demand, action,
suit, proceeding, judgment or assessment, including the defense or settlement
thereof, relating to such Taxes).
ARTICLE XI
TAXES
11.1 Transfer Taxes. Seller and Parent shall each (i) be responsible
for half of any and all sales, use, stamp, documentary, filing, recording,
transfer, real estate transfer, stock transfer, gross receipts, registration,
duty, securities transactions or similar fees or taxes or governmental charges
(together with any interest or penalty, addition to tax or additional amount
imposed) as levied by any Taxing Authority in connection with the transactions
contemplated by this Agreement (collectively, "Transfer Taxes"), regardless of
the Person liable for such Transfer Taxes under applicable Law and (ii) timely
file or caused to be filed all necessary documents (including all Tax Returns)
with respect to Transfer Taxes.
11.2 Prorations. Seller shall bear all property and ad valorem tax
liability with respect to the Purchased Assets if the lien or assessment date
arises prior to the Closing Date irrespective of the reporting and payment dates
of such taxes. All other real property taxes, personal property taxes, or ad
valorem obligations and similar recurring taxes and fees on the Purchased Assets
for taxable periods beginning before, and ending after, the Closing Date, shall
be prorated between Purchaser and Seller as of the Closing Date. Seller shall be
responsible for all such taxes and fees on the Purchased Assets accruing during
any period up to and including the Closing Date. Purchaser shall be responsible
for all such taxes and fees on the Purchased Assets accruing during any period
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after the Closing Date. With respect to Taxes described in this Section 11.2,
Seller shall prepare and timely file all Tax Returns due before the Closing Date
with respect to such Taxes and Purchaser shall prepare and timely file all Tax
Returns due after the Closing Date with respect to such Taxes. If one party
remits to the appropriate Taxing Authority payment for Taxes, which are subject
to proration under this Section 11.2 and such payment includes the other party's
share of such Taxes, such other party shall promptly reimburse the remitting
party for its share of such Taxes.
11.3 Cooperation on Tax Matters. Parent and Seller shall furnish or
cause to be furnished to each other, as promptly as practicable, such
information and assistance relating to the Purchased Assets and the Assumed
Liabilities as is reasonably necessary for the preparation and filing of any Tax
Return, claim for refund or other filings relating to Tax matters, for the
preparation for any Tax audit, for the preparation for any Tax protest, for the
prosecution or defense of any suit or other proceeding relating to Tax matters.
ARTICLE XII
RISK OF LOSS
The risk of loss, damage or destruction to the Purchased Assets from
fire or other casualty or cause, shall be borne by Seller at all times up to the
Closing. It shall be the responsibility of Seller prior to the Closing to use
reasonable commercial efforts to repair or cause to be repaired and to restore
the affected property to its condition prior to any such loss, damage or
destruction. In the event of any such loss, damage or destruction, the proceeds
of any claim for any loss payable under any insurance policy with respect
thereto shall be used to repair, replace or restore any such property to its
former condition subject to the conditions stated below. In the event that
property reasonably required for the normal operation of the Business is not
repaired, replaced, or restored prior to the Closing, Purchaser, at its sole
option, and as Purchaser's sole remedy with respect to any of the foregoing,
upon written notice to Seller: (a) may elect to postpone Closing until such time
as the property has been repaired, replaced, or restored, or (b) may elect to
consummate the Closing and accept the property in its then condition, in which
event Seller shall assign to Purchaser all proceeds of insurance theretofore, or
to be, received, covering the property involved; and if Purchaser shall extend
the time for Closing pursuant to clause (a) above, and the repairs,
replacements, or restorations are not completed within sixty (60) days after the
date on which all of the conditions set forth in Article IX has been satisfied
or waived (other than conditions by their nature are to be satisfied at
Closing), Purchaser may, as its sole right and remedy, terminate this Agreement
by giving written notice thereof to Seller, without any party having any
Liability or obligation under or in respect of this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Except as otherwise provided in this Agreement, each
of Seller, Parent and Purchaser shall bear its own expenses incurred in
connection with the negotiation and execution of this Agreement and each other
agreement, document and instrument contemplated by this Agreement and the
consummation of the transactions contemplated hereby and thereby. Without
limiting the generality of the foregoing, each of Parent and Seller shall pay
one-half the costs of title insurance and surveys.
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13.2 Specific Performance. Seller agrees that the Purchased Assets
include unique property that cannot be readily obtained on the open market and
that Parent and Purchaser will be irreparably injured if the Closing under this
Agreement does not occur as provided herein. Therefore, Parent and Purchaser
shall have the right specifically to enforce the performance of Seller's
obligations under this Agreement to effect the Closing without the necessity of
posting any bond or other security, and Seller hereby waives the defense in any
such suit that Parent and Purchaser have an adequate remedy at law and agree not
to interpose any opposition, legal, or otherwise, as to the propriety of
specific performance as a remedy. If the Closing shall not occur in accordance
with the terms of this Agreement, the remedy of specific enforcement in
accordance with this Section 13.2 shall not be exclusive of any other rights and
remedies that Parent and Purchaser may otherwise have under this Agreement, all
of which rights and remedies shall be cumulative.
13.3 Submission to Jurisdiction; Consent to Service of Process;
Arbitration.
(a) The parties hereto hereby irrevocably submit to the exclusive
jurisdiction of any federal or state court located within the State of New York
over any dispute arising out of or relating to this Agreement or any of the
transactions contemplated hereby and each party hereby irrevocably agrees that
all claims in respect of such dispute or any suit, action proceeding related
thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Any controversy, dispute or
claim arising under or in connection with this Agreement (including, without
limitation, the existence, validity, interpretation or breach hereof and any
claim based on contract, tort of statute) shall be resolved by a binding
arbitration, to be held in Dallas, Texas pursuant to the Federal Arbitration Act
and in accordance with the then-prevailing International Arbitration Rules of
the American Arbitration Association (the "AAA"). The AAA shall select three
arbitrators. Each party shall bear its own expenses incurred in connection with
arbitration and the fees and expenses of the arbitrators shall be shared equally
by the parties involved in the dispute and advanced by them from time to time as
required. It is the mutual intention and desire of the parties that the tribunal
of three arbitrators be constituted as expeditiously as possible following the
submission of the dispute to arbitration. Once such tribunal is constituted and
except as may otherwise be agreed in writing by the parties involved in such
dispute or as ordered by the arbitrators upon substantial justification shown,
the hearing for the dispute will be held within sixty days of submission of the
dispute to arbitration. The arbitrators shall render their final award within
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sixty days, subject to extension by the arbitrators upon substantial
justification shown of extraordinary circumstances, following conclusion of the
hearing and any required post-hearing briefing or other proceedings ordered by
the arbitrators. Any discovery in connection with arbitration hereunder shall be
limited to information directly relevant to the controversy or claim in
arbitration. The arbitrators will state the factual and legal basis for the
award in writing. The decision of the arbitrators in any such proceeding will be
final and binding and not subject to judicial review and final judgment may be
entered upon such an award in any court of competent jurisdiction, but entry of
such judgment will not be required to make such award effective. Any action
against any party hereto ancillary to arbitration pursuant to this Section
13.3(a) (as determined by the arbitrators), including any action for provisional
or conservatory measures or action to enforce an arbitration award or any
judgment entered by any court in respect of any thereof may be brought in any
federal or state court of competent jurisdiction located within the State of New
York, and the parties hereto hereby irrevocably submit to the exclusive
jurisdiction of any federal or state court located within the State of New York
over any such action.
(b) The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such action brought in such court or any defense
of inconvenient forum for the maintenance of such action. Each of the parties
hereto agrees that a judgment in any such action may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(c) Each of the parties hereto hereby consents to process being
served by any party to this Agreement in any suit, action or proceeding by the
delivery of a copy thereof in accordance with the provisions of Section 13.6.
13.4 Entire Agreement; Amendments and Waivers. This Agreement and the
exhibits hereto, the Company Disclosure Schedule, the Parent Disclosure
Schedule, and the Confidentiality Agreement represent the entire understanding
and agreement between the parties hereto with respect to the subject matter
hereof. This Agreement can be amended, supplemented or changed, and any
provision hereof can be waived, only by written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, modification or waiver is sought. No action taken
pursuant to this Agreement, including without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
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13.5 Governing Law. This Agreement and all matters based upon,
arising out of or related to this Agreement or the negotiation, execution or
performance of this Agreement shall be governed by and construed in accordance
with the laws, both procedural and substantive, of the State of New York without
regard to its conflict of laws provisions that if applied might require the
application of the laws of another jurisdiction.
13.6 Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
facsimile (with written confirmation of transmission) or (iii) one Business Day
following the day sent by overnight courier (with written confirmation of
receipt), in each case at the following addresses and facsimile numbers (or to
such other address or facsimile number as a party may have specified by notice
given to the other party pursuant to this provision):
If to Seller, to:
National By-Products, LLC
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, President
Facsimile: 000-000-0000
With a copy to:
Nyemaster, Goode, West, Xxxxxxx & O'Brien PC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxx
Facsimile: 000-000-0000
If to Parent and/or Purchaser, to:
Darling International Inc.
000 X'Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attn: General Counsel
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxx, Esq.
13.7 Severability. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
86
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
13.8 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Nothing in this Agreement shall create or be deemed to create
any third party beneficiary rights in any person or entity not a party to this
Agreement except as provided below. No assignment of this Agreement or of any
rights or obligations hereunder may be made by either Seller, Parent or
Purchaser (by operation of law or otherwise) without the prior written consent
of the other parties hereto and any attempted assignment without the required
consents shall be void; provided, however, that Parent and Purchaser may assign
this Agreement and any or all rights or obligations hereunder (including,
without limitation, Purchaser's rights to purchase the Purchased Assets and
assume the Assumed Liabilities and Parent's and Purchaser's rights to seek
indemnification hereunder) to any Affiliate of Parent, any Person from which it
has borrowed money or any Person to which Parent or any of its Affiliates
proposes to sell all or substantially all of the assets relating to the
Business. Upon any such permitted assignment, the references in this Agreement
to Parent or Purchaser, as applicable, shall also apply to any such assignee
unless the context otherwise requires.
13.9 Non-Recourse. No past, present or future director, officer,
employee, incorporator, member, partner, stockholder, Affiliate, agent, attorney
or representative of Parent or its Affiliates shall have any Liability for any
Liabilities of Parent under this Agreement or the Purchaser Documents of or for
any claim based on, in respect of, or by reason of, the transactions
contemplated hereby and thereby. No past, present or future director, manager,
officer, employee, incorporator, member, partner, stockholder, Affiliate, agent,
attorney or representative of Seller or its Affiliates shall have any Liability
for any Liabilities of Seller under this Agreement or the Seller Documents of or
for any claim based on, in respect of, or by reason of, the transactions
contemplated hereby and thereby.
13.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
87
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers, as of the date first
written above.
DARLING INTERNATIONAL INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
DARLING NATIONAL LLC
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx
Chief Executive Officer
NATIONAL BY-PRODUCTS, LLC
By: /s/ Xxxx X. Xxxxx
----------------------------------
Xxxx X. Xxxxx
President
88
EXHIBIT A
ESCROW AGREEMENT
----------------
This ESCROW AGREEMENT, dated as of ____________, 2006 (this "ESCROW
AGREEMENT"), is by and among Darling International Inc., a Delaware corporation
("PARENT"), National By-Products, LLC, an Iowa limited liability company
("SELLER" and together with Parent, sometimes referred to collectively as the
"PARTIES"), and U.S. Bank, National Association, as escrow agent (the "ESCROW
AGENT").
RECITALS
A. Pursuant to that certain Asset Purchase Agreement, dated as of
December 19, 2005, by and among Parent, Darling National LLC, a Delaware limited
liability company and wholly-owned subsidiary of Parent ("PURCHASER"), and
Seller (the "PURCHASE AGREEMENT"), Purchaser will acquire substantially all of
Seller's assets. The Escrow Agent is not a party to and will not be responsible
for the Purchase Agreement.
B. The Parties wish, pursuant to the Purchase Agreement, to set aside
in escrow a portion of the consideration to be delivered by Parent pursuant to
the Purchase Agreement to secure any purchase price adjustments or
indemnification obligations of Seller under the Purchase Agreement.
C. Capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Purchase Agreement.
AGREEMENT
Accordingly, in consideration of the recitals and of the respective
agreements and covenants contained herein, and intending to be legally bound
hereby, the Parties and the Escrow Agent agree as follows:
Section 1. DEPOSIT OF ESCROW FUNDS. On the Closing Date, Parent shall,
on behalf of Seller, deliver or caused to be delivered to the Escrow Agent an
amount in immediately available funds equal to THREE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($3,500,000) (the "ESCROW CASH") and that number of shares of
Parent Common Stock rounded to the nearest whole number equal to the quotient of
SIX MILLION FIVE HUNDRED THOUSAND DOLLARS ($6,500,000) divided by the Closing
Share Price (the "ESCROW SHARES"). The Escrow Cash, together with interest and
dividends earned thereon, is referred to as the "CASH ESCROW FUNDS." As used
herein, the term "ESCROW FUNDS" shall mean the Cash Escrow Funds and the Escrow
Shares, less any distributions made hereunder. The Escrow Funds will be held in
trust and will not be subject to any lien or attachment of any creditor of any
party hereto and will be used solely for the purposes and subject to the
conditions set forth herein. The Cash Escrow Funds shall be delivered to the
Escrow Agent by wire transfer of immediately available funds to an account
designated by the Escrow Agent. The Escrow Shares shall be delivered to the
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Escrow Agent by a bonded carrier against receipt therefor by the Escrow Agent.
All cash amounts received as a distribution in respect of the Escrow Shares
shall be deposited under the terms of this Escrow Agreement, and shall become
part of the Cash Escrow Funds. All non-cash amounts received as a distribution
in respect of the Escrow Shares shall be deposited under the terms of this
Escrow Agreement, and shall be held with the Escrow Shares.
Section 2. ACCEPTANCE OF APPOINTMENT AS ESCROW AGENT. The Escrow Agent,
by executing this Escrow Agreement, accepts the appointment as the Escrow Agent
hereto and agrees (a) to hold, invest, reinvest and distribute the Cash Escrow
Funds and (b) to hold and distribute the Escrow Shares, as applicable, in
accordance with the terms of this Escrow Agreement.
Section 3. INVESTMENTS.
(a) Permitted Investments. Pending disbursement of the Cash
Escrow Funds, the Escrow Agent will invest the Cash Escrow Funds, including
those cash amounts received as a distribution in respect of the Escrow Shares,
in Permitted Investments (as hereinafter defined). For purposes of this Escrow
Agreement, "PERMITTED INVESTMENTS" means (i) money market funds registered under
the Investment Company Act of 1940, as amended, the portfolio of which is
limited to the investments described in clauses (ii) through (v) of this Section
3(a), (ii) obligations of or guaranteed by the United States of America or any
agency thereof, either outright or in connection with repurchase agreements
covering such obligations, (iii) obligations of or guaranteed by any state or
political subdivision of the United States of America with a maturity of six
months or less, (iv) interest bearing certificates of deposit or bankers'
acceptances issued by any national or state-chartered bank having capital and
surplus of at least $1,000,000,000 with an investment term of six months or
less, (v) commercial paper with a maturity of no more than 30 days rated at
least P-1 by Xxxxx'x Investor Service, Inc. and A-1 by Standard & Poor's
Corporation, (vi) a U.S. Bank Money Market Account and (vii) such other
investments as may be specified from time to time to the Escrow Agent by joint
written instructions of Parent and Seller.
(b) Conversion of Investments. As and when any amount of the
Cash Escrow Funds is needed for disbursement under this Escrow Agreement, the
Escrow Agent will cause a sufficient amount of the Cash Escrow Funds to be
converted into cash. Seller will select the investments or types of investments
to be so converted. Neither Parent nor Seller will be liable for any loss of
principal or income due to the choice of Permitted Investments in which the Cash
Escrow Funds are invested or the Permitted Investments sold or converted
pursuant to this Section 3(b).
(c) TINs. Tax Matters. The Parties each represent that its
correct Taxpayer Identification Number assigned by the Internal Revenue Service
("IRS") or any other taxing authority is set forth on the signature page hereof.
In addition, all interest or other income earned under this Escrow Agreement
shall be reported, allocated and/or paid to Seller and treated as owned by
Seller for all tax purposes, and such income shall be reported to the IRS or any
other taxing authority in a manner consistent therewith. The Escrow Agent shall
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withhold any taxes it deems appropriate and shall remit such taxes to the
appropriate authorities. Any tax returns or reports required to be prepared and
filed on behalf of or by the Escrow Funds will be prepared and filed by Seller,
as applicable, and the Escrow Agent shall have no responsibility for the
preparation and/or filing of any tax return with respect to any income earned by
the Escrow Funds. In addition, any tax or other payments (including penalties
and interest thereon) required to be made pursuant to such tax return or filing
will be paid by Seller, as appropriate. The Escrow Agent shall have no
responsibility for such payment unless directed to do so by the appropriate
authorized party.
(d) Investments. During the term of this Escrow Agreement, the
Cash Escrow Funds shall be invested in the [U.S. Bank Money Market Account](1),
unless otherwise instructed in writing by the Parties and as shall be acceptable
to the Escrow Agent. Such written instructions, if any, referred to in the
foregoing sentence shall specify the type and identity of the Permitted
Investments to be purchased and/or sold. The Escrow Agent shall have the right
to liquidate any investments held in order to provide funds necessary to make
required payments under this Escrow Agreement. The Escrow Agent shall have no
liability for any loss sustained as a result of any investment in an investment
made pursuant to the terms of this contract or as a result of any liquidation of
any investment prior to its maturity or for the failure of the Parties to give
the Escrow Agent instructions to invest or reinvest the Cash Escrow Funds. The
Escrow Agent or any of its affiliates may receive compensation with respect to
any investment directed hereunder. Receipt of the Escrow Funds and investment
and reinvestment of the Cash Escrow Funds shall be confirmed by the Escrow Agent
as soon as practicable by an account statement, and any discrepancies in any
such account statement shall be noted by the Parties to the Escrow Agent within
30 calendar days after receipt thereof. Failure to inform the Escrow Agent in
writing of any discrepancies in any such account statement within such 30-day
period shall conclusively be deemed confirmation of such account statement in
its entirety.
Section 4. RELEASE OF ESCROW FUNDS DUE TO PURCHASE PRICE ADJUSTMENT.
Upon final determination of Final Working Capital pursuant to Section 3.5 of the
Purchase Agreement, if Initial Closing Working Capital exceeds Final Working
Capital, Seller and Parent shall promptly, but not later than three Business
Days after such final determination, execute and deliver to the Escrow Agent an
instruction letter, substantially in the form attached hereto as Exhibit A (a
"JOINT INSTRUCTION LETTER"), directing the Escrow Agent to release from the
Escrow Funds to Parent an amount equal to the difference between Initial Closing
Working Capital and Final Working Capital, together with interest thereon from
the Closing Date to the date payment is made as determined in accordance with
Section 3.5(f) of the Purchase Agreement (such amount, the "WORKING CAPITAL
CLAIM"). Promptly following the Escrow Agent's receipt of the executed Joint
Instruction Letter, the Escrow Agent shall release and distribute, in accordance
with such instructions, the number of Escrow Shares necessary to satisfy
sixty-five percent (65%) of the Working Capital Claim by a bonded carrier
----------------------------
(1) If not a U.S. Bank Money Market Account, a similar account to be agreed upon
by the Parties and acceptable to the Escrow Agent.
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against receipt therefor by Parent and thirty-five percent (35%) of the Working
Capital Claim out of the Cash Escrow Funds by wire transfer thereof to the
account designated by Parent. The number of Escrow Shares to be released and
distributed to Parent, if any, shall be valued in accordance with Section 10
hereof.
Section 5. RELEASE OF ESCROW FUNDS DUE TO INDEMNITY.
(a) After any final decision, judgment or award shall have been
rendered by a Governmental Body of competent jurisdiction and the expiration of
the time in which to appeal therefrom, or a settlement shall have been
consummated, or Seller and the applicable Parent Indemnified Party shall have
arrived at a mutually binding agreement with respect to any claim for
indemnification under Section 10.2(a) of the Purchase Agreement (each such
resolved claim, a "FINAL CLAIM"), Parent shall deliver to Seller (with a copy to
the Escrow Agent) written notice of any sums due and owing by Seller pursuant to
the Purchase Agreement with respect to such matter, substantially in the form
attached hereto as Exhibit B (a "FINAL CLAIM NOTICE"), and the Escrow Agent
shall promptly release and distribute to Parent the number of Escrow Shares
necessary to satisfy sixty-five percent (65%) of such Final Claim by a bonded
carrier against receipt therefor by Parent and an amount in cash out of the Cash
Escrow Funds sufficient to satisfy thirty-five percent (35%) such Final Claim by
wire transfer thereof to the account designated by Parent. The number of Escrow
Shares to be released and distributed to Parent, if any, shall be valued in
accordance with Section 10 hereof.
(b) Any portion of the Escrow Funds identified and held beyond
the applicable release date under Section 6 hereof will continue to be held by
the Escrow Agent available to satisfy, in accordance with Section 5(a), any
claims for indemnification under Section 10.2(a) of the Purchase Agreement
asserted, but not yet resolved, prior to the applicable release date described
in Section 6 hereof ("UNRESOLVED CLAIMS"). After any Unresolved Claim is fully
resolved in accordance with Section 10.3(c) of the Purchase Agreement and
Section 5(a) hereof and any Final Claim in respect thereof has been paid in
full, Parent and Seller shall promptly, but not later than five Business Days
after such final resolution and payment, execute and deliver to the Escrow Agent
a Joint Instruction Letter directing the Escrow Agent to release any remaining
Escrow Funds to Seller that have been retained as Escrow Funds for such
Unresolved Claim under Section 6 hereof, which shall be released in the same
proportion of Cash Escrow Funds and Escrow Shares as provided in Section 6
hereof. Promptly following the Escrow Agent's receipt of such Joint Instruction
Letter, the Escrow Agent shall release and distribute any remaining Escrow Funds
to Seller that have been retained as Escrow Funds for such Unresolved Claim
under Section 6 hereof, which shall be released in the same proportion of Cash
Escrow Funds and Escrow Shares as provided in Section 6 hereof. The Cash Escrow
Funds to be released pursuant to this Section 5(b), if any, shall be delivered
by wire transfer thereof to the account designated by Seller and the Escrow
Shares to be released pursuant to this Section 5(b), if any, shall be delivered
by a bonded carrier against receipt therefor by Seller.
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Section 6. PERIODIC RELEASE OF ESCROW FUNDS.
(a) On [the date that is the first Business Day 90 days after
Closing] (the "FIRST RELEASE DATE"), the Escrow Agent shall release and
distribute to Seller (i) (A) that number of Escrow Shares, to the extent such
Escrow Shares remain in the Escrow Funds, rounded to the nearest whole number,
equal to the quotient of ONE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS
($1,950,000) divided by the Release Date Share Price (as defined in Section 10
hereof) and (B) ONE MILLION FIFTY THOUSAND DOLLARS ($1,050,000) in immediately
available funds out of the Cash Escrow Funds (plus interest and dividends earned
thereon), less (ii) any distributions made to Parent hereunder and the aggregate
dollar amount of any Unresolved Claims identified in the first Unresolved Claims
Letter.
(b) On [the date that is the first Business Day 180 days after
Closing] (the "SECOND RELEASE DATE"), the Escrow Agent shall release and
distribute to Seller (i) (A) that number of Escrow Shares, to the extent such
Escrow Shares remain in the Escrow Funds, rounded to the nearest whole number,
equal to the quotient of ONE MILLION NINE HUNDRED FIFTY THOUSAND DOLLARS
($1,950,000) divided by the Release Date Share Price and (B) ONE MILLION FIFTY
THOUSAND DOLLARS ($1,050,000) in immediately available funds out of the Cash
Escrow Funds (plus interest and dividends earned thereon), less (ii) any
distributions made to Parent hereunder following the First Release Date and the
aggregate dollar amount of any Unresolved Claims identified in the second
Unresolved Claims Letter and not previously retained pursuant to the first
Unresolved Claims Letter. Previously retained amounts shall continue to be
retained until released in accordance with Sections 5(a) and 5(b).
(c) On [the last day of the 13th full consecutive month
following the Closing Date] (the "FINAL RELEASE Date"), the Escrow Agent shall
release and distribute to Seller the remainder of the then remaining Escrow
Funds (plus interest and dividends earned thereon), less any Unresolved Claims
identified in the final Unresolved Claims Letter and not previously retained
pursuant to the first and second Unresolved Claims Letters. Previously retained
amounts shall continue to be retained until released in accordance with Sections
5(a) and 5(b).
(d) On or before each of the First Release Date, the Second
Release Date and the Final Release Date, Parent shall deliver to the Escrow
Agent written notice of any Unresolved Claims, substantially in the form
attached hereto as Exhibit C, which shall specifically identify the nature and
Parent's good faith estimate of the amounts of all then Unresolved Claims (the
"UNRESOLVED CLAIMS LETTER").
Section 7. VOTING RIGHTS. Seller shall not be entitled to exercise
voting rights with respect to the Escrow Shares until such time as they are
released to Seller.
Section 8. DIVIDENDS, ETC. Any cash, securities or other property
distributable (whether by way of dividend, stock split or otherwise) in respect
of or in exchange for any of the Escrow Shares shall not be immediately
distributed to Seller, but rather shall be held by the Escrow Agent as a part of
the Escrow Funds. At the time any of the Escrow Shares are required to be
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released from the Escrow Funds to either of the Parties pursuant to this Escrow
Agreement, any cash, securities or other property previously distributed in
respect of or in exchange for such Escrow Shares shall be released from the
Escrow Funds to such Party.
Section 9. FRACTIONAL SHARES. No fractional shares of Parent Common
Stock shall be retained in or released from the Escrow Funds pursuant to this
Escrow Agreement. In connection with any release and distribution of the Escrow
Shares from the Escrow Funds, all such shares shall be rounded to the nearest
whole number.
Section 10. ESCROW SHARE VALUATION AND MECHANICS. For purposes of this
Escrow Agreement, the "RELEASE DATE SHARE PRICE," shall be the lesser of (a) the
Closing Share Price and (b) the Current Market Price as of the date that is one
Business Day before payment is due under Section 4, Section 5 or Section 6
hereof. "CURRENT MARKET PRICE" shall mean the average of the daily per share
closing price of Parent Common Stock on the American Stock Exchange (as reported
by The Wall Street Journal, Eastern Edition, or if not reported thereby, any
other authoritative source) for the five consecutive trading days that end on
the trading day prior to the date payment is made. The Release Date Share Price
shall be used for determining the value of Escrow Shares under Section 4 and
Section 5 hereof.
Section 11. RIGHTS AND RESPONSIBILITIES OF THE ESCROW AGENT.
(a) Duties. The Escrow Agent undertakes to perform only such
duties as are expressly set forth herein and no duties shall be implied. The
Escrow Agent shall have no liability under and no duty to inquire as to the
provisions of any agreement other than this Escrow Agreement (other than (i) the
definitions of capitalized terms that are defined in the Purchase Agreement and
not otherwise defined herein and (ii) to the extent specific reference is made
in this Escrow Agreement to particular provisions of the Purchase Agreement).
The Escrow Agent may rely upon and shall not be liable for acting or refraining
from acting upon any written notice, document, instruction or request furnished
to it hereunder and believed by it to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall be under no
duty to inquire into or investigate the validity, accuracy or content of any
such document, notice, instruction or request. The Escrow Agent shall have no
duty to solicit any payments that may be due it or the Escrow Funds. The Escrow
Agent shall not be liable for any action taken or omitted by it in good faith
except to the extent that a final adjudication of a court of competent
jurisdiction determines that the Escrow Agent's gross negligence, willful
misconduct or bad faith was the primary cause of any loss to either of the
Parties. The Escrow Agent may execute any of its powers and perform any of its
duties hereunder directly or through agents or attorneys (and shall be liable
only for the careful selection of any such agent or attorney) and may consult
with counsel, accountants and other skilled persons to be selected and retained
by it. The Escrow Agent shall not be liable for anything done, suffered or
omitted in good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons. In the event that the Escrow
Agent shall be uncertain as to its duties or rights hereunder or shall receive
instructions, claims or demands from any party hereto that, in its opinion,
conflict with any of the provisions of this Escrow Agreement, it shall be
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entitled to refrain from taking any action and its sole obligation shall be to
keep safely all property held in escrow until it shall be directed otherwise in
writing by all of the other parties hereto or by a final order or judgment of a
court of competent jurisdiction. The Escrow Agent may interplead all of the
assets held hereunder into a court of competent jurisdiction or may seek a
declaratory judgment with respect to certain circumstances, and thereafter be
fully relieved from any and all liability or obligation with respect to such
interpleaded assets or any action or non action based on such declaratory
judgment. Anything in this Escrow Agreement to the contrary notwithstanding, in
no event shall the Escrow Agent be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including, but not limited to, lost
profits), even if the Escrow Agent has been advised of the likelihood of such
loss or damage and regardless of the form of action. No party to this Escrow
Agreement is liable to any other party for losses due to, or if it is unable to
perform its obligations under the terms of this Escrow Agreement because of,
acts of God, fire, war, terrorism, floods, strikes, electrical outages,
equipment or transmission failure, or other causes reasonably beyond its
control.
(b) Reliance on Orders. If any Escrow Funds are at any time
attached, garnished or levied upon under any court order or in case the release
of any such Escrow Funds is stayed or enjoined by any court order, or in case
any order, judgment or decree is made or entered by any court affecting such
Escrow Funds or any part thereof, then and in any of such events, the Escrow
Agent is authorized, in its sole discretion, to rely upon and comply with any
such order, writ, judgment or decree that it is advised by legal counsel is
binding upon it. If the Escrow Agent complies with any such order, writ,
judgment or decree, it will not be liable to any of the Parties or to any other
person by reason of such compliance even though such order, writ, judgment or
decree may be subsequently reversed, modified, annulled, set aside or vacated.
(c) Liability. The Escrow Agent will not be liable for any act
taken or omitted under this Escrow Agreement if taken or omitted by it in good
faith except to the extent that a final adjudication of a court of competent
jurisdiction determines that the Escrow Agent's gross negligence, willful
misconduct or bad faith was the primary cause of any loss to either of the
Parties. The Escrow Agent will also be fully protected in relying upon any
written notice, demand, certificate or document that it in good faith believes
to be genuine (including facsimiles thereof).
(d) Resignation. The Escrow Agent, and any successor escrow
agent, may resign at any time as the Escrow Agent hereunder by giving at least
30 days written notice to Parent and Seller. Upon such resignation and the
appointment of a successor escrow agent, the resigning Escrow Agent will be
absolved from any and all liability in connection with the exercise of its
powers and duties as the Escrow Agent hereunder except for liability arising in
connection with its gross negligence, willful misconduct or bad faith. Upon
their receipt of notice of resignation from the Escrow Agent, Parent and Seller
will use reasonable efforts jointly to designate a successor escrow agent. In
the event Parent and Seller do not agree upon a successor escrow agent within 30
days after the receipt of such notice, the Escrow Agent so resigning may
petition any court of competent jurisdiction for the appointment of a successor
escrow agent or other appropriate relief and any such resulting appointment will
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be binding upon all of the Parties. By mutual agreement, Parent and Seller will
have the right at any time upon not less than 10 days written notice to the
Escrow Agent to terminate their appointment of the Escrow Agent, or successor
escrow agent, as the Escrow Agent. The Escrow Agent or successor escrow agent
will continue to act as Escrow Agent until a successor is appointed and
qualified to act as the Escrow Agent.
(e) Conflicting Demands. In the event conflicting demands are
made or conflicting notices are served upon the Escrow Agent that are directly
related to its duties under this Escrow Agreement, the parties hereto agree that
the Escrow Agent will take no action until (i) such action is agreed to in
writing by the Parties or (ii) the issuance of a court order by a court of
competent jurisdiction directing the Escrow Agent with respect to the action
that is the subject of the conflicting demands or notices.
(f) Indemnification. Parent and Seller hereby agree, severally
but not jointly, to indemnify the Escrow Agent for, and to hold the Escrow Agent
harmless against, any loss, liability or expense incurred without gross
negligence, willful misconduct or bad faith on the part of the Escrow Agent,
arising out of or in connection with the Escrow Agent's entering into this
Escrow Agreement and carrying out the Escrow Agent's duties hereunder, including
costs and expenses of successfully defending the Escrow Agent against any claim
of liability with respect thereto. One-half of any payment made pursuant to this
Section 11(f) will be paid by Parent and one-half will be paid by Seller. The
Escrow Agent may consult with counsel of its own choice and will have full and
complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel.
(g) Fees and Expenses of Escrow Agent. The Escrow Agent will (i)
be paid a fee for its services under this Escrow Agreement as provided by
Exhibit D and (ii) be entitled to reimbursement for reasonable expenses
(including the reasonable fees and disbursements of its counsel) actually
incurred by the Escrow Agent in connection with its duties under this Escrow
Agreement (such fees and expenses being hereinafter referred to collectively as
the "ESCROW AGENT FEES AND EXPENSES"). All Escrow Agent Fees and Expenses will
be shared equally by Parent and by Seller.
Section 12. MISCELLANEOUS.
(a) Notices. All notices and other communications under this
Escrow Agreement shall be in writing and shall be deemed given (i) when
delivered personally by hand (with written confirmation of receipt), (ii) when
sent by facsimile (with written confirmation of transmission) or (iii) one
Business Day following the day sent by overnight courier (with written
confirmation of receipt), in each case at the following addresses and facsimile
numbers (or to such other address or facsimile number as a party may have
specified by notice given to the other party pursuant to this provision):
A-8
If to Seller, to:
National By-Products, LLC
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, President
Facsimile: 000-000-0000
With a copy to:
Nyemaster, Goode, West, Xxxxxxx & O'Brien PC
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxx
Facsimile: 000-000-0000
If to Parent, to:
Darling International Inc.
000 X'Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: General Counsel
With a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Escrow Agent, to:
U.S. Bank, National Association
[Address]
Attention:
Facsimile:
(b) Binding Effect; Assignment. This Escrow Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Nothing in this Escrow Agreement shall create
or be deemed to create any third party beneficiary rights in any person or
entity not a party to this Escrow Agreement except as provided below. No
assignment of this Escrow Agreement or of any rights or obligations hereunder
may be made by either Seller, Parent or the Escrow Agent (by operation of law or
otherwise) without the prior written consent of the other parties hereto and any
attempted assignment without the required consents shall be void; provided,
A-9
however, that Parent may assign this Escrow Agreement and any or all rights or
obligations hereunder to any Affiliate of Parent, any Person from which it has
borrowed money or any Person to which Parent or any of its Affiliates proposes
to sell all or substantially all of the assets relating to the Business. Upon
any such permitted assignment, the references in this Escrow Agreement to Parent
shall also apply to any such assignee unless the context otherwise requires.
(c) Amendment and Waivers. This Escrow Agreement can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Escrow Agreement signed by the
party against whom enforcement of any such amendment, supplement, modification
or waiver is sought. No action taken pursuant to this Escrow Agreement,
including without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any covenant or agreement contained herein. The waiver by any
party hereto of a breach of any provision of this Escrow Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of such
right, power or remedy by such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. All remedies
hereunder are cumulative and are not exclusive of any other remedies provided by
law.
(d) Governing Law. This Escrow Agreement and all matters based
upon, arising out of or related to this Escrow Agreement or the negotiation,
execution or performance of this Escrow Agreement shall be governed by and
construed in accordance with the laws, both procedural and substantive, of the
State of New York without regard to its conflict of laws provisions that if
applied might require the application of the laws of another jurisdiction.
(e) Headings. The division of this Escrow Agreement into
Sections and other subdivisions and the insertion of headings are for
convenience of reference only and shall not affect or be utilized in construing
or interpreting this Escrow Agreement. All references in this Escrow Agreement
to any "Section" or "Exhibit" are to the corresponding Section or Exhibit of
this Escrow Agreement unless otherwise specified.
(f) Termination. This Escrow Agreement will terminate at the
time of the final distribution by the Escrow Agent of all Escrow Funds in
accordance with the provisions of this Escrow Agreement. Section 11(f) will
survive the termination hereof.
(g) Counterparts. This Escrow Agreement may be executed in one
or more counterparts, each of which will be deemed to be an original copy of
this Escrow Agreement and all of which, when taken together, will be deemed to
constitute one and the same agreement.
A-10
(h) Severability. If any term or other provision of this Escrow
Agreement is invalid, illegal, or incapable of being enforced by any law or
public policy, all other terms or provisions of this Escrow Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal, or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Escrow Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible. (i)
Waiver of Offset Rights. The Escrow Agent hereby waives any and all rights to
offset that it may have against the Escrow Funds including, without limitation,
claims arising as a result of any claims, amounts, liabilities, costs, expenses,
damages, or other losses that the Escrow Agent may be otherwise entitled to
collect from either of the Parties.
(j) General. The terms and provisions of this Escrow Agreement
and the Purchase Agreement represent the entire understanding and agreement
between the parties hereto with respect to the subject matter hereof.
(k) Security Procedures. In the event funds transfer
instructions are given (other than in writing at the time of execution of this
Escrow Agreement), whether in writing, by telecopier or otherwise, the Escrow
Agent is authorized to seek confirmation of such instructions by telephone
call-back to the person or persons designated on Schedule 1 hereto, and the
Escrow Agent may rely upon the confirmation of anyone purporting to be the
person or persons so designated. Each funds transfer instruction shall be
executed by an authorized signatory, a list of such authorized signatories is
set forth on Schedule 1. The undersigned is authorized to certify that the
signatories on Schedule 1 are authorized signatories. The persons and telephone
numbers for call-backs may be changed only in a writing actually received and
acknowledged by the Escrow Agent. If the Escrow Agent is unable to contact any
of the authorized representatives identified on Schedule 1, the Escrow Agent is
hereby authorized to seek confirmation of such instructions by telephone
call-back to any one or more of the Parties' respective executive officers,
("EXECUTIVE OFFICERS"), which shall include the titles of President, Chief
Executive Officer and Chief Financial Officer, as the Escrow Agent may select.
Such Executive Officer shall deliver to the Escrow Agent a fully executed
incumbency certificate, and the Escrow Agent may rely upon the confirmation of
anyone purporting to be any such officer. The Escrow Agent and the beneficiary's
bank in any funds transfer may rely solely upon any account numbers or similar
identifying numbers provided by Parent or Seller to identify (i) the
beneficiary, (ii) the beneficiary's bank, or (iii) an intermediary bank. The
Escrow Agent may apply any of the escrowed funds for any payment order it
executes using any such identifying number, even when its use may result in a
person other than the beneficiary being paid, or the transfer of funds to a bank
other than the beneficiary's bank or an intermediary bank designated. The
parties to this Escrow Agreement acknowledge that these security procedures are
commercially reasonable.
A-11
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed by their respective duly authorized officers, as of the
date first written above.
--------------------------------------------------------------------------------
TAX CERTIFICATION: Taxpayer ID#:
--------------------------------------
Customer is a (check one):
X Corporation Municipality Partnership Non-profit or Charitable Org
--- --- --- ---
Individual REMIC Trust Other
--- --- --- --- ----------------------
Under the penalties of perjury, the undersigned certifies that:
(1) the entity is organized under the laws of the United States;
(2) the number shown above is its correct Taxpayer Identification Number (or
it is waiting for a number to be issued to it); and
(3) it is not subject to backup withholding because: (a) it is exempt from
backup withholding or (b) it has not been notified by the Internal Revenue
Service (IRS) that it is subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified
it that it is no longer subject to backup withholding.
(If the entity is subject to backup withholding, cross out the words after the
(3) above.)
Investors who do not supply a tax identification number will be subject to
backup withholding in accordance with IRS regulations.
NOTE: THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
--------------------------------------------------------------------------------
PARENT:
DARLING INTERNATIONAL INC.
By:
--------------------------------------
Name:
Title:
SIGNATURE PAGE TO ESCROW AGREEMENT
--------------------------------------------------------------------------------
TAX CERTIFICATION: Taxpayer ID#:
--------------------------------------
Customer is a (check one):
Corporation Municipality Partnership Non-profit or Charitable Org
--- --- --- ---
Individual REMIC Trust X Other Limited Liability Company
--- --- --- --- ----------------------
Under the penalties of perjury, the undersigned certifies that:
(1) the entity is organized under the laws of the United States;
(2) the number shown above is its correct Taxpayer Identification Number (or
it is waiting for a number to be issued to it); and
(3) it is not subject to backup withholding because: (a) it is exempt from
backup withholding or (b) it has not been notified by the Internal Revenue
Service (IRS) that it is subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified
it that it is no longer subject to backup withholding.
(If the entity is subject to backup withholding, cross out the words after the
(3) above.)
Investors who do not supply a tax identification number will be subject to
backup withholding in accordance with IRS regulations.
NOTE: THE IRS DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT
OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING.
--------------------------------------------------------------------------------
SELLER:
NATIONAL BY-PRODUCTS, LLC
By:
--------------------------------------
Name:
Title:
SIGNATURE PAGE TO ESCROW AGREEMENT
ESCROW AGENT:
U.S. BANK, NATIONAL ASSOCIATION
By:
--------------------------------------
Name:
Title:
SIGNATURE PAGE TO ESCROW AGREEMENT
Exhibit A
JOINT INSTRUCTION LETTER
Pursuant to [Section 4] [Section 5(b)] of that certain Escrow Agreement
(the "ESCROW AGREEMENT") dated as of _____________ ___, 2006, by and among
Darling International Inc., a Delaware corporation, National By-Products, LLC,
an Iowa limited liability company, and U.S. Bank, National Association, as the
Escrow Agent, the undersigned hereby instruct and direct the Escrow Agent to
release the Escrow Funds or a portion thereof on the date and in the manner and
amount set forth below. Capitalized terms used but not defined in this Joint
Instruction Letter shall have the meanings ascribed to such terms in the Escrow
Agreement.
RELEASE DATE: ____________ ___, 200__
TOTAL RELEASE AMOUNT: $______________.___
ESCROW CASH: $______________.___
ESCROW SHARES: ______________
INSTRUCTIONS:
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned have caused this Joint Instruction
Letter to be executed by their respective duly authorized officers, as of this
___ day of ______________, 200__.
DARLING INTERNATIONAL INC.
By:
---------------------------------------
Name:
Title:
NATIONAL BY-PRODUCTS, LLC
By:
---------------------------------------
Name:
Title:
Exhibit B
FINAL CLAIM NOTICE
Pursuant to Section 10.3(c) of the Purchase Agreement and Section 5(a)
of that certain Escrow Agreement (the "ESCROW AGREEMENT") dated as of
_____________ ___, 2006, by and among Darling International Inc., a Delaware
corporation, National By-Products, LLC, an Iowa limited liability company
("SELLER"), and U.S. Bank, National Association, as the Escrow Agent, the
undersigned hereby gives notice to Seller and directs the Escrow Agent to
release a portion of the Escrow Funds on the date and in the manner and amount
set forth below. Capitalized terms used but not defined in this Final Claim
Notice shall have the meanings ascribed to such terms in the Escrow Agreement.
RELEASE DATE: ____________ ___, 200__
TOTAL RELEASE AMOUNT: $______________.___
ESCROW CASH: $______________.___
ESCROW SHARES: ______________
INSTRUCTIONS:
* * * * *
IN WITNESS WHEREOF, the undersigned has caused this Final Claim Notice
to be executed by its duly authorized officer, as of this ___ day of
______________, 200__.
DARLING INTERNATIONAL INC.
By:
-------------------------------------
Name:
Title:
Exhibit C
UNRESOLVED CLAIMS LETTER
Pursuant to Section 6(d) of that certain Escrow Agreement (the "ESCROW
AGREEMENT") dated as of _____________ ___, 2006, by and among Darling
International Inc., a Delaware corporation, National By-Products, LLC, an Iowa
limited liability company, and U.S. Bank, National Association, as the Escrow
Agent, the undersigned hereby directs the Escrow Agent to retain (in the Escrow
Funds) the amount set forth below from the portion of the Escrow Funds to be
released on the [First] [Second] [Final] Release Date, so that such retained
Escrow Funds may be available to satisfy, if necessary, the Unresolved Claim(s)
set forth below. Capitalized terms used but not defined in this Unresolved
Claims Letter shall have the meanings ascribed to such terms in the Escrow
Agreement.
DATE: ____________ ___, 200__
UNRESOLVED CLAIM(S) AMOUNT: $______________.___
NATURE OF UNRESOLVED CLAIM(S):
* * * * *
IN WITNESS WHEREOF, the undersigned has caused this Unresolved Claims
Letter to be executed by its duly authorized officer, as of this ___ day of
_____________, 200__.
DARLING INTERNATIONAL INC.
By:
-------------------------------------
Name:
Title:
Exhibit D
FEES OF ESCROW AGENT
Schedule 1
TELEPHONE NUMBER(S) AND SIGNATURE(S) FOR
PERSON(S) DESIGNATED TO GIVE AND CONFIRM FUNDS TRANSFER INSTRUCTIONS
If to Parent:
Name Telephone Number Signature
1. _____________________ _________________ __________________
2. _____________________ _________________ __________________
3. _____________________ _________________ __________________
If to Seller:
Name Telephone Number Signature
1. _____________________ _________________ __________________
2. _____________________ _________________ __________________
3. _____________________ _________________ __________________
Telephone call backs shall be made to both Parent and Seller if joint
instructions are required pursuant to the Escrow Agreement. All funds transfer
instructions must include the signature of the person(s) authorizing said funds
transfer.
EXHIBIT B
RULE 145 AFFILIATE LETTER
-------------------------
________, 2006
Darling International Inc.
000 X'Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: General Counsel
Dear Sir/Madam:
Reference is made to the terms of that certain Asset Purchase
Agreement dated December 19, 2005 (the "Agreement"), among National
By-Products, LLC, an Iowa limited liability company ("Seller"), Darling National
LLC, a Delaware limited liability company ("Purchaser"), and Darling
International Inc., a Delaware corporation ("Parent"), pursuant to which
Purchaser will acquire substantially all of Seller's assets in exchange for
consideration including the issuance of new shares representing twenty percent
of the outstanding shares of Parent's common stock, par value $0.01 per share
("Parent Common Stock"), on the Closing Date (the "Transaction"). Terms used but
not defined in this letter shall have the meanings assigned to such terms in the
Agreement.
I understand that I may be deemed to be an "affiliate" of Seller, as
such term is defined for purposes of paragraphs (c) and (d) of Rule 145 ("Rule
145") promulgated under the Securities Act of 1933, as amended (including the
rules and regulations promulgated thereunder, the "Act").
If in fact I were to be deemed an "affiliate" of Seller under
paragraphs (c) and (d) of Rule 145, my ability to sell, transfer or otherwise
dispose of any shares of Parent Common Stock received by me pursuant to the
Transaction may be restricted under current law.
I hereby represent, warrant and covenant to Parent that:
I will not sell, pledge, transfer or otherwise dispose of any Parent
Common Stock unless (i) such sale, pledge, transfer or other disposition has
been registered under the Act, (ii) such sale, transfer or other disposition is
made in conformity with the provisions of Rule 145 under the Act (as such rule
may be amended from time to time), or (iii) in the opinion of counsel in form
and substance reasonably satisfactory to Parent, or under a "no-action" letter
obtained by me from the staff of the Securities and Exchange Commission (the
"SEC"), (a) such sale, pledge, transfer or other disposition will not violate or
is otherwise exempt from registration under the Act and (b) such sale, pledge,
transfer or other disposition otherwise complies with all applicable laws;
B-1
I hereby acknowledge that Parent is under no obligation to register
the sale, transfer, pledge or other disposition by me of Parent Common Stock or
to take any other action necessary for the purpose of making an exemption from
registration available.
I understand that Parent will issue stop transfer instructions to its
transfer agent with respect to Parent Common Stock to be received in the
Transaction and that a restrictive legend will be placed on certificates
delivered to me evidencing such Parent Common Stock in substantially the
following form:
"This certificate and the shares represented hereby have been issued
pursuant to a transaction governed by Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), and may be sold or otherwise disposed of only in
accordance with the terms of a letter agreement, dated ____________,
2006, between the holder of this certificate and the issuer of this
security (a copy of which is on file in the principal office of such
issuer) which contains further restrictions on the transferability of
the shares represented hereby."
It is understood and agreed that the legend set forth above will be
removed by delivery of substitute certificates without such legend if such
legend is not required for purposes of the Act. It is understood and agreed that
such legends and the stop orders referred to above will be removed if (i) the
securities have been sold in conformity with the provisions of Rule 145 under
the Act, (ii) Parent Common Stock received by me in the Transaction are
registered for sale by me under the Act or (iii) Parent has received either an
opinion of counsel in form and substance reasonably satisfactory to Parent, or a
"no-action" letter obtained by me from the staff of the SEC, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to me.
The term "Parent Common Stock" as used in this letter shall mean and
include not only the common stock of Parent as presently constituted, but also
any other stock which may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Parent Common Stock.
I hereby acknowledge that I have read this letter and the Agreement
and discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of shares of
Parent Common Stock to the extent I felt necessary with my counsel.
This letter will be governed by the laws of Texas regardless of any
applicable principles of conflict of laws. This letter will be binding upon the
undersigned and Parent and their respective successors and assigns. This letter
is the complete agreement between the undersigned and Parent concerning the
subject matter hereof. If the Agreement is terminated in accordance with its
terms prior to the Closing Date, then the legal effect of this letter will
thereupon automatically terminate.
B-2
Execution of this letter shall not be construed as an admission on my
part of "affiliate" status nor as a waiver of any rights that I may have to
object to any claim that I am an "affiliate" on or after the date of this
letter.
Very truly yours,
-------------------------------
Name:
Agreed to and accepted as of the
date first written above:
Darling International Inc.
By:
------------------------------
Name:
Title:
B-3
EXHIBIT C
NONCOMPETITION AND NONSOLICITATION AGREEMENT
--------------------------------------------
This NONCOMPETITION AND NONSOLICITATION AGREEMENT (this "Agreement")
is made and entered into as of the [__] day of [____________], 2006, by and
among Darling International Inc., a Delaware corporation ("Parent"), Darling
National LLC, a Delaware limited liability company and wholly-owned subsidiary
of Parent ("Company"), and Xxxx Xxxxxxx ("Executive").
WHEREAS, Company and Parent have entered into that certain Asset
Purchase Agreement (the "Asset Purchase Agreement") with National By-Products,
LLC, an Iowa limited liability company ("Seller"), dated as of December 19,
2005, and capitalized terms used herein shall have the meaning ascribed to such
terms in the Asset Purchase Agreement; and
WHEREAS, pursuant to the Asset Purchase Agreement, Seller will sell
to Company, and Company will purchase from Seller, substantially all of Seller's
assets (the "Transaction"); and
WHEREAS, in order to induce Company and Parent to enter into the
Asset Purchase Agreement, Seller agreed that Executive would enter into an
agreement to refrain from entering into competition with and/or engaging in
solicitation with respect to the Business (as defined below); and
WHEREAS, Executive is the Chairman of Seller's Board of Managers and
a holder of equity interests in Seller; and
WHEREAS, Executive will derive a significant benefit from the
Transaction as a result of his ownership of equity interests in Seller; and
WHEREAS, pursuant to the terms and conditions of the Asset Purchase
Agreement, the execution of this Agreement is a condition precedent to the
consummation of the transactions contemplated therein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and undertakings in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Noncompetition. For a period of five (5) years from the date hereof,
Executive shall not, directly or indirectly, own, manage, operate, control or
participate in the ownership, management, operation or control of any business,
whether in corporate, proprietorship or partnership form or otherwise, engaged
in the Business or that otherwise competes with the Business (a "Restricted
Business"). The parties hereto specifically acknowledge and agree that the
remedy at law for any breach of the foregoing will be inadequate and that
Company and Parent, in addition to any other relief available to it, shall be
entitled to temporary and permanent injunctive relief without the necessity of
C-1
proving actual damage or posting any bond whatsoever. For purposes of this
Agreement, the term "Business" means the business of Company, including (a) the
collection and conversion of animal and poultry by-products from the meat
processing and restaurant industries into fats and protein meal products, (b)
the collection, processing and marketing of animal hides, and (c) the sale of
the processed products to livestock and pet food manufacturers, among other
customers, throughout the United States and internationally.
2. Non-solicitation. For a period of five (5) years from the date hereof,
Executive shall not, and shall not permit any of his or her Affiliates to,
directly or indirectly: (a) cause, solicit, induce or encourage any Employees of
Company or Seller to leave such employment or hire, employ or otherwise engage
any such individual or (b) cause, induce or encourage any material actual or
prospective client, customer, supplier or licensor of the Business (including
any existing or former customer of Seller and any Person that becomes a client
or customer of the Business after the Closing) or any other Person who has a
material business relationship with the Business, to terminate or modify any
such actual or prospective relationship.
3. Confidentiality. From and after the date hereof, Executive shall not and
shall cause his or her Affiliates and their respective officers and directors
not to, directly or indirectly, disclose, reveal, divulge or communicate to any
Person other than authorized officers, directors and employees of Parent or
Company or use or otherwise exploit for its own benefit or for the benefit of
anyone other than the Parent or Company, any Confidential Information (as
defined below). Executive and his or her Affiliates shall not have any
obligation to keep confidential any Confidential Information if and to the
extent disclosure thereof is specifically required by law; provided, however,
that in the event disclosure is required by applicable Law, Executive shall, to
the extent reasonably possible, provide Parent with prompt notice of such
requirement prior to making any disclosure so that Parent may seek an
appropriate protective order. For purposes of this Section 3, "Confidential
Information" means any information with respect to the Business, including
methods of operation, customers, customer lists, products, prices, fees, costs,
Technology, inventions, Trade Secrets, know-how, Software, marketing methods,
plans, personnel, suppliers, competitors, markets or other specialized
information or proprietary matters. Confidential Information does not include,
and there shall be no obligation hereunder with respect to, information that (a)
is generally available to the public on the date of this Agreement or (b)
becomes generally available to the public other than as a result of a disclosure
not otherwise permissible hereunder.
4. Acknowledgments; Injunctive Relief.
(a) Executive acknowledges and agrees that the restrictive covenants
contained in Section 1, Section 2 and Section 3 are reasonable with respect to
their duration and scope, and reasonable and necessary to protect legitimate
business interests of Company and Parent. Executive also acknowledges and agrees
that Parent and Company are relying on the agreements contained herein in
entering into the transactions contemplated by the Asset Purchase Agreement.
C-2
(b) The parties acknowledge that a breach of this Agreement by
Executive would cause irreparable injury to Company and Parent, the amount of
which will be impossible to estimate or determine and which cannot be adequately
compensated. Accordingly, the remedy at law for any breach of this Agreement
will be inadequate. Therefore, Company and Parent will be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction in the event of any breach of this Agreement without the
necessity of proving actual damages or posting any bond whatsoever. The rights
and remedies provided by this Section 4(b) are cumulative and in addition to any
other rights and remedies which Company or Parent may have hereunder or at law
or in equity.
5. Notices. All notices and other communications under this Agreement shall be
in writing and shall be deemed given (a) when delivered personally by hand (with
written confirmation of receipt), (b) when sent by facsimile (with written
confirmation of transmission) or (c) one Business Day following the day sent by
overnight courier (with written confirmation of receipt), in each case at the
following addresses and facsimile numbers (or to such other address or facsimile
number as a party may have specified by notice given to the other party pursuant
to this provision):
If to Company or Parent, to:
c/o Darling International Inc.
000 X'Xxxxxx Xxxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attn: General Counsel
With a copy to (which shall not constitute notice):
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to Executive, to:
Xxxx Xxxxxxx
__________________
Fax:_____________
6. Interpretation.
(a) Ambiguities. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement and, in the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as jointly drafted by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
provision of this Agreement.
C-3
(b) Headings. The Sections and other subdivisions and the insertion
of headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement. All references in this
Agreement to any "Section" are to the corresponding Section of this Agreement
unless otherwise specified.
(c) Governing Law. This Agreement and all matters based upon, arising
out of or related to this Agreement or the negotiation, execution or performance
of this Agreement shall be governed by and construed in accordance with the
laws, both procedural and substantive, of the State of New York without regard
to its conflict of laws provisions that if applied might require the application
of the laws of another jurisdiction.
(d) Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
7. Entire Agreement; Amendments and Waivers. This Agreement represents the
entire understanding and agreement between the parties hereto with respect to
the subject matter hereof. This Agreement can be amended, supplemented or
changed, and any provision hereof can be waived, only by written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of any such amendment, supplement, modification or waiver is sought.
No action taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate or be construed
as a further or continuing waiver of such breach or as a waiver of any other or
subsequent breach. No failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by law.
C-4
8. Assignment/Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and permitted
assigns. Nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity not a party to this Agreement
except as provided below. No assignment of this Agreement or of any rights or
obligations hereunder may be made by either Parent or Company (by operation of
law or otherwise) without the prior written consent of Executive and any
attempted assignment without the required consents shall be void; provided,
however, that Parent and Company may assign this Agreement and any or all rights
or obligations hereunder to any Affiliate of Parent, any Person from which it
has borrowed money or any Person to which Parent or any of its Affiliates
proposes to sell all or substantially all of the assets relating to the
Business. Upon any such permitted assignment, the references in this Agreement
to Parent or Company, as applicable, shall also apply to any such assignee
unless the context otherwise requires. The rights of Executive under this
Agreement may not be assigned or encumbered by Executive, voluntarily or
involuntarily, and any attempted assignment shall be void.
9. Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
C-5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers, as of the date first
written above.
DARLING NATIONAL LLC
By:
-----------------------------------
Name:
Title:
DARLING INTERNATIONAL INC.
By:
-----------------------------------
Name:
Title:
---------------------------------------
Xxxx Xxxxxxx
EXHIBIT D
XXXX OF SALE
------------
This XXXX OF SALE (this "Xxxx of Sale") is made and delivered this
[___] day of [_______], 2006, by National By-Products, LLC, an Iowa limited
liability company ("Seller"), for the benefit of Darling National LLC, a
Delaware limited liability company ("Purchaser"). Capitalized terms used but not
defined herein shall have the meanings ascribed to such terms in the Agreement
(as hereinafter defined).
WHEREAS, Seller and Purchaser have entered into that certain Asset
Purchase Agreement dated as of December 19, 2005 (the "Agreement"), the terms of
which are incorporated herein by reference, which provides, among other things,
for the sale and assignment by Seller to Purchaser of the Purchased Assets as
described in Section 2.1 of the Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained in
the Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by Seller, and subject to the terms
and conditions of the Agreement:
1. Transfer of Purchased Assets. Seller does hereby bargain, sell,
grant, assign, transfer, convey and deliver unto Purchaser, and its successors
and assigns, forever, all of Seller's right, title and interest in and to the
Purchased Assets, free and clear of all Liens except for Permitted Exceptions,
TO HAVE AND TO HOLD such Purchased Assets with all appurtenances thereto, unto
Purchaser, and its successors and assigns, for its use forever.
2. Further Assurances. At and after the Closing, Seller shall from
time to time, at the request of Purchaser and without further cost or expense to
Purchaser, execute and deliver such other instruments of assignment, transfer
and conveyance and shall take such other action as Purchaser may reasonably
request in order more effectively to assign, transfer and convey to Purchaser,
and to place Purchaser in possession and control of, any of the Purchased
Assets, or to enable it to exercise and enjoy all rights and benefits of Seller
with respect thereto.
3. Successors and Assigns. This Xxxx of Sale shall inure to the
benefit of and be binding upon the parties thereto and their respective
successors and permitted assigns.
4. Conflicts with Agreement. Nothing in this Xxxx of Sale, express or
implied, is intended to or shall be construed to modify, expand or limit in any
way the terms of the Agreement. To the extent that any provision of this Xxxx of
Sale conflicts or is inconsistent with the terms of the Agreement, the Agreement
shall govern.
5. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, and all of which together shall constitute one and the same
instrument.
6. Governing Law. This Xxxx of Sale shall be governed by, and
construed in accordance with, the laws of the State of Texas, as applied to
contracts made and performed entirely in such State and without regard to its
principles of conflict of laws.
D-1
IN WITNESS WHEREOF, and intending to be legally bound hereby, Seller
has caused this Xxxx of Sale to be executed and delivered as of the day and year
first above written.
NATIONAL BY-PRODUCTS, LLC
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
D-2
EXHIBIT E
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
This ASSIGNMENT AND ASSUMPTION AGREEMENT, is dated as of [___], 2006
(this "Assignment"), between National By-Products, LLC, an Iowa limited
liability company ("Seller") and Darling National LLC, a Delaware limited
liability company ("Purchaser"). Capitalized terms used but not defined herein
shall have the meanings ascribed to such terms in the Agreement (as hereinafter
defined).
W I T N E S S E T H:
--------------------
WHEREAS, Seller and Purchaser are parties to an Asset Purchase
Agreement, dated as of December 19, 2005 (the "Agreement"), providing for, among
other things, the sale by Seller to Purchaser of the Purchased Assets and the
assumption by Purchaser of the Assumed Liabilities; and
WHEREAS, in accordance with the terms of the Agreement, Seller and
Purchaser have agreed to enter into this Assignment, providing for (a) the
assignment from Seller to Purchaser of all of Seller's right, title and interest
in, under and to the Purchased Contracts from and after the Closing, on and
subject to the terms of the Agreement, and (b) the acceptance by Purchaser of
such assignment and the assumption by Purchaser of (i) all obligations to be
performed by Seller under the Purchased Contracts on and after the Closing Date
and (ii) the other Assumed Liabilities.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
1. Assignment. In accordance with and subject to the terms of the
Agreement, Seller hereby sells, assigns, transfers and conveys to Purchaser, all
of Seller's right, title and interest in and to the Purchased Contracts.
2. Acceptance and Assumption. In accordance with and subject to the
terms of the Agreement, Purchaser hereby (a) purchases and accepts the
assignment, transfer and conveyance of Seller's right, title and interests in,
under and to the Purchased Contracts; (b) assumes, undertakes and agrees,
subject to valid claims and defenses, to pay, satisfy, perform or discharge in
accordance with the terms thereof all obligations and liabilities of any kind
arising out of, or required to be performed under, such assigned Purchased
Contracts from and after the Closing; and (c) assumes, undertakes and agrees to
pay, satisfy, perform or discharge in accordance with the terms thereof all of
the Assumed Liabilities.
3. Successors. This Assignment shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns.
4. Conflicts with Agreement. Nothing in this Assignment, express or
implied, is intended to or shall be construed to modify, expand or limit in any
way the terms of the Agreement. To the extent that any provision of this
Assignment conflicts or is inconsistent with the terms of the Agreement, the
Agreement shall govern.
E-1
5. Counterparts. This Assignment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, and all of which together shall constitute one and the
same instrument.
6. Governing Law. This Assignment and all matters based upon, arising
out of or related to this Assignment or the negotiation, execution or
performance of this Assignment shall be governed by and construed in accordance
with the laws, both procedural and substantive, of the State of Texas without
regard to its conflict of laws provisions that if applied might require the
application of the laws of another jurisdiction.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
E-2
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Assignment as of the date first written above.
NATIONAL BY-PRODUCTS, LLC
By:
------------------------------
Name:
Title:
DARLING INTERNATIONAL INC.
By:
-------------------------------
Name:
Title:
E-3
EXHIBIT F
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, which are intended to constitute
a LIMITED POWER OF ATTORNEY, that the undersigned, National By-Products, LLC, an
Iowa limited liability company, ("Seller"), does hereby appoint Darling National
LLC, a Delaware limited liability company ("Purchaser"), as its attorney-in-fact
to endorse and deposit all checks and other evidences of indebtedness received
by Purchaser on account of the assets transferred by Seller to Purchaser
pursuant to that certain Asset Purchase Agreement (the "Agreement") dated as of
December 19, 2005, by and among Seller, Purchaser, and Darling International
Inc.
To induce any third party to rely on this instrument, it is hereby
agreed that any third party receiving a duly executed copy or facsimile of this
instrument may rely on this instrument, until revocation of this instrument
shall have been received by such third party, and the undersigned hereby agrees
to indemnify and hold harmless such third party from and against any and all
claims that may arise against such third party by reason of such third party
having relied on the provisions of this instrument prior to the receipt of such
revocation.
IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its duly authorized signatory.
NATIONAL BY-PRODUCTS, LLC
By:
--------------------------------
Name:
Title:
Dated: [________ __, 2006]
F-1
EXHIBIT G
FORM OF OPINION OF SELLER'S COUNSEL
-----------------------------------
REPLY TO: DES MOINES
FACSIMILE
000-000-0000
WRITER'S DIRECT DIAL NUMBER
000-000-0000
E-MAIL: XXX@XXXXXXXXX.XXX
________________, 2006
Darling International Inc. Darling National LLC
000 X'Xxxxxx Xxxxx Xxxx. 000 X'Xxxxxx Xxxxx Xxxx.
Xxxxx 000 Xxxxx 000
Xxxxxx, XX 00000 Xxxxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel for National By-Products, LLC ("Seller") in
connection with the Asset Purchase Agreement (the "Purchase Agreement") dated as
of December 19, 2005 among Darling International Inc. (Parent), Darling National
LLC ("Purchaser") and Seller. This opinion is being rendered to you at the
request of Seller pursuant to Section 9.1(x) of the Purchase Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials, and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Based upon the foregoing, and subject to the qualifications and
exceptions hereinafter set forth, we are of the opinion that:
1. Seller is a limited liability company validly existing and in good
standing under the laws of the State of Iowa and has all requisite limited
liability company power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Seller is duly qualified to
G-1
December 19, 2005
Page 2
transact business and is in good standing as a foreign corporation in each
jurisdiction identified in Schedule 1 hereto.
2. Seller has all requisite limited liability company power and
authority to execute and deliver the Seller Documents (which for the purpose of
this letter also includes the Purchase Agreement) and to perform its obligations
thereunder. The execution, delivery and performance of the Seller Documents by
Seller have been duly authorized by all necessary limited liability company
action on the part of Seller. The Seller Documents have been duly and validly
executed and delivered by Seller and (assuming the due authorization, execution
and delivery thereof by the other parties thereto and assuming the applicability
of Iowa law) constitute the legal, valid and binding obligation of Seller,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally, and subject, as
to enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).
3. The execution and delivery by Seller of the Seller Documents and the
performance by Seller of its obligations thereunder will not conflict with,
constitute a default under or violate (i) any of the terms, conditions or
provisions of Seller's operating agreement or bylaws, (ii) any of the terms,
conditions or provisions of any material document, agreement or other instrument
to which Seller is a party or by which it is bound of which we are aware,
(iii)Iowa or federal law or regulation (other than federal and state securities
or blue sky laws, as to which we express no opinion in this paragraph) or (iv)
any judgment, writ, injunction, decree, order or ruling of any court or
governmental authority binding on Seller of which we are aware.
4. No consent, approval, waiver, license or authorization or other
action by or filing with any Iowa or federal governmental authority is required
in connection with the execution and delivery by Seller of the Seller Documents
to which it is a party, the consummation by Seller of the transactions
contemplated thereby or the performance by Seller of its obligations thereunder,
except for the filings required to be made under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvement Act of 1976, as amended, and for filings and other actions required
pursuant to the Securities Act of 1933 and/or the Securities Exchange Act of
1934 and the rules and regulations thereunder and federal and state securities
or blue sky laws, and except those already obtained or which are not listed on
Company Disclosure Schedule 7.3 or waived by Parent and Purchaser.
5. To our knowledge, there is no litigation, proceeding or governmental
investigation pending or overtly threatened against Seller that relates to any
of the transactions contemplated by the Seller Documents to which it is a party.
G-2
December 19, 2005
Page 3
6. Seller has amended its Rights Agreement, dated as of January 1,
1999, such that it shall terminate immediately prior to the Closing.
The foregoing opinions are subject to the following qualifications and
exceptions:
A. We express no opinion with respect to the laws of any jurisdiction
other than the State of Iowa and the federal laws of the United States of
America, as now in effect. To the extent the Seller Documents provide that they
are to be governed by the law of jurisdictions other than the Iowa, we have
assumed at your request that such documents are instead governed by Iowa law.
There may be material differences between the law of Iowa and such other
jurisdictions and there is no reasonable expectation that Iowa law will apply.
Accordingly, we express no opinion and make no representation as to the
appropriateness of the assumption regarding Iowa law as governing. We express no
opinion as to any ordinance or regulation of any municipal, county, township or
other local governmental authority.
B. We have assumed the genuineness of all signatures appearing on the
documents examined by us other than Seller on the Purchase Agreement, the legal
capacity of all natural persons, the genuineness, completeness and authenticity
of all documents submitted to us as originals and the conformity with genuine,
complete and authentic originals of all documents submitted to us as copies.
C. We express no opinion in connection with the Purchase Agreement or
the transactions contemplated thereby, and no opinion may be implied or
inferred, except as expressly set forth in this opinion letter.
D. When an opinion set forth herein is given to our knowledge or of
which we are aware, that knowledge or awareness is limited to the actual
knowledge of the individual lawyers in the firm who have participated directly
in the matters referred to us by Seller and its representatives in the course of
our regular representation of Seller, without any special or additional
investigation undertaken for purposes of this opinion.
E. The opinions expressed herein are made as of the date hereof, and we
do not undertake to update this opinion with respect to any changes of which we
may later become aware.
F. This opinion letter is limited in its use solely to reliance by you
and the lenders of Parent in consummating the transactions contemplated by the
Purchase Agreement. No other person or entity may rely or claim reliance upon
this opinion letter, and it is not to be quoted in whole or in part or otherwise
G-3
December 19, 2005
Page 4
referred to or furnished to any other person or entity without the prior written
consent of this firm.
G. We have assumed that you have all requisite power and authority and
have taken all necessary action to execute and deliver the Purchase Agreement
and to authorize the performance of your obligations thereunder, that the
Purchase Agreement has been duly executed and delivered by you and that the
Purchase Agreement is the valid and binding obligation of you, enforceable
against you in accordance with its terms.
H. We express no opinion with respect to the governing law, submission
to jurisdiction, non-competition, waiver of bulk sales laws or liquidated
damages provisions in the Seller Documents.
Very truly yours,
NYEMASTER, GOODE, WEST,
XXXXXXX & O'BRIEN, P.C.
By ____________________________
X. X. Xxxxxxx
GRN:pks
G-4
EXHIBIT H
SUBJECT TO OPINION
COMMITTEE REVIEW
Form of Opinion for Parent's Counsel
------------------------------------
________, 2006
National By-Products, LLC
0000 Xxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx, President
Ladies and Gentlemen:
We have acted as special counsel to Darling International Inc., a
Delaware corporation ("Parent"), and Darling National LLC, a Delaware limited
liability company and wholly-owned subsidiary of Parent ("Purchaser"), in
connection with the preparation, authorization, execution and delivery of, and
the consummation of the transactions contemplated by, that certain Asset
Purchase Agreement dated as of December 19, 2005 by and among Parent, Purchaser
and National By-Products, LLC (the "Purchase Agreement"). Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed to such terms
in the Purchase Agreement.
In so acting, we have examined originals or copies (certified or
otherwise identified to our satisfaction) of (a)(i) the Purchase Agreement, (ii)
the Escrow Agreement dated as of the date hereof, by and among Parent, National
By-Products, LLC and U.S. Bank, N.A. (the "Escrow Agreement") and (iii) the
Noncompetition and Nonsolicitation Agreement dated as of the date hereof, by and
between Parent and Xxxx Xxxxxxx (the "Noncompetition Agreement" and together
with the Purchase Agreement and the Escrow Agreement, the "Transaction
Documents") and (b) such corporate and limited liability company records,
agreements, documents and other instruments, and such certificates or comparable
documents of public officials and of officers and representatives of Parent and
Purchaser, and have made such inquiries of such officers and representatives, as
we have deemed relevant and necessary as a basis for the opinions hereinafter
set forth.
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. As to all questions
of fact material to these opinions that have not been independently established,
we have relied upon certificates or comparable documents of officers and
representatives of Parent and Purchaser and upon the representations and
warranties of Parent and Purchaser contained in the Purchase Agreement. As used
herein, "to our knowledge" and "of which we are aware" mean the conscious
awareness of facts or other information by any lawyer in our firm actively
involved in the transactions contemplated by the Purchase Agreement.
H-1
Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that:
1. Parent is a corporation validly existing and in good standing
under the laws of the State of Delaware and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted.
2. Purchaser is a limited liability company validly existing and in
good standing under the laws of the State of Delaware and has all requisite
limited liability company power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.
3. The shares of common stock to be issued pursuant to the Purchase
Agreement have been duly authorized and, when issued as contemplated by the
Purchase Agreement, will be validly issued, fully paid and nonassessable and
free of preemptive rights pursuant to law or in Parent's Certificate of
Incorporation.
4. Each of Parent and Purchaser has all requisite corporate or
limited liability company power and authority, as applicable, to execute and
deliver the Transaction Documents to which it is a party and to perform its
obligations thereunder. The execution, delivery and performance by each of
Parent and Purchaser of the Transaction Documents to which it is a party have
been duly authorized by all necessary corporate or limited liability company
action, as applicable, on the part of each of Parent and Purchaser. The
Transaction Documents to which each of Parent and Purchaser are a party have
been duly and validly executed and delivered by each of Parent and Purchaser and
(assuming the due authorization, execution and delivery thereof by the other
parties thereto), constitute the legal, valid and binding obligation of each of
Parent and Purchaser, enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except that (A) rights to indemnification and contribution
thereunder may be limited by federal or state securities laws or public policy
relating thereto, (B) no opinion is expressed with respect to Section 7.7 of the
Purchase Agreement, (C) enforceability may be affected by any failure to comply
with the bulk sales laws of any jurisdiction and (D) no opinion is expressed
with respect to any provision of the Transaction Documents providing for
liquidated damages.
5. The execution and delivery by Purchaser of the Transaction
Documents to which it is a party and the performance by Purchaser of its
obligations thereunder will not conflict with, constitute a default under or
violate (i) any of the terms, conditions or provisions of Purchaser's
certificate of formation or limited liability company agreement, (ii) any of the
terms, conditions or provisions of any material document, agreement or other
instrument to which Purchaser is a party or by which it is bound of which we are
aware, (iii) New York, Delaware corporate or federal law or regulation (other
than federal and state securities or blue sky laws, as to which we express no
opinion in this paragraph) or (iv) any judgment, writ, injunction, decree, order
or ruling of any court or governmental authority binding on Purchaser of which
we are aware.
H-2
6. The execution and delivery by Parent of the Transaction Documents
to which it is a party and the performance by Parent of its obligations
thereunder will not conflict with, constitute a default under or violate (i) any
of the terms, conditions or provisions of Parent's certificate of incorporation
or bylaws, (ii) any of the terms, conditions or provisions of any material
document, agreement or other instrument to which Parent is a party or by which
it is bound of which we are aware, (iii) New York, Delaware corporate or federal
law or regulation (other than federal and state securities or blue sky laws, as
to which we express no opinion in this paragraph) or (iv) any judgment, writ,
injunction, decree, order or ruling of any court or governmental authority
binding on Parent of which we are aware.
7. Except for the filings required to be made under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvement Act of 1976, as amended, no consent,
approval, waiver, license or authorization or other action by or filing with any
New York state or federal governmental authority is required in connection with
the execution and delivery by each of Parent and Purchaser of the Transaction
Documents to which it is a party, the consummation by each of Parent and
Purchaser of the transactions contemplated thereby or the performance by each of
Parent and Purchaser of its respective obligations thereunder, except for
filings and other actions required pursuant to the Securities Act of 1933 and/or
the Securities Exchange Act of 1934 and the rules and regulations thereunder and
federal and state securities or blue sky laws, as to which we express no opinion
in this paragraph, and those already obtained.
The opinions expressed herein are limited to the laws of the State of
New York, the corporate and limited liability company laws of the State of
Delaware and the federal laws of the United States, and we express no opinion as
to the effect on the matters covered by this letter of the laws of any other
jurisdiction.
The opinions expressed herein are rendered solely for your benefit in
connection with the transactions described herein. These opinions may not be
used or relied upon by any other person, nor may this letter or any copies
hereof be furnished to a third party, filed with a governmental agency, quoted,
cited or otherwise referred to without our prior written consent.
Very truly yours,
H-3
