ASSET PURCHASE AGREEMENT

 

(d)           all of the rights of the Seller under all contracts, arrangements, licenses, leases and other agreements set forth on Schedule 1.1(d)  (the “ Assumed Contracts ”);

 

(e)           all credits, prepaid expenses, deferred charges, advance payments, security deposits and prepaid items related to the Pet Treat Business;

 

(f)            all Intellectual Property, including but not limited to the Intellectual Property listed on Schedule 3.1.19 (a), and all rights there under or in respect thereof primarily relating to or used or held for use in connection with the Pet Treat Business, including, but not limited to, rights to sue for and remedies against past, present and future infringements thereof, and rights of priority and protection of interests therein under the laws of any jurisdiction worldwide and all tangible embodiments thereof (together with all Intellectual Property rights included in the other clauses of this Section 1.1, the “ Intellectual Property Assets ”); provide, however, the Seller shall not transfer the Trademarks;

 

(g)           all books, records, manuals and other materials (in any form or medium), including, without limitation, all records and materials maintained at the headquarters of Seller, advertising matter, catalogues, price lists, correspondence, mailing lists, lists of customers, distribution lists, photographs, production data, sales and promotional materials and records, purchasing materials and records, personnel records, manufacturing and quality control records and procedures, blueprints, research and development files, records, data and laboratory books, Intellectual Property disclosures, media materials and plates, accounting records, sales order files and litigation files related to the Pet Treat Business;

 

(h)           to the extent their transfer is permitted by law, all Governmental Approvals, including all applications therefore related to the operation of the i) Pet Treat Business or the ii) the Manufacturing Location, including but not limited to those identified on Schedule 1.1 (h) ;

 

(i)            all rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Seller with respect to the Pet Treat Business or the ownership, use, function or value of any Asset, whether arising by way of counterclaim or otherwise; and

 

(k)           all guarantees, warranties, indemnities and similar rights in favor of the Seller with respect to any Asset.

 

Subject to the terms and conditions hereof, at the Closing, the Assets shall be transferred or otherwise conveyed to the Buyer Parties, as directed by the Buyer, free and clear of all liabilities, obligations, liens and encumbrances excepting only Assumed Liabilities and Permitted Liens.

 

1.2.          Excluded Assets . The Buyer shall not acquire and Seller shall retain and not transfer the following assets (collectively, the “ Excluded Assets ”):

 

(a)           all assets of Seller and its subsidiaries that are not included in the described Assets, including those used in Seller’s other lines of business;

 

(b)           cash and cash equivalents, account receivables, and all note receivables;

 

(c)           the names and marks “MGP Ingredient Inc.” and derivatives thereof;

 

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(d)                                  the equipment at the Manufacturing Location utilized for the production of Wheatex®, as identified on Schedule 1.2 (d) , the Wheatex® trademark and all intellectual property and know-how associated with the Wheatex Product;

 

(e)                                   all customer-owned molds and all customer-owned intellectual property and rights of use thereof related to the Pet Treat Business;

 

(f)                                     perpetual joint ownership interest within the meaning of 35 U.S.C. §262 in U.S. Patent 5,665,152 (the “ ‘152 Patent ”) as further defined and set forth in a Joint Ownership Agreement in the form attached as Exhibit D with respect to the ‘152 Patent to be entered into by the parties at Closing; and

 

(g)                                  all of Seller’s right, title and interest in the vacant tract of land north of the Owned Real Property.

 

ARTICLE II

THE CLOSING

 

2.1.          Place and Date . The closing of the sale and purchase of the Assets (the “ Closing ”) shall take place at 10:00 A.M. local time on the 21st day of August, 2009, at the offices of Lathrop & Gage LLP, 2345 Grand Boulevard, Suite 2200, Kansas City, Missouri 64108, or such other time and place upon which the parties may agree. The day on which the closing actually occurs is herein sometimes referred to as the “ Closing Date ”.

 

2.2.          Purchase Price . On the terms and subject to the conditions set forth in this Agreement, the Buyer agrees to pay or cause to be paid to Seller an aggregate of U.S. $3,585,110 (the “ Purchase Price ”) and to assume or cause the Buyer to assume the Assumed Liabilities as provided in Section 2.4. The following portions of the Purchase Price shall be payable at the respective Closing, in separate payments, as follows:

 

(a)           By the wire transfer, the sum of $3,585,110 in immediately available funds to such bank account or accounts as per written instructions of Seller, given to the Buyer prior to the Closing to which such payment relates; and

 

(b)           In addition to the foregoing Buyer shall pay Seller earn-out payments in an amount equal to  40% of the Pet Treat Income for the period from August 1, 2009 through July 31, 2010, such amount payable on November 1, 2010; 20% of the net income of the Pet Treat Income for the period from August 1, 2010 through July 31, 2011, such amount payable on November 1, 2011; 10% of the net income of the Pet Treat Income for the period from August 1, 2011 through July 31, 2012, such amount payable on November 1, 2012. Net income shall be computed in accordance with GAAP by the Buyer. Together with each earn-out payment, Buyer shall provide a calculation of the net income of the Pet Treat Income for such period and, upon Seller’s request, Buyer shall also provide any supporting documentation reasonably requested by Seller to enable Seller to verify the earn-out payment calculation.

 

2.3.          Allocation of Purchase Price .

 

(a)           The Purchase Price shall be allocated among the Assets in accordance with an allocation schedule to be initially prepared by Buyer and approved by Seller at or before Closing.

 

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Such allocation schedule shall be prepared in accordance with section 1060 of the Code. Such allocation schedule shall be prepared in accordance with the requirements of applicable tax law.

 

(b)           In connection with the determination of the foregoing allocation schedules, the parties shall cooperate with each other and provide such information as any of them shall reasonably request. The parties will each report the federal, state and local and other Tax consequences of the purchase and sale contemplated hereby (including the filing of Internal Revenue Service Form 8594) in a manner consistent with such allocation schedules.

 

2.4.          Assumption of Liabilities . Subject to the terms and conditions set forth herein, at the Closing the Buyer shall assume and agree to pay, honor and discharge when due the liabilities, obligations and commitments (x) arising out of the Assumed Contract, but not including any obligation or liability for any breach thereof occurring prior to the Closing Date or (y) listed on Schedule 2.4(a)(ii) (collectively, the “ Assumed Liabilities ”).The parties shall execute an “Assumption Agreement” evidencing Buyer’s assumption of these liabilities.

 

2.5.          Excluded Liabilities . Notwithstanding the provisions of Section 2.4 or any other provision hereof or any schedule or exhibit hereto and regardless of any disclosure to the Buyer, the Buyer shall not assume any other liabilities, obligations or commitments arising from activities conducted prior to the Closing, included but not limited to any liability of the Seller, regardless of when such liability arose (the “ Excluded Liabilities ”).

 

2.6.          Consent of Third Parties . Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute an agreement to assign or transfer any Governmental Approval or Assumed Contract or any claim, right or benefit arising there under or resulting there from if an assignment or transfer or an attempt to make such an assignment or transfer without the consent of a third party would constitute a breach or violation thereof or affect adversely the rights of the Buyer or  Seller there under; and any transfer or assignment to the Buyer by  Seller of any interest under any such Governmental Approval or Assumed Contract that requires the consent of a third party shall be made subject to such consent or approval being obtained.

 

2.7.          Prorations .    The following items shall be adjusted or prorated between Seller and Buyer:

 

(a)           Ad valorem taxes relating to the Owned Real Property for 2009 shall be prorated between Seller and Buyer as of the Closing Date.  If the ad valorem taxes for such calendar year have not been determined on the Closing Date, the proration shall be estimated based upon the ad valorem taxes for the calendar year immediately preceding the calendar year in which the Closing Date occurs, but such proration shall be subject to adjustment between the parties when the actual ad valorem taxes are determined for the calendar year in which the Closing Date occurs.  Seller shall pay any installments of special assessments for any periods prior to the Closing Date.

 

(b)           All utilities and similar operating expenses of the Owned Real Property shall be prorated at the Closing effective as of the Closing Date.  If the exact amount of any item to be prorated is not known as of the Closing Date, the proration shall be based upon the exact amount of the item when it is known, the proration shall be adjusted, if necessary, and appropriate cash adjustments shall be made by Buyer and Seller if necessary.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

3.1.          Representations and Warranties of Seller . As of the date hereof and as of the Closing Date, Seller represents and warrants to the Buyer Parties as follows:

 

3.1.1.       Authorization. etc . Seller has the corporate power and authority to execute and deliver this Agreement and each of the Collateral Agreements to which it will be a party, to perform fully its obligations there under, and to consummate the transactions contemplated thereby. The execution and delivery by  Seller of this Agreement and the consummation of the transactions contemplated hereby, have been, and on the Closing Date each of the Collateral Agreements to which the Seller will be a party and the consummation of the transactions contemplated thereby will have been, duly authorized by all requisite corporate action of the Seller.  Seller has duly executed and delivered this Agreement and on the Closing Date the Seller will have duly executed and delivered each of the Collateral Agreements to which it is a party. This Agreement is, and on the Closing Date each of the Collateral Agreements to which Seller is a party will be, legal, valid and binding obligations of Seller, enforceable against it in accordance with their respective terms.

 

3.1.2.       Corporate Status .

 

(a)           The Seller is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with full corporate power and authority to carry on the Pet Treat Business and to own or lease and to operate the Manufacturing Location as and in the places where such Pet Treat Business is conducted.

 

(b)           The Seller is duly qualified and is in good standing in Kansas, which is the only jurisdiction in which the operation of the Pet Treat Business or the character of the properties owned, leased or operated by it in connection with the Pet Treat Business makes such qualification necessary.

 

(c)           The Seller is not in violation of any provisions of its certificate of incorporation or by-laws or other organizational documents.

 

3.1.3.       No Conflicts, etc . The execution, delivery and performance by Seller of this Agreement and each of the Collateral Agreements to which it is a party, and the consummation of the transactions contemplated thereby, do not and will not conflict with, contravene, result in a violation or breach of or default under (with or without the giving of notice or the lapse of time or both), give rise to a right or claim of termination, amendment, modification, vesting, acceleration or cancellation of any right or obligation or loss of any material benefit under, or result in the creation of any Lien (or any obligation to create any Lien) upon any of the Assets under (i) any Applicable Law applicable to Seller or any Affiliate thereof or any of the properties or assets of Seller (including but not limited to the Assets), (ii) the certificate of incorporation or by-laws or other organizational documents of Seller or (iii) except as set forth in Schedule 3.1.3 , any Contract or other contract, agreement or other instrument to which Seller or any Affiliate thereof is a party or by which Seller or any of their properties or assets, including but not limited to the Assets, may be bound or affected.  Except as specified in Schedule 3.1.3 , no Governmental Approval or other Consent is required to be obtained or made by any Seller in connection with the execution and delivery of this Agreement and the Collateral Agreements or the consummation of the transactions contemplated thereby.

 

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3.1.4.       Financial Statements. Etc .

 

(a)           Financial Statements .  Seller has delivered to the Buyer unaudited profit and loss statements of the Pet Treat Business for the monthly periods beginning on July 1, 2007 through May 31, 2009 ( the “ Financial Statements ”).  The Financial Statements have been prepared in accordance with GAAP, but are divisional statements that do not contain notes and are subject to normal end of period and audit adjustments.  The Financial Statements present fairly the results of operations of the Pet Treat Business for the periods indicated and have been prepared and, when delivered will have been prepared in all material respects on a basis consistent with Seller’s books and records.

 

(b)           Other Financial Information . Schedule 3.1.4(b)  sets forth the sales attributable to each customer of the Pet Treat Business for the last two fiscal years.

 

3.1.5.       Absence of Undisclosed Liabilities . Seller has no liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due, which may impose a lien upon the assets or which may be payable by the Buyer, other than the Assumed Liabilities or as otherwise disclosed in this Agreement.

 

3.1.6.       Taxes .

 

(a)           The Seller has (or by the Closing will have) duly and timely filed all Tax Returns relating to the Assets required to be filed on or before the Closing Date (“ Returns ”). Except for Taxes set forth on Schedule 3.1.6(a) , which are being contested in good faith, all Taxes have (or by the Closing Date will have) been duly and timely paid. All Taxes required to be withheld by or on behalf of the Seller in connection with amounts paid or owing to any employee, independent contractor, creditor or other party with respect to the Pet Treat Business (“ Withholding Taxes ”) have been withheld, and such withheld taxes have either been duly and timely paid to the proper Governmental Authorities or escrowed in accounts solely for such purpose.

 

(b)           No agreement or other document extending, or having the effect of extending, the period of assessment or collection of any Taxes or Withholding Taxes related to the Pet Treat Business, and no power of attorney with respect to any such Taxes, has been filed with the IRS or any other Governmental Authority, other than powers of attorney applicable to the Seller’s tax returns generally.

 

(c)           Except as set forth on Schedule 3.1.6(c) , (i) there are no Taxes or Withholding Taxes related to the Pet Treat Business asserted in writing by any Governmental Authority to be due and (ii) no issue has been raised in writing by any Governmental Authority in the course of any audit with respect to any such Taxes or Withholding Taxes related to the Pet Treat Business. Except as set forth on Schedule 3.1.6(c) , no Taxes and no Withholding Taxes related to the Pet Treat Business are currently under audit by any Governmental Authority. Except as set forth on Schedule 3.1.6(c), neither the IRS nor any other Governmental Authority is now asserting or, to the Knowledge of Seller, threatening to assert against Seller any deficiency or claim for additional Taxes or any adjustment of Taxes related to the Pet Treat Business, if the payment of such deficiency or claim would have a Material Adverse Effect and there is no reasonable basis for any such assertion of which Seller is or reasonably should be aware.

 

(d)           Buyer will not be required to deduct and withhold any amount pursuant to section 1445(a) of the Code upon the transfer of the Assets to Buyer.

 

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(e)           Except as set forth on Schedule 3.1.6(e) , there is no litigation or administrative appeal pending or, to the Knowledge of Seller, threatened against or relating to Seller in connection with Taxes, if such Taxes would impose a Lien on the Assets or be properly assessed against Buyer.

 

3.1.7.       Absence of Changes . Except as set forth in Schedule 3.1.7 , since the January 1, 2009, the Seller has conducted the Pet Treat Business only in the ordinary course consistent with prior practice and has not, on behalf of, in connection with or relating to the Pet Treat Business or the Assets:

 

(a)           suffered any Material Adverse Effect;

 

(b)           incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, except current liabilities for trade or Pet Treat Business obligations incurred in connection with the purchase of goods or services in the ordinary course of Pet Treat Business consistent with prior practice, none of which liabilities, in any case or in the aggregate, could have a Material Adverse Effect;

 

(c)           discharged or satisfied any Lien other than those then required to be discharged or satisfied, or paid any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due, other than current liabilities incurred since the date thereof in the ordinary course of Pet Treat Business consistent with prior practice;

 

(d)           assigned, mortgaged, pledged or otherwise subjected to Lien, any Asset;

 

(e)           sold, transferred, leased to others or otherwise disposed of any of the Assets, except for inventory sold in the ordinary course of Pet Treat Business, or forgiven, canceled or compromised any debt or claim, or waived or released any right, of substantial value;

 

(f)            received any notice of termination of any contract, lease or other agreement related to the Assets or suffered any damage, destruction or loss (whether or not covered by insurance);

 

(g)           transferred or granted any rights or licenses under, or entered into, any settlement regarding the breach or infringement of, any Intellectual Property, or modified any existing rights with respect thereto;

 

(h)           made any change in the rate of compensation, commission, bonus or other direct or indirect remuneration payable, or paid or agreed or orally promised to pay, conditionally or otherwise, any bonus, incentive, retention or other compensation, retirement, welfare, fringe or severance benefit or vacation pay, to or in respect of any shareholder, director, officer, employee, salesman, distributor or agent of Seller relating to the Pet Treat Business, other than in the ordinary course of business;

 

(i)            encountered any labor union organizing activity, had any actual or threatened employee strikes, work stoppages, slowdowns or lockouts, or had any material change in its relations with its employees, agents, customers or suppliers;

 

(j)            failed to maintain inventories and supplies in a normal and customary manner consistent with its prior practice or made any purchase commitment in excess of or less than the normal, ordinary and usual requirements;

 

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(k)           made any capital expenditures or capital additions or improvements in excess of an aggregate of $15,000;

 

(1)           instituted, settled or agreed to settle any litigation, action or proceeding before any court or government; body relating to the Assets involving amounts in excess of $15,000;

 

(m)          (i) entered into any transaction, contract or commitment related specifically to the Pet Treat Business other than in the ordinary course of the Pet Treat Business or (ii) breached any contract or commitment;

 

(n)           made any material changes in policies or practices relating to selling practices, returns, discounts or other terms of sale or accounting therefore or in policies of employment;

 

(o)           delayed payment of any trade payables or other obligations, or made any other cash payments other than in the ordinary course of Pet Treat Business;

 

(p)           failed to maintain all of the Assets in good repair, working order and operating condition;

 

(q)           failed to keep in full force and effect insurance comparable in amount and scope of coverage to insurance now carried in connection with the Pet Treat Business; or

 

(r)            taken any action or omitted to take any action that would result in the occurrence of any of the foregoing.

 

3.1.8.       Litigation . Except as set forth on Schedule 3.1.8 , there is no action, claim; demand, suit, proceeding, arbitration, grievance, citation, summons, subpoena, inquiry or investigation of any nature, civil, criminal, regulatory or otherwise, in law or in equity, pending or threatened against or relating to Seller in connection with the Assets or against or relating to the transactions contemplated by this Agreement. Except as set forth in Schedule 3.1.8 , no citations, fines or penalties have been asserted against any Seller with respect to the Assets under any Environmental Law or any foreign, federal, state or local law relating to occupational health or safety.

 

3.1.9.       Compliance with Laws, Governmental Approvals and Consents; Governmental Contracts .

 

(a)           Except as disclosed in Schedule 3.1.9(a)  Seller has complied with all Applicable Laws applicable to the Pet Treat Business and the Assets, and Seller has not received any written notice alleging any such conflict, violation, breach or default.

 

(b)           Schedule 3.1.9(b)  sets forth all Governmental Approvals and other Consents necessary for or otherwise material to, the conduct of the Pet Treat Business and the ownership and operation of the Assets as they are currently operated.  Except as set forth in Schedule 3.1.9(b) , all such Governmental Approvals and Consents have been duly obtained and are in full force and effect, and Seller is in compliance with each of such Governmental Approvals and Consents held by it with respect to the Assets and the Pet Treat Business.

 

(c)           Schedule 3.1.9(c)  sets forth all Contracts related to the Pet Treat Business or the Assets with any Governmental Authority.

 

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(d)           To the Knowledge of Seller, there are no proposed laws, rules, regulations, ordinances, orders, judgments, decrees, governmental takings, condemnations or other proceedings applicable to the Owned Real Property which are reasonably likely to materially affect the use and ownership of the Owned Real Property as currently used by Seller.

 

3. l.10.     Operation of the Pet Treat Business . Except as set forth in Schedule 3.1.10 , (a) Seller has conducted the Pet Treat Business only through Seller and not through any other entity and (b) no part of the Pet Treat Business is operated by Seller through any entity other than Seller.

 

3.1.11.     Assets . Except as disclosed in Schedule 3.1.11 , the Seller has good and marketable title to all the Assets free and clear of any and all Liens other than Permitted Liens. The Assets, together with the services and arrangements described in the Collateral Agreements, comprise all assets and services required for (i) the continued conduct of the Pet Treat Business by the Buyer as such business is now being conducted, and the (ii) operation of the Manufacturing Location as now conducted.  The Assets are in all material respects adequate for the purposes for which such assets are currently used or are held for use, and are in good repair and operating condition for their current use. Except as disclosed in this Agreement, none of the Assets are subject to any lease or license.

 

3.1.12.     Contracts .

 

(a)           Schedule 3.1.12(a)  contains a complete and correct list of all agreements, contracts, commitments and other instruments and arrangements (whether written or oral) (x) by which any of the Assets are bound or affected or (y) to which any Seller is a party and by which it is bound in connection with the Pet Treat Business or the Assets, in each case excepting contracts related to the Liens set forth on Schedule 3.1.11 to be released at or before Closing (the “ Contracts ”).

 

(b)           The Seller has delivered to the Buyer complete and correct copies of all written Contracts, together with all amendments thereto, and accurate descriptions of all material terms of all oral Contracts, set forth or required to be set forth in Schedule 3.1.12(a) .

 

(c)           All Contracts are in full force and effect and enforceable against each party thereto. There does not exist under any Contract any event of default or event or condition that, after notice or lapse of time or both, would constitute a violation, breach or event of default there under on the part of any Seller or, to the Knowledge of Seller, any other party thereto except as set forth in Schedule 3.1.12(c)  and except for such events or conditions that, individually and in the aggregate, (i) have not had or resulted in, and will not have or result in, a Material Adverse Effect and (ii) have not and will not materially impair the ability of Seller to perform its obligations under this Agreement and under the Collateral Agreements. Except as set forth in Schedule 3.1.3 , no consent of any third party is required under any Assumed Contract as a result of or in connection with the execution, delivery and performance of this Agreement or any of the Collateral Agreements or the consummation of the transactions contemplated thereby.

 

(d)           The Seller does not have outstanding any power of attorney relating to the Assets.

 

3.1.13.     Territorial Restrictions .  Except as may be provided in any of the Assumed Contracts, the Buyer, solely as a result of its purchase of the Pet Treat Business from the Seller pursuant hereto and the assumption of the Assumed Liabilities, will not thereby become restricted in carrying on any Pet Treat Business anywhere in the world.

 

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3.1.14.     Inventories . All Inventories are of good, usable and merchantable quality in all material respects and, except as set forth on Schedule 3.1.14 , do not include obsolete or discontinued items. Except as set forth on Schedule 3.1.14 , (a) all Inventories are of such quality as to meet the quality control standards of  Seller and any applicable governmental quality control standards, (b) all Inventories that are finished goods are saleable as current inventories at the current prices thereof in the ordinary course of the Pet Treat Business, (c) all Inventories are recorded on the books of the Pet Treat Business at the lower of cost or market value determined in accordance with GAAP and (d) no write-down in inventory has been made or should have been made pursuant to GAAP since January 1, 2009. Schedule 3.1.14 lists the locations of all Inventories.

 

3.1.15.     Customers .  Schedule 3.1.15 sets forth (a) the names and addresses of all customers of Seller as to the Pet Treat Business that ordered goods and services from such Seller with an aggregate value for each such customer of $5,000 or more during the twelve-month period ended May 31, 2009, and (b) the amount for which each such customer was invoiced during such period. Except as set forth on Schedule 3.1.15 , Seller has not received any notice or has any reason to believe that any significant customer of Seller (i) has ceased, or will cease, to use the products, goods or services of the Pet Treat Business, (ii) has substantially reduced or will substantially reduce, the use of products, goods or services of the Pet Treat Business or (iii) has sought, or is seeking, to reduce the price it will pay for products, goods or services of the Pet Treat Business, including in each case after the consummation of the transactions contemplated hereby. Except as set forth on Schedule 3.1.15 , to the Knowledge of the Seller, no customer of the Pet Treat Business described in clause (a) of the first sentence of this section has otherwise threatened to take any action described in the preceding sentence as a result of the consummation of the transactions contemplated by this Agreement and the Collateral Agreements.

 

3.1.16.     Suppliers: Raw Materials . Schedule 3.1.16 sets forth (a) the names and addresses of all suppliers (including without limitation Seller and any Affiliates thereof) from which the Pet Treat Business ordered raw materials, supplies, merchandise and other goods and services with an aggregate purchase price for each such supplier of $15,000 or more during the twelve-month period ended May 31, 2009, and (b) the amount for which each such supplier invoiced the Pet Treat Business during such period. Seller has not received any notice nor, except for general fluctuations in commodity prices, has any reason to believe that there has been any material adverse change in the price of such raw materials, supplies, merchandise or other goods or services, or that any such supplier will not sell raw materials, supplies, merchandise and other goods to the Buyer at any time after the Closing Date on terms and conditions materially similar to those used in its current sales to the Pet Treat Business, subject to general and customary price increases. To the Knowledge of the Seller, no supplier of the Pet Treat Business described in clause (a) of the first sentence of this section has otherwise threatened to take any action described in the preceding sentence as a result of the consummation of the transactions contemplated by this Agreement and the Collateral Agreements.

 

3.1.17.     Products .

 

(a)           Warranties . Buyer has been furnished with complete and correct copies of the terms and conditions of sale for each of the products or services of Seller (containing applicable guaranty, warranty and indemnity provisions) currently sold with respect to the Pet Treat Business. Except as required by Applicable Law or as set forth on Schedule 3.1.17(a) , no product manufactured, sold, or delivered by, or service rendered by or on behalf of, Seller is subject to any guaranty, warranty or other indemnity, express or implied, beyond such  terms and conditions.

 

(b)           Product Liability . Except as set forth on Schedule 3.1.17(b) , Seller has no liability or obligation of any nature (whether known or unknown, accrued, absolute, contingent or

 

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otherwise, and whether due or to become due), whether based on strict liability, negligence, breach of warranty (express or implied), breach of contract or otherwise, in respect of any product, component or other item manufactured, sold, designed or produced by the Pet Treat Business prior to the Closing by, or service rendered prior to the Closing by or on behalf of, Seller or any predecessor thereto with respect to the Pet Treat Business, that is not fully and adequately disclosed to Buyer.

 

(c)           Rebates . Except as set forth on Schedule 3.1.17(c) ; Seller has not entered into, or offered to enter into, any agreement, contract commitment or other arrangement with respect to the Pet Treat Business (whether written or oral) pursuant to which such Seller is or will be obligated to make any rebates, discounts, promotional allowances or similar payments or arrangements to any customer (“ Rebate Obligations ”).

 

(d)           Returns . No products of the Pet Treat Business sold prior to the Closing shall be returned by any purchaser of such products following the Closing.

 

3.1.18.     Absence of Certain Pet Treat Business Practices . The Seller, any officer, employee or agent of any Seller, or any other person acting on their behalf, has not, directly or indirectly, within the past five years given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other person who is or may be in a position to help or hinder the Pet Treat Business (or assist the Seller in connection with any actual or proposed transaction relating to the Pet Treat Business) (i) which subjected or might have subjected any Seller to any damage or penalty in any civil, criminal or governmental litigation or proceeding,  (ii) for any of the purposes described in Section 162(c) of the Code.

 

3.1.19. Intellectual Property .

 

(a)           Title . Schedule 3.1.19(a)  contains a complete and correct list of all Intellectual Property Assets (excluding the formulas described in Section 1.1(c), which shall be delivered by separate document to Buyer by Seller at the Closing) that are owned by Seller and primarily related to, used in, held for use in connection with, or necessary for the conduct of, or otherwise material to the Pet Treat Business or the Assets (the “Owned Intellectual Property”). Except as set forth on Schedule 3.1.19(a) , the Seller owns or has the exclusive right to use pursuant to license, sublicense, agreement or permission all Intellectual Property Assets, free from any Liens (other than Permitted Liens) and free from any requirement of any past, present or future royalty payments, license fees, charges or other payments, or conditions or restrictions whatsoever. The Intellectual Property Assets to be transferred to Buyer at Closing comprise all of the Intellectual Property necessary for the Buyer to conduct and operate the Pet Treat Business as now being conducted by the Seller.

 

(b)           Transfer . Immediately after the Closing, Buyer will own all of the Intellectual Property Assets except for the Trademarks and rights under agreements not assumed by Buyer.  Buyer will have a right to use the Wonderware software on the same terms and conditions as Seller’s rights in effect prior to the Closing.  The rights in the Intellectual Property Assets , will be conveyed by Buyer free from any Liens (other than Permitted Liens).

 

(c)           No Infringement . The conduct of the Pet Treat Business does not infringe or otherwise conflict with any rights of any Person in respect of any Intellectual Property. To the Knowledge of the Seller, none of the Intellectual Property Assets is being infringed or otherwise used or available for use, by any other Person.

 

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(d)           Licensing Arrangements . Schedule 3.1.19(d)  sets forth all agreements, arrangements or laws (i) pursuant to which Seller has licensed Intellectual Property Assets to, or the use of Intellectual Property Assets is otherwise permitted (through non-assertion, settlement or similar agreements or otherwise) by, any other Person and (ii) pursuant to which Seller has had Intellectual Property licensed to it, or has otherwise been permitted to use Intellectual Property (through non-assertion, settlement or similar agreements or otherwise).  Seller has delivered to the Buyer true and complete copies of all licenses and arrangements (including amendments) set forth on Schedule 3.1.19(d) . Except as disclosed in this Agreement, all of the agreements or arrangements set forth on Schedule 3.1.19(d)  (x) are in full force and effect in accordance with their terms and no default exists there under by Seller, or to the knowledge of Seller after due inquiry, by any other party thereto, (y) are free and clear of all Liens, and (z) do not contain any change in control or other terms or conditions that will become applicable or inapplicable as a result of the consummation of the transactions contemplated by this Agreement.

 

(e)           No Intellectual Property Litigation . No claim or demand of any Person has been made nor is there any proceeding that is pending, or to the Knowledge of the Seller, threatened in writing, which (i) challenges the rights of the Seller in respect of any Intellectual Property Assets, (ii) asserts that Seller is infringing or otherwise in conflict with, or is, except as set forth in Schedule 3.1.19(d) , required to pay any royalty, license fee, charge or other amount with regard to, any Intellectual Property, or (iii) claims that any default exists under any agreement or arrangement listed on Schedule 3.1.19(d) . Except as set forth on Schedule 3.1.19(e ), none of the Intellectual Property Assets is subject to any outstanding order, ruling, decree, judgment or stipulation by or with any court, arbitrator, or administrative agency, or has been the subject of any litigation within the last five years, whether or not resolved in favor of the Seller.

 

(f)            Due Registration. Etc. The Owned Intellectual Property has been duly registered with, filed in or issued by, as the case may be, the United States Patent and Trademark Office, United States Copyright Office, and the Seller has taken such other actions, to ensure full protection under any applicable laws or regulations, and such registrations, filings, issuances and other actions remain in full force and effect, in each case to the extent material to the Assets.

 

(g)           Reserved

 

(h)           Software . The WonderWare software used to operate certain equipment included in the Assets is sufficient to operate such equipment in accordance with its current use.  Seller has a  sufficient number of licenses for the WonderWare software to operate the equipment in accordance with its current use.

 

(i)            Trademarks . The trademarks used by Seller in the Pet Treat Business are identified on Schedule 3.19(a) (the “ Trademarks ”). “). Following the Closing, Seller shall cease and desist from directly or indirectly using the Trademarks and shall not license the right to use the Trademarks to others, nor sell the Trademarks.  Seller shall abandon in due course all pending trademark applications with respect to the Pet Treat Business and shall cancel in due course all existing trademark registrations with respect to the Pet Treat Business, .  Seller shall have no liability of any kind to Buyer arising out of or relating to the existence of the applications or registrations after the Closing so long as Seller does not breach this Section 3.1.19(i).

 

3.1.20.     Insurance .  Seller has maintained insurance coverage for the Assets that is adequate and customary for the Assets and is on such terms (including without limitation as to deductibles and self-insured retentions), covers such risks, contains such deductibles and retentions, and is in such amounts, as the insurance customarily carried by comparable companies of established reputation

 

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similarly situated and carrying on the same or similar businesses or owning similar assets. Schedule 3.1.20 sets out all claims made by the Seller under any policy of insurance during the past two years with respect to the Assets.

 

3.1.21.     Real Property .

 

(a)           Owned Real Property . Schedule 3.1.21(a)  contains the address and owner of each parcel of Owned Real Property. Seller owns fee simple title to the Owned Real Property and, except as set forth on Schedule 3.1.11 , free and clear of all Liens other than Permitted Liens. There are no outstanding options or rights of first refusal to purchase the Owned Real Property, or any portion thereof or interest therein. The Owned Real Property constitutes all the fee and leasehold interests in real property held for use in connection with the Pet Treat Business and the Assets

 

(b)           [Reserved]

 

(c)           No Proceedings . There is no eminent domain or other similar proceedings pending or threatened in writing affecting any portion of the Owned Real Property. There is no writ, injunction, decree, order or judgment outstanding, nor any action, claim, suit or proceeding, pending or threatened, relating to the ownership, lease, use, occupancy or operation by any Person of any Owned Real Property.

 

(d)           Current Use. The use and operation of the Owned Real Property does not violate any instrument of record or agreement affecting the Owned Real Property. There is no violation of any covenant, condition, restriction, easement or order of any Governmental Authority having jurisdiction over such property or of any other Person entitled to enforce the same affecting the Owned Real Property or the use or occupancy thereof. No damage or destruction has occurred with respect to any of the Owned Real Property since January 1, 2009, except as set forth in Schedule 3.1.20 .

 

(e)           Compliance with Real Property Laws . The Owned Real Property is in compliance with all applicable building, zoning, subdivision and other land use and similar Applicable Laws affecting the Owned Real Property (collectively, the “ Real Property Laws ”), and Seller has not received any written notice of violation or claimed violation of any Real Property Law. To the Knowledge of Seller, there is no pending or anticipated change in any Real Property Law that will have or result in a Material Adverse Effect upon the ownership, alteration, use, occupancy or operation of the Owned Real Property or any portion thereof. To Seller’s Knowledge, no current use by Seller of the Owned Real Property is dependent on a nonconforming use or other Governmental Approval the absence of which would materially limit the use of all or any portion of the Assets.

 

(f)            Real Property Taxes . Except as set forth on Schedule 3.1.21(f) , each parcel included in the Owned Real Property is assessed for real property tax purposes as a wholly independent tax lot, separate from adjoining land or improvements not constituting a part of that parcel.

 

3.1.22.     Environmental Matters .

 

(a)           Permits . All Environmental Permits are identified in Schedule 3.1.22(a) , and the Seller currently hold, and at all times has held, all such Environmental Permits necessary to the operation of the Assets and the Pet Treat Business. Seller has not been notified in writing by any

 

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relevant Governmental Authority that any Environmental Permit will be modified, suspended, canceled or revoked, or cannot be renewed in the ordinary course of business.

 

(b)           No Violations . The Seller and their respective Affiliates have complied and are in compliance in all material respects with all Environmental Permits and all applicable Environmental Laws pertaining to the Owned Real Property (and the use, ownership or transferability thereof) and the Pet Treat Business. No Person has alleged in writing of any violation by Seller of any Environmental Permits or any applicable Environmental Law relating to the conduct of the Pet Treat Business or the use, ownership or transferability of the Owned Real Property.

 

(c)           No Actions . Except as set forth in Schedule 3.1.22(c) , the Seller has not caused or taken any action that has resulted or may result in, or has been or is subject to, any liability or obligation relating to (i) the environmental conditions on, under, or about the Owned Real Property or other properties or assets owned, leased or used by the Seller held for use in connection with, necessary for the conduct of, or otherwise material to, the Pet Treat Business, or (ii) the past or present use, management, handling, transport, treatment, generation, storage or Release of any Hazardous Substances on the Owned Real Property other than in accordance with Applicable Law.

 

(d)           Other . Except asset forth in Schedule 3.1.22(d):

 

(i)            To Seller’s Knowledge, none of current or past operations, or any by-product thereof, and none of the currently or formerly owned property or assets of Seller used in the Pet Treat Business or any assets which is part of the Assets defined herein, is related to or subject to any investigation or evaluation by any Governmental Authority, as to whether any Remedial Action is needed to respond to a Release or threatened Release of any Hazardous Substances.

 

(ii)  &n