TABLE OF CONTENTS

ARTICLE 1. DEFINITIONS			1
ARTICLE 2. PURCHASE AND SALE			15
Section 2.01	Purchase and Sale.		15
Section 2.02	Amount and Form of Consideration		16
Section 2.03	Payment.		16
Section 2.04	Working Capital Adjustments.		17
Section 2.05	Excess Accounts Payable Adjustments.		19
Section 2.06	Limited Assumption of Obligations.		21
Section 2.07	Assignment of Assumed Contracts and Permits.		21
Section 2.08	Allocation of Purchase Price.		22
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS			22
Section 3.01	Organization		22
Section 3.02	Authority; Execution and Delivery; Enforceability		22
Section 3.03	Capitalization; Ownership; Subsidiaries.		23
Section 3.04	Consents and Approvals; No Violation.		23
Section 3.05	Financial Statements; Indebtedness.		24
Section 3.06	Conduct Since December 31, 2005.		24
Section 3.07	Undisclosed Liabilities.		25
Section 3.08	Taxes.		25
Section 3.09	Employee Plans.		26
Section 3.10	Contracts.		28
Section 3.11	Litigation; Pending Decrees.		28
Section 3.12	Legal Compliance; Permits and Licenses.		28
Section 3.13	Labor Matters.		29
Section 3.14	Personal Property.		30
Section 3.15	Real Property.		30
Section 3.16	Receivables; Inventory.		32
Section 3.17	Proprietary Rights.		32
Section 3.18	Environmental Matters.		32
Section 3.19	Certain Transactions.		33
Section 3.20	Certain Business Relationships.		33
Section 3.21	Accounts Payable and Accrued Expenses.		33
Section 3.22	Products Liability.		34
Section 3.23	Warranty Claims.		34
Section 3.24	Illegal Practices.		34
Section 3.25	Disclosure.		34
Section 3.26	Certain Fees and Liabilities.		34
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYERS			34
Section 4.01	Corporate Organization.		34
Section 4.02	Authority; Execution and Delivery; Enforceability.		35

 

 

Section 4.03	Consents and Approvals; No Violation.		35
Section 4.04	Certain Fees and Liabilities.		35
ARTICLE 5. PRE-CLOSING COVENANTS			36
Section 5.01	Interim Operations of the Companies.		36
Section 5.02	Access to Information.		37
Section 5.03	Notice of Certain Events.		37
Section 5.04	Efforts to Consummate Transactions.		38
Section 5.05	No Solicitation or Negotiation.		38
Section 5.06	Affiliate-Owned Real Property and Owned Real Property.		38
Section 5.07	Affiliate-Owned Personal Property.		41
Section 5.08	JEM Sales Metal Building; Removal of Certain Assets		40
Section 5.09	Supplemental Disclosure		42
Section 5.10	Customer Interviews		42
Section 5.11	Personal Guarantees and Pledged Collateral		42
ARTICLE 6. CONDITIONS TO THE CLOSING			42
Section 6.01	Conditions to the Obligations of Buyers.		42
Section 6.02	Conditions to the Obligations of the Sellers.		44
ARTICLE 7. CLOSING			46
Section 7.01	Time and Place.		46
Section 7.02	Timing and Effectiveness of Actions.		46
Section 7.03	Zartic and Zar Tran Deliveries.		46
Section 7.04	James Mauer and Jeffrey Mauer Deliveries.		47
Section 7.05	JEM Sales Deliveries.		48
Section 7.06	Buyers Deliveries.		49
Section 7.07	Mutual Deliveries.		49
Section 7.08	Other Actions to be Taken at the Closing.		50
ARTICLE 8. ADDITIONAL COVENANTS			50
Section 8.01	Payment of Taxes.		50
Section 8.02	Pro-rations.		50
Section 8.03	Expenses; Sales and Other Transfer Taxes.		50
Section 8.04	Employee Matters.		50
Section 8.05	Collection of Receivables.		52
Section 8.06	Financing.		52
Section 8.07	Post-Closing Access.		52
Section 8.08	Noncompetition and Nonsolicitation.		53
Section 8.09	Confidentiality.		54
Section 8.10	Company Names.		55
Section 8.11	Interim Financial Reports.		55
Section 8.12	Publicity.		55
ARTICLE 9. TERMINATION			55
Section 9.01	Termination.		55
Section 9.02	Effect of Termination.		56

ii

 

 

ARTICLE 10. INDEMNIFICATION			57
Section 10.01	Survival of Representations and Warranties.		57
Section 10.02	Indemnification by Sellers and Beneficiaries and Buyers.		57
ARTICLE 11. MISCELLANEOUS			67
Section 11.01	Waiver.		67
Section 11.02	Entire Agreement; Amendment.		67
Section 11.03	Further Assurances.		68
Section 11.04	Governing Law.		68
Section 11.05	Interpretation.		68
Section 11.06	Notices.		68
Section 11.07	Counterparts.		69
Section 11.08	Parties in Interest; Assignment.		69
Section 11.09	Severability.		69
Section 11.10	No Strict Construction.		70
Section 11.11	No Third Party Beneficiaries.		70

iii

 

EXHIBITS

Exhibit A		Consulting Agreement
Exhibit B		Escrow Agreement
Exhibit C		Noncompetition Agreement
Exhibit D		Jeffrey Mauer Employment Agreement

 

DISCLOSURE SCHEDULES

Designation		Description
1(a)		Assumed Contracts
1(b)		Assumed Employee Agreements
1(c)		Excluded Executive Agreements
1(d)		JEM Sales Lab Equipment
1(e)		Knowledge
1(f)		Leased Personal Property
1(g)		MNM Assets
1(h)		Owned Personal Property
1(i)		Permits
1(k)		Real Property Permitted Exceptions
1(l)		Warfighter Foods Assumed Contracts
2.04		Illustration of Estimated and Final Working Capital Statements
2.08		Allocation of Purchase Price
3.01		Organization
3.03		Capitalization; Ownership; Subsidiaries
3.04		Consents and Approvals; No Violation
3.05		Financial Statements; Indebtedness
3.06		Conduct Since December 31, 2005
3.07		Undisclosed Liabilities
3.08		Taxes
3.09		Employee Plans
3.10		Contracts
3.11		Litigation; Pending Decrees
3.12		Legal Compliance; Permits and Licenses
3.13		Labor Matters
3.14		Personal Property
3.15		Real Property
3.16		Receivables; Inventory
3.17		Proprietary Rights
3.18		Environmental Matters
3.19		Certain Transactions
3.20		Certain Business Relationships
3.22		Products Liability
4.03		Consents and Approvals; No Violation
5.01		Interim Operations of the Companies
6.01(h)		Required Consents
10.02(f)		Severance Escrow Amount

 

iv

 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is entered into as of November 3, 2006 among PIERRE NEWCO I, LLC, an Ohio limited liability company (“ Zartic Buyer ”), PIERRE NEWCO II, LLC, an Ohio limited liability company (“ Zar Tran Buyer ”), ZARTIC, INC., a Georgia corporation (“ Zartic ”), ZAR TRAN, INC., a Georgia corporation (“ Zar Tran ”), JEM SALES, INC., a Georgia corporation (“ JEM Sales ”), MNM LEASING COMPANY, LLC, a Georgia limited liability company (“ MNM Leasing ”), JAMES E. MAUER (“ James Mauer ”), JEFFREY J. MAUER (“ Jeffrey Mauer ”), CHRISTOPHER W. MAUER (“ Christopher Mauer ”), and TAMARA L. MAUER f/k/a Tamara Mauer Acker (“ Tamara Mauer ” and together with Jeffrey Mauer and Christopher Mauer, the “ Beneficiaries ”), under the following circumstances:

A.            Zartic is engaged in the business of further processing and selling of packaged beef, poultry, pork, and veal products (the “ Zartic Business ”), and Zar Tran is engaged in the business of delivering and distributing packaged beef, poultry, pork, and veal products (the “ Zar Tran Business ” and together with the Zartic Business, the “ Businesses ”);

B.             James Mauer and the co-trustees of the 1994 Trust and the 2003 Trust (of which the Beneficiaries are the sole beneficiaries) are all of the shareholders of Zartic, James Mauer is the sole shareholder of Zar Tran and JEM Sales, Jeffrey Mauer and Mary M. Mauer are all of the members of MNM Leasing, and Jeffrey Mauer is the sole member of Warfighter Foods;

C.             Zartic Buyer desires to purchase substantially all of the assets and assume certain of the liabilities of Zartic, and Zartic desires to sell and assign the same to Zartic Buyer, upon the terms and conditions set forth in this Agreement;

D.             Zar Tran Buyer desires to purchase substantially all of the assets and assume certain of the liabilities of Zar Tran, and Zar Tran desires to sell and assign the same to Zar Tran Buyer, upon the terms and conditions set forth in this Agreement; and

E.             Zartic Buyer desires to purchase certain real property used in the Zartic Business from James Mauer, the real property and equipment used in the laboratory business of JEM Sales from JEM Sales, the MNM Assets from MNM Leasing, and the Warfighter Foods Assumed Contracts from Warfighter Foods, and James Mauer, JEM Sales, MNM Leasing, and Warfighter Foods desire to sell the same to Zartic Buyer, upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, the parties agree as follows:

ARTICLE 1.
DEFINITIONS

For all purposes of this Agreement, the terms set forth below shall be defined as follows:

 

“ 1994 Trust ” means the James E. Mauer Irrevocable Trust, dated December 17, 1994, and each of the GST Exempt Subtrust f/b/o Jeffrey Mauer, the GST Exempt Subtrust f/b/o Christopher Mauer, and the GST Exempt Subtrust f/b/o Tamara Mauer.

“ 2003 Trust ” means the James E. Mauer Irrevocable Trust II, dated June 11, 2003, and each of the GST Exempt Subtrust f/b/o Jeffrey Mauer, the GST Exempt Subtrust f/b/o Christopher Mauer, and the GST Exempt Subtrust f/b/o Tamara Mauer.

“ Accounting Firm ” has the meaning given that term in Section 2.04(d).

“ Affiliate ” of any Entity means any other Entity in control of, controlled by, or under common control with such Entity.

“ Affiliate-Owned Personal Property ” means the JEM Sales Lab Equipment and the MNM Assets.

“ Affiliate-Owned Real Property ” means the Corporate Office Property, the West Rome Plant Property, and the JEM Sales Property.

“ Agreement ” means this Asset Purchase Agreement.

“ Assumed Contracts ” means the Contracts and agreements listed on Schedule 1(a) .

“ Assumed Employee Agreements ” means the employment agreements listed on Schedule 1(b) ;

“ Assumed Liabilities ” means for each Company, only those liabilities and obligations existing as of the Effective Time as follows (for Zartic, the “ Zartic Assumed Liabilities ” and for Zar Tran, the “ Zar Tran Assumed Liabilities ”):

(a)           all Payables;

(b)           all liabilities to employees of the Company’s Business for accrued vacation and accrued payroll, all liabilities for accrued utilities, and other Current Liabilities, but in each case only to the extent reflected in the Final Working Capital Statement of the Company;

(c)           all obligations under the Assumed Contracts and the Permits, but only to the extent that (i) such obligations are to be performed after the Closing and (ii) the Assumed Contracts or Permits are validly assigned or transferred to Zartic Buyer or Zar Tran Buyer, as applicable, or the benefits are made available to Zartic Buyer or Zar Tran Buyer, as applicable, pursuant to an alternative arrangement in the event an Assumed Contract or Permit is not assigned;

(d)           all obligations under the Assumed Employee Agreements, but only to the extent that such obligations are to be performed after the Closing;

(e)           all obligations under the Zartic 401(k) Plan, but only to the extent that such obligations are to be performed after the Closing;

2

 

(f)            all obligations under the Blue Cross Blue Shield Group Health Policy maintained by Zartic under the Zartic, Inc. Welfare Benefit Plan, but only to the extent that (i) such obligations are to be performed after the Closing, and (ii) such insurance policies are validly assigned or transferred to Zartic Buyer; and

(g)           all obligations under any insurance policies other than the Blue Cross Blue Shield Group Health Policy maintained by Zartic under the Zartic, Inc. Welfare Benefit Plan, but only to the extent that (i) such obligations are to be performed after the Closing, (ii) such insurance policies are validly assigned or transferred to Zartic Buyer, and (iii) Zartic Buyer notifies Sellers in writing prior to the Closing of its intention to assume any such policies.

and it is expressly acknowledged and agreed that Assumed Liabilities shall not include, and neither Zartic Buyer nor Zar Tran Buyer shall be liable for, any liabilities and obligations of any Seller other than those in clauses (a) through (g) immediately above in this definition, including without limitation, the following:

(i)             any Indebtedness;

(ii)            any liabilities for Taxes which arise out of either Business or the ownership of the Purchased Assets for any period prior to the Effective Time (it being understood that property taxes and assessments will be prorated as of the Effective Time in accordance with Section 8.02);

(iii)           any pending or threatened litigation relating to any Seller, including without limitation, the litigation listed on Schedule 3.11 ;

(iv)          any liability associated with or relating to any Employee Plan (other than accrued vacation, accrued payroll, and the Zartic 401(k) Plan specifically included in the Assumed Liabilities above);

(v)           any liabilities or obligations based on any theory of product liability or personal injury caused by defective products of either Business sold at any time by any Seller;

(vi)          any liabilities or obligations under any Environmental Laws relating to the operation of the Businesses (or either of them), the ownership or operation of any Owned Real Property or Affiliate-Owned Real Property, or any Hazardous Substance Released, generated, stored, used, disposed of, treated, handled, or shipped by any Seller prior the Effective Time; and

(vii)         any Contract other than the Assumed Contracts, including, without limitation, the Excluded Executive Agreements.

“ Beneficiary ” means Jeffrey J. Mauer, Christopher W. Mauer, or Tamara L. Mauer (f/k/a Tamara Mauer Acker); collectively, the “ Beneficiaries ”.

“ Business ” means the Zartic Business or the Zar Tran Business; together, the “ Businesses ”.

3

 

“ Buyer ” means Zartic Buyer or Zar Tran Buyer; together, the “ Buyers ”.

“ Buyer Group ” has the meaning given that term in Section 10.02(a).

“ Cap ” has the meaning given that term in Section 10.02(d)(iii).

“ Cash Purchase Price ” has the meaning given that term in Section 2.02(a).

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act, as amended from time to time, 42 U.S.C. §9601, et seq.

“ Claims ” has the meaning given that term in Section 10.02(b)(iv).

“ Closing ” means the closing of the transactions contemplated by this Agreement.

“ Closing Date ” has the meaning given that term in Section 7.01.

“ COBRA ” means the Consolidated Omnibus Budget Act of 1985, as amended from time to time.

“ COBRA Coverage ” means continuation coverage required under Section 4980B of the Code and Part 6 of Title I of ERISA or any similar state law.

“ COBRA Covered Employees ” has the meaning given that term in Section 8.04(c).

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Company ” means Zartic or Zar Tran; together, the “ Companies ”.

“ Competitive Business ” has the meaning given that term in Section 8.08.

“ Confidentiality Agreement ” means the Confidentiality Agreement dated May 25, 2006 by and between Madison Dearborn Partners, LLC, on behalf of the Buyers, and Fidus Partners, LLC, on behalf of the Sellers.

“ Confidential Information ” has the meaning given that term in Section 8.09(b).

“ Consulting Agreement ” means that certain Consulting Agreement to be entered into between Zartic Buyer and James Mauer at the Closing, substantially in the form attached hereto as Exhibit A .

“ Contracts ” means and includes all of the following to which either Company is a party or by which either Company is bound or by which any of their respective property or assets may be bound, and in the case of James Mauer, JEM Sales, or MNM Leasing, relates to any Affiliate-Owned Real Property or any Affiliate-Owned Personal Property: (i) any real property lease; (ii) any lease of equipment or other personal property requiring annual payments in excess of $10,000; (iii) any franchise, dealer, or other distribution agreement pursuant to which either Company sells or otherwise distributes products or services or pursuant to which any other person sells or otherwise distributes any such products or services to either Company; (iv) any

4

 

supply contract or other agreement or understanding pursuant to which either Company purchased in the last fiscal year, or expects to purchase in the current fiscal year, in excess of $15,000 worth of products or services; (v) any agreement, arrangement, or commitment which restricts the conduct of any line of business or which imposes a confidentiality obligation upon either Company; (vi) any agreement with or benefiting any current or former director, officer, or shareholder of either Company, or any Affiliate of any of them; (vii) any agreement, indenture, or other instrument relating to the borrowing of money; (viii) any agreement pursuant to which either Company is obligated to lend money or make advances to any person; (ix) any agreement, arrangement, or commitment to guarantee the obligations of, or to indemnify or exonerate from liability, any person (including, without limitation, either Company or any director or officer of either Company); (x) any Tax allocation or Tax sharing agreement; (xi) any Proprietary Rights License; (xii) any contract, commitment, agreement, or understanding with respect to deferred compensation payable by either Company; (xiii) any other contract, commitment, agreement, or understanding, whether written or oral, which involves the payment or receipt of more than $15,000 per year and is not terminable without penalty upon not more than 30 days’ notice; and (xiv) any other contract or agreement not in the ordinary course of business, other than this Agreement.

“ Corporate Office Property ” means the real property, all buildings and other improvements thereon, and all fixtures and equipment used in connection therewith, and all easements and other rights appurtenant or relating thereto, located at 438 Lavender Drive, Rome, Georgia, as more particularly described on Schedule 3.15 .

“ Current Assets ” has the meaning given that term in Section 2.04(b).

“ Current Liabilities ” has the meaning given that term in Section 2.04(b).

“ Damages ” has the meaning given that term in Section 10.02(a).

“ Deductible ” has the meaning given that term in Section 10.02(d)(i).

“ Effective Time ” has the meaning given to such term in Section 7.02.

“ Employee Plans ” means all employment, bonus, deferred compensation, employee pension benefit plans defined in Section 3(2) of ERISA, retirement, profit sharing, stock option, stock purchase, employee stock ownership, stock appreciation rights, savings, consulting, severance, termination, collective bargaining, insurance (including both group and self-insured arrangements), fringe benefit, and other employee benefit, incentive, vacation, and employee welfare plans as defined in Section 3(1) of ERISA, policies, contracts, and arrangements, written or oral, and all trust agreements related thereto, relating to any present or former directors, officers, or employees of either Company due to their status as present or former directors, officers, or employees of either Company.

“ Entity ” means an individual, firm, trust, corporation, partnership, limited liability company, joint venture, business, enterprise, association, or organization, however constituted or existing.

“ Environmental Laws ” means any applicable Law related to:

5

 

(a)           the protection of human health or the protection, preservation, or restoration of the environment (including, without limitation, air, water vapor, surface water, ground water, drinking water supply, surface soil, subsurface soil, plant and animal life, or any other natural resource); and/or

(b)           the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, emission, Release, or disposal of any Hazardous Substance.

“ Environmental Laws ” include, without limitation:

(a)           CERCLA;

(b)           the Resource Conservation and Recovery Act, as amended, 42 U.S.C. §6901, et seq.;

(c)           the Clean Air Act, as amended, 42 U.S.C. §7401, et seq.;

(d)           the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251, et seq.;

(e)           the Toxic Substances Control Act, as amended, 15 U.S.C. §2601, et seq.;

(f)            the Emergency Planning and Community Right to Know Act, as amended, 42 U.S.C. §11001, et seq.;

(g)           the Safe Drinking Water Act, as amended, 42 U.S.C. §300f, et seq.;

(h)           all comparable state and local laws; and

(i)            any common law (including, without limitation, common law that may impose strict liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any Hazardous Substance.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ Escrow Agent ” means SunTrust Bank, as escrow agent under the Escrow Agreement.

“ Escrow Agreement ” means the Escrow Agreement to be entered into among Zartic, Zartic Buyer, and the Escrow Agent at the Closing, which shall be in substantially the form attached hereto as Exhibit B .

“ Estimated Excess Accounts Payable ” has the meaning given that term in Section 2.05(a).

“ Estimated Excess Accounts Payable Statement ” has the meaning given that term in Section 2.05(a).

“ Estimated Working Capital ” has the meaning given that term in Section 2.04(a).

6

 

“ Estimated Working Capital Adjustment ” has the meaning given that term in Section 2.04(a).

“ Estimated Working Capital Statement ” has the meaning given that term in Section 2.04(a).

“ Excess Accounts Payable ” means all (a) accounts payable for beef, poultry, pork, or veal that remain outstanding more than seven (7) days from the date of the invoice and (b) all accounts payable relating to anything other than beef, poultry, pork, or veal which remain outstanding more than thirty (30) days from the date of the invoice.

“ Excluded Assets ” has the meaning given that term under the definition of “Purchased Assets.”

“ Excluded Executive Agreements ” means the Contracts listed on Schedule 1(c) .

“ FDA ” means United States Food and Drug Administration.

“ Fidus Engagement Letter ” means that certain agreement for fees entered into between Fidus Partners, LLC and Zartic, dated March 28, 2006.

“ Final Excess Accounts Payable ” has the meaning given that term in Section 2.05(b).

“ Final Excess Accounts Payable Statement ” has the meaning given that term in Section 2.05(b).

“ Final Working Capital ” has the meaning given that term in Section 2.04(b).

“ Final Working Capital Adjustment ” has the meaning given that term in Section 2.04(b).

“ Final Working Capital Statement ” has the meaning given that term in Section 2.04(b).

“ Financial Statements ” means (i) the audited financial statements, schedules, and notes of Zartic at and for the years ended December 31, 2004 and December 31, 2005, (ii) the audited financial statements, schedules, and notes of Zar Tran at and for the years ended December 31, 2004 and December 31, 2005, (iii) the internal financial statements of Zartic at and for the nine (9) months ended September 30, 2006, and (iv) the internal financial statements of Zar Tran at and for the nine (9) months ended September 30, 2006.

“ Financing Commitment Letter ” means that certain Project Rome Commitment Letter, dated October 17, 2006, issued in favor of Pierre Foods, Inc., a North Carolina corporation, the parent company of each of the Buyers, by Wachovia Bank, National Association, Wachovia Capital Markets, LLC, Bank of America, N.A., and Banc of America Securities LLC, and providing for a commitment to financing Buyers’ acquisition of the Businesses as contemplated by this Agreement.

“ FMLA ” means the United States Family and Medical Leave Act and the rules and regulations promulgated thereunder, as amended from time to time.

7

 

“ Food ” means all products (whether finished food or food ingredients) that Zartic processes as of the Closing Date and all products (whether finished food or food ingredients) that Zartic has processed prior to the Closing Date.

“ FTC ” means the United States Federal Trade Commission.

“ GAAP ” means United States generally accepted accounting principles applied on a consistent basis.

“ General Escrow Amount ” shall have the meaning given that term in Section 2.03(a).

“ Governmental Entity ” means any court, governmental authority, or other regulatory or administrative agency or commission, domestic or foreign.

“ Hazardous Substance ” means any substance, pollutant, contaminant, or waste which is listed, defined, designated, or classified as hazardous, toxic, explosive, radioactive, or otherwise is regulated, under any Environmental Laws, whether by type or by quantity.  Hazardous Substance includes, without limitation, any “hazardous substance” as defined in Section 101(14) of CERCLA, petroleum products and any derivative or by-product thereof, asbestos, ammonia, radioactive materials, and polychlorinated biphenyls.

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations thereunder, as amended from time to time.

“ HSR Filing Fee ” means fifty percent (50%) of filing fee paid by either Buyer (or any Affiliate of either Buyer) to any Governmental Entity for required filings pursuant to the HSR Act in connection with the transactions contemplated by this Agreement.

“ Indebtedness ” means (i) any and all indebtedness for borrowed money, (ii) any and all indebtedness which is secured by any interest in any real property, assets, or capital stock, and (iii) for Zartic and Zar Tran (x) any Payables owed to any shareholder, director or officer of either Company or any Affiliate of any of them, and (y) the excess of outstanding checks payable by either Company as of the Closing Date over the amount of cash available in such Company’s account against which such checks are drawn.

“ Indemnified Party ” has the meaning given that term in Section 10.02(c)(i).

“ Indemnifying Party ” has the meaning given that term in Section 10.02(c)(i).

“ Inventory ” means for each Company, all finished products, work-in-progress, raw materials, spare parts, tools, and supplies which relate to, or are used in, the Company’s Business.

“ IRS ” means the United States Internal Revenue Service.

“ Jeffrey Mauer Employment Agreement ” has the meaning given that term in Section 6.01(j).

“ JEM Sales ” has the meaning given that term in the first paragraph of this Agreement.

8

 

“ JEM Sales Lab Equipment ” means the equipment and other assets used in the laboratory business of JEM Sales by or for the benefit of the Businesses or either of them, as described on Schedule 1(d) .

“ JEM Sales Metal Building ” means that certain metal-roofed, office building with an address of 430 Lavender Drive, Rome, Georgia 30165 and located on the West Rome Plant Property.

“ JEM Sales Property ” means the real property, all buildings and other improvements thereon, and all fixtures and equipment used in connection therewith, and all easements and other rights appurtenant or relating thereto, located at 400 Lavender Drive, Rome, Georgia, as more particularly described on Schedule 3.15 .

“ Knowledge ” means (i) with respect to the Sellers, the actual knowledge (after due inquiry) of the individuals listed in subsection (i) of Schedule 1(e) and (ii) with respect to the Buyers (or their designees), the actual knowledge (after due inquiry) of the individuals listed in subsection (ii) of Schedule 1(e) .

“ Law ” means any federal, state, or local statute, law, ordinance, regulation, rule, code, order, injunction, decree, treaty, or rule of common law and all other provisions having the force or effect of law.

“ Lead Party ” has the meaning given that term in Section 10.02(g)(iv).

“ Leased Personal Property ” means for each Company, machinery, equipment, tools, furniture, furnishings, trailers, vehicles, and other fixed assets leased by the Company, a true and correct list of which is set forth on Schedule 1(f) .

“ License Expiration Date ” has the meaning given that term in Section 5.08.

“ Lien ” means any mortgage, pledge, charge, security interest, or other encumbrance upon, or conditional assignment of, any property or assets.

“ Material Adverse Effect ” means a material adverse effect on the financial condition, results of operations, business, or prospects of either Company taken as a whole for such Company, and which adverse effect is not disclosed on the Schedules as of the date of this Agreement and is not the result of (i) normal seasonality of such Company’s Business, (ii) general national, regional, or local economic or financial conditions, (iii) general industry conditions which do not disproportionately impact such Company’s Business, (iv) the announcement or pendency of the transactions contemplated by this Agreement, except for a change or effect which, to the actual knowledge (after due inquiry) of James Mauer, Jeffrey Mauer, Jackson Harris, Jay Matthews or Elizabeth Rogers, would occur as a result of the announcement or pendency of this Agreement, or (v) the taking of any action contemplated or required by this Agreement.

“ MNM Assets ” means the personal property listed on Schedule 1(g) .

9

 

“ MNM Leasing ” has the meaning given that term in the first paragraph of this Agreement.

“ Names ” has the meaning given that term in Section 8.10.

“ Net Severance Amount ” means for each individual listed on Schedule 1(b) the amount identified on such Schedule as the Net Severance Amount for such individual, which amount reflects the amount of severance obligations set forth in the Assumed Employee Agreement to which such individual is a party (based on the rate of compensation of such individual immediately prior the Closing) plus the employer-portion of any Taxes or other amounts that Zartic Buyer (or any Affiliate of Zartic Buyer) would have to withhold and pay over to any Governmental Entity upon payment of such severance obligation to such individual, and net of any Tax benefit to Zartic Buyer (or any Affiliate of Zartic Buyer).

“ Noncompetition Agreement ” means that certain Noncompetition Agreement to be entered into between Pierre Foods, Inc. and James Mauer at the Closing, substantially in the form attached hereto as Exhibit C .

“ Notice of Disagreement ” has the meaning given that term in Sections 2.04(c) and 2.05(c).

“ Owned Personal Property ” means for each Company, machinery, equipment, tools, furniture, furnishings, trailers, vehicles, and other fixed assets owned by the Company, including, without limitation, those set forth on Schedule 1(h) .

“ Owned Real Property ” has the meaning given that term in Section 3.15.

“ Parking Area ” means the parking area consisting of Tract 1 of the real property known as the Zar Tran Depot & Maintenance Facility, located at 150 Prior Station Road, Cedartown, Georgia and further described on Schedule 3.15 .

“ Payables ” means for each Company, the accounts payable of the Company’s Businesses which are reflected in the Financial Statements and which will be reflected on the Final Working Capital Statement, but shall not include any payable to any shareholder, director, officer or any Affiliate of such Company.

“ Per Claim Threshold ” has the meaning given that term in Section 10.02(d)(ii).

“ Permits ” means for each Company and, to the extent related to the Affiliate-Owned Personal Property or the Affiliate-Owned Real Property, JEM Sales, James Mauer and MNM Leasing, all rights of the Entity under all federal, state, local, and other governmental licenses, permits, approvals, and authorizations which relate to or are necessary to conduct the Businesses or own the Purchased Assets, the Affiliate-Owned Personal Property, or the Affiliate-Owned Real Property, including, without limitation, those listed on Schedule 1(i) .

“ Permitted Encumbrance ” means Liens with respect to current taxes not yet delinquent or which are being contested in good faith by appropriate proceedings.

10

 

“ Potential Transferred Employees ” has the meaning given that term in Section 8.04(a).

“ Prepaid Assets ” has the meaning given that term in Section 2.04(b).

“ Prime Rate ” means the prime rate as published in the Wall Street Journal.

“ Proprietary Rights ” means patents, trademarks, service marks, trade names, copyrights, brand names, logos, and domain names (including all registrations and applications therefor) which relate to or are used in either Business or which are owned by either Company and all other intellectual property, know-how, trade secrets, formulae, drawings, and processes which are used in either Business or which are owned by either Company.

“ Proprietary Rights License ” means any agreement under which either Company: (i) obtains any right to use Proprietary Rights or any right to provide Proprietary Rights to any other person; or (ii) provides to any other person any right to use any Proprietary Rights or any right to provide Proprietary Rights to any other person.

“ Purchased Assets ” means for each Company, all of the assets, properties, privileges, claims, and rights that are owned, used, or held for use in connection with, or that are otherwise related to or are used in, the Company’s Business, of every kind, nature, and description (other than the Excluded Assets), whether such assets, properties, and rights are real, personal, or mixed, tangible or intangible, wherever located, whether or not any of such assets, properties, privileges, claims, and rights have any value for accounting purposes or are carried or reflected on or specifically referred to in the Company’s books or financial statements, including, without limitation, all of the Company’s rights in the following (for Zartic, the “ Zartic Purchased Assets ” and for Zar Tran, the “ Zar Tran Purchased Assets ”):

(a)           all Owned Real Property;

(b)           all Owned Personal Property;

(c)           all Leased Personal Property;

(d)           all Inventory;

(e)           all Proprietary Rights;

(f)            all Receivables other than those from any shareholder, director, officer or Affiliate of the Company;

(g)           all Prepaid Assets;

(h)           all Assumed Contracts, in each case to the extent assignable;

(i)            all Permits, in each case to the extent assignable;

(j)            all Records;

11

 

(k)           all of the assets reflected in the asset accounts on the Final Working Capital Statement for the Company;

(l)            all rights in the names “Zartic” and “Zar Tran” or any derivatives thereof, and all telephone and fax number(s) currently used by the Company;

(m)          any insurance proceeds, awards, or other compensation payable to the Company with respect to any of the Purchased Assets which become payable as a result of damage to the Purchased Assets occurring prior to the Closing Date;

(n)           all assets relating to the Zartic 401(k) Plan;

(o)           all assets relating to the Blue Cross Blue Shield Group Health Policy maintained by Zartic under the Zartic, Inc. Welfare Benefit Plan, but only to the extent that (i) such obligations are to be performed after the Closing, and (ii) such insurance policies are validly assigned or transferred to Zartic Buyer; and

(p)           all assets relating to any insurance policies other than the Blue Cross Blue Shield Group Health Plan maintained by Zartic under the Zartic, Inc. Welfare Benefit Plan, but only to the extent that (i) such obligations are to be performed after the Closing, (ii) such insurance policies are validly assigned or transferred to Zartic Buyer, and (iii) Zartic Buyer notifies Sellers in writing prior to the Closing of its intention to assume any such policies;

provided, however, that notwithstanding anything to the contrary contained in this Agreement, the term “ Purchased Assets ” shall not include the following assets (which shall be retained by the applicable Company and are hereinafter referred to collectively as the “ Excluded Assets ”):

(i)             all cash and cash equivalents;

(ii)            any interest in, or assets related to, the Employee Plans other than (x) the assets relating to the Zartic 401(k) Plan, (y) assets relating to the Blue Cross Blue Shield Group Health Policy and such other insurance policies as may be assigned to Zartic Buyer, and (z) other assets relating to Employee Plans to the extent included in the Final Working Capital Statement;

(iii)           all rights of such Company under this Agreement including the proceeds of the sale contemplated herein and other payments to the Company contemplated herein; and

(iv)          all of the issued and outstanding membership interests in JJCT, LLC, a Georgia limited liability company.

“ Purchase Price ” has the meaning given that term in Section 2.02.

“ Real Property Permitted Exceptions ” means (i) any real estate taxes and assessments (general or special) which are not due and payable as of the Closing Date, (ii) any matters of survey shown on any survey obtained by Buyers as of the date of this Agreement (other than

12

 

those survey matters covered in that certain Memorandum dated October 16, 2006 from Joan H. Roddy to Scott Smith except for those matters set forth on Schedule 1(k) ), and (iii) those matters set forth on Schedule 1(k) as to the Owned Real Property or the Affiliate-Owned Real Property to which they relate.

“ Receivables ” means for each Company, all accounts and notes receivable of the Company’s Businesses which are reflected in the Financial Statements and which will be reflected on the Final Working Capital Statement.

“ Records ” means for each Company, all books and records of the Company including, without limitation, a copy of the general ledger of the Business of the Company, and originals or copies of all property and equipment records, production records, engineering records, purchasing and sales records, personnel and payroll records, accounting records, magnetic or electronic copies of computer files and documentation, customer and vendor lists, sales and product literature, warranty and other claims information, and other records and files which relate to, or are used in, the Business of the Company or relate to the Purchased Assets, the Affiliate-Owned Personal Property, or the Affiliate-Owned Real Property; provided; however, “ Records ” shall not include any minute books and stock records of the Company, the original of the general ledger of the Business, tax returns of the Company, policies or contracts of insurance, or any records that do not relate to the Business of the Company, but Buyers shall be permitted to examine and make copies of such documents for any bona fide business purpose.

“ Release ” means “release” as defined in Section 101(22) of CERCLA.

“ Related Party Personal Property Leases ” has the meaning given that term in Section 5.07.

“ RMP/PSM Plans ” has the meaning given that term in Section 10.02(g)(i).

“ Schedules ” means the disclosure schedules delivered by Sellers to Buyers and Buyers to Sellers pursuant to this Agreement.

“ Seller ” means Zartic, Zar Tran, James Mauer, JEM Sales, or MNM Leasing, collectively, “ Sellers ”.

“ Seller Group ” has the meaning given that term in Section 10.02(b).

“ Severance Escrow Amount ” shall have the meaning given that term in Section 2.03(b).

“ Subsidiary ” of any Entity means any other Entity of which the first Entity (either alone or through or together with any other Subsidiary) owns, directly or indirectly, 50% or more of the stock or other equity interests.

“ SYL ” means the USDA Permanent Substitution Plan (Standard Yield) for poultry.

“ Target Working Capital ” means $22,035,000 for Zartic, and $705,000 for Zar Tran.

13

 

“ Tax Returns ” means federal, state, local, and foreign income, gross receipts, franchise, sales, use, excise, real, and personal property, transfer, employment, social security, unemployment, withholding, and other tax returns.

“ Taxes ” means federal, state, local, or foreign income, gross receipts, franchise, sales, use, excise, value added, goods and services, real and personal property, transfer, employment, social security, unemployment and withholding, and other taxes or assessments and any interest or penalties thereon or other similar additions thereto.

“ Termination Date ” has the meaning given that term in Section 9.01(b).

“ Title Commitment ” has the meaning given that term in Section 5.06(c).

“ Title Company ” has the meaning given that term in Section 5.06(c).

“ Transferred Employees ” has the meaning given that term in Section 8.04(a).

“ USDA ” means the United States Department of Agriculture.

“ USTs ” has the meaning given that term in Section 10.02(g)(iii).

“ Warfighter Foods ” means Warfighter Foods, LLC, a Georgia limited liability company.

“ Warfighter Foods Assumed Contracts ” means the rights and obligations of Warfighter Foods under the agreements described on Schedule 1(l) , but only to the extent that (i) such obligations are to be performed after the Closing, (ii) such agreements are validly assigned or transferred to Zartic Buyer or the benefits are made available to Zartic Buyer pursuant to an alternative arrangement in the event such agreements are not assigned, and (iii) Zartic Buyer notifies Sellers in writing prior to the Closing of its intention to assume any such agreements.

“ WARN Act ” means the United States Workers Adjustment and Retraining Notification Act and the rules and regulations promulgated thereunder, as amended from time to time.

“ West Rome Plant Property ” means the real property, all buildings and other improvements thereon, and all fixtures and equipment used in connection therewith, and all easements and other rights appurtenant or relating thereto, located at 430 and 432 Lavender Drive, Rome, Georgia 30165 as more particularly described on Schedule 3.15 .

“ Zartic ” has the meaning given that term in the first paragraph of this Agreement.

“ Zartic 401(k) Plan ” means the Zartic, Inc. Savings Investment Plan.

“ Zartic Assumed Liabilities ” has the meaning given that term under the definition of “Assumed Liabilities”.

“ Zartic Business ” has the meaning given that term in the recitals of this Agreement.

“ Zartic Buyer ” has the meaning given that term in the first paragraph of this Agreement.

14

 

“ Zartic Capital Lease Amount ” means all amounts payable under the capital leases to which Zartic is a party (through the term of such leases and as determined in accordance with GAAP).

“ Zartic Plants ” has the meaning given that term in Section 10.02(g)(i).

“ Zartic Purchased Assets ” has the meaning given that term under the definition of “Purchased Assets”.

“ Zar Tran ” has the meaning given that term in the first paragraph of this Agreement.

“ Zar Tran Assumed Liabilities ” has the meaning given that term under the definition of “Assumed Liabilities”.

“ Zar Tran Business ” has the meaning given that term in the recitals of this Agreement.

“ Zar Tran Buyer ” has the meaning given that term in the first paragraph of this Agreement.

“ Zar Tran Capital Lease Amount ” means all amounts payable under the capital leases to which Zar Tran is a party (through the term of such leases and as determined in accordance with GAAP).

“ Zar Tran Purchased Assets ” has the meaning given that term under the definition of “Purchased Assets”.

ARTICLE 2.
PURCHASE AND SALE

Section 2.01         Purchase and Sale .   Subject to the terms and conditions of this Agreement, at the Closing (which shall be held as provided in Article 7), for the consideration payable as provided in this Article 2:

(a)   Zartic shall sell, assign, and transfer to Zartic Buyer (or with respect to the Owned Real Property, such other Entity as Zartic Buyer may designate), and Zartic Buyer (or such designee) shall purchase from Zartic, all of the Zartic Purchased Assets;

(b)   Zar Tran shall sell, assign, and transfer to Zar Tran Buyer (or with respect to the Owned Real Property, such other Entity as Zar Tran Buyer may designate), and Zar Tran Buyer (or such designee) shall purchase from Zar Tran, all of the Zar Tran Purchased Assets;

(c)   James Mauer shall sell, assign, and transfer to Zartic Buyer (or such other Entity as Zartic Buyer may designate), and Zartic Buyer (or such designee) shall purchase from James Mauer, the Corporate Office Property and the West Rome Plant Property;

(d)   JEM Sales shall sell, assign, and transfer to Zartic Buyer (or with respect to the JEM Sales Property, such other Entity as Zartic Buyer may designate), and Zartic Buyer (or

15

 

such designee) shall purchase from JEM Sales, the JEM Sales Property and the JEM Sales Lab Equipment;

(e)   MNM Leasing shall sell, assign, and transfer to Zartic Buyer, and Zartic Buyer shall purchase from MNM Leasing, the MNM Assets; and

(f)    Jeffrey Mauer shall cause Warfighter Foods to assign and transfer to Zartic Buyer, and Zartic Buyer shall purchase from Warfighter Foods, the Warfighter Foods Assumed Contracts.

Section 2.02         Amount and Form of Consideration .

The aggregate consideration (the “ Purchase Price ”) to be paid by Buyers to Sellers in full consideration of the transactions described in Section 2.01 shall be:

(a)            $93,000,000 less the Zartic Capital Lease Amount, the Zar Tran Capital Lease Amount, and the HSR Filing Fee, and subject to adjustment as set forth in Sections 2.04 and 2.05 (the “ Cash Purchase Price ”); and

(b)           the assumption by Buyers of the Assumed Liabilities.

Section 2.03         Payment .

At the Closing, Buyers shall pay or apply the Cash Purchase Price, as adjusted in accordance with Sections 2.04 and 2.05, as follows:

(a)           To Escrow Agent, $5,000,000 by wire transfer of immediately available funds to the account specified by Escrow Agent (the “ General Escrow Amount ”).

(b)           To Escrow Agent, $490,849 by wire transfer of immediately available funds to the account specified by Escrow Agent (the “ Severance Escrow Amount ”).

(c)           By wire transfer of immediately available funds, the entire outstanding amount of Indebtedness of Zartic and Zar Tran (including, without limitation, all premiums, penalties, and other amounts payable in connection therewith), if any, with funds made available by Buyers from the Cash Purchase Price (which amount shall reduce the amount of the Cash Purchase Price payable to Sellers).

(d)           By wire transfer of immediately available funds, the entire outstanding amount of Indebtedness relating to the Affiliate-Owned Real Property or the Affiliate-Owned Personal Property (including, without limitation, all premiums, penalties, and other amounts payable in connection therewith), if any, with funds made available by Buyers from the Cash Purchase Price (which amount shall reduce the amount of the Cash Purchase Price payable to Sellers).

(e)           To Sellers in accordance with Schedule 2.08 , the remainder of the Cash Purchase Price after deducting the portions paid or applied in accordance with Sections 2.03(c) and 2.03(d), by wire transfer of immediately available funds to the accounts specified by Sellers.

16

 

Section 2.04         Working Capital Adjustments .

(a)   At least two (2) business days prior to the Closing Date, each of Zartic and Zar Tran shall prepare or cause to be prepared and delivered to Zartic Buyer and Zar Tran Buyer, respectively, a good faith estimate of the working capital of such Company as of the Effective Time (each, an “ Estimated Working Capital Statement ”), together with supporting schedules setting forth in reasonable detail the estimated Current Assets and the estimated Current Liabilities, and the estimated working capital (amount determined by subtracting the estimated Current Liabilities from the estimated Current Assets) as of the Effective Time (“ Estimated Working Capital ”).  At the Closing, the Cash Purchase Price shall be (i) increased dollar for dollar to the extent that the Estimated Working Capital of each Company exceeds the Target Working Capital for that Company, or (ii) decreased dollar for dollar to the extent that the Estimated Working Capital for each Company is less than the Target Working Capital for that Company (each, an “ Estimated Working Capital Adjustment ”).

(b)   Within 90 days after the Closing Date, Zartic Buyer and Zar Tran Buyer shall prepare or cause to be prepared, and delivered to Zartic and Zar Tran, respectively, a statement of the working capital of such Company as of the Effective Time (each, a “ Final Working Capital Statement ”).  Each Final Working Capital Statement shall be prepared from the books and records of the applicable Company and shall show the following (determined in accordance with GAAP applied on a basis consistent with each Company’s historical accounting policies and the December 31, 2005 audited financial statements for each Company (to the extent such policies and financial statements are in accordance with GAAP)): (i) the aggregate book value of the Receivables as of the Closing Date, net of an allowance for doubtful accounts; (ii) the Inventory, determined after taking into account the physical count of such inventories taken as provided in Section 2.04(e); and (iii) the prepaid assets other than unamortized loan fees (the “ Prepaid Assets ” and, collectively with the trade Receivables and the Inventory, the “ Current Assets ”); and (iv) the Payables and all other accrued current liabilities and expenses, other than (A) the Indebtedness of the Company paid at the Closing and (B) the Excess Accounts Payable for such Company deducted from the Cash Purchase Price paid at the Closing (the Payables and other accrued liabilities and expenses to be included in the Final Working Capital Statement are referred to collectively as the “ Current Liabilities ”); provided, however, that neither Current Assets nor Current Liabilities shall include (1) any balances or amounts relating to SYL, (2) any prepaid shutdown reserve, (3) any Payables or Receivables relating to any shareholder, director, officer, employee, or other Affiliate of such Company, or (4) any assets or liabilities relating to any Employee Plan except to the extent such Employee Plan is expressly included in the Assumed Liabilities.  Each Final Working Capital Statement also shall show the amount determined by subtracting the Current Liabilities from the Current Assets (the result of such subtraction being the “ Final Working Capital ”) and the difference between the Final Working Capital and the Target Working Capital for the Company (each, a “ Final Working Capital Adjustment ”).

(c)   Each Final Working Capital Statement shall become final and binding upon the parties on the earlier of:  (i) the date Zartic or Zar Tran, as applicable, gives notice of its acceptance of the Final Working Capital Statement to Zartic Buyer or Zar Tran Buyer, as applicable, (ii) the 30th day following receipt of the Final Working Capital Statement by Zartic or Zar Tran, as applicable, unless such Company gives written notice to the applicable Buyer

17

 

prior to such date of its disagreement (“ Notice of Disagreement ”) with the Final Working Capital Statement, or (iii) if the Notice of Disagreement is received by the applicable Buyer within such 30-day period, on the earlier of:  (x) the date the applicable Buyer and the applicable Company resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement, or (y) the date any disputed matters finally are resolved in writing by the Accounting Firm as hereinafter provided.  Any Notice of Disagreement shall specify in reasonable detail the nature of any disagreement and shall include only disagreements based on mathematical errors or the Final Working Capital Statement not being calculated in accordance with this Section 2.04.

(d)   During the 30-day period following the delivery of a Notice of Disagreement, the applicable Buyer and the applicable Company shall seek in good faith to resolve in writing any differences which they may have with respect to the matters specified in the Notice of Disagreement.  If all such differences are not so resolved within the 30-day period, at the end of such 30-day period, the applicable Buyer and the applicable Company shall submit to an independent accounting firm (the “ Accounting Firm ”) for review and resolution any and all matters which remain in dispute and which were properly included in the Notice of Disagreement.  Unless such Buyer and Company otherwise agree in writing, the Accounting Firm shall be the Atlanta, Georgia office of PricewaterhouseCoopers LLP.  The Accounting Firm shall be instructed to use its best efforts to notify the parties of its determination concerning the matter(s) included in the Notice of Disagreement within 30 days of its appointment.  The determination of the Accounting Firm shall be final and binding on the parties, and judgment may be entered upon the determination of the Accounting Firm in any court having jurisdiction over the party against which such determination is to be enforced.  All fees and expenses relating to the work, if any, to be performed by the Accounting Firm shall be borne pro rata as between the applicable Buyer, on the one hand, and the applicable Company, on the other, in proportion to the allocation of the dollar value of the amounts remaining in dispute between such parties, made by the Accounting Firm, such that the prevailing party pays the lesser proportion of the fees and expenses.

(e)   In connection with the preparation of each Final Working Capital Statement, a physical count of the Inventory of the applicable Company as of the Effective Time shall be taken pursuant to which all of the Inventory shall be counted as to quantity by personnel of such Company using procedures agreed upon by the applicable Buyer and such Company.  Representatives of such Buyer and Company shall be permitted to observe the physical count.  Based on the physical count, damaged, missing, excess and obsolete Inventory shall be excluded from the applicable Final Working Capital Statement, to the extent such Inventory exceeds the Company’s inventory reserves (all as determined in accordance with GAAP).  The parties shall use commercially reasonable efforts to resolve any objections to the value of the Inventory during the course of the physical count.

(f)    For the purposes of illustrating the proper format for, and the accounts to be included in, each Estimated Working Capital Statement and Final Working Capital Statement, Buyers and Sellers have attached Schedule 2.04 a statement of Current Assets and Current Liabilities and the working capital for each Company as of September 30, 2006 on the same basis as the Estimated Working Capital Statement and the Final Working Capital Statement for such Company are to be prepared.

18

 

(g)   Within two (2) business days after the Final Working Capital Statement becomes final and binding in accordance with this Section 2.04:

(i)                                      If that portion of the Cash Purchase Price payable to Zartic or Zar Tran, as applicable, as adjusted using the applicable Final Working Capital Adjustment shown on the applicable Final Working Capital Statement, is greater than that portion of the Cash Purchase Price paid to Zartic or Zar Tran, as applicable, at the Closing determined using the applicable Estimated Working Capital Adjustment shown on the applicable Estimated Working Capital Statement, Zartic Buyer or Zar Tran Buyer, as applicable, shall pay to Zartic or Zar Tran, as applicable; or

(ii)                                   If that portion of the Cash Purchase Price payable to Zartic or Zar Tran, as applicable, as adjusted using the applicable Final Working Capital Adjustment shown on the applicable Final Working Capital Statement, is less than that portion of the Cash Purchase Price paid to Zartic or Zar Tran, as applicable, at the Closing determined using the applicable Estimated Working Capital Adjustment shown on the applicable Estimated Working Capital Statement, Zartic or Zar Tran, as applicable, shall pay to Zartic Buyer or Zar Tran Buyer, as applicable,

by wire transfer of immediately available funds to the account specified in writing by the party to receive the payment, an amount equal to the difference between that portion of the Cash Purchase Price paid to Zartic or Zar Tran, as applicable, at the Closing determined using the applicable Estimated Working Capital Adjustment, and that portion of the Cash Purchase Price payable to Zartic or Zar Tran, as applicable, determined by using the applicable Final Working Capital Adjustment shown on the applicable Final Working Capital Statement, plus interest at the Prime Rate commencing on the day after the Closing Date to and including the date of payment.

Section 2.05         Excess Accounts Payable Adjustments .

(a)   At least two (2) business days prior to the Closing Date, each of Zartic and Zar Tran shall prepare or cause to be prepared and delivered to Zartic Buyer and Zar Tran Buyer, respectively, a good faith estimate of the Excess Accounts Payable of such Company as of the Effective Time (each, an “ Estimated Excess Accounts Payable Statement ”), together with supporting schedules setting forth in reasonable detail the estimated Excess Accounts Payable as of the Effective Time (“ Estimated Excess Accounts Payable ”).  At the Closing, the Cash Purchase Price shall be decreased by an amount equal to the Estimated Excess Accounts Payable for each Company.

(b)   Within 90 days after the Closing Date, Zartic Buyer and Zar Tran Buyer shall prepare or cause to be prepared, and delivered to Zartic and Zar Tran, respectively, a statement of the Excess Accounts Payable of such Company as of the Effective Time (each, a “ Final Excess Accounts Payable Statement ”).  Each Final Excess Accounts Payable Statement shall be

19

 

prepared from the books and records of the applicable Company and shall show the Excess Accounts Payable for such Company as of the Effective Time (“ Final Excess Accounts Payable ”).

(c)   Each Final Excess Accounts Payable Statement shall become final and binding upon the parties on the earlier of:  (i) the date Zartic or Zar Tran, as applicable, gives notice of its acceptance of the Final Excess Accounts Payable Statement to Zartic Buyer or Zar Tran Buyer, as applicable, (ii) the 30th day following receipt of the Final Excess Accounts Payable Statement by Zartic or Zar Tran, as applicable, unless such Company gives written notice to the applicable Buyer prior to such date of its disagreement (“ Notice of Disagreement ”) with the Final Excess Accounts Payable Statement, or (iii) if the Notice of Disagreement is received by the applicable Buyer within such 30-day period, on the earlier of:  (x) the date the applicable Buyer and the applicable Company resolve in writing any differences they have with respect to the matters specified in the Notice of Disagreement, or (y) the date any disputed matters finally are resolved in writing by the Accounting Firm as hereinafter provided.  Any Notice of Disagreement shall specify in reasonable detail the nature of any disagreement and shall include only disagreements based on mathematical errors or the Final Excess Accounts Payable Statement not being calculated in accordance with this Section 2.05.  Any disagreements relating to any such Notice of Disagreement shall be handled in accordance with the procedures set forth in Section 2.04(d).

(d)   Within two (2) business days after the Final Excess Accounts Payable Statement becomes final and binding in accordance with this Section 2.05:

(i)                                      If that portion of the Cash Purchase Price payable to Zartic or Zar Tran, as applicable, as adjusted by subtracting therefrom the applicable Final Excess Accounts Payable shown on the applicable Final Excess Accounts Payable Statement, is greater than that portion of the Cash Purchase Price paid to Zartic or Zar Tran, as applicable, at the Closing determined by subtracting therefrom the applicable Estimated Excess Accounts Payable shown on the applicable Estimated Excess Accounts Payable Statement, Zartic Buyer or Zar Tran Buyer, as applicable, shall pay to Zartic or Zar Tran, as applicable; or

(ii)                                   If that portion of the Cash Purchase Price payable to Zartic or Zar Tran, as applicable, as adjusted by subtracting therefrom the applicable Final Excess Accounts Payable shown on the applicable Final Excess Accounts Payable Statement, is less than that portion of the Cash Purchase Price paid to Zartic or Zar Tran, as applicable, at the Closing determined by subtracting therefrom the applicable Estimated Excess Accounts Payable shown on the applicable Estimated Excess Accounts Payable Statement, Zartic or Zar Tran, as applicable, shall pay to Zartic Buyer or Zar Tran Buyer, as applicable,

20

 

by wire transfer of immediately available funds to the account specified in writing by the party to receive the payment, an amount equal to the difference between that portion of the Cash Purchase Price paid to Zartic or Zar Tran, as applicable, at the Closing determined by subtracting therefrom the applicable Estimated Excess Accounts Payable, and that portion of the Cash Purchase Price payable to Zartic or Zar Tran determined by subtracting therefrom the applicable Final Excess Accounts Payable shown on the applicable Final Excess Accounts Payable Statement, plus interest at the Prime Rate commencing on the day after the Closing Date to and including the date of payment.

Section 2.06         Limited Assumption of Obligations .   At the Closing, Zartic Buyer shall assume and agree to perform in due course the Zartic Assumed Liabilities and the Warfighter Foods Assumed Contracts, and Zar Tran Buyer shall assume and agree to perform in due course the Zar Tran Assumed Liabilities.  EXCEPT AS EXPRESSLY PROVIDED IN THE PRECEDING SENTENCE, NEITHER ZARTIC BUYER NOR ZAR TRAN BUYER OR ANY DESIGNEE OF EITHER OF THEM IS ASSUMING OR WILL ASSUME OR SHALL BE LIABLE FOR, ANY DEBT, OBLIGATION, RESPONSIBILITY, OR LIABILITY OF ANY SELLER OR RELATING TO ANY PURCHASED ASSETS, AFFILIATE-OWNED REAL PROPERTY, ANY AFFILIATE-OWNED PERSONAL PROPERTY, OR WARFIGHTER FOODS, WHETHER KNOWN OR UNKNOWN, CONTINGENT OR ABSOLUTE, OR OTHERWISE (INCLUDING, WITHOUT LIMITATION, ANY LIABILITY OR OBLIGATION OF ANY SELLER ARISING FROM THE CONDUCT OF ITS BUSINESS PRIOR TO THE CLOSING OR FROM THE CONDUCT OF ANY OTHER BUSINESS BY ANY SELLER OR ANY LIABILITY OR OBLIGATION OF ANY SELLER UNDER ANY HEALTH, WELFARE, BENEFIT, PENSION, PROFIT SHARING, OR OTHER RETIREMENT PLAN OR AGREEMENT OR ANY COLLECTIVE BARGAINING AGREEMENT OR ANY OTHER AGREEMENT WITH OR RELATING TO ANY PRESENT OR FORMER EMPLOYEES OF ANY SELLER).  NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE DISCLAIMER BY BUYERS IN THIS SECTION 2.06 OR ELSEWHERE SHALL NOT MODIFY, EXTEND, OR INCREASE ANY INDEMNIFICATION OBLIGATION OF ANY SELLER OR ANY  BENEFICIARY UNDER THIS AGREEMENT OR OTHERWISE.

Section 2.07         Assignment of Assumed Contracts and Permits .   To the extent the assignment of any of the Assumed Contracts, the Warfighter Foods Assumed Contracts, or the Permits by any Seller (or with respect to the Warfighter Foods Assumed Contracts, Warfighter Foods) to either Buyer is not permitted without the consent or approval of any Governmental Entity or any other party or parties thereto, this Agreement shall not be deemed to constitute an undertaking to assign the same if the consent or approval is not given; provided, however, that if either Buyer so requests, the applicable Seller (or with respect to the Warfighter Foods Assumed Contracts, Warfighter Foods) shall use reasonable efforts to secure any such consent or approval upon such Buyer’s request.  If a consent or approval is required and not obtained, the applicable Seller (or with respect to the Warfighter Foods Assumed Contracts, Warfighter Foods) shall cooperate with the applicable Buyer following the Closing in any reasonable arrangement designed to provide such Buyer with the benefits under the Assumed Contracts, the Warfighter Foods Assumed Contracts, and the Permits, to the extent not assigned.

21

 

Section 2.08          Allocation of Purchase Price .

For purposes of Section 2.03, the Cash Purchase Price, and for purposes of Section 1060 of the Code, the Purchase Price, shall be allocated among the Zartic Purchased Assets, the Zar Tran Purchased Assets, the JEM Sales Property and the JEM Sales Lab Equipment, and the MNM Assets, respectively, in the manner set forth on Schedule 2.08 hereto, as the same may be adjusted to reflect the Working Capital Adjustments and the Excess Accounts Payable Adjustments in accordance with Sections 2.04 and 2.05.  Buyers and Sellers thereafter shall be bound by such allocations and shall complete their respective IRS Forms 8594 and their other federal and state Tax filings in a manner which is consistent with the allocations on Schedule 2.08 .  Sellers shall have the right, prior to the Closing and upon written consent of Buyers (which consent shall not be unreasonably withheld), to amend the amount of the Cash Purchase Price (and the Purchase Price) allocated to goodwill for each of Zartic and Zar Tran.

ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF SELLERS

The Sellers hereby, jointly and severally, represent and warrant to Zartic Buyer and Zar Tran Buyer, as of the date of this Agreement and as of the Closing Date, as follows:

Section 3.01          Organization .   Each Company and JEM Sales is duly incorporated and existing under the laws of the State of Georgia.  Each of MNM Leasing and Warfighter Foods is a limited liability company validly existing under the laws of the State of Georgia.   Each jurisdiction in which each Company is duly qualified to do business as a foreign corporation is listed on Schedule 3.01 .  Each Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or leasing of property or the nature of the business conducted by it makes such qualification necessary, except for such jurisdictions in which the failure to be so qualified would not have a material adverse effect on the Company.  Each of the Companies and JEM Sales has the requisite corporate power and authority, and each of MNM Leasing and Warfighter Foods has the requisite power and authority under its articles of organization and operating agreement, to own or lease, as the case may be, and operate its properties and assets and to carry on its business as it is now being conducted.  Each Company and JEM Sales has delivered to the Buyers true and complete copies of such Entity’s articles of incorporation and bylaws, each as currently in effect, and each of MNM Leasing and Warfighter Foods has delivered to the Buyers true and complete copies of such Entity’s articles of organization and operating agreement, each as currently in effect.

Section 3.02          Authority; Execution and Delivery; Enforceability .   Each of the Companies and JEM Sales has the requisite corporate power and authority, and each of MNM Leasing and Warfighter Foods has the requisite power and authority under its articles of organization and operating agreement, to execute and deliver this Agreement and to perform its obligations under this Agreement.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized and approved by all necessary corporate actions on the part of each Company and JEM Sales and by all necessary action under the applicable articles of organization and operating agreement and the Georgia Limited Liability Company Act on the part of each of MNM Leasing and Warfighter Foods.  This Agreement has been duly executed and delivered by each Seller and each

22

 

Beneficiary and constitutes a legal, valid, and binding obligation of each of them, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance, or other similar laws affecting the enforcement of creditors’ rights generally and except that the availability of equitable remedies may be limited by equitable principles of general applicability.

Section 3.03          Capitalization; Ownership; Subsidiaries .

(a)    All of the issued and outstanding voting capital stock of Zartic is held of record and owned beneficially by James Mauer, and all of the issued and outstanding non-voting capital stock of Zartic is held of record and controlled by James Mauer, Jeffrey Mauer, as co-trustee of each of the 1994 Trust and the 2003 Trust, Jackson B. Harris, as co-trustee of each of the 1994 Trust and the 2003 Trust, and Christopher Mauer, as co-trustee of each of the 1994 Trust and the 2003 Trust.

(b)    All of the issued and outstanding capital stock of each of Zar Tran and JEM Sales is held of record and owned beneficially by James Mauer.

(c)    All of the issued and outstanding membership interests or other equity or economic interests in MNM Leasing is held of record and owned beneficially by Jeffrey Mauer and Mary M. Mauer.

(d)    All of the issued and outstanding membership interests or other equity or economic interests in Warfighter Foods is held of record and owned beneficially by Jeffrey Mauer .

(e)    Except as set forth on Schedule 3.03 , none of the Companies, JEM Sales, or MNM Leasing has any Subsidiaries.  Schedule 3.03 lists all of the assets of any Subsidiary disclosed thereon as of the Closing.

Section 3.04          Consents and Approvals; No Violation .   Except as set forth on Schedule 3.04 , neither the execution and delivery of this Agreement by any Seller or any Beneficiary nor the consummation by any Seller or any Beneficiary of the transactions contemplated hereby, nor compliance by any Seller or any Beneficiary with any of the provisions hereof, will:

(a)    conflict with or result in any breach of any provision of the articles of incorporation or bylaws of either Company or JEM Sales or the articles of organization or operating agreement of either of MNM Leasing and Warfighter Foods;

(b)    violate, conflict with, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination of, accelerate the performance required by, or result in a right of termination or acceleration of, any Contract, or result in the creation of any Lien upon any of the Purchased Assets (including, without limitation, any of the Contracts), or any of the Affiliate-Owned Personal Property or Affiliate-Owned Real Property;

23

 

(c)    violate any judgment, ruling, order, writ, injunction, decree, statute, rule, or regulation applicable to any Seller or any Beneficiary, any of the Purchased Assets, any Affiliate-Owned Personal Property, or any Affiliate-Owned Real Property; or

(d)    except for compliance with the HSR Act, require any consent, approval, authorization, or permit of or from, or filing with or notification to, any Governmental Entity (including, without limitation, with respect to any Permits).

Section 3.05          Financial Statements; Indebtedness .

(a)    The audited Financial Statements have been prepared in accordance with GAAP and present fairly in all material respects the financial position of the Companies at the dates thereof and the results of operations for the periods then ended.  The unaudited Financial Statements have been prepared in accordance with GAAP, however, customary notes and  period ending adjusting entries have not been made to such statements and to the Knowledge of Sellers, no such period ending adjusting entries would have a material effect on the unaudited Financial Statements.  The audited balance sheets included in the Financial Statements set forth all liabilities required to be disclosed under GAAP as of the respective dates of such balance sheets.  The books and records of each Company are accurate and complete in all material respects and are sufficient to permit the preparation and audit of financial statements of such Company in accordance with GAAP.  Set forth on Schedule 3.05 is a complete and accurate description of all balances and amounts included in the Financial Statements relating to SYL.

(b)    Schedule 3.05 sets forth a complete and accurate listing of all Indebtedness of each Company and, to the extent related to any Affiliate-Owned Personal Property or Affiliate-Owned Real Property, JEM Sales, Jeffrey Mauer, and James Mauer.  Schedule 3.05 sets forth a complete and accurate listing of all capital leases (as determined in accordance with GAAP) of each Company, including the description of the applicable Contract and all remaining payments to be made thereunder.

Section 3.06          Conduct Since December 31, 2005 .   Except as disclosed in Schedule 3.06 and except for the transactions expressly contemplated by this Agreement, from and after December 31, 2005:

(a)    each of the Companies has carried on its business in the ordinary and usual course, consistent with its practices during the periods covered by the Financial Statements;

(b)    neither Company has sold, assigned, transferred, or otherwise disposed of any of its properties or assets other than in the ordinary course of its business;

(c)    neither Company has purchased or otherwise acquired from a third party assets constituting any other line of business or any material properties or assets outside the ordinary course of its business;

(d)    neither Company has disposed of any assets of such Company’s Business other than the sale or disposition of inventory and the collection of receivables in the ordinary course of business;

24

 

(e)    neither Company has increased the rate of compensation of, or paid any bonus to, any of its directors, officers, or salaried employees, except as required under existing Employee Plans; secured, collateralized, or funded any Employee Plan not previously secured, collateralized, or funded; entered into, terminated, or substantially modified, any Employee Plan; or agreed to do any of the foregoing;

(f)     neither Company has entered into, or amended, modified, or terminated, any Contract outside the ordinary course of business;

(g)    neither Company has experienced any general work stoppage or other general labor dispute;

(h)    neither Company has written off (or otherwise removed from its books) any accounts payable which was not paid in full by the applicable Company; and

(i)     neither Company has entered into any agreement with respect to any of the foregoing.

Section 3.07          Undisclosed Liabilities .   After making the payments contemplated by Sections 2.03(c), except as is otherwise disclosed on Schedule 3.07 or on the Companies’ balance sheets included in the Financial Statements, as of the Closing Date, neither Company will have any material liabilities or obligations (whether accrued, absolute, contingent, or otherwise) required to be accrued on a balance sheet prepared in accordance with GAAP or to Sellers’ Knowledge, other than: (i) the Current Liabilities, (ii) liabilities and obligations arising with respect to periods after the Closing under the Contracts, the Permits, and the Employee Plans, and (iii) liabilities with respect to Taxes for periods prior to the Closing which are covered by the indemnification obligations of Sellers and Beneficiaries under Article 10.

Section 3.08          Taxes .

(a)    Each Company has prepared in good faith and duly and timely filed all Tax Returns which could give rise to a Lien on any Purchased Asset and, to the Knowledge of the Sellers, all such Tax Returns are correct and complete in all material respects.  Except as set forth on Schedule 3.08 or as accrued or reserved in the Final Working Capital Statement, each Company has paid all Taxes which are due and payable and could give rise to a Lien on any Purchased Asset.

(b)    Schedule 3.08 sets forth the following information with respect to each Company: (i) whether there is an examination pending by the IRS or any other Governmental Entity with respect to the Company and, if so, the tax years involved; and (ii) whether the Company has executed or filed with the IRS or any other Governmental Entity any agreement which is still in effect extending the period for assessment and collection of any Tax which could give rise to a Lien on any Purchased Asset and, if so, the tax years covered by such agreement and expiration date of such extension.  There are no Liens for Taxes upon any assets of either Company or upon any Affiliate-Owned Real Property or Affiliate-Owned Personal Property, except for statutory Liens for Taxes not yet delinquent.

25

 

(c)    Except as set forth on Schedule 3.08 , neither Company is a party to any audit, investigation, action, or proceeding nor, to the Knowledge of the Sellers, is any such audit, investigation, action, or proceeding threatened, by any Governmental Entity for the assessment or collection of Taxes, and no deficiency notice or report has been received by either Company in respect of any deficiencies for Taxes.

(d)    Except as set forth on Schedule 3.08 , neither Company has made any payments, is obligated to make any payments, or is a party to any agreement that could obligate it to make any payments, that will not be deductible under Section 280G of the Code.

(e)    Each Company has complied with all applicable Laws with respect to payments made to third parties and the withholding of any Taxes against any payment and has timely withheld from employee wages and other payments and paid over to the proper Governmental Entities all amounts required to be so withheld and paid over for all periods under all applicable Law.

(f)     No Seller is a foreign person subject to withholding under Section 1445 of the Code and the regulations promulgated thereunder (and, if requested by a Buyer, a Seller will provide certification to that effect to the Buyer at the Closing).

Section 3.09          Employee Plans .

(a)    Schedule 3.09 sets forth a complete list of all Employee Plans of each Company.  Each Company has previously delivered or made available to Buyers, for each of the Employee Plans of such Company, true and complete copies of:  (i) the plan document, including amendments and summary plan description, if any; (ii) the most recent determination letter, if any, received from the IRS with respect to the qualification of any Employee Plan intended to be qualified under Section 401(a) of the Code; (iii) the most recently filed annual return/report on Form 5500, if any; and (iv) each trust agreement or annuity contract relating to such Plan.  No change in any of the Employee Plans has been announced nor is any such change required, by Contract or otherwise (other than a change required by law for which the time provided by Law for making the required change has not yet passed).

(b)    The Zartic 401(k) Plan and, to the Knowledge of Sellers, each other Employee Plan, has been maintained, operated, and administered in compliance with its terms in all material respects.  Except as set forth on Schedule 3.09 , none of the Employee Plans are subject to ERISA.  The Zartic 401(k) Plan and, to the Knowledge of Sellers, each of the other Employee Plans, complies with, and at all relevant times has complied in all material respects with, ERISA (to the extent subject to ERISA), the Code, and any other applicable Laws (including, without limitation, the provisions of ERISA relating to fiduciary obligations and disclosure and reporting requirements).  All Form I-9s and supporting documents for each employee of Zartic and Zar Tran are in compliance with all applicable Laws.

(c)    Neither Company now sponsors nor has ever sponsored, maintained, contributed to, or been required to contribute to a “defined benefit plan” as defined in Section 3(35) of ERISA or an Employee Plan subject to the minimum funding standards of Section 302 of ERISA or Section 412 of the Code.  No underfunded “defined benefit plan” (as such term is

26

 

defined in Section 3(35) of ERISA) has been, during the five (5) years preceding the Closing Date, transferred out of the controlled group of companies (within the meaning of Sections 414(b), (c), (m), and (o) of the Code) of which either Company is a member or was a member during such five-year period.

(d)    With respect to each Employee Plan which is a pension plan (as defined in Section 3(2) of ERISA) and which is subject to any of the provisions of ERISA:  (i) each pension plan as amended (and any trust relating thereto) intended to be a qualified plan under Section 401(a) of the Code either has been determined by the IRS to be so qualified or is the subject of a pending application for such a determination that was timely filed; and (ii) with respect to the Zartic 401(k) Plan and, to the Knowledge of the Sellers, each other Employee Plan, no nonexempt prohibited transaction (as defined in Section 4975 of the Code) has occurred.  Neither Company is a party to, and has not completely or partially withdrawn from, any multi-employer plan (as defined for purposes of Section 3(37) of ERISA) which is subject to any of the provisions of ERISA.

(e)    No Employee Plan provides benefits, including, without limitation, death or medical benefits (whether or not insured), with respect to current or former employees beyond their retirement or other termination of service, other than: (i) temporary coverage mandated by applicable Law; (ii) deferred compensation benefits accrued as liabilities on the books of either Company; or (iii) benefits the full cost of which are borne by the current or former employee (or his or her beneficiary).

(f)     No Employee Plan is involved in or is the subject of any litigation, governmental investigation, audit, or compliance examination relating to or seeking benefits under any Employee Plan, or any claims other than routine benefit claims and, to the Knowledge of the Sellers, no such litigation or claim reasonably can be expected to be filed.

(g)    All required contributions to each Employee Plan, if any, have been made.

(h)    With respect to the Zartic 401(k) Plan and, to the Knowledge of the Sellers, each other Employee Plan, no event has occurred and no condition exists that would subject either Company or either Buyer to any tax under Sections 4971 through 4980B of the Code or to a fine or liability under Sections 501 and 502 of ERISA.  Except as otherwise described on Schedule 3.09 , no provision of any Employee Plan prevents either Company or either Buyer from terminating such plan.

(i)     Except as set forth on Schedule 3.09 , no employee or former employee of either Company will become entitled to any bonus, retirement, severance, job security or similar benefit or enhanced benefit, including accelerated vesting rights under any Employee Plan, or accelerated time for payments under any Employee Plan, as a result of the transactions contemplated by this Agreement.  The Net Severance Amount for each individual listed on Schedule 1(b) is the full amount that would be payable to such individual if such individual was terminated at the Closing.

(j)     Neither Company sponsors any voluntary employee beneficiary association, as described in Section 501(c)(9) of the Code.

27

 

Section 3.10          Contracts .   Set forth on Schedule 3.10 is a complete list of all Contracts.  Sellers have provided to Buyers true and complete copies of all such Contracts.  Except as set forth on Schedule 3.10 , no Seller is in default under any Contract; there has not occurred any event which, with the lapse of time or the giving of notice, or both, would constitute such a default; and, to the Knowledge of the Sellers, no other party to any of the Contracts is in default under any Contract nor has any event occurred that, with the lapse of time or the giving of notice, or both, would constitute such a default by any such other party.  The Warfighter Foods Assumed Contracts are the only contracts or agreements of Warfighter Foods which would be included in the Contracts if the definition of “Companies” included Warfighter Foods.

Section 3.11          Litigation; Pending Decrees .   Except as set forth on Schedule 3.11 , there is no litigation, action, arbitration, or proceeding pending against any Seller or relating to any of the Purchased Assets, the Affiliate-Owned Real Property, the Affiliate-Owned Personal Property, or the Warfighter Foods Assumed Contracts, or, to the Knowledge of the Sellers, threatened against or affecting any Seller or relating to any of the Purchased Assets, the Affiliate-Owned Real Property, the Affiliate-Owned Personal Property, or the Warfighter Foods Assumed Contracts.  There is no judgment, decree, injunction, rule, or order of any Governmental Entity or arbitrator outstanding against any Seller or relating to the Purchased Assets, the Affiliate-Owned Real Property, the Affiliate-Owned Personal Property, or the Warfighter Foods Assumed Contracts.

Section 3.12          Legal Compliance; Permits and Licenses .

(a)    Except as disclosed on Schedule 3.12 , each of the Companies, JEM Sales, and, to the extent related to the Affiliate-Owned Personal Property, the Affiliate-Owned Real Property, or the Warfighter Foods Assumed Contracts, James Mauer and Warfighter Foods, has complied with all applicable Laws and licenses, plans, and permits of all Governmental Entities having jurisdiction over them (including, without limitation, zoning ordinances, building codes, Environmental Laws and occupational health and safety laws and regulations, FDA, USDA, and the FTC) and: (i) no investigation or review by any Governmental Entity with respect to either Company, JEM Sales, or, to the extent related to the Affiliate-Owned Personal Property, the Affiliate-Owned Real Property, or the Warfighter Foods Assumed Contracts, James Mauer or Warfighter Foods, is, to the Knowledge of the Sellers, pending or threatened, and (ii) no Governmental Entity has indicated to any Seller any intention to conduct such an investigation or review.

(b)    Each of the Companies and their respective manufacturing facilities and processes, if any, and all Foods, packaging and food contact substances used in or with all Foods, comply, and have complied during the three (3) years prior to the date hereof, in all material respects, with all applicable USDA, FDA, FTC, other federal agency and any relevant state agency regulations relating to the regulation of Foods, packaging, and food contact substances. During the three (3) years prior to the date hereof, neither Company has had any co-packer other than Quik-to-Fix Foods.

(c)    Each Company has given Buyers access to (i) all written USDA noncompliance records and inspectional observations, FDA inspectional observations and

28

 

warning letters, and written notices from the FTC, received by either Company during the last three (3) years from the USDA, FDA, FTC, or other similar federal agencies or states authorities relating to legal or regulatory non-compliance, (ii) such Company’s written response to such items identified in clause (i) which have been submitted to such regulatory agency or authority (except for such responses which are immaterial), and (iii) any further written correspondence from such Governmental Entity relating to the items identified in clause (i).

(d)    Each Company and, to the extent related to the JEM Sales Property or the JEM Sales Lab Equipment, JEM Sales, holds all Permits required for the operation of their respective businesses (including, without limitation, all Permits required by any Environmental Laws), all of which are valid and in full force and effect.  Set forth on Schedule 1(i) is a complete and accurate list of all Permits.  As of the Closing, all such Permits shall be held by the Companies and JEM Sales (or either of them).  None of the Sellers has received any notice that any Governmental Entity which has issued any such Permit intends to cancel, terminate, or not renew any such Permit nor, to the Knowledge of the Sellers, does any basis exist for any such cancellation, termination, or nonrenewal.

Section 3.13          Labor Matters .

(a)    Set forth on Schedule 3.13 is a true and complete list of the names, titles, and rate of compensation and the exempt status of all employees of each Company under the Fair Labor Standards Act, as amended from time to time.  Except as set forth on Schedule 3.13 or Schedule 3.11 , (i) there are no written complaints, lawsuits, arbitration, or charges pending between either Company and any of their respective employees, and (ii) no employee of either Company is represented by any labor union and, to the Knowledge of the Sellers, no labor union is attempting to organize any employee of either Company or any group of employees of either Company.  Except as set forth on Schedule 3.13 , each Company is in compliance in all material respects with all applicable laws respecting employment, equal employment, employment practices, employee health and safety, employment terms and conditions, and wages and hours and is not engaged in any unfair labor practice, and there is no pending or, to the Knowledge of the Sellers, threatened charge, complaint, grievance, compliance review, or audit against either Company relating to any employment Law.  Schedule 3.13 includes a list of each former employee of each Company and JEM Sales who is entitled to, or receives, benefits under COBRA, or other similar provision of federal, state, or local Law, as of the date of this Agreement.  Each employee of Zartic and Zar Tran is properly classified for purposes of the Fair Labor Standards Act.

(b)    Each Company maintains workers’ compensation insurance with limits not less than those required under the laws of each state to which it is subject or, if so indicated on Schedule 3.14 , is a certified self-insurer under such laws.  All workers’ compensation insurance maintained by each Company is in full force and effect, and no payments with respect thereto are past due.

Section 3.14          Personal Property .

(a)    Set forth on Schedule 3.14 is a true and complete list of: (i) all Owned Personal Property; (ii) all machinery, equipment, vehicles, and other fixed assets relating to any

29

 

Affiliate-Owned Real Property; (iii) all Leased Personal Property; and (iv) all machinery, equipment, vehicles, and other fixed assets leased relating to any Affiliate-Owned Real Property or Affiliate-Owned Personal Property.  The Owned Personal Property of each of the Companies includes all machinery, equipment, vehicles, and other fixed assets reflected on the balance sheet of such Company as of September 30, 2006, which is included in the Financial Statements.  Except for the JEM Sales Lab Equipment and the MNM Assets, no Seller or Beneficiary or any Affiliate of any Seller or Beneficiary (other than the Companies or either of them) owns any machinery, equipment, vehicles, or other fixed assets used in either of the Businesses.  The JEM Sales Lab Equipment and the JEM Sales Property constitute all of the assets necessary to provide laboratory services to the Companies as provided by JEM Sales immediately prior to the date of this Agreement.  The Owned Personal Property, the Leased Personal Property, the Affiliate-Owned Personal Property, and the Affiliate-Owned Real Property constitute all of the assets necessary to operate the Businesses as such Businesses were operated immediately prior to the date of this Agreement.

(b)    Except as disclosed in Schedule 3.14 , the Companies, or either of them, have good and valid title to all of the Owned Personal Property and all other of its tangible assets and a valid leasehold interest in all of the Leased Personal Property, in each case free and clear of all Liens, except Permitted Encumbrances.  Except as set forth on Schedule 3.14 , all of the Owned Personal Property, the Leased Personal Property, and the Affiliate-Owned Personal Property is located on the Owned Real Property or Affiliate-Owned Real Property.  All of the agreements under which either Company leases the Leased Personal Property or the Affiliate-Owned Personal Property are included in the Contracts, and a Company enjoys, or with respect to the Contracts relating to the Affiliate-Owned Personal Property, will enjoy prior to or at the Closing, quiet possession of the Leased Personal Property and the Affiliate-Owned Personal Property.  Except for any personal property held for use (but not being used by any Seller), all of the Owned Personal Property, the Leased Personal Property, and the Affiliate-Owned Personal Property is in good operating condition, ordinary wear and tear excepted, and the Leased Personal Property has been maintained in accordance with the applicable Contract.  No Seller has received any notice that any of the Owned Personal Property, the Leased Personal Property, or the Affiliate-Owned Personal Property is in violation of any applicable building, zoning, safety, or other similar ordinance code or regulation.

Section 3.15          Real Property .

(a)    Set forth on Schedule 3.15 is a true and complete description of (i) all real property owned by either Company other than the Excluded Assets (“ Owned Real Property ”) and (ii) the Affiliate-Owned Real Property.  The Owned Real Property and the Affiliate-Owned Real Property are the only real property used in the Businesses.  Each Company owns marketable, fee simple title to each of the Owned Real Properties listed on Schedule 3.15 as being owned by such Company, James Mauer owns marketable, fee simple title to each of the Corporate Office Property and the West Rome Plant Property, and JEM Sales owns marketable, fee simple title to the JEM Sales Property, each free and clear of any and all Liens, except for (i) the Real Property Permitted Exceptions, (ii) such zoning or other restrictions, easements, rights-of-way, and covenants of record as do not, individually or in the aggregate, (A) interfere in any material respect with the present use or occupancy of the affected property by the Company which conducts Business thereon, (B) have more than an immaterial effect on the value of the affected

30

 

property or its use, or (C) would impair the ability of the affected real property to be sold for its present use, and (iii) any Liens for any Indebtedness to be paid at Closing, provided such Indebtedness is paid at Closing, payoff letters sufficient to allow the Title Company to insure over such Liens at the Closing are delivered to the Title Company, and such Liens are released as soon as practicable after the Closing.  Except for (1) the lease of the Corporate Office Property and the West Rome Plant Property by James Mauer to Zartic, (2) the lease of the storage facility on the JEM Sales Property by JEM Sales to Zartic, (3) the sublease of the JEM Sales Metal Building by Zartic to JEM Sales, (4) the lease of the Parking Area by Zartic to Zar Tran, and (5) the sublease of the Parking Area by Zar Tran to Penske Truck Leasing Co., L.P., neither Company leases any real property.

(b)    The buildings and fixtures included in the Owned Real Property and the Affiliate-Owned Real Property are in good working condition, ordinary wear and tear excepted, and none are subject to any rights of way or use restrictions that now limit or interfere in any material respect with, or will limit or interfere in any material respect with after the Closing, the use of such real property in the manner in which it has been used by either Company, James Mauer, or JEM Sales immediately prior to the date of this Agreement.  Except as otherwise set forth on Schedule 3.15 :  (i) the water, electric, gas, and sewer utility services and the storm drainage facilities currently available to the Owned Real Property and the Affiliate-Owned Real Property are adequate for the present use of such real property in the conduct of the Businesses (or with respect to the JEM Sales Property, the laboratory operated by JEM Sales); (ii) no Seller has received any notice that any Governmental Entity having the power of eminent domain or condemnation over the Owned Real Property or the Affiliate-Owned Real Property has commenced or intends to exercise the power of eminent domain or condemnation or a similar power with respect to all or any part of such real property; (iii) no assessment for public improvements has been made against the Owned Real Property or the Affiliate-Owned Real Property on which any installment is due and payable and remains unpaid; and (iv) no notice from any Government Entity has been received by any Seller requiring or calling attention to the need for any work, repair, construction, alteration, or installation on or in connection therewith which has not been complied with in full prior to the date of this Agreement.

31

 

Section 3.16          Receivables; Inventory .  Except as otherwise described on Schedule 3.16 , each of the Receivables of each Company has arisen in the ordinary course of business from bona fide, arms-length transactions.  Except as otherwise described on Schedule 3.16 , all of the Inventory is located at the Owned Real Property or the Affiliate-Owned Real Property.

Section 3.17          Proprietary Rights .  Set forth on Schedule 3.17 is a complete list of all Proprietary Rights which are used in the conduct of either Business or which are necessary for the conduct of either Business in the manner in which such business heretofore have been conducted, together with a summary description of such Proprietary Rights and full information concerning the filing, registration, issuance, or licensing thereof.  Except as otherwise described on Schedule 3.17 , the Companies (or either of them) own or otherwise have the full ownership of and right to use all such Proprietary Rights.  To the Knowledge of the Sellers, the existence or use of the Proprietary Rights by either Company does not infringe upon the rights of any other party, and no claim of such infringement is pending or threatened.  No licenses, sublicenses, or agreements with respect to the Proprietary Rights have been granted or entered into by either Company, except pursuant to Proprietary Rights Licenses listed on Schedule 3.10 .

Section 3.18          Environmental Matters .

Except as set forth in Schedule 3.18 , no Company or, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales, or any Owned Real Property or Affiliate-Owned Real Property or any other real property currently owned or leased by either Company or currently used in either Business, has been or is now in material violation of any Environmental Laws.  Except as otherwise set forth in Schedule 3.18 : (i) there are no actions, suits, written demands, written notices, claims, or proceedings under any Environmental Laws pending or, to the Knowledge of the Sellers, threatened against either Company or, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales, or relating to the Owned Real Property or the Affiliate-Owned Real Property or any other real property currently owned or leased by either Company or currently used in either Business, or against any Entity whose liability for such actions, suits, demands, notices, claims, or proceedings either Company or, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales has assumed or retained, either contractually or by operation of law, including, without limitation, any written notices, demand letters, or requests for information from any Governmental Entity making inquiries relating to any Environmental Laws or any written notice that either Company or, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales was, is, or may be a potentially responsible party for investigation or remediation of any site under any Environmental Laws; and (ii) to the Knowledge of the Sellers, there are no investigations pending or threatened against either Company or, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales relating to the compliance with any Environmental Laws of either Business, the Owned Real Property, the Affiliate-Owned Real Property, or any other real property currently owned or leased by either Company or currently used in either Business.  Except as set forth in Schedule 3.18 , and to the Knowledge of the Sellers: (i) the Owned Real Property, the Affiliate-Owned Real Property, and any other real property currently owned or leased by either Company or currently used in either Business have not been subject to any Release or threatened Release of any Hazardous Substance except in compliance with Environmental Laws, have not been and are not the subject of any environmental investigation or cleanup, and are not subject to any restrictions on ownership, occupancy, use, or transferability

32

 

under any Environmental Laws; (ii) there are no past or present conditions, circumstances, activities, practices, omissions, plans, or contractual undertakings that will interfere with or prevent continued compliance by the Companies and, to the extent related to the Affiliate-Owned Real Property, James Mauer and JEM Sales with Environmental Laws and the material requirements of any Permits issued under any Environmental Laws or which will give rise to any liability or other obligation under any Environmental Laws; (iii) neither the Owned Real Property or the Affiliate-Owned Real Property nor any other real property currently owned or leased by either Company or currently used in either Business contains any Hazardous Substance except in compliance with Environmental Laws; (iv) neither Company nor, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales has received any written notice or demand that would form the basis for any liability for costs to investigate, remove any contamination from, or remediate any site pursuant to any Environmental Laws; (iv) to the Knowledge of the Sellers, there are not now and there have never been any underground storage tanks on the Owned Real Property, the Affiliate-Owned Real Property, or any other real property currently owned or leased by either Company or currently used in either Business; and (v) to the Knowledge of the Sellers, there are not now and there have never been any friable asbestos-containing materials or polychlorinated biphenyls on the Owned Real Property, the Affiliate-Owned Real Property, or any other real property currently owned or leased by either Company or currently used in either Business except as in compliance with Environmental Laws.  All on-site and off-site locations where either Company or, to the extent related to the Affiliate-Owned Real Property, James Mauer or JEM Sales has stored, disposed, reclaimed, or treated or arranged for disposal, reclamation, or treatment of any Hazardous Substance are identified on Schedule 3.18 .

Section 3.19          Certain Transactions .   Except as set forth on Schedule 3.19 , no officer, director, employee, or shareholder of either Company or any Affiliate of either of them is currently a party to any transaction with either Company or relating to any Affiliate-Owned Real Property or Affiliate-Owned Personal Property, including, without limitation, any contract, agreement, or other arrangement: (a) providing for the furnishing of services to or by, (b) providing for rental of real or personal property to or from, or (c) otherwise requiring payments to or from, any such officer, director, employee, or shareholder, any member of the family of any such officer, director, employee, or shareholder, or any Entity in which any such officer, director, employee, or shareholder has a substantial interest or which is an Affiliate of such officer, director, employee, or shareholder.  All contracts, agreements or other arrangements described on Schedule 3.19 will be terminated at or prior to the Closing.

Section 3.20          Certain Business Relationships . Except as set forth on Schedule 3.20 , as of the date of this Agreement, no creditor, employee, customer, or other person having a material business relationship with either Company has informed such Company that such person intends to change, or is considering changing, such relationship (including, without limitation, because of the transactions contemplated by this Agreement).

Section 3.21          Accounts Payable and Accrued Expenses . All of the Payables included in the Current Liabilities of each Company were incurred for goods or services purchased in the ordinary course of business or in connection with the transactions contemplated by this Agreement.  All other accrued expenses included in the Current Liabilities of each Company were incurred in the ordinary course of the business or in connection with the transactions contemplated by this Agreement.  There are no material Payables of either Company

33

 

that are unpaid past their stated terms and not included in the Excess Accounts Payable for such Company.

Section 3.22          Products Liability .   Except as set forth on Schedule 3.22 , since October 1, 2003, no products liability claim exceeding Ten Thousand U.S. Dollars ($10,000) has been made against either Company (whether or not covered by insurance) with respect to any Food or other products manufactured, processed, or sold by either Company.

Section 3.23          Warranty Claims .   Each Company has provided to Buyers a complete and accurate report showing all warranty claims exceeding Ten Thousand U.S. Dollars ($10,000) made against the Company since October 1, 2003.

Section 3.24          Illegal Practices .   Neither Company or Warfighter Foods nor any shareholder, officer, director, employee, or agent acting on behalf of either Company or Warfighter Foods has ever given or agreed to give any gift or similar benefit of more than nominal value to any customer, supplier, government employee or official, or any other person who is or may be in a position to help or hinder either Company, either Business or Warfighter Foods in connection with any actual or proposed transaction, which gift or similar benefit: (i) is not reflected in the Financial Statements or (ii) constitutes a violation of law.

Section 3.25          Disclosure .   To the Knowledge of the Sellers, the representations and warranties of the Sellers contained in this Agreement and the information set forth on the Schedules do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements contained herein or therein not misleading.

Section 3.26          Certain Fees and Liabilities .   Except for the obligations owed to Fidus Partners, LLC under the Fidus Engagement Letter, no Seller has paid or is obligated to pay any fee or commission to any broker, finder, or intermediary in connection with the transactions contemplated by this Agreement.  Sellers shall pay all fees, commissions, compensation, costs, or other expenses or indemnities arising out of or relating to the Fidus Engagement Letter.

ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYERS

Buyers hereby, jointly and severally, represent and warrant to Sellers, as of the date of this Agreement and as of the Closing Date, as follows:

Section 4.01          Corporate Organization .

Each Buyer is a limited liability company duly organized, validly existing, and in good standing under the laws of the State of Ohio.  Each Buyer is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or leasing of property or the nature of the business conducted by it makes such qualification necessary, except for such jurisdictions in which the failure to be so qualified would not have a material adverse effect on such Buyer.  Each Buyer has the requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as it is now being conducted.

34

 

Section 4.02          Authority; Execution and Delivery; Enforceability .

Each Buyer has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby.  The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby has been duly authorized and approved by all necessary corporate action on the part of each Buyer.  This Agreement has been duly executed and delivered by, and constitutes a valid and binding obligation of, each Buyer enforceable against them in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance, or other similar laws affecting the enforcement of creditors’ rights generally and except that the availability of equitable remedies may be limited by equitable principles of general applicability.

Section 4.03          Consents and Approval; No Violation .   Except as otherwise provided in Schedule 4.03 , neither the execution and delivery of this Agreement by either Buyer, nor the consummation by either Buyer of the transactions contemplated hereby, nor compliance by either Buyer with any of the provisions hereof, will:

(a)    conflict with or result in any breach of any provision of the Articles of Organization or Operating Declaration of either Buyer;

(b)    violate, conflict with, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination of, accelerate the performance required by, result in a right of termination or acceleration of, or result in the creation of any Lien upon any of the properties or assets of either Buyer under, any note, bond, mortgage, indenture, deed of trust, lease, agreement, or other instrument or obligation to which either Buyer is a party or to which its properties or assets may be subject, except for such violations, conflicts, defaults, terminations, or accelerations which would not have a material adverse effect on either Buyer;

(c)    violate any judgment, ruling, order, writ, injunction, decree, statute, rule, or regulation applicable to either Buyer or any of their respective properties or assets; or

(d)    except as required under the HSR Act, require any consent, approval, authorization, or permit of or from, or filing with or notification to, any Governmental Entity.

Section 4.04          Certain Fees and Liabilities .   Neither Buyer has paid, and neither Buyer is obligated to pay, any fee or commission to any broker, finder, or intermediary in connection with the transactions contemplated by this Agreement.

ARTICLE 5.
PRE-CLOSING COVENANTS

Section 5.01          Interim Operations of the Companies .   During the period from the date of this Agreement to the earlier of the Effective Time or the termination of this Agreement in accordance with Article 9, except as specifically contemplated by this Agreement, or as may be approved in writing by Buyers:

35

 

(a)    Each of the Companies shall conduct its Business in, and only in, the ordinary course in substantially the same manner as heretofore conducted, use commercially reasonable efforts to preserve and protect its Business, rights, properties and assets, and, to the extent consistent with such Business, use commercially reasonable efforts to preserve intact its respective present business organization, keep available the services of its respective present officers and employees, and preserve its respective relationships with customers and suppliers.

(b)    Except as set forth on Schedule 5.01 , neither Company shall incur or assume any liabilities, obligations, or indebtedness for borrowed money or guarantee any such liabilities, obligations, or indebtedness, other than trade payables incurred in the ordinary course of business consistent with past practices.

(c)    Neither Company nor to the extent related to the Affiliated Owned Personal Property or Affiliate-Owned Real Property, James Mauer or JEM Sales, shall permit, allow or suffer any of its assets to become subjected to any Liens of any nature which did not exist on the date of this Agreement.

(d)    Neither Company shall waive any claims or rights of substantial value.

(e)    Except as set forth on Schedule 5.01 , neither Company shall: (i) adopt or amend any bonus, profit sharing, compensation (including both qualified and non-qualified deferred compensation arrangements), severance, stock option, pension, retirement, or other employee benefit agreement, trust, plan, or arrangement for the benefit or welfare of any present or former director, officer, or employee of such Company; (ii) increase the compensation or fringe benefits, except in the ordinary course of business in accordance with past practices, or pay any bonus, compensation, or benefit not required by any existing plan or arrangement; (iii) hire any hourly or salaried employee, except in the ordinary course of business in accordance with past practices; (iv) enter into or extend any employment agreement; or (v) enter into any contract, agreement, commitment, or arrangement to do any of the foregoing.

(f)     Neither Company shall sell or dispose of any assets other than Inventory sold or used in the ordinary course of business and Receivables collected in the ordinary course of business.

(g)    Neither Company shall accelerate the collection of any Receivables or decelerate the payment of any Payables.

(h)    Neither Company shall make or incur any individual capital expenditure other than capital expenditures made in accordance with past practices of such Company.

(i)     No Seller shall take any action which would cause any of the representations and warranties of the Sellers set forth in Article 3 to be untrue as of the Closing Date.

(j)     Neither Company shall agree, whether in writing or otherwise, to do any of the foregoing.

36

 

Each Seller shall take or cause to be taken each action that is required to be taken under this Section 5.01, and shall not take or permit to be taken any action which is prohibited under this Section 5.01.

Section 5.02          Access to Information .   Prior to the Closing, each Company, JEM Sales, and, to the extent related to the Affiliate-Owned Real Property or the Affiliate-Owned Personal Property, James Mauer, MNM Leasing, and Jeffrey Mauer (with respect to Warfighter Foods) shall provide Buyers and their respective authorized representatives with reasonable access during normal business hours to the facilities and to the books and records of such Entity, and shall cause its employees and representatives promptly to furnish Buyers with such information with respect to the Businesses and properties of the Companies, JEM Sales, MNM Leasing, and, to the extent related to the Affiliate-Owned Real Property, the Affiliate-Owned Personal Property, or the Warfighter Foods Assumed Contracts, James Mauer and Jeffrey Mauer (with respect to Warfighter Foods), as Buyers or their respective authorized representatives from time to time reasonably may request.  Each Company shall cause the firm(s) of accountants auditing the financial statements of such Company to make available to Buyers and their respective representatives the work papers of such firm with respect to its reviews of such financial