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Exhibit 10.12
EXECUTION COPY
ASSET PURCHASE AND SALE AGREEMENT
Between
Land O'Lakes, Inc.
as Seller
And
Maschhoff West, LLC as Buyer
Dated as of February 15, 2005
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ASSET PURCHASE AND SALE AGREEMENT
This
ASSET PURCHASE AND SALE AGREEMENT is made as of the 15th day of
February, 2005 by and among Land O'Lakes, Inc., a Minnesota
cooperative
corporation ("Seller") and Maschhoff West, LLC, an Illinois limited
liability
company ("Buyer").
WITNESSETH:
WHEREAS, the Buyer desires to purchase from the Seller and the
Seller
desires to sell to the Buyer substantially all of the assets owned
or leased by
Seller and used exclusively in the conduct of the business of its
Swine
Production Division ("Business") and the Buyer is willing to assume
obligations
of the Business, all upon the terms and conditions hereinafter set
forth.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
warranties, representations, covenants and agreements herein
contained, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Certain capitalized terms used herein have the meanings set forth
below.
"Accounts Payable and Accrued Expenses" has the meaning set forth
in
Section 2.4(c).
"Accounts Receivable and Prepaids" has the meaning set forth in
Section 2.1
(g).
"Agreement" shall mean this Asset Purchase and Sale Agreement,
including
all exhibits and schedules hereto, as it may be amended,
supplemented or
modified from time to time in accordance with its terms.
"Ancillary Agreements" shall mean those agreements set forth in
Section
7.9.
"Assigned Contracts" has the meaning set forth in Section 2.2.
"Assignment and Assumption Agreement" shall mean the Assignment
and
Assumption Agreement executed by the Seller and the Buyer as
described in
Section 11.2(a)
"Assumed Obligations" has the meaning set forth in Section 2.4.
"Books and Records" has the meaning set forth in Section
2.1(e).
"Business" has the meaning set forth in the preamble hereto.
"Business Day" shall mean any day of the year other than (a) any
Saturday
or Sunday or (b) any other day on which banks located in New York,
New York are
closed for business.
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"Business Financial Statements" shall mean those pro forma
financial
statements of the Business attached hereto as Schedule 4.5.
"Buyer" has the meaning set forth in the preamble hereto.
"Buyer's Costs" has the meaning set forth in Section 3.1.
"Camborough-22 Closed Herd Multiplier Agreement" shall mean
that
Camborough-22 Closed Herd Multiplier Agreement dated April 1, 2000,
by and
between Seller and Pig Improvement Company, Inc.
"Cash" shall mean all cash, certificates of deposit, bank accounts
and
other cash equivalents, together with all accrued but unpaid
interest thereon.
"Closing" shall mean the consummation of the transactions
contemplated
herein in accordance with Article XI.
"Closing Date" shall have the meaning set forth in Section
11.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the
temporary and final regulations promulgated thereunder.
"Confidentiality Agreement" has the meaning set forth in Section
7.5.
"Contract" shall mean any contract, lease, easement, license, sales
order,
purchase order, supply agreement, or any other agreement,
commitment or
understanding whether oral or written, other than Permits.
"Conveyance Documents" has the meaning set forth in Section
11.2(a).
"Countyline Finishing Pig Inventory" shall mean all feeder pigs
purchased
from the Countyline operations and finished under Grower
Agreements.
"Earnest Money Deposit" shall mean an amount equal to 5% of the
Purchase
Price, prior to the Purchase Price Adjustment.
"Effective Time" shall mean 12:01 a.m., Central Standard Time, on
the
Closing Date.
"Employee Plan" shall mean any "employee benefit plan" within the
meaning
of Section 3(3) of ERISA, all specified fringe benefits as defined
in Section
6039D of the Code, and all other retirement, savings, disability,
salary
continuation, medical, dental, health, life insurance, death
benefit, group
insurance, post-retirement insurance, profit-sharing, deferred
compensation,
stock option, cash option, educational assistance, bonus,
incentive, vacation
pay, severance, or other employee benefit or fringe benefit plan
currently in
effect as of the date of this Agreement with respect to the
Employees.
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"Employee" or "Employees" shall mean all employee(s) of the
Seller
principally employed in the Business and listed on Schedule 4.12(b)
and shall
have the meaning set forth in Section 10.1.
"Environment" shall mean soil, land surface, or subsurface strata,
surface
waters, groundwater, drinking water supply, stream sediments,
ambient air
(including indoor air), plant and animal life and any other
environmental medium
or natural resource.
"Environmental Law" shall mean any Law applicable to the Purchased
Assets
in respect of the Environment, including without limitation
federal, state or
local law (including common law), statute, code, ordinance, rule,
regulation or
other requirement relating to the pollution or protection of the
Environment,
natural resources, or public or employee health and safety
applicable to the
Business or the Purchased Assets, and includes without limitation
the
Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"),
42 U.S.C. Section 9601 et seq., the Hazardous Materials
Transportation Act, 49
U.S.C. Section 1801 et seq., the Resource Conservation and Recovery
Act
("RCRA"), 42 U.S.C. Section 6901 et seq., the Clean Water Act, 33
U.S.C. Section
1251 et seq., the Clean Air Act, 33 U.S.C. Section 2601 et seq.,
the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal
Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. Section 136 et seq., the
Oil Pollution
Act of 1990,33 U.S.C. Section 2701 et seq., Emergency Planning and
Community
Right-to-Know Act ("EPCRA"), 42 U.S.C Section 1101 et. seq., and
the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
as such laws
have been amended or supplemented, and the regulations promulgated
pursuant
thereto, and all analogous state or local statutes.
"Equipment and Fixed Assets" has the meaning set forth in Section
2.1 (a),
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as
amended.
"Excluded Assets" has the meaning set forth in Section 2.3.
"Excluded Obligations" has the meaning set forth in Section
2.5.
"Governmental Authority" shall mean the government of the United
States, or
any other foreign country, or any state, provincial or political
subdivision
thereof and any entity, body or authority exercising executive,
legislative,
judicial, regulatory or administrative functions of or pertaining
to government.
"Grower Agreements" has the meaning set forth in Section
2.2(c).
"Guarantees" has the meaning set forth in Section 2.4(d).
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"Hazardous Material" shall mean any waste, pollutant,
contaminant,
hazardous or toxic substance or waste, special waste, or any
constituent of any
such substance or waste which is regulated by any Environmental Law
due to its
properties of being toxic, hazardous, explosive, corrosive,
flammable,
infectious, radioactive, carcinogenic, or mutagenic, including,
without
limitation, petroleum and petroleum products or byproducts,
asbestos,
asbestos-containing materials, or presumed asbestos-containing
materials, urea
formaldehyde and polychlorinated biphenyls.
"Hog
Slat Maintenance Agreement" shall mean that agreement dated
December
1, 2004 between Seller and Hog Slat, Inc.
"Indemnification Basket" has the meaning set forth in Section 13.3
(c).
"Indemnification Cap" has the meaning set forth in Section 13.3
(c).
"Knowledge." when used with respect to the Seller, shall mean the
actual
knowledge, of the fact or matter of any of the persons listed on
Schedule 1.1
and any such person listed on Schedule 1.1 will be deemed to have
conducted a
reasonably comprehensive investigation regarding the accuracy of
the statements,
representations, warranties, facts, or matters made herein by the
person.
Wieland and Miller are listed on Schedule 1.1 solely for the
purposes of
Sections 4.7 and 4.13.
"Land Sale Agreement" has the meaning set forth in Section
2.3(r),
"Law" shall mean any law, statute, code, regulation, ordinance, or
rule
enacted or promulgated by any Governmental Authority and
specifically includes
any Environmental Laws.
"Leased Real Property" shall mean the real property and interests
in real
property leased by the Seller listed on Schedule 2.2(a) and shall
have the
meaning set forth in Section 4.6(b)
"Litigation" has the meaning set forth in Section 4.9.
"Maschhoff Entities" shall mean those entities set forth on the
Guaranty
Agreement attached as Exhibit B. The Maschhoff Entities shall act
as guarantors
of the obligations of the Buyer hereunder.
"Material Adverse Effect" shall mean any event or circumstance that
has a
material and adverse effect on the Purchased Assets or the
Business, taken as a
whole, other than events or circumstances generally applicable to
the swine
industry or changes in general economic conditions, or which
materially impair
the ability of Seller to consummate the transactions contemplated
by this
Agreement.
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"Monsanto Genetics Agreements" shall mean collectively all those
agreements
between Seller and Monsanto relating to genetics as follows: the
Confidential
Artificial Insemination Stud and Processing Center Cooperation
Agreement
(Southfield) dated October 6, 2000; the Confidential Artificial
Insemination
Stud and Processing Center Cooperation Agreement (Northpoint) dated
October 21,
1999; the De-Kalb Land O'Lakes Swine License Agreement dated
January 29, 1997 as
revised and restated by that Revised and Restated MCG-Land O'Lakes
Swine License
Agreement Multiplication Farm effective January 29, 1997; and the
Outsource
Semen Production & Supply Agreement dated February 13,
2003.
"New
Dominion Agreements" shall mean those Swine Production
Management
Agreements between Seller and New Dominion Management dated
December 22, 2000
and December 29, 1998.
"Net
Working Capital" shall be calculated using the same line items as
set
forth in Section 3.1.
"Oklahoma Facilities" has the meaning set forth in Section
2.1(a).
"Other Inventory" has the
meaning set forth in Section 2.1(c).
"Owned Real Property" shall mean the real property owned in fee
simple by
the Seller listed on Schedule 2.1(d).
"Permits" shall mean permits, tariffs, authorizations,
licenses,
certificates, variances, interim permits, approvals, franchises and
rights under
any Law or otherwise issued or required by any Governmental
Authority and any
applications for the foregoing which are currently used by the
Seller to engage
in the Business as currently conducted.
"Permitted Encumbrance" shall mean (i) any encumbrance related to
the Owned
Real Property and used in the operation of the Business that (A) is
disclosed or
otherwise reflected in the Title Commitment or any surveys to be
prepared on the
Owned Real Property and accepted by the Buyer pursuant to Section
7.2, and (B)
does not interfere materially with the ownership, use, operation or
value of the
Owned Real Property in question, the Business or any of the
Purchased Assets.
"Personal Property Leases" has the meaning set forth in Section
2.2(b).
"PIC" shall mean PIC USA, Inc. or Pig Improvement Company, Inc.,
as
appropriate in the context.
"PIC
Genetics Agreement" shall mean that Production Nucleus
Multiplier
Agreement dated July 1, 2003, between Seller and PIC USA, Inc.
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"Post-Transfer Period" has the meaning set forth in Section
7.4(a).
"Pre-Transfer Period" has the meaning set forth in Section
7.4(a).
"Property Taxes" has
the meaning set forth in Section 7.4(a).
"Purchase Price" has the meaning set forth in Section 3.1.
"Purchase Price Adjustment" has the meaning set forth in Section
3.2.
"Purchase Price Allocation" has the meaning set forth in Section
3.4.
"Purchased Assets" has the meaning set forth in Section 2.1.
"Real Property" shall mean the Owned Real Property and the Leased
Real
Property.
"Real Property Leases" has the meaning set forth in Section
2.2(a).
"Release" shall mean,
with respect to the Purchased Assets, any release,
spill, emission, leaking, migration or leaching on or into the
Environment or
into or out of any property. Other than as occurs in the normal
course of manure
application, "Release" shall also include any pumping, pouring,
dumping,
emptying, injection, deposit, disposal, discharge or dispersal.
"Seller" has the meaning set forth in the preamble hereto.
"Swine Inventory" has the meaning set forth in Section 2.1(b).
"Tax" (and, with
correlative meaning, "Taxes" and "Taxable") shall mean any
federal, state, provincial, county, local or foreign taxes,
charges, fees,
duties (including customs duties), levies or other assessments,
including
income, gross receipts, net proceeds, ad valorem, turnover, real
and personal
property (tangible and intangible), sales, use, franchise, excise,
value added,
alternative minimum, add-on minimum, stamp, leasing, lease, user,
transfer,
fuel, excess profits, occupational, interest equalization, windfall
profits,
license, payroll, environmental, capital stock, disability,
severance,
employee's income withholding, other withholding, unemployment and
Social
Security taxes, which are imposed by any Governmental Authority,
and such term
shall include any interest, penalties, fines or additions to tax
attributable
thereto or associated therewith, and shall include any transferee
or successor
liability in respect of Taxes (whether by contract or
otherwise).
"Tax
Return" shall mean any report, return, statement, notice, form,
declaration, claim for refund or other document or information
filed, submitted
to, or required to be supplied to a Governmental Authority in
connection with
the determination, assessment, collection or payment of any Tax,
including any
schedule or attachment thereto, and including any amendment
thereof.
"Title Commitment" has the meaning set forth in Section 7.2(a).
"Title Company" shall mean Caddo County Abstract as set forth in
Section
7.2(a).
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"Transferred Employees" has the meaning set forth in Section
10.1.
"Tyson Finishing Pig Inventory" shall mean all feeder pigs
purchased under
the Tyson Feeder Pig Purchase Agreement dated December 19, 1997 and
finished
under Grower Agreements.
"Tyson Marketing Agreement" shall mean that certain agreement
between
Seller and Tyson/IBP dated August 17, 2000 and titled Market Hog
Supply
Agreement.
"Tyson Feeder Pig Purchase Agreement" shall mean that certain
agreement
between Tyson and Seller dated December 19, 1997 pursuant to which
Seller
purchases feeder pigs from Tyson.
"Tyson VMR Agreement" shall mean that certain agreement between
Tyson/IBP,
Inc. and Seller dated August 17,2000 and titled Evergreen VMR
Procurement
Agreement.
ARTICLE II
SALE AND PURCHASE OF PURCHASED ASSETS;
ASSUMPTION OF ASSUMED OBLIGATIONS
2.1
Purchased Assets. Subject to and upon the terms and conditions
set
forth in this Agreement, on the Closing Date, but effective as of
the Effective
Time and except for the Excluded Assets, the Seller shall sell,
assign, convey,
transfer and deliver to the Buyer, and the Buyer shall purchase,
acquire and
take assignment and delivery of all of the right, title and
interest of the
Seller in and to the assets owned or leased by Seller and used
exclusively in
the Business, free and clear of all encumbrances other than
Permitted
Encumbrances, as follows:
(a) Equipment and Fixed Assets. The tangible personal property,
including the buildings, structures, improvements, facilities,
fixtures,
machinery, equipment, fixed assets, furniture, tools, automobiles,
trucks,
loaders and other vehicles, maintenance equipment and materials and
other
tangible personal property and any replacements thereof acquired
prior to
the
Effective Time, in each case, that is or are owned by the Seller
and
used, or intended to be used, in the operation of the Business or
the
operation, repair or maintenance of its Oklahoma swine facilities
commonly
referred to as the Lone Mound, Weathers Sow Farm, Wright Canyon
East Sow
Farm, Wright Canyon West Sow Farm, Randolph Sow Farm, and the
Randolph
Nursery (such facilities may be referred to collectively
hereinafter as the
"Oklahoma Facilities") and set forth on Schedule 2.1(a)
(collectively, the
"Equipment and Fixed Assets");
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(b) Swine Inventory. All of the swine owned by Seller as of the
Effective Time, including the Tyson Finishing Pig Inventory and
the
Countyline Finishing Pig Inventory, and all gilts, unborn animals,
farrowed
pigs, nursery pigs, finishing pigs, and the sows and boars
comprising
Seller's breeding stock, as more completely described in Schedule
2.1(b)
(collectively, the "Swine Inventory");
(c) Other Inventory. The feed, medicine and other miscellaneous
supplies and materials, used or to be used in the operation of the
Business
as
more completely described in Schedule 2.1(c) (collectively, the
"Other
Inventory");
(d) Owned Real Property. The Owned Real Property upon which the
Oklahoma Facilities are located, which is described in Schedule
2.l(d),
together with all appurtenant rights and easements thereunto and
all owned
buildings, structures, improvements, plants, facilities, and
fixtures
located thereon;
(e) Information and Records. To me extent legally transferable,
all
books and records used, or intended to be used, in the operation of
the
Business or relating to the Transferred Employees ("Books and
Records")
that
are in the Seller's care, custody or control, including,
without
limitation, accounting records, employee records, and originals of
all
written Contracts (if Seller does not have originals, a copy will
be
provided) and copies of Permits;
(f) Membership Interest in GK/LOL, LLC. Seller's unencumbered
fifty
percent (50%) Membership Interest in GK/LOL, LLC, a Minnesota
limited
liability company, including its governance rights and financial
rights;
(g) Accounts Receivable and Prepaids. The categories of
accounts
receivable and prepaid accounts as described in Schedule 3.1 (the
"Accounts
Receivable and Prepaids");
(h) Permits. Subject to the need to obtain any required consent
from
any
third party, all Permits and applications for Permits that are
legally
capable of being transferred and which are utilized by Seller to
own, lease
and/or operate the Purchased Assets or to conduct the Business as
presently
operated and conducted. Buyer shall pay the transfer fees, if any,
that are
required to transfer any Permit (to the extent it is transferable)
to
Buyer;
(i) Rights Against Third Parties. All rights against suppliers
(including Land O'Lakes Purina Feed LLC for feed products) under
warranties
covering any of the
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Swine Inventory, Other Inventory or Equipment and Fixed Assets, and
all
claims against third parties unrelated to Seller relating to the
Purchased
Assets, whether choate or unchoate, known or unknown, contingent
or
non-contingent;
(j) Goodwill. All goodwill related to the Purchased Assets;
and,
(k) Software and Hardware. The software and hardware as described
in
Schedule 2.1(k) (the "Software and Hardware").
All
of the foregoing assets described in this Section 2.1, together
with
the Assigned Contracts described in Section 2.2, but excluding the
Excluded
Assets, are referred to herein collectively as the "Purchased
Assets."
2.2
Assignment of Contracts. Subject to the terms and conditions of
this
Agreement and the need to obtain any required consent from any
third party, on
the Closing Date and as of the Effective Time, the Seller or its
affiliates
shall assign and transfer to the Buyer, all of its right, title and
interest in
and to, and the Buyer shall assume all of the obligations of the
Seller under
the following Contracts and unexpired leases (collectively, the
"Assigned
Contracts"):
(a) Real Property Leases. All leases to or by the Seller of
Real
Property used in the Business and listed on Schedule 2.2(a)
(collectively,
the
"Real Property Leases");
(b) Personal Property Leases. All leases to or by the Seller of
personal property used exclusively in the Business including, but
not
limited to, those listed on Schedule 2.2(b) (collectively, the
"Personal
Property Leases");
(c) Grower Agreements. All Contracts for the care and production
of
swine for the Business, whether finishing Contracts, wean-finish
Contracts,
nursery Contracts, farrow feeder pig Contracts, farrow-wean pig
Contracts, or boar stud Contracts, and listed on Schedule
2.2(c),
(collectively, the "Grower Agreements");
(d)
The Tyson Marketing Agreement. The Tyson Marketing Agreement;
(e) Genetics Agreements. The PIC Genetics Agreement and the
Monsanto
Genetics Agreements;
(f) Hog Slat Maintenance Agreement. The Hog Slat Maintenance
Agreement;
(g) Feed Purchase Agreements with Locals. Those feed purchase
agreements with local cooperatives listed on Schedule 2.2(g);
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(h) GK/LOL, LLC Agreements. Those contracts between LOL and
GK/LOL,
LLC
listed on Schedule 2.2(h);
(i) Other Contracts. All Contracts for the purchase of feed
products,
veterinary supplies and services, hauling services, and all
other
miscellaneous Contracts, in any case which relate exclusively to
operation
of
the Business with reference to the Purchased Assets to which the
Seller
is a
party, including, but not limited to those listed on Schedule
2.2(i);
(j) New Dominion Agreements. The New Dominion Agreements;
(k) Camborough-22 Closed Herd Multiplier Agreement. The
Camborough-22
Closed Herd Multiplier Agreement; and
(l) Waste Disposal Agreements. Those Waste Disposal Agreements
listed
on
Schedule 2.2(1).
2.3
Excluded Assets. Seller shall retain and not sell, transfer or
assign
to Buyer, and Buyer shall not purchase or acquire from Seller any
of the
following assets related to the Business ("Excluded Assets") all as
more
particularly described on Schedule 2.3 attached hereto and made a
part hereof:
(a) All Cash, including any cash in GK/LOL, LLC, and all
accounts
receivable and prepaids not described in Schedule 3.1;
(b) All intellectual property and all rights thereunder including,
but
not
limited to, the LAND O LAKES brand;
(c) Any "Cost Plus" agreements Seller may have with swine
producers;
(d) Any Swine Aligned Feeder Pig Supply Agreements between Seller
and
various local cooperatives, including the accounts receivable and
Contract
prepayments;
(e) Tax refunds;
(f) All software and any license agreements related thereto that
are
not
listed as a Purchased Asset;
(g) FMR, Inc;
(h) Countyline farrow-feeder pig operation in Ohio;
(i) Land owned by Seller in the Oklahoma panhandle and the
Kreihbel
property in Caddo County Oklahoma;
(j) Boars owned by Monsanto in Seller's boar stud facilities;
(k) Equipment owned by Monsanto in Seller's boar stud
facilities;
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(l) The Fort Dodge, Iowa office facilities, including all
office
furniture and equipment, except that Equipment listed on Schedule
2.1(a);
(m) All current hedge positions, except those positions subject
to
Exhibit H;
(n) Accounts receivables through the Effective Time associated
with
the
monthly settlement under the Tyson Marketing Agreement;
(o) The Tyson Feeder Pig Purchase Agreement;
(p) Bacon Acres farrow-feeder pig operation in Iowa;
(q) Any Indiana operations;
(r) The assets subject to, and the Land Sale Agreement itself,
which
is
that contract for the sale of excess land associated with the Lone
Mound
Multiplier Unit between Seller and Dean Smith dated September 8,
2004; and
(s) The Tyson VMR Agreement.
2.4
Assumed Obligations. On the Closing Date, but effective as of
the
Effective Time, and except to the extent subject to Seller's
obligation to
indemnify for breach of any representation or warranty pursuant to
Article XIII
hereof, the Buyer shall assume, and agree to discharge, all
obligations of the
Business or associated with the Purchased Assets, including the
following
obligations of the Seller (the "Assumed Obligations"):
(a) Contract Obligations. The obligations of the Seller under
the
Assigned Contracts; provided, however, that the Buyer shall not
assume any
obligation arising as a result of the Seller's breach of, or
failure to pay
in
the ordinary course in accordance with, the terms of any
Assigned
Contract prior to the Closing Date. Buyer shall pay the transfer
fees, if
any,
that are required to transfer any Assigned Contract to Buyer;
(b) Transferred Employees. The obligations with respect to
Transferred
Employees but only to the extent expressly provided pursuant to
Section 5.7
and
Article X;
(c) Accounts Payable and Accrued Expenses. The categories of
accounts
payable and accrued expenses, as described in Schedule 3.1
("Accounts
Payable and Accrued Expenses");
(d) Guarantees. The obligations of the Seller to guaranty the
loans
listed on Schedule 2.4(d) as documented in Exhibit F;
(e) Environmental Law. Liabilities, obligations, and commitments
of
Seller relating to any Environmental Law to the extent relating to
the
Purchased Assets or
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arising out of the operation of the Business excluding the Excluded
Assets
and
Excluded Obligations;
(f) Miscellaneous. A Payment Agreement entered into with a
lessee,
Lionel Coffey, with respect to back rent due and payable to Seller
as of
March 15, 2005 amounting to $6,857.94. The Double O nursery
operation in
Oklahoma is in default of its contract for failure to provide
propane for
the
facilities and failure to maintain facilities in adequate
condition.
Seller has purchased $2778.31 in propane for the facilities which
funds are
listed as receivables and will be deducted from the producer's
final
contract payments with interest. Seller has discussed this
situation with
the
grower but has not delivered a formal default notice. This
Grower
Contract expires in August 2005.
2.5
Excluded Obligations. The Buyer does not assume (or intend to
assume)
or agree to pay, perform, fulfill or discharge any of the following
obligations,
which shall remain with Seller;
(a) Excluded Assets. The Buyer is not assuming any obligations of
the
Seller that relate to the Excluded Assets;
(b) Tax Liability. Except as provided in Section 7.4(a), the Buyer
is
not
assuming any Tax liability of any kind of the Seller, including any
Tax
liabilities arising, imposed or assessed in respect of the
Seller's
operation of the Business or its ownership of the Purchased Assets
for or
applicable to periods ending on or before the Effective Time (such
as Taxes
on
or measured by income, sales and use Taxes, liabilities for
withheld
federal and state income Taxes and employee or employer Federal
Insurance
Contribution Act Taxes, or as a result of me transactions
contemplated
herein);
(c) Employees. Except to the extent expressly provided pursuant
to
Section 5.7 and Article X, the Buyer is not assuming any
obligations for
personal, sick and vacation time accruals, workers' compensation
accruals,
any
liability arising out of or relating to a Seller employee
grievance
whether or not such employee is a Transferred Employee,
liabilities, and
obligations of Seller to any Employee under any health, life or
disability
insurance plans prior to the Effective Time, including COBRA
obligations
(except for those COBRA obligations set forth in Article X) to
any
employees whom do not accept employment with Buyer, variable
compensation
obligations for Transferred Employees for pension plan obligations
of
Seller to Transferred Employees, pre and post retirement welfare
benefit
obligations of Seller to Transferred Employees, severance,
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termination, or otherwise to any employees (present or former),
agents or
independent contractors of the Seller;
(d) Debt. The Buyer is not assuming any obligations of the Seller
for
any
indebtedness for borrowed money;
(e) Litigation. The Buyer is not assuming any obligations,
liabilities
or
losses with respect to any litigation or claims to the extent
related to
Excluded Assets and Excluded Obligations and any litigation or
claims filed
against or, to Seller's Knowledge, threatened against Seller prior
to the
Effective Time;
(f) Tyson Marketing Agreement Payables. Accounts payable through
the
Effective Time associated with the monthly settlement under the
Tyson
Marketing Agreement;
(g) Fees and Expenses. The Buyer is not assuming any obligations
of
the
Seller for fees and expenses incurred in connection with the
negotiation, execution, performance and delivery of this Agreement
and the
transactions contemplated hereby, including, without limitation,
the fees
and
expenses of counsel and investment bankers; and
(h) General Liability Insurance. The Buyer is not assuming any
accruals for general liability insurance.
All
of the foregoing are referred to herein collectively as the
"Excluded
Obligations."
2.6
Schedule Updates. To the extent Purchased Assets listed on any
schedule
referred to in this Article II are sold, transferred, or otherwise
disposed of
or terminated in the ordinary course of business prior to the
Closing Date and
in accordance with Section 6.2, such Purchased Assets shall be
deemed to be
deleted from such schedules and any replacement asset shall be
deemed to be
added to such schedules. To the extent Seller is reasonably able,
Seller shall
provide Buyer with updated Schedules at Closing reflecting any
changes as
referenced above.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1
Purchase Price; Earnest Money Deposit. In consideration for the
sale,
assignment, conveyance, transfer and delivery of the Purchased
Assets to the
Buyer, the Buyer shall assume the Assumed Obligations and shall,
subject to
Section 3.2 below, pay to Seller an amount equal to Forty-Seven
Million Nine
Hundred Seventy Seven Thousand One Hundred
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Fifty Dollars ($47,977,150.00) (the "Purchase Price"). The Purchase
Price is
based on the Seller's net working capital as of July 31, 2004, as
calculated,
described and defined in Schedule 3.1 (hereinafter, the "Net
Working Capital
Target").
Upon
the execution hereof, Buyer shall deposit with Seller the
Earnest
Money Deposit. Upon Closing, the Earnest Money Deposit plus
interest at five
percent (5%) per annum shall be credited against the Purchase
Price. In the
event this transaction does not close due to a breach hereunder by
Buyer, Seller
shall retain such Earnest Money Deposit. In the event this
transaction does not
close due to any reason other than breach by Buyer, then Seller
shall promptly
return the Earnest Money Deposit plus interest at five percent (5%)
per annum to
Buyer, and, if the transaction does not close due to Seller's
failure to obtain
any necessary consents, then in addition to return of the Earnest
Money Deposit
plus interest referenced above, Seller shall reimburse Buyer for
its costs and
expenses in the amount of One Hundred Thousand Dollars
($100,000.00) herein
"Buyer's Costs,"
3.2
Purchase Price Adjustment. The Purchase Price will be adjusted
("Purchase Price Adjustment") for any changes as of the Closing
Date, upward or
downward, to the Net Working Capital Target on a dollar for dollar
basis. The
Net Working Capital as of Closing Date shall be calculated in the
same manner as
was the Net Working Capital Target. If the Net Working Capital as
of the Closing
Date is greater than the Net Working Capital Target, then Buyer
shall pay such
difference to Seller. If the Net Working Capital as of the Closing
Date is less
than the Net Working Capital Target, then Seller shall pay such
difference to
Buyer. Buyer shall calculate the Net Working Capital as of the
Closing Date no
later than thirty (30) days after Closing and immediately shall
provide such
calculation and supporting materials to Seller. After receipt,
Seller shall have
thirty (30) days to review such calculation. If the parties are in
agreement,
the amount due shall be immediately paid to the appropriate party
with interest
at five percent (5%) per annum. If a dispute arises, such dispute
shall be
submitted to a mutually acceptable independent accounting referee
within thirty
(30) days. If the parties cannot agree upon an independent
accounting referee,
each party shall, within thirty (30) days, select an independent
accountant. The
two selected independent accountants shall select an independent
accounting
referee within ten (10) days. The decision of such accounting
referee shall be
rendered within thirty (30) days and shall be binding upon the
parties. The
amount due as determined by the accounting referee, plus interest
calculated at
the rate of eight percent per annum calculated from the Closing
Date, shall be
due and payable within five Business Days of
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the accounting referee's decision. The parties agree to bear the
cost of the
accounting referees equally.
The
Purchase Price Adjustment shall be paid in accordance with Section
3.3.
3.3
Payment Process. On the Closing Date, the Buyer shall pay to
Seller, by
wire transfer of immediately available funds to accounts designated
by Seller,
an amount equal to the Purchase Price as adjusted per Section
7.4(b) less the
Earnest Money Deposit plus accrued interest. Any amounts due under
Section 3.2
shall be paid by wire transfer of immediately available funds to an
account or
accounts designated by the party to whom the funds are owed.
3.4
Allocation of Purchase Price. The Seller and the Buyer mutually
agree
to make their respective allocations of the Purchase Price in
accordance with
Section 1060 of the Code. The Seller and the Buyer will endeavor in
good faith
to agree, prior to the Closing Date or as soon as practical
following the
Closing Date, on a reasonable allocation of the Purchase Price (as
determined
for federal income tax purposes, in accordance with the provisions
of the Code,
including Sections 453 and 1274 of the Code, as applicable) among
the Purchased
Assets ("Purchase Price Allocation"). The Purchase Price Allocation
shall be
evidenced by a written schedule signed and dated by the Seller and
the Buyer, in
the form attached as Schedule 3.4. The Seller and the Buyer shall
each file IRS
Form 8594 at the time and in the manner as required by Treasury
Regulation
Section 1.1060-1 consistent with the Purchase Price Allocation. The
Seller and
the Buyer shall be bound by the Purchase Price Allocation in
preparing and
filing their respective tax returns and agree to allocate any
adjustment to the
Purchase Price as determined for federal income tax purposes in a
manner
consistent with the Purchase Price Allocation. The Seller and the
Buyer mutually
agree to provide each other with such assistance as is reasonably
necessary for
such other party to satisfy its reporting obligations under Section
1060 of the
Code.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH HEREIN, THE PURCHASED
ASSETS ARE
BEING SOLD AND TRANSFERRED TO BUYER ON AN "AS-IS, WHERE IS" BASIS
WITHOUT ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED. The Seller
represents and
warrants as of the date hereof and as of the Closing Date, and only
with respect
to the Business and the Purchased Assets, as follows:
4.1
Existence and Good Standing. The Seller is a cooperative
corporation
duly organized, validly existing and in good standing under the
laws of the
State of Minnesota. The Seller has all requisite power and
authority to own,
lease and operate the Purchased Assets and to conduct the Business
as it is
presently conducted and is duly qualified to transact business and
is in good
standing in Illinois, Iowa, Minnesota, Missouri, Kansas, Oklahoma
and each
jurisdiction in which the Purchased Assets are owned, leased or
operated by it
or where the nature of the operation of the Business requires the
Seller to
qualify to transact business, except where the failure to be so
qualified and in
good standing would not reasonably be expected to have a Material
Adverse
Affect.
4.2
Due Authorization. The Seller has, or will have on the Closing
Date,
all requisite power and authority to execute, deliver and perform
this Agreement
and the Ancillary Agreements to which it is a party and to
consummate the
transactions contemplated hereby and thereby. The execution,
delivery and
performance by the Seller of this Agreement and the Ancillary
Agreements to
which it is a party and the consummation by the Seller of the
transactions
contemplated hereby and thereby have been or will be duly and
validly authorized
by all necessary action on the part of the Seller, and except as
set forth in
Article IX, no other actions or proceedings on the part of the
Seller is
necessary to authorize the execution, delivery and performance by
the Seller of
this Agreement and by the Seller of the Ancillary Agreements to
which it is a
party or the transactions contemplated hereby and thereby. The
Seller has duly
and validly executed and delivered this Agreement and has duly and
validly
executed and delivered (or prior to or at the Closing shall duly
and validly
execute and deliver) the Ancillary Agreements to which it is a
party. This
Agreement constitutes, and upon execution and delivery thereof
(assuming due
execution and delivery thereof by all other parties thereto) the
Ancillary
Agreements to which the Seller is a party shall constitute, legal,
valid and
binding obligations of the Seller, enforceable against the Seller
in accordance
with their respective terms, except as may
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be limited by (a) applicable bankruptcy, insolvency, moratorium,
reorganization
or similar laws in effect which affect creditors' rights generally,
or (b)
principles of equity including legal or equitable limitations on
the
availability of specific remedies.
4.3
Absence of Conflicts. Neither the execution and delivery of
this
Agreement nor any of the Ancillary Agreements to which the Seller
is a party nor
the consummation of any of the transactions contemplated hereby or
thereby will
violate, conflict with, or result in a breach of or give any person
the right to
declare a default or to exercise any remedy under, or to accelerate
the maturity
or performance of, or payment under, or to cancel, terminate or
modify the
terms, conditions or provisions of (a) the charter, by-laws or
other
organizational documents of the Seller; (b) any judgment, decree or
order of any
Governmental Authority to which the Seller is subject or by which
the Seller is
bound; (c) any other contracts or agreements by which Seller is
bound; or (d)
any requirements of Laws applicable to the Seller.
4.4
Absence of Changes or Events. From July 31, 2004, through the date
of
this Agreement and as of the Closing Date, and except for the Land
Sale
Agreement referenced in Section 2.3(r) and the sale of the Johnson
farrowing
herd sold to Deer Ridge SEW Feeder Pigs, LC on December 21, 2004,
and the
amendment approved by Buyer to amend Section 13 of the GK/LOL, LLC
Operating and
Member Control Agreement, the Business has been conducted by Seller
in the
ordinary course as defined in Section 6.2. Without limiting the
generality of
the immediately preceding sentence, from July 31, 2004, through the
date of this
Agreement and as of the Closing Date, the Business has not:
(a) Suffered any change, damage or destruction that has resulted
in
the
discontinuance of operations or has otherwise resulted in a
Material
Adverse Effect;
(b) Made any change in the method of accounting or accounting
practice
or
policy; and/or
(c) Modified, amended, or terminated, prior to their expiration
dates,
any
of the Assigned Contracts in any material respect, except for
the
termination of the Johnson Farrow to Feeder Pig Contract and the
amendment
to
the GK/LOL Operating and Member Control Agreement.
4.5
Business Financial Statements. Attached hereto as Schedule 4.5
are
true, complete and correct, in all material respects, pro forma
copies of
Business Financial Statements dated as of December 31, 2004, and
pro forma
income statements for the years 2000, 2001, 2002 and 2003.
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4.6 Title to
Assets.
(a)
Except as set forth on Schedule 4.6(a) and other than Owned
Real
Property and the Leased Real Property, which are addressed in
Section 4.6(b),
the Seller has, or will have at Closing, good, valid and marketable
title to
all of the Purchased Assets and valid leasehold interests in, or
other rights to
use, all of the Purchased Assets, in each case, free and clear of
all
encumbrances, subject only to the Permitted Encumbrances.
(b)
Schedules 2.l(d) and 2.2(a) respectively set forth a complete list
of
all Owned Real Property and a complete list of all interests in
real property
leased by Seller and used in the Business (the "Leased Real
Property"). The
Seller has, or at Closing will have, (a) good, valid and marketable
fee simple
title to the Owned Real Property except for the Permitted
Encumbrances set
forth as Schedule 4.6(b) (such Schedule to be completed at
Closing); and (b)
valid leasehold interests in the Leased Real Property, in each
case, free and
clear of all encumbrances, except for the Permitted
Encumbrances.
(c)
Seller has not received any notice that there is an existing or
proposed plan to modify or realign any street or highway or any
existing or
proposed eminent domain proceeding that would result in the taking
of all or any
part of any facility on the Owned Real Property or that would
prevent or hinder
the continued use of any facility on the Owned Real Property as
heretofore used
in the conduct of the Business of Seller.
4.7 Compliance with
Laws; Permits.
(a)
Except as set forth on Schedule 4.7(a), and since January 1, 2000,
the
Seller has not received any notice that it has failed to conduct
the Business
and maintain the Purchased Assets in material compliance with all
applicable
Laws and applicable Permits nor to Seller's Knowledge has any event
or
circumstance occurred as of the date of this Agreement and as of
Closing Date
that would constitute or result in material noncompliance with any
applicable
Laws or Permits.
(b)
To Seller's Knowledge, the Seller owns, holds, possesses or
lawfully
uses in the operation of the Business all Permits which are
material and
necessary to conduct the Business as currently conducted by the
Seller or to own
and use the Purchased Assets as currently used in the Business.
Schedule 4.7(b)
sets forth a true, correct, and complete list of all material
Permits currently
used in the Business.
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4.8
Taxes.
(a) As of the date of Closing, Seller has filed or caused to be
filed
all
Tax Returns which are required to be filed by Seller on or prior to
the
date
of this Agreement, and has paid all Taxes which have become due
pursuant to such Tax Returns or pursuant to any assessment which
has become
payable on or prior to the date hereof, except for any Taxes or
assessments
which are being
contested in good faith by appropriate proceedings.
(b) Seller shall file or cause to be filed all Tax Returns which
are
required to be filed by Seller as a result of the operation of
Business
through the Effective Time and will pay all Taxes due on such Tax
Returns
or
as determined to be due on such Tax Returns by a final decision of
any
taxing authority and all Taxes pursuant to any assessment that
relate to
the
timeframe up to the Effective Time.
4.9 Litigation. Except
for those matters described on Schedule 4.9, there
is no legal, administrative or arbitration proceeding, suit or
action of any
nature ("Litigation") relating to the Business, any Purchased
Assets, the
Assumed Obligations or the transactions contemplated by this
Agreement, pending,
or, to the Knowledge of the Seller, threatened against the Seller,
by or before
any Governmental Authority or by or on behalf of any third party.
To Seller's
Knowledge no event or circumstance, other than events or
circumstances that
occur in the normal operation of the Business, exists that is
reasonably likely
to give rise to or serve as the basis for the commencement of any
litigation or
proceeding related to the Purchased Assets, Assumed Obligations,
and Business.
Schedule 4.9 sets forth a true, correct, and complete list of all
material
Litigation against the Seller relating to the Business, any
Purchased Asset, any
Assumed Obligations, or the transactions contemplated hereby.
4.10
Swine Inventory. Other than the PRRS outbreak in December 2004
and
January 2005 at the Archery and Bald Eagle, Illinois and Brentwood,
Missouri
facilities, since July 31, 2004, there has been no material change
to the feed
protocol, health protocol, or genetic sources of the Swine
Inventory.
4.11
Contracts.
(a) Other than purchase orders or service orders placed in the
conduct
of
business as defined in Section 6.2, the Assigned Contracts and
the
Schedules thereof referenced in Section 2.2 and the Assumed
Obligations
referenced in Section 2.4(a) collectively contain a complete list
of
Assigned Contracts and Assumed Obligations
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related to the Assigned Contracts that by any of their individual
terms can
reasonably be expected to require future payment by or to Seller of
$50,000
or
more, or in the aggregate $250,000, or which call for delivery
or
performance on a date more than one year from the date of this
Agreement.
Such Assigned
Contracts may be referr
