EXHIBIT 2.2
PARTNERSHIP INTEREST AND STOCK
PURCHASE
AGREEMENT
BY AND AMONG
ADVANCED BIOENERGY,
LLC,
HGF ACQUISITION,
LLC,
HEARTLAND GRAIN FUELS,
L.P.,
HEARTLAND PRODUCERS,
LLC,
SOUTH DAKOTA WHEAT GROWERS
ASSOCIATION,
AND
DAKOTA FUELS, INC.
November 7, 2006
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF
HGF LIMITED PARTNERSHIP INTERESTS AND DF
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1
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COMMON SHARES
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Section 1.1
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Purchase and Sale of HGF Limited
Partnership Interests and DF Common Shares
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1
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ARTICLE II CLOSINGS; PURCHASE
PRICE
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1
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Section 2.1
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First Closing
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1
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Section 2.2
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Second Closing
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2
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Section 2.3
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Escrow Agreement
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2
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Section 2.4
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Purchase Price
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2
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ARTICLE III REPRESENTATIONS AND
WARRANTIES OF HGF
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2
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Section 3.1
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Organization of HGF
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3
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Section 3.2
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HGF Partnership Interests
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3
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Section 3.3
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Authority; No Conflict; Required
Filings and Consents
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3
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Section 3.4
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Financial Statements; Absence of
Undisclosed Liabilities
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4
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Section 3.5
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Tax Matters
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4
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Section 3.6
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Absence of Certain Changes or
Events
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5
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Section 3.7
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Title and Related Matters
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7
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Section 3.8
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Proprietary Rights
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8
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Section 3.9
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Employee Benefit Plans
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9
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Section 3.10
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Bank Accounts
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11
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Section 3.11
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Contracts
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11
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Section 3.12
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Orders, Commitments and
Returns
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11
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Section 3.13
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Compliance With Law
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12
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Section 3.14
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Labor Matters; No
Discrimination
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12
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Section 3.15
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Trade Regulation
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12
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Section 3.16
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Insider Transactions
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12
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Section 3.17
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Employees, Independent Contractors
and Consultants
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13
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Section 3.18
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Insurance
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13
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Section 3.19
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Accounts Receivable
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13
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Section 3.20
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Litigation
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13
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Section 3.21
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Governmental Authorizations and
Regulations
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13
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Section 3.22
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Subsidiaries
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13
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Section 3.23
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Compliance with Environmental
Requirements
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14
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Section 3.24
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Partnership Documents
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14
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Section 3.25
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No Brokers
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14
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Section 3.26
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Offers
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14
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ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF DF, SDWG AND HP
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15
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Section 4.1
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Organization
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15
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Section 4.2
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Authority; No Conflict; Required
Filings and Consents
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15
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Section 4.3
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Litigation
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16
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Section 4.4
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Offers
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16
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Section 4.5
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Purchase for Investment
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16
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Section 4.6
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Ownership of HGF Limited Partnership
Interests and DF Common Shares
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16
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ARTICLE V REPRESENTATIONS AND
WARRANTIES OF ABE AND ACQUISITION SUB
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16
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Section 5.1
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Organization of ABE and Acquisition
Sub
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17
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Section 5.2
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ABE Capital Structure
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17
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Section 5.3
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Authority; No Conflict; Required
Filings and Consents
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18
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Section 5.4
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SEC Filings
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19
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Section 5.5
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Tax Matters
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19
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Section 5.6
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Absence of Certain Changes or
Events
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20
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Section 5.7
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Title and Related Matters
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22
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Section 5.8
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Proprietary Rights
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23
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Section 5.9
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Employee Benefit Plans
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24
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Section 5.10
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Contracts
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25
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Section 5.11
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Compliance With Law
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26
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Section 5.12
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Labor Matters; No
Discrimination
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26
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Section 5.13
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Insider Transactions
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27
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Section 5.14
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Employees, Independent Contractors
and Consultants
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27
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Section 5.15
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Insurance
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27
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Section 5.16
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Litigation
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27
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Section 5.17
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Governmental Authorizations and
Regulations
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27
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Section 5.18
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Subsidiaries
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27
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Section 5.19
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Compliance with Environmental
Requirements
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28
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Section 5.20
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ABE Documents
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28
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Section 5.21
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No Brokers
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28
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Section 5.22
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Interim Operations of Acquisition
Sub
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28
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Section 5.23
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Valid Issuance of ABE
Units
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28
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Section 5.24
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Financing
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29
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Section 5.25
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Solvency
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29
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ARTICLE VI PRECLOSING COVENANTS
OF HGF, SDWG AND HP
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29
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Section 6.1
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Advice of Changes
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29
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Section 6.2
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Operation of Business
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29
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Section 6.3
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Access to HGF Information
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32
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Section 6.4
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Satisfaction of Conditions
Precedent
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32
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Section 6.5
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Novations, Terminations, Amendments,
Consents, Authorizations and Notices
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32
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Section 6.6
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Litigation
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32
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Section 6.7
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Other Negotiations
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32
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ARTICLE VII PRECLOSING AND
OTHER COVENANTS OF ABE AND ACQUISITION SUB
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33
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Section 7.1
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Advice of Changes
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33
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Section 7.2
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Operation of Business
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33
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Section 7.3
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Access to ABE Information
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33
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Section 7.4
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Novations, Terminations, Amendments,
Consents, Authorizations and Notices
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34
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Section 7.5
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Satisfaction of Conditions
Precedent
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34
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Section 7.6
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Litigation
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34
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ARTICLE VIII OTHER
AGREEMENTS
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34
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Section 8.1
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Preparation of the Form S-4;
Information Statement; HP Member Meeting
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34
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Section 8.2
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Confidentiality
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36
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Section 8.3
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No Public Announcement
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36
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Section 8.4
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Further Assurances
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36
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Section 8.5
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FIRPTA
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36
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Section 8.6
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Certain Employment
Agreements
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36
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Section 8.7
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Expansion of Aberdeen
Facility
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36
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Section 8.8
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Employee Related Matters
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36
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Section 8.9
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Distribution
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37
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Section 8.10
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Tax Allocation
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37
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Section 8.11
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Federal Income Tax
Matters
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37
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Section 8.12
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Licenses
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37
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ARTICLE IX CONDITIONS TO FIRST
CLOSING AND SECOND CLOSING
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38
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Section 9.1
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Conditions to Each Party’s
Obligation to Effect the First Closing
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38
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Section 9.2
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Additional Conditions to Obligations
of ABE and Acquisition Sub
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38
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Section 9.3
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Additional Conditions to Obligations
of SDWG
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39
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Section 9.4
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Additional Conditions to the
Obligations of HP and ABE to Effect the Second Closing
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40
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ARTICLE X TERMINATION AND
AMENDMENT
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41
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Section 10.1
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Termination
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41
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Section 10.2
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Effect of Termination
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41
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Section 10.3
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Fees and Expenses
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42
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Section 10.4
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Termination of Obligations with
Respect to the Second Closing
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42
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ARTICLE XI ESCROW AND
INDEMNIFICATION
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43
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Section 11.1
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Indemnification of the ABE
Indemnified Persons
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43
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Section 11.2
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Indemnification of the Partner
Indemnified Persons
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43
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Section 11.3
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Escrow Fund; Limitations on
Liability
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44
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Section 11.4
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Escrow Period
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45
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Section 11.5
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Claims for Damages during Escrow
Period
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45
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Section 11.6
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Objections to Claims
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46
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Section 11.7
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Resolution of Conflicts
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46
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Section 11.8
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Partners’
Representative
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47
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Section 11.9
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Actions of the Partners’
Representative
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47
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Section 11.10
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Defense of Third-Party
Claims
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47
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ARTICLE
XII MISCELLANEOUS
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48
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Section 12.1
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Survival of Representations and
Covenants
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48
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Section 12.2
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Notices
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49
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Section 12.3
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Interpretation
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50
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Section 12.4
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Counterparts
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50
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Section 12.5
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Entire Agreement; No Third Party
Beneficiaries
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51
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Section 12.6
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Governing Law;
Jurisdiction
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51
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Section 12.7
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Assignment
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51
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Section 12.8
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Amendment
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51
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Section 12.9
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Extension; Waiver
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51
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Section 12.10
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Specific Performance
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51
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Section 12.11
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Severability
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51
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Annex I
Defined Terms
Exhibits
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Exhibit A
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Form of Escrow Agreement
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Exhibit B
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Purchase Price Allocation
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Exhibit C
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Aventine Partnership Interest Purchase
Agreement
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Exhibit D
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Form of Non-Solicitation Agreement — SDWG
and HP
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Exhibit E
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Form of Legal Opinion of Blackwell Sanders Peper
Martin LLP
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Exhibit F
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Form of Employment Agreement for Bill
Paulsen
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Exhibit G
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Form of Amendments to Agreement of Limited
Partnership
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Exhibit H
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Form of Investor Rights Agreement -
SDWG
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Exhibit I
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Form of Grain Origination Agreement
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Exhibit J
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Form of Legal Opinion of Faegre & Benson
LLP
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Exhibit K
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Form of Non-Solicitation Agreement —
ABE
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Schedules
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3.3
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HGF Required Filings and Consents
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3.5(d)
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HGF Tax Matters
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3.6
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HGF Absence of Certain Changes or
Events
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3.7
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HGF Title and Related Matters
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3.8
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HGF Proprietary Rights
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3.9
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HGF Employee Benefit Plans
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3.10
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HGF Bank Accounts
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3.11(a)
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HGF Material Contracts
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3.11(c)
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HGF Defaults
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3.11(d)
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HGF Indemnity Obligations
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3.12
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HGF Orders, Commitments and Returns
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3.14
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HGF Labor Matters
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3.16
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HGF Insider Transactions
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3.17
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HGF Employee Agreements
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3.18
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HGF Insurance
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3.20
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HGF Litigation
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3.23
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HGF Environmental
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5.1
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ABE Organization
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5.2
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ABE Capital Structure
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5.3
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ABE Governmental Approvals
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5.6
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ABE Absence of Certain Changes or
Events
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5.7
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ABE Title and Related Matters
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5.8
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ABE Proprietary Rights
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5.9
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ABE Employee Benefit Plans
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5.10
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ABE Material Contracts
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5.12
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ABE Labor Matters
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5.13
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ABE Insider Transactions
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5.14
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ABE Employee Agreements
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5.15
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ABE Insurance
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5.19
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ABE Environmental
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6.2
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HGF Operation of Business
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6.5
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HGF Material Consents
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8.7
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Expansion Plan for Aberdeen
Facilities
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8.8
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HGF Employees
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9.2(i)
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HGF Key Employees
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PARTNERSHIP INTEREST AND STOCK
PURCHASE AGREEMENT
THIS PARTNERSHIP INTEREST AND STOCK
PURCHASE AGREEMENT, dated as of November 7, 2006 (this “
Agreement ”), is entered into by and among Advanced
BioEnergy, LLC, a Delaware limited liability company (“
ABE ”), HGF Acquisition, LLC, a Delaware limited
liability company and a wholly owned subsidiary of ABE (“
Acquisition Sub ”), Heartland Grain Fuels, L.P., a
Delaware limited partnership (“ HGF ”),
Heartland Producers, LLC, a South Dakota limited liability company
and a limited partner of HGF (“ HP ”), South
Dakota Wheat Growers Association, a South Dakota cooperative and a
limited partner of HGF (“ SDWG ”), and Dakota
Fuels, Inc., a Delaware corporation and the general partner of HGF
(“ DF ”).
RECITALS
A.
DF is the sole general partner of HGF with a .818% Percentage
Interest in HGF.
B.
HP is a limited partner of HGF with a 46.284% Percentage Interest
in HGF and owns 49% of the outstanding DF Common Shares.
C.
SDWG is a limited partner of HGF with a 47.898% Percentage Interest
in HGF and owns 51% of the outstanding DF Common Shares.
D.
The Selling HGF Partners desire to sell, and Acquisition Sub
desires to purchase, all of the HGF Limited Partnership Interests
and the DF Common Shares owned by the Selling HGF Partners subject
to and on the terms and conditions set forth herein.
E.
Unless otherwise defined herein, capitalized terms used herein have
the meaning set forth in Annex I hereto.
In consideration of the foregoing
and the respective representations, warranties, covenants and
agreements set forth below, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE OF HGF LIMITED
PARTNERSHIP INTERESTS AND DF COMMON SHARES
Section
1.1
Purchase and Sale of HGF Limited Partnership Interests and DF
Common Shares .
(a)
Subject to the provisions of this Agreement, at the First Closing,
SDWG shall sell, transfer, assign, convey and deliver to
Acquisition Sub, and Acquisition Sub shall purchase, SDWG’s
HGF Limited Partnership Interests and SDWG’s DF Common
Shares, in each case free and clear of all Encumbrances.
(b)
Subject to the provisions of this Agreement, at the Second Closing,
HP shall sell, transfer, assign, convey and deliver to Acquisition
Sub, and Acquisition Sub shall purchase, HP’s HGF Limited
Partnership Interest and HP’s DF Common Shares, in each case
free and clear of all Encumbrances.
ARTICLE II
CLOSINGS; PURCHASE
PRICE
Section
2.1
First Closing . The closing of the acquisition of the
HGF Limited Partnership Interests and DF Common Shares owned by
SDWG (the “ First Closing ”) will take place at
10:00 a.m., Minneapolis time, on a date (the “ First
Closing Date ”) to be specified by ABE and SDWG, which
shall be no later than the second business day after satisfaction
or waiver of the latest to occur of the
1
conditions set forth in Sections
9.1, 9.2 and 9.3, at the offices of Faegre & Benson LLP, 2200
Wells Fargo Center, Minneapolis, Minnesota, unless another date,
time or place is agreed to in writing by ABE and SDWG. The
parties will endeavor to complete the First Closing on or prior to
November 8, 2006.
Section
2.2
Second Closing . The closing of the acquisition of the
HGF Limited Partnership Interests and DF Common Shares owned by HP
(the “ Second Closing ”) will take place at
10:00 a.m., Minneapolis time, on a date (the “ Second
Closing Date ”) to be specified by ABE and HP, which
shall be no later than the second business day after satisfaction
or waiver of the latest to occur of the conditions set forth in
Section 9.4, at the offices of Faegre & Benson LLP, 2200 Wells
Fargo Center, Minneapolis, Minnesota, unless another date, time or
place is agreed to in writing by ABE and HP.
Section
2.3
Escrow Agreement . At the First Closing, (a) ABE will
withhold and deposit into escrow 50,857 ABE Units issuable to SDWG
pursuant to Section 2.4 of this Agreement (such ABE Units together
with any ABE Units withheld at the Second Closing, the “
Indemnification Escrow Amount ”) and (b) the parties
hereto will cause to be deposited by HGF into escrow cash in the
amount of $7,794,124 and ABE will deposit 1,228,547 ABE Units (the
“ HP Purchase Price Escrow Amount ” and together
with the ABE Units withheld at the First Closing, the “
Escrow Amount ”). At the Second Closing, (x) the
Escrow Agent will withhold 49,143 ABE Units issuable to HP pursuant
to Section 2.4 of this Agreement, (y) release 1,179,404 ABE Units
to HP or its designees and (z) release the cash portion of the HP
Purchase Price Escrow Amount to HP or its designees. The
Indemnification Escrow Amount shall be held in escrow for a period
of six months from the First Closing to secure the indemnification
obligations of the Selling HGF Partners. The Escrow Amount
shall be held and applied pursuant to the provisions of this
Agreement and an escrow agreement in the form attached hereto as
Exhibit A (the “ Escrow Agreement
”).
Section
2.4
Purchase Price . The aggregate purchase price for the
HGF Limited Partnership Interests and DF Common Shares owned by
SDWG and HP shall be $15,860,020 in cash and 2,499,999 newly issued
ABE Units.
(a)
At the First Closing, Acquisition Sub shall pay SDWG (1) $7,847,465
in cash and issue to SDWG 1,271,452 newly issued ABE Units (of
which 50,857 ABE Units will be deposited in the Escrow Fund) with
respect to its HGF Limited Partnership Interest and (2) $218,430 in
cash with respect to its DF Common Shares.
(b)
At the Second Closing, Acquisition Sub shall pay HP (1) $7,584,260
in cash and issue to HP or its designees 1,228,547 newly issued ABE
Units (of which 49,143 ABE Units will be deposited in the Escrow
Fund) with respect to its HGF Limited Partnership Interest and (2)
$209,864 in cash with respect to its DF Common Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
HGF
HGF represents and warrants to ABE
and Acquisition Sub that the statements contained in this Article
III are true and correct, except as expressly set forth in the
disclosure schedule delivered by HGF to ABE on or before the date
of this Agreement (the “ HGF Disclosure Schedule
”). The HGF Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article III. For purposes of this
Agreement, each statement or other item of information set forth in
one section of the HGF Disclosure Schedule shall be deemed to be a
part of the representation and warranty to which it relates and
shall be deemed to be a disclosure for all other sections of the
HGF Disclosure Schedule; provided, that the mere listing in the HGF
Disclosure Schedule of a document or other item shall not be deemed
adequate to disclose an exception or qualification to a
representation or warranty made in this Agreement (unless it is
reasonably
2
apparent that such exception or
qualification relates to, or is applicable to, such representation
or warranty).
Section
3.1
Organization of HGF . HGF is a limited partnership
duly organized, validly existing and in good standing under the
laws of the State of Delaware, has all requisite partnership power
to own, lease and operate its property and to carry on its business
as now being conducted, and is duly qualified or licensed to do
business and is in good standing as a foreign partnership in the
State of South Dakota. All of HGF’s offices,
manufacturing facilities, and employees are located in South
Dakota.
Section
3.2
HGF Partnership Interests .
(a)
The general partner of HGF is DF with a Percentage Interest of
.818%. The sole limited partners of HGF are SDWG, with a
Percentage Interest of 47.898%, HP, with a Percentage Interest of
46.284%, and Aventine Renewable Energy, Inc., a Delaware
corporation (“ Aventine ”), with a Percentage
Interest of 5%. Except as provided in the Agreement of
Limited Partnership, all of the HGF Partnership Interests are
validly issued and are not subject to repurchase rights by
HGF. Except as provided in the Agreement of Limited
Partnership, there are no obligations, contingent or otherwise, of
HGF to repurchase, redeem or otherwise acquire any HGF Partnership
Interests or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity.
(b)
DF, SDWG, HP and Aventine are the only partners of HGF, and no
other person or entity has any right to purchase additional equity
securities of HGF from HGF. Except as provided in this
Agreement and the other Transaction Documents or any transaction
contemplated hereby or thereby, to HGF’s knowledge, there are
no voting trusts, proxies or other agreements or understandings
with respect to the voting of the HGF Partnership
Interests.
Section
3.3
Authority; No Conflict; Required Filings and Consents
.
(a)
HGF has all requisite partnership power and authority to enter into
this Agreement. The execution and delivery of this Agreement
has been duly authorized by all necessary partnership action on the
part of HGF. This Agreement has been duly executed and
delivered by HGF. This Agreement constitutes, assuming the
due authorization, execution and delivery by the other parties
hereto and thereto, the valid and binding obligation of HGF,
enforceable by ABE against HGF in accordance with its terms, except
to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors’ rights generally and
by general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in
equity.
(b)
Except as set forth on the HGF Disclosure Schedule, the execution
and delivery by HGF of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and
the Transaction Documents will not, (i) conflict with, or result in
any violation or breach of any provision of HGF’s Certificate
of Limited Partnership or its Agreement of Limited Partnership,
(ii) to the knowledge of HGF, result in any violation or
breach of, or constitute a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss
of any benefit) under any of the terms, conditions or provisions of
any material note, bond, mortgage, indenture, lease, contract or
other agreement, instrument or obligation to which HGF is a party
or by which it or any of its properties or assets may be bound, or
(iii) to the knowledge of HGF, and assuming the accuracy of
the representations and warranties made in this Agreement by ABE
and Acquisition Sub, conflict with or violate any federal, state,
local or municipal laws, statutes, ordinances, regulations and
rules, or any orders, writs injunctions, awards, judgments and
decrees applicable to its assets, properties and
business.
(c)
None of the execution and delivery by HGF of this Agreement or the
consummation of the transactions contemplated by this Agreement or
the Transaction Documents will require HGF to obtain any consent,
approval, order or authorization of, or to make any
registration,
3
declaration or filing with, any
court, administrative agency or commission or other governmental
authority or instrumentality (“ Governmental Entity
”), except for such consents, authorizations, filings,
approvals and registrations that are listed on the HGF Disclosure
Schedule.
Section
3.4
Financial Statements; Absence of Undisclosed Liabilities
.
(a)
HGF has delivered to ABE copies of HGF’s audited balance
sheets as of December 31, 2005, December 31, 2004 and December
31, 2003 and HGF’s unaudited balance sheet for the eight
months ended August 31, 2006 and the related unaudited statements
of operations, members’ equity and cash flow for the years
ended December 31, 2005, December 31, 2004 and December 31,
2003 and the eight months ended August 31, 2006 (together with the
HGF balance sheets, the “HGF Financial Statements
”).
(b)
The HGF Financial Statements are in accordance with the books and
records of HGF and present fairly in all material respects, the
financial position, results of operations and cash flows of HGF as
of their historical dates and for the periods indicated. The
HGF Financial Statements have been prepared in accordance with
generally accepted accounting principles (“ GAAP
”) applied on a basis consistent with prior periods and
except that unaudited financial statements may not contain
footnotes and are subject to year-end adjustments.
(c)
HGF has no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, and whether due
or to become due, that is not reflected or reserved against in the
August 31, 2006 HGF Balance Sheet (the “ Most Recent HGF
Balance Sheet ”), except for those that may have been
incurred after the date of the Most Recent HGF Balance Sheet, and
except for those not required by GAAP to be reflected on the Most
Recent HGF Balance Sheet. All debts, liabilities, and obligations
incurred after the date of the Most Recent HGF Balance Sheet were
incurred in the ordinary course of business.
Section
3.5
Tax Matters .
(a)
Since January 1, 2002, all Returns required to be filed by or on
behalf of HGF have been duly filed on a timely basis, and such
Returns are true, complete and correct in all material
respects. All Taxes shown to be payable on such Returns or on
subsequent assessments with respect thereto, and all payments of
estimated Taxes required to be made prior to the date hereof by or
on behalf of HGF with respect to such Returns have been paid in
full on a timely basis and no other Taxes are payable by HGF with
respect to items or periods covered by such Returns (whether or not
shown on or reportable on such Returns). HGF has withheld and
paid over all Taxes required to have been withheld and paid over,
and complied with all information reporting and backup withholding
requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third
party. There are no liens on any of the assets of HGF with
respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that HGF is contesting in good faith through
appropriate proceedings and for which appropriate reserves have
been established on the Most Recent HGF Balance Sheet. HGF
has not at any time been (i) a member of an affiliated group of
companies filing consolidated, combined or unitary income or
franchise tax returns, or (ii) a member of any partnership or joint
venture for a period for which the statute of limitations for any
Tax potentially applicable as a result of such membership has not
expired.
(b)
The amount of HGF’s liability for unpaid Taxes (whether
actual or contingent) for all periods beginning on or after January
1, 2002 through the date of the Most Recent HGF Balance Sheet does
not, in the aggregate, exceed the amount of the current liability
accruals for Taxes reflected on the Most Recent HGF
4
Balance Sheet, and the Most Recent
HGF Balance Sheet reflects proper accrual in accordance with GAAP
of all liabilities for Taxes payable after the date of the Most
Recent HGF Balance Sheet attributable to transactions and events
occurring prior to such date. No material amount of taxable
income or liability for Taxes has been realized or incurred (or
prior to and including the First Closing Date will be realized or
incurred) since such date other than in the ordinary course of
business.
(c)
ABE has been furnished by HGF with true and complete copies of (i)
income tax audit reports, statements of deficiencies, closing or
other agreements received by or on behalf of HGF relating to Taxes
for all periods beginning on or after January 1, 2002, and (ii) all
federal and state income or franchise tax Returns and state sales
and use tax Returns for or including HGF for all periods beginning
on or after January 1, 2002. HGF does not do business in or
derive income from any state other than states for which Returns
have been duly filed and furnished to ABE.
(d)
Except as set forth on the HGF Disclosure Schedule, the Returns of
HGF for periods beginning on or after January 1, 2002 have never
been audited by a government or taxing authority, nor is any such
audit in process, pending or, to HGF’s knowledge, threatened
(in writing). Since January 1, 2002, no deficiencies have
been asserted (in writing), and HGF has not received notice (in
writing) that it has not filed a Return or paid Taxes required to
be filed or paid. HGF is neither a party to any action or
proceeding for assessment or collection of Taxes, nor has such
event been asserted or threatened (in writing) against HGF or any
of its assets. No waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of
HGF. HGF has disclosed on its federal and state income and
franchise Returns for periods beginning on or after January 1, 2002
all positions taken therein that could give rise to a substantial
understatement penalty or comparable provisions of applicable
state, local, foreign or other Tax laws.
(e)
Except as may be required as a result of the transactions
contemplated hereby, HGF has not been and will not be required to
include any material adjustment in taxable income for any Tax
period beginning on or after January 1, 2002 (or portion thereof)
or any comparable provision under state or foreign Tax laws as a
result of transactions, events or accounting methods employed prior
to the First Closing.
(f)
HGF is not, nor has it ever been, a party to any Tax sharing
agreement.
(g)
HGF is not, nor has it been, taxable as a corporation under the
Code.
Section
3.6
Absence of Certain Changes or Events . Since August
31, 2006, other than as set forth in the HGF Disclosure Schedule,
HGF has operated its business in the ordinary course consistent
with its past practices, and, other than as set forth in the HGF
Disclosure Schedule, since such date there has not been with
respect to HGF any:
(a)
Material Adverse Effect on HGF or any change, event, circumstance,
condition or effect that would reasonably be expected to result in
a Material Adverse Effect on HGF;
(b)
amendment or change in its Certificate of Limited Partnership or
Agreement of Limited Partnership;
(c)
incurrence, creation or assumption of: (i) any material
Encumbrance on any of its assets or properties (other than
Permitted Encumbrances), (ii) any material liability for borrowed
money or (iii) any material liability as a guarantor or surety with
respect to the obligations of others;
(d)
payment or discharge of any material Encumbrance on any of its
assets or properties, other than in the ordinary course of
business, or payment or discharge of any of its liabilities, other
than in the ordinary course of business, after the date of the Most
Recent HGF Balance Sheet;
(e)
material damage, destruction or loss of any material property or
material asset, whether or not covered by insurance;
5
(f)
distribution made in respect of the HGF Partnership Interests
(other than the distribution contemplated under Section 6.2(i)),
any direct or indirect purchase or other acquisition of any HGF
Partnership Interest or any change in any rights, preferences,
privileges or restrictions of any HGF Partnership
Interest;
(g)
material change or increase in the compensation payable or to
become payable to any of its officers, managers, employees,
partners, agents, consultants or independent contractors, or in any
bonus, commission, expense reimbursement, pension, severance,
retention, or insurance plan of HGF or in any other benefit payment
or arrangement made to or with any of such officers, managers,
employees, partners, agents, consultants or independent
contractors; or material modification of any “nonqualified
deferred compensation plan” as defined in Code Section
409A;
(h)
material change with respect to its management, supervisory or
other key personnel of HGF; termination of employment of a material
number of employees of HGF; termination of the engagement of a
material number of agents, consultants, or independent contractors
of HGF; or any union organizing activity at any HGF
facility;
(i)
liability incurred by it to any of its officers, managers,
employees, partners, agents, consultants, or independent
contractors except for normal and customary compensation and
expense allowances in the ordinary course of its business
consistent with its past practices;
(j)
loan, advance (other than ordinary advances for work-related
expenses) or capital contribution to, or any investment in, any of
its officers, managers or partners or any firm or business
enterprise in which any such person had a direct or indirect
material interest at the time of such loan, advance, capital
contribution or investment;
(k)
entering into, amendment of, relinquishment, termination or
nonrenewal of any HGF Material Contract other than in the ordinary
course of its business consistent with its past practices, default
by HGF under any such Material Contract; or written assertion by
the other party thereto of any material problems with its services
or performance under such Material Contract or such other
party’s desire to so amend in any material respect,
relinquish, terminate or not renew any such Material
Contract;
(l)
entering into by it of any Contract that by its terms requires or
contemplates a current and/or future financial commitment, expense
or obligation on its part that involves any individual payment in
excess of $10,000 or aggregate payments in excess of $120,000 in
any twelve month period;
(m)
making or entering into any Contract with respect to any
acquisition, sale or transfer of any material asset of HGF that is
not entered into in the ordinary course of its business consistent
with past practices;
(n)
material change in accounting policies, methods or practices
(including any change in depreciation or amortization policies or
rates or revenue recognition policies); change in Tax elections or
methods; or revaluation of any of its assets (other than in
connection with or as a result of the transactions contemplated by
this Agreement);
(o)
deferral of the payment of any material accounts payable, or any
material discount, accommodation or other concession made in order
to accelerate or induce the collection of any receivable, in each
case other than in the ordinary course of business consistent with
past practice;
(p)
payment, directly or indirectly, of any material liability before
the same became due and payable in accordance with its terms or
otherwise than in the ordinary course of its business consistent
with past practice; or
6
(q)
announcement of, any negotiation by or any entry into any Contract
to do any of the things described in the preceding clauses (a)
through (p) (other than negotiations and agreements with ABE and
its representatives regarding the transactions contemplated by this
Agreement).
Section
3.7
Title and Related Matters .
(a)
Except as set forth on the HGF Disclosure Schedule, HGF has good
and valid title to all its properties, interests in properties and
assets, real and personal, free and clear of all Encumbrances
except Permitted Encumbrances. The equipment of HGF used in
the operation of its business is adequate for the business
conducted by HGF and, to the knowledge of HGF, in good operating
condition and repair, ordinary wear and tear excepted. All
personal property leases to which HGF is a party are valid, binding
obligations of HGF and are enforceable against HGF, and, to
HGF’s knowledge are valid, binding on, and are enforceable
against the other parties thereto and are in effect in accordance
with their respective terms, except in each case to the extent that
enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors’ rights generally and by principles
of equity, regardless of whether such enforceability is considered
in a proceeding at law or in equity. Except as set forth on
the HGF Disclosure Schedule, to the knowledge of HGF, there is not
under any of such leases any existing default or event of default
or event which, with notice or lapse of time or both, would
constitute a default. The HGF Disclosure Schedule contains a
copy of HGF’s depreciation schedule, which lists all fixed
assets with an original cost greater than $5,000
. True and correct copies of
HGF’s personal property leases have been provided to ABE or
its representatives.
(b)
The HGF Disclosure Schedule sets forth a complete list of (i) all
real property and interests in real property owned in fee by HGF
(individually, an “ Owned HGF Property ” and collectively,
the “ Owned HGF
Properties ”), and (ii) all
real property and interests in real property leased or occupied by
HGF, or which HGF has the right to occupy, now or in the future
(individually, a “ Leased HGF Property ” and collectively,
the “ Leased HGF
Properties ”; the Owned HGF
Properties and the Leased HGF Properties may hereinafter be
individually referred to as the “ HGF Property ” and collectively as
the “ HGF
Properties ”). Each
agreement pursuant to which HGF leases or occupies (or has the
right to lease or otherwise occupy) any Leased HGF Property may
hereinafter be referred to as a “ HGF Real Property Lease. ”
(c)
Title insurance policies have been issued insuring HGF’s fee
simple title to each parcel of the Owned HGF Property in amounts at
least equal to the purchase price thereof, and all premiums due
under such policies have been paid and no claim has been made
against any such policy. True and correct copies of each of
such title insurance policies have been provided to ABE or its
representatives. The Owned HGF Property constitutes all of
the real property owned by HGF on the date hereof, and HGF has never owned any real property other
than the Owned HGF Property. There are no development
or other agreements that limit the ability to protest real property
taxes or assessments, fix minimum real estate taxes or require
continued business operations with respect to any parcel of HGF
Property. Except as set forth on the HGF Disclosure Schedule,
all HGF Property is in compliance with all laws and codes,
including all zoning laws, codes and ordinances, for the current
and intended purpose of the HGF Property.
(d)
HGF has paid all rent due and is not otherwise in material default
under any HGF Real Property Lease and to the knowledge of HGF
no other party is in default thereof and no party to the HGF Real
Property Leases has delivered written notice of any exercise of any
termination rights with respect thereto. True and correct
copies of each of the HGF Real Property Leases have been provided
to ABE or its representatives. Each HGF Real Property Lease
constitutes the entire agreement between the parties thereto.
There are no disputes, oral agreements or forbearance programs in
effect as to any of the HGF Real Property Leases. Except as
set out in the HGF Disclosure Schedule:
(i) no
7
estoppel
certificates have been given by HGF to any mortgagee or other third
party that would preclude the assertion of any claim by the tenant
under any HGF Real Property Lease, affect any of the tenant’s
rights or obligations under such HGF Real Property Lease or
otherwise be binding upon any successor to HGF’s position
under such HGF Real Property Lease; (ii) HGF has not contested
since January 1, 2004, and is not currently contesting, any
operating costs, real estate taxes or assessments or other charges
payable by the tenant under such HGF Real Property Lease;
(iii) there are no purchase options, rights of first refusal,
first option or other rights held by HGF with respect to such HGF
Real Property Lease, or the real estate and/or buildings affected
by such HGF Real Property Lease that are not contained within such
HGF Real Property Lease; and (iv) HGF has not exercised any
option or right to terminate, renew or extend or otherwise affect
the rights or obligations of the tenant under such HGF Real
Property Lease or to purchase the real property subject to such HGF
Real Property Lease.
(e)
All of the land, buildings, structures and other improvements used
by HGF in the conduct of its business are included in the HGF
Property. Except for the HGF Real Property Leases and those
items set forth in Section 3.7 of the HGF Disclosure Schedule,
there are no leases, subleases or occupancy agreements in effect
with respect to the HGF Property. There are no pending or, to
the knowledge of HGF, threatened or contemplated actions or
proceedings regarding condemnation or other eminent domain actions
or proceedings affecting the HGF Property or any part thereof or of
any sale or other disposition of the HGF Property or any part
thereof in lieu of condemnation. No portion of the HGF
Property has suffered any material damage by fire or other casualty
which has not heretofore been completely repaired and
restored.
Section
3.8
Proprietary Rights .
(a)
The HGF Disclosure Schedule sets forth all: (1) patents
and patent applications owned by HGF; (2) all material
software used in the HGF Business, (3) Internet domain
names used in the HGF Business, (4) all registered copyrights and
applications to register copyrights, (5) trademarks (with separate
listings of registered and unregistered trademarks), and (6) trade
names (the “HGF Proprietary Rights” ). The
HGF Disclosure Schedule sets forth all licenses and other
agreements with third parties (the “ Third Party
Licenses ”) relating to any material patents, copyrights,
software, technology, processes or trademarks (the “ Third
Party Technology” ) that HGF is licensed or otherwise
authorized by such third parties to use, market, distribute or
incorporate into HGF products. Except as set forth on the HGF
Disclosure Schedule, HGF owns all right, title and interest in and
to or has the right to use all HGF Proprietary Rights. No
claims have been asserted or threatened in writing against HGF by
any person challenging HGF’s use of any HGF Proprietary
Rights or challenging or questioning the validity or effectiveness
of any material license or agreement relating thereto or alleging a
violation of any person’s or entity’s privacy, personal
or confidentiality rights. To HGF’s knowledge, none of
HGF’s products nor the use or exploitation of any HGF
Proprietary Rights or the Third Party Technology in HGF’s
current business infringes on the rights of or constitutes
misappropriation of any proprietary information or intangible
property right of any third person or entity.
(b)
To HGF’s knowledge, no current or former officer, manager,
employee, partner, agent, consultant, or independent contractor of
HGF: (1) is in material violation of any term or covenant of
any employment contract, patent disclosure agreement, invention
assignment agreement, nondisclosure agreement, noncompetition
agreement or any other contract with any other person by virtue of
such officer’s, manager’s, employee’s,
partner’s, agent’s, consultant’s or independent
contractor’s being employed by, or performing services for,
HGF or using trade secrets or proprietary information of others; or
(2) has developed any technology, software or other copyrightable,
patentable or otherwise proprietary work for HGF that is subject to
any contract under which such officer, manager, employee, partner,
agent, consultant or independent contractor has assigned or
otherwise granted to any
8
third party any rights in or to such
technology, software or other copyrightable, patentable or
otherwise proprietary work.
(c)
To HGF’s knowledge, there is no material unauthorized use,
disclosure, infringement or misappropriation of any HGF Proprietary
Rights or any Third Party Technology to the extent licensed by or
through HGF by any person. HGF has not entered into any
agreement to indemnify any other person against any charge of
infringement of any HGF Proprietary Rights.
(d)
HGF has taken all steps customary and reasonable in its industry to
protect and preserve the confidentiality and proprietary nature of
all HGF Proprietary Rights other confidential information not
otherwise protected by patents, patent applications or copyright
(“ Confidential Information ”).
Section
3.9
Employee Benefit Plans .
(a)
The HGF Disclosure Schedule lists, with respect to HGF and any
trade or business (whether or not incorporated) that is treated as
a single employer with HGF (an “ ERISA Affiliate
”) within the meaning of Section 414(b), (c), (m) or (o)
of the Code, (i) all employee benefit plans (as defined in
Section 3(3) of ERISA), (ii) each loan to a non-officer
employee, loans to officers and any equity or phantom equity based
plans, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria
benefit (Code Section 125) or dependent care (Code
Section 129), life insurance or accident insurance plans,
programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans,
programs or arrangements, (iv) other fringe or employee
benefit plans, programs or arrangements that apply to senior
management of HGF and that do not generally apply to all employees,
and (v) any current or former employment or executive
compensation or severance agreements, written or otherwise, for the
benefit of, or relating to, any present or former employee,
consultant or director of HGF as to which (with respect to any of
items (i) through (v) above) any potential liability is borne by
HGF (together, the “ HGF Employee Plans
”).
(b)
HGF has delivered to ABE or its representatives a copy of each of
the HGF Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets,
summary plan descriptions and other authorizing documents, and, to
the extent still in its possession, any material employee
communications relating thereto) and has, with respect to each HGF
Employee Plan that is subject to ERISA reporting requirements,
provided copies of the most recent Form 5500 reports
filed. Any HGF Employee Plan intended to be qualified under
Section 401(a) of the Code (i) is the subject of an
unrevoked favorable determination letter from the IRS with respect
to such plan’s qualified status under the Code, as amended by
that Tax legislation commonly known as “GUST” and
“EGTRRA,” (ii) has remaining a period of time
under the Code or applicable Treasury regulations or IRS
pronouncements in which to request, and make any amendments
necessary to obtain, such a letter from the IRS, or (iii) is a
prototype or volume submitter plan entitled, under applicable IRS
guidance, to rely on the favorable opinion or advisory letter
issued by the IRS to the sponsor of such prototype or volume
submitter plan. HGF has also furnished ABE with the most
recent IRS letter issued with respect to each such HGF Employee
Plan that is maintained solely by HGF and its ERISA Affiliates (a
“Single Employer Plan” ), and to HGF’s
knowledge, nothing has occurred since the issuance of each such
letter which could reasonably be expected to cause the loss of the
tax-qualified status of such HGF Employee Plan. To
HGF’s knowledge, nothing has occurred since the issuance of
the most recent IRS letter that could reasonably be expected to
cause the loss of the tax-qualified status of any HGF Employee Plan
subject to Code Section 401(a) that is a Multi-Employer Plan
or Multiple-Employer Plan.
(c)
(i) With respect to any HGF Employee Plans that are
Single-Employer Plans, and to HGF’s knowledge, with respect
to any HGF Employee Plans that are Multiple-Employer Plans, none of
the HGF Employee Plans promises or provides retiree medical or
other retiree welfare benefits to
9
any person (other than as required
under applicable statutory law or regulation); (ii) there has
been no “prohibited transaction,” as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any HGF Employee Plan; (iii) each HGF Employee Plan
has been administered in all material respects in accordance with
its terms and in all material respects in compliance with the
requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), and HGF and each
subsidiary or ERISA Affiliate have performed all material
obligations required to be performed by them under, are not in any
material respect in default, under or violation of, and have no
knowledge of any material default or violation by any other party
to, any of the HGF Employee Plans; (iv) neither HGF nor any
subsidiary or ERISA Affiliate is subject to any material liability
or penalty under Sections 4976 through 4980 of the Code or
Title I of ERISA with respect to any of the HGF Employee
Plans; (v) all material contributions required to be made by
HGF or any subsidiary or ERISA Affiliate to any HGF Employee Plan
have been made on or before their due dates and a reasonable amount
has been accrued for contributions to each HGF Employee Plan for
the current plan years; (vi) no “reportable event”
within the meaning of Section 4043 of ERISA (excluding any
such event for which the 30 day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred;
and (vii) except as set forth in the HGF Disclosure Schedule, no
HGF Employee Plan is covered by, and neither HGF nor any ERISA
Affiliate has incurred or expects to incur any material liability
under, Title IV of ERISA or Section 412 of the Code. With
respect to each HGF Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of
ERISA or an employee welfare benefit plan within the meaning of
Section 3(1) of ERISA, HGF has prepared in good faith and
timely filed all material governmental reports required to be filed
by HGF (which were true and correct in all material respects as of
the date filed) and has properly and timely filed and distributed
or posted all material notices and reports to participants required
to be filed, distributed or posted by HGF with respect to each such
HGF Employee Plan. Since January 1, 2002, no suit,
administrative proceeding, action or other litigation has been
brought, or to the knowledge of HGF is threatened, against or with
respect to any such HGF Employee Plan, including any audit or
inquiry by the IRS or United States Department of Labor.
Except as set forth in the HGF Disclosure Schedule, neither HGF nor
any ERISA Affiliate is a party to, or has made any contribution to
or otherwise incurred any obligation under, any
“multi-employer plan” as defined in Section 3(37) of
ERISA (a “ Multi-Employer Plan ”) or any plan
maintained by more than one unrelated employer (a “
Multiple-Employer Plan ”). Neither HGF nor any
ERISA Affiliate has been notified by any Multiple-Employer Plan
that it is a “substantial employer” with respect to
such Multiple-Employer Plan that is subject to the withdrawal
provisions of Section 4063 of ERISA, nor would HGF or any ERISA
Affiliate have any liability to the Pension Benefit Guaranty
Corporation under Section 4063 of ERISA if it withdrew from such a
Multiple-Employer Plan on or before the date of this
Agreement.
(d)
With respect to each HGF Employee Plan, HGF has complied in all
material respects with (i) the applicable health care
continuation and notice provisions of COBRA, (ii) the
applicable requirements of the FMLA, (iii) the applicable
requirements of HIPAA (iv) the applicable requirements of the
ADA; (v) the ADEA, and (vi) the applicable requirements
of WHCRA.
(e)
Except as set forth in the HGF Disclosure Schedule, the
consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former officer, manager,
employee, partner, agent, consultant, independent contractor or
other service provider of HGF or any other ERISA Affiliate to
severance benefits or any other payment (including, without
limitation, unemployment compensation, golden parachute or bonus),
except as expressly provided in this Agreement, or
(ii) accelerate the time of payment or vesting of any such
benefits, or (iii) increase or accelerate any benefits or the
amount of compensation due any such employee or service
provider.
(f)
There has been no amendment to, written interpretation or written
announcement by HGF or other ERISA Affiliate relating to, or change
in participation or coverage under, any HGF
10
Employee Plan which would materially
increase the expense of maintaining such Plan above the level of
expense incurred with respect to that Plan for the most recent
fiscal year included in the HGF Financial Statements other than as
required by law. No HGF Employee Plan will be subject to any
surrender fees or services fees upon termination other than the
normal and reasonable administrative fees associated with the
termination of benefit plans.
(g)
The HGF Disclosure Schedule lists all “nonqualified deferred
compensation plans” (within the meaning of Section 409A of
the Code) to which HGF is a party. Each such nonqualified
deferred compensation plan to which HGF is a party complies in all
material respects with the requirements of paragraphs (2), (3) and
(4) of Section 409A(a) by its terms and has been operated in
material compliance with such requirements. No event has
occurred that would be treated by Section 409A(b) as a transfer of
property for purposes of Section 83 of the Code.
Section
3.10
Bank Accounts . The HGF Disclosure Schedule sets forth
the names and locations of all banks, trust companies, savings and
loan associations, and other financial institutions at which HGF
maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals
therefrom.
Section
3.11
Contracts .
(a)
The HGF Disclosure Schedule lists all Contracts to which HGF is a
party and (i) which require HGF to pay any third party an
amount in excess of $10,000 per payment or in excess of $120,000 in
the aggregate in any twelve month period, (ii) which require
payments to HGF from any third party in an amount in excess of
$10,000 per payment or in excess of $120,000 in the aggregate in
any twelve month period, (iii) which restrict HGF from competing
with any person or from carrying on its business anywhere in the
world, or (iv) under which HGF guarantees the obligation of other
persons or has agreed to acquire or guarantee the obligations of
any other persons (collectively, the “HGF Material
Contracts” ).
(b)
All of the HGF Material Contracts are valid, binding obligations of
HGF and are enforceable against HGF, and to HGF’s knowledge,
are valid, binding obligations of, and are enforceable against, the
other parties thereto in accordance with their respective terms,
except in each case to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting the enforcement of
creditors’ rights generally and by general principles of
equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity. No HGF Material Contract
contains any liquidated damages, penalty or similar
provision. To the knowledge of HGF, no party to any such HGF
Material Contract intends to cancel, withdraw, modify or amend such
contract, agreement or arrangement.
(c)
Except as set forth on the HGF Disclosure Schedule, HGF is not in
default under or in breach or violation of, nor, to HGF’s
knowledge, is there any valid basis for any claim of default by HGF
under, or breach or violation by HGF of, any material provision of
any HGF Material Contract. To the knowledge of HGF, no other
party is in default under or in breach or violation of, nor is
there any valid basis for any claim of default by any other party
under or any breach or violation by any other party of, any HGF
Material Contract.
(d)
Except as set forth on the HGF Disclosure Schedule, none of the HGF
Material Contracts provides for indemnification by HGF of any third
party. No claims have been made or, to HGF’s knowledge,
threatened that could require indemnification by HGF, and HGF has
not paid any amounts to indemnify any third party as a result of
indemnification requirements of any kind.
Section
3.12
Orders, Commitments and Returns . All agreements,
contracts, or commitments for the purchase of supplies by HGF were
made in the ordinary course of business. Except as set forth
on the HGF Disclosure Schedule, HGF does not have any oral
contracts or arrangements for the sale of any
11
product or service by HGF that
require payments to or from any third party in an amount in excess
of $10,000 per payment or in excess of $120,000 in the aggregate in
any twelve month period.
Section
3.13
Compliance With Law . To HGF’s knowledge, HGF
and the operation of its business are in compliance in all material
respects with all applicable laws and regulations material to the
operation of its business.
Section
3.14
Labor Matters; No Discrimination .
(a)
HGF’s employees are not unionized. To HGF’s
knowledge, there is no union organizing activity pending with
respect to HGF or the HGF Business. HGF is not a party to a
collective bargaining agreement. HGF has not experienced any
material work stoppage or other material labor
difficulty.
(b)
There is not and has not been any claim against HGF or its
officers, managers or employees, or to HGF’s knowledge,
threatened against HGF or its officers, managers or employees,
(i) based on actual or alleged unlawful discrimination,
including but not limited to unlawful harassment because of race,
national origin, age, sex, disability, religion or other
protected-class status, or (ii) based on other actual or
alleged tortious or otherwise unlawful conduct related to any
person’s employment, or (iii) based on actual or alleged
breach of contract, promissory estoppel, or other cause of action
with respect to any person’s employment by HGF.
(c)
Except as set forth in the HGF Disclosure Schedule, there are no
pending claims against HGF under any workers’ compensation
plan or policy or for long term disability. HGF has no
material obligations under COBRA with respect to any former
employees or qualifying beneficiaries thereunder. There are
no proceedings pending or, to the knowledge of HGF, threatened,
between HGF and any of its employees. The HGF Disclosure
Schedule lists each HGF employee who is currently on leave from
active employment, the reason for such leave, and the expected date
of return to active employment, each person who is on a reduced
schedule as an accommodation for a disability or under FMLA or any
other similar state law. No employee of HGF has been
involuntarily terminated since August 31, 2006.
(d)
Except as set forth on the HGF Disclosure Schedule, no key employee
of HGF has given notice to HGF, nor does HGF otherwise have
knowledge, that any such key employee intends to terminate his or
her employment with HGF. The employment of each of the
employees of HGF is “at will” and HGF does not have any
obligation to provide any particular form or period of notice prior
to terminating the employment of any of their respective employees,
except as set forth on the HGF Disclosure Schedule. As of the
date hereof, except as contemplated by this Agreement, HGF has not
entered into any Contract that obligates or purports to obligate
ABE or Acquisition Sub to continue to employ any present or former
employee or to offer to engage any present or former agent,
consultant or independent contractor of HGF.
Section
3.15
Trade Regulation . No claims have been communicated or
threatened in writing against HGF with respect to wrongful
termination of any dealer, distributor or any other marketing
entity, discriminatory pricing, price fixing, unfair competition,
false advertising, or any other violation of any laws or
regulations relating to anti-competitive practices or unfair trade
practices of any kind.
Section
3.16
Insider Transactions . Except as set forth on the HGF
Disclosure Schedule, no affiliate of HGF has any interest in any
equipment or other property, real or personal, tangible or
intangible of HGF, including, without limitation, any HGF
Proprietary Rights or, to the knowledge of HGF, any creditor,
supplier, customer, manufacturer, agent, representative, or
distributor of HGF’s products; provided, however, that no
such affiliate or other person shall be deemed to have such an
interest solely by virtue of the ownership of less than 5% of the
outstanding stock or debt securities of
12
any publicly-held company, the stock
or debt securities of which are traded on a recognized stock
exchange.
Section
3.17
Employees, Independent Contractors and Consultants .
The HGF Disclosure Schedule lists all currently effective written
consulting, independent contractor and/or employment agreements and
other material agreements entered into by HGF and any individual
officers, managers, employees, partners, consultants, or
independent contractors. True and correct copies of all such
written agreements have been provided to ABE or its
representatives. Also shown on the HGF Disclosure Schedule
are the names, positions, salaries or other rate of compensation,
including bonuses, of all persons presently employed by, or
performing contract services for, HGF whose annual cash
compensation, including bonuses in the last twelve months, exceeds
$75,000. Except as set forth on the HGF Disclosure Schedule,
no bonus or other payment will become due to any HGF officer,
manager, employee, partner, agent, consultant, or independent
contractor as a result of this Agreement and the transactions
contemplated hereby.
Section
3.18
Insurance . HGF has insurance policies in effect
covering the risks associated with its business and properties
which are of such character and are in such amounts as are
customarily maintained by entities engaged in the same or similar
business similarly situated. The HGF Disclosure Schedule
contains a list of the principal policies of fire, liability and
other forms of insurance currently held by HGF, and all claims made
by HGF since January 1, 2006, under such policies. To the
knowledge of HGF, HGF has not done anything, either by way of
action or inaction, that might invalidate such policies in whole or
in part. There is no claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid
and HGF is otherwise in compliance with the terms of such policies
and bonds in all material respects. HGF has no knowledge of
any threatened termination of, or material premium increase with
respect to, any of such policies.
Section
3.19
Accounts Receivable . Subject to any reserves set
forth in the Most Recent HGF Balance Sheet, the accounts receivable
shown on the Most Recent HGF Balance Sheet represent bona fide
claims against debtors for sales and other charges, and are not
subject to discount except for normal cash and immaterial trade
discounts.
Section
3.20
Litigation . Except as set forth on the HGF Disclosure
Schedule, there is no private or governmental action, suit, charge,
proceeding, claim, arbitration or investigation pending before any
agency, court or tribunal, foreign or domestic, or, to the
knowledge of HGF, threatened against HGF or any of its properties
or any of its employees, officers, managers or partners (in their
capacities as such). There is no judgment, decree, probable
cause or other finding, or order against HGF, or, to the knowledge
of HGF, any of its managers, officers or partners (in their
capacities as such).
Section
3.21
Governmental Authorizations and Regulations . HGF has
obtained each material federal, state, county, local or foreign
governmental or regulatory consent, license, permit, grant, order
or other authorization of a Governmental Entity that is required
for the operation of HGF’s business or the holding of any
interest in any of its properties and to HGF’s knowledge, all
of such authorizations are in full force and effect. HGF has
provided ABE or its representatives copies of all such
authorizations.
Section
3.22
Subsidiaries . HGF has no subsidiaries. HGF does
not own or control (directly or indirectly) any capital stock,
bonds or other securities of, and does not have any proprietary
interest in, any other corporation, limited liability company,
general or limited partnership, firm, association or business
organization, entity or enterprise, and HGF does not control
(directly or indirectly) the management or policies of any other
corporation, limited liability company, partnership, firm,
association or business organization, entity or
enterprise.
13
Section
3.23
Compliance with Environmental Requirements .
(a)
Except as set forth on the HGF Disclosure Schedule, to HGF’s
knowledge, HGF has obtained all permits, licenses and other
authorizations which are required under federal, state and local
laws and relating to pollution or protection of the environment,
including laws or provisions relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials, substances, or wastes into air,
surface water, groundwater, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials, substances, or wastes or which are
intended to assure the safety of employees, workers or other
persons (collectively “ Environmental Laws
”). To HGF’s knowledge, HGF is in compliance with
all terms and conditions of all such permits, licenses and
authorizations. All such material permits, licenses and
authorizations currently held by HGF are identified in the HGF
Disclosure Schedule.
(b)
Except as set forth on the HGF Disclosure Schedule, there are no
conditions, circumstances, activities, practices, incidents, or
actions known to HGF which could reasonably be expected to form the
basis of any claim, action, suit, proceeding, hearing, or
investigation of, by, against or relating to HGF, based on or
related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic
substance, material or waste. Except as set forth on the HGF
Disclosure Schedule, there is no Environmental Claim pending or, to
HGF’s knowledge, threatened against HGF.
(c)
True and correct copies of all reports, licenses, permits,
authorizations, disclosures and other documents of which it is
aware relating in any way to the status of any of the HGF Property
or otherwise relating to the business of HGF with respect to any
Environmental Law have been provided to ABE or its
representatives.
Section
3.24
Partnership Documents . HGF has furnished to ABE or
its representatives copies of (i) its Certificate of Limited
Partnership and the HGF Agreement of Limited Partnership, as
amended to date, (ii) all material permits, orders, and consents
issued by any regulatory agency with respect to HGF or its
operations, and all applications for such permits, orders and
consents, (iii) records of any limited partnership
proceedings, including any consents, actions, and meetings of the
limited partners, the board of directors and any committees
thereof. The records of HGF provided hereunder are complete
and accurate in all material respects, and the signatures appearing
on all documents contained therein are the true or facsimile
signatures of the persons purporting to have signed the
same.
Section
3.25
No Brokers . Neither HGF nor any Selling HGF Partner
is obligated for the payment of fees or expenses of any broker or
finder in connection with the origin, negotiation or execution of
this Agreement or the other Transaction Documents or in connection
with any transaction contemplated hereby or thereby.
Section
3.26
Offers . HGF has suspended or terminated, and has the
legal right to terminate or suspend, all negotiations and
discussions of Acquisition Transactions with parties other than
ABE.
14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
DF, SDWG AND HP
Each of DF, SDWG and HP represents
and warrants to ABE and Acquisition Sub on behalf of itself only
and not jointly that the statements contained in this Article IV
with respect to it are true and correct:
Section
4.1
Organization . Such party is a limited liability company,
cooperative or corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of
organization.
Section
4.2
Authority; No Conflict; Required Filings and Consents
.
(a)
Such party has all requisite corporate or limited liability company
power to enter into this Agreement and all Transaction Documents to
which it is or will become a party and to consummate the
transactions contemplated by this Agreement and such Transaction
Documents. The execution and delivery of this Agreement and such
Transaction Documents and the consummation of the transactions
contemplated by this Agreement and such Transaction Documents have
been duly authorized by all necessary action on the part of such
party including approval by its board, subject only, to the
approval by HP’s members under the provisions Section
3.9(b)(ii) of the HP Operating Agreement.
(b)
This Agreement has been and such Transaction Documents have been
or, to the extent not executed by it as of the date hereof, will be
duly executed and delivered by such party. This Agreement and each
of the Transaction Documents to which such party is a party
constitutes, and each of the Transaction Documents to which it will
become a party, when executed and delivered by such party, will
constitute, assuming the due authorization, execution and delivery
by the other parties hereto and thereto, and assuming the accuracy
of the representations and warranties made in this Agreement by ABE
and Acquisition Sub, the valid and binding obligation of such
party, enforceable by ABE against it in accordance with their
respective terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other laws affecting the enforcement of
creditors’ rights generally and by general principles of
equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity.
(c)
The execution and delivery by such party of this Agreement and the
Transaction Documents to which it is or will become a party does
not, and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents to which it is or will
become a party will not, (i) conflict with, or result in any
violation or breach of any provision of its organizational and
other governing documents, (ii) to its knowledge, result in any
violation or breach of, or constitute a default (or give rise to a
right of termination, cancellation or acceleration of any
obligation or loss of any benefit) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to
which it is a party or by which it or any of its properties or
assets may be bound, except for the items disclosed in Section
3.3(b) of the HGF Disclosure Schedule, if any, or (iii) to its
knowledge, and assuming the accuracy of the representations and
warranties made in this Agreement by ABE and Acquisition Sub,
conflict with or violate any federal, state, local or municipal
laws, statutes, ordinances, regulations and rules, or any orders,
writs injunctions, awards, judgments and decrees applicable to its
assets, properties and business (and any regulations promulgated
thereunder).
(d)
Assuming the accuracy of the representations and warranties made in
this Agreement by ABE and Acquisition Sub, none of the execution
and delivery by such party of this Agreement or of any other
Transaction Document to which it is or will become a party or the
consummation of the transactions contemplated by this Agreement or
such Transaction Document will require such party to obtain any
consent, approval, order or authorization of, or make any
registration,
15
declaration or filing with, any
Governmental Entity, except for such consents, orders,
authorizations, filings, approvals, declarations and registrations
that are listed on the HGF Disclosure Schedule.
Section
4.3
Litigation . There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending
before any agency, court or tribunal, foreign or domestic, or, to
the knowledge of such party, threatened against it that would in
any way affect its ability to consummate the transactions
contemplated by this Agreement. There is no judgment, decree or
order against such party that would in any way affect its ability
to consummate the transactions contemplated by this
Agreement.
Section
4.4
Offers . Such party has suspended or terminated, and has the
legal right to terminate or suspend, all negotiations and
discussions of Acquisition Transactions with parties other than
ABE.
Section
4.5
Purchase for Investment . SDWG has total assets in excess of
$5,000,000 as contemplated in the definition of “accredited
investor” in Rule 501(a) of the Securities Act and is an
accredited investor. SDWG is acquiring the ABE Units for its own
account and not with a view to the distribution or resale thereof
within the meaning of Section 2(11) of the Securities Act; and
further represents that it has not adopted a plan or agreement
providing for its dissolution, for a pro rata or similar
distribution of the ABE Units being acquired by it, or adopted
resolutions relative to the foregoing and it does not have a
preexisting plan for distribution of the ABE Units. SDWG has such
knowledge and experience in financial and business matters that it
is capable of evaluating the merits and the risks of the
transactions contemplated hereby.
Section
4.6
Ownership of HGF Limited Partnership Interests and DF Common
Shares . Each of SDWG and HP owns its HGF Limited Partnership
Interests free and clear of all Encumbrances and each of SDWG and
HP owns its DF Common Shares free and clear of all Encumbrances.
The DF Common Shares are validly authorized, duly issued, fully
paid and nonassessable, constitute all of the outstanding capital
stock of DF and there are no outstanding warrants, options,
subscriptions, or other agreements pursuant to which DF is or may
become obligated to issue shares of capital stock or other
securities of DF. DF is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power to own, lease and
operate its property and to carry on its business as now being
conducted and has not engaged in any business other than as general
partner of HGF.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
ABE AND ACQUISITION SUB
ABE and Acquisition Sub jointly and
severally represent and warrant to HGF and the Selling HGF Partners
that the statements contained in this Article V are true and
correct, except as expressly set forth in the disclosure schedule
delivered by ABE to HGF and the Selling HGF Partners on or before
the date of this Agreement (the “ ABE Disclosure
Schedule ”). The ABE Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article V. As used in this Article V,
the term “ABE” shall be deemed to include ABE and each
of its subsidiaries. For purposes of this Agreement, each statement
or other item of information set forth in one section of the ABE
Disclosure Schedule shall be deemed to be a part of the
representation and warranty to which it relates and shall be deemed
to be a disclosure for all other sections of the ABE Disclosure
Schedule; provided, that the mere listing in the ABE Disclosure
Schedule of a document or other item shall not be deemed adequate
to disclose an exception or qualification to a representation or
warranty made in this Agreement (unless it is reasonably apparent
that such exception or qualification relates to, or is applicable
to, such representation or warranty).
16
Section
5.1
Organization of ABE and Acquisition Sub . ABE is a limited
liability company duly organized, validly existing and in good
standing under the laws of the State of Delaware, has all requisite
limited liability company power to own, lease and operate its
property and to carry on its business as now being conducted, and
is duly qualified or licensed to do business and is in good
standing as a foreign limited liability company in each
jurisdiction in which the nature of its business or ownership or
leasing of properties makes such qualification or licensing
necessary and where the failure to be so qualified or licensed
could reasonably be expected to result in a Material Adverse Effect
with respect to ABE. The ABE Disclosure Schedule contains a true
and complete listing of the location of all offices, manufacturing
facilities, and any other offices or facilities of ABE and its
subsidiaries and a true and complete list of all states in which
ABE or any of its subsidiaries maintains any employees. The ABE
Disclosure Schedule contains a true and complete list of all states
in which ABE or any of its subsidiaries is duly qualified or
licensed to transact business as a foreign entity. Acquisition Sub
is a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware, has all
requisite limited liability company power to own, lease and operate
its property and to carry on its business as now being conducted,
and is duly qualified or licensed to do business and is in good
standing as a foreign corporation in each jurisdiction in which the
nature of its business or ownership or leasing of properties makes
such qualification or licensing necessary and where the failure to
be so qualified or licensed could reasonably be expected to result
in a Material Adverse Effect with respect to ABE.
Section
5.2
ABE Capital Structure .
(a)
All of the outstanding ABE Units were validly issued, and are not
subject to any capital calls, are fully vested and not subject to
forfeiture by the holder thereof. All outstanding ABE Units were
issued in compliance with applicable federal and state securities
laws. Except as set forth in the ABE Operating Agreement, there are
no obligations, contingent or otherwise, of ABE to repurchase,
redeem or otherwise acquire any ABE Units or make any investment
(in the form of a loan, capital contribution or otherwise) in any
other entity. The ABE Disclosure Schedule sets forth: (i) the
number of ABE Units or other equity securities of ABE, including
restricted ABE Units, owned by Revis L. Stephenson III and Don
Gales; (ii) the number of ABE Units or other equity securities of
ABE that Mr. Stephenson and Mr. Gales have the right to purchase or
otherwise acquire by virtue of the exercise of options or
otherwise; and (iii) the status of Mr. Stephenson’s and Mr.
Gales’ right to purchase or otherwise acquire ABE
Units.
(b)
Except as set forth in the ABE Disclosure Schedule, there are no
equity securities of any class or series of ABE, or any security
exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except for this
Agreement and as may be contemplated by the Investor Rights
Agreement, there are no options, warrants, equity securities,
calls, rights, commitments, understandings or agreements of any
character to which ABE is a party or by which it is bound
obligating ABE to issue, deliver or sell, or cause to be issued,
delivered or sold, additional ABE Units or obligating ABE to grant,
extend or enter into any such option, warrant, equity security,
call, right, commitment or agreement. Except for this Agreement,
the sale of ABE Units contemplated by the Form SB-2 registration
statement filed by ABE with the SEC on September 13, 2006 and
option grants after the date hereof to new employees of ABE in the
ordinary course of business, ABE is not in discussion, formal or
informal, with any person or entity regarding the issuance of any
equity or debt securities of ABE. Except as provided in this
Agreement, the ABE Operating Agreement and the other Transaction
Documents or any transaction contemplated hereby or thereby, there
are no voting trusts, proxies or other agreements or understandings
with respect to the voting of the ABE Units. No ABE securityholder
had the right, whether pursuant to applicable law, contract or
otherwise, to purchase or acquire any portion of a prior issuance
of ABE securities that was not satisfied, waived (including, if
applicable, through the expiration of a relevant notice period) to
the extent not satisfied, or validly
17
cancelled. ABE has not granted any
person or entity any registration rights with respect to any of its
securities, issued or unissued.
(c)
Except for restrictions under the ABE Operating Agreement, the ABE
Disclosure Schedule sets forth any agreements restricting the
transfer of any securities of ABE, identifying the parties thereto,
the number of securities subject to restriction and a summary of
the restrictions (the “ Lock-Up Agreements ”).
The Lock-Up Agreements are in full force and effect and are valid
and binding obligations of the parties thereto in accordance with
their respective terms, except to the extent that enforceability
may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of
creditors’ rights generally and by general principles of
equity, regardless of whether such enforceability is considered in
a proceeding at law or in equity. The ABE Disclosure Schedule sets
forth a list of all prior transfers of ABE securities.
Section
5.3
Authority; No Conflict; Required Filings and Consents
.
(a)
Each of ABE and Acquisition Sub has all requisite limited liability
company power and authority to enter into this Agreement and all
Transaction Documents to which it is or will become a party and to
consummate the transactions contemplated by this Agreement and such
Transaction Documents. The execution and delivery of this Agreement
and such Transaction Documents and the consummation of the
transactions contemplated by this Agreement and such Transaction
Documents have been duly authorized by all necessary limited
liability company action on the part of ABE and Acquisition Sub.
This Agreement has been and such Transaction Documents have been
or, to the extent not executed by ABE or Acquisition Sub as of the
date hereof, will be duly executed and delivered by ABE and/or
Acquisition Sub. This Agreement and each of the Transaction
Documents to which ABE or Acquisition Sub is a party constitutes,
and each of the Transaction Documents to which ABE or Acquisition
Sub will become a party, when executed and delivered by ABE and/or
Acquisition Sub, will constitute, assuming the due authorization,
execution and delivery by the other parties hereto and thereto, the
valid and binding obligation of ABE and/or Acquisition Sub,
enforceable by HGF and the Selling HGF Partners against ABE and/or
Acquisition Sub in accordance with their respective terms, except
to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors’ rights generally and
by general principles of equity, regardless of whether such
enforceability is considered in a proceeding at law or in
equity.
(b)
Except as set forth on the ABE Disclosure Schedule, the execution
and delivery by ABE and Acquisition Sub of this Agreement and the
Transaction Documents to which each is or will become a party does
not, and the consummation of the transactions contemplated by this
Agreement and the Transaction Documents to which each is or will
become a party will not, (i) conflict with, or result in any
violation or breach of any provision of the Certificate of
Organization or operating agreement of ABE or Acquisition Sub, (ii)
to the knowledge of ABE result in any violation or breach of, or
constitute a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any
benefit) under any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, contract or other
agreement instrument or obligation to which ABE is a party or by
which it or any of its properties or assets may be bound, or (iii)
to the knowledge of ABE and assuming the accuracy of the
representations and warranties made in this Agreement by SDWG,
conflict with or violate any foreign, federal, state, local or
municipal laws, statutes, ordinances, regulations and rules, or any
orders, writs injunctions, awards, judgments and decrees applicable
to the assets, properties and business.
(c)
None of the execution and delivery by ABE or Acquisition Sub of
this Agreement or of any other Transaction Document to which ABE or
Acquisition Sub is or will become a party or the consummation of
the transactions contemplated by this Agreement or such Transaction
Document will require ABE or Acquisition Sub to obtain any consent,
approval, order or authorization
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of, or to make any registration,
declaration or filing with, any Governmental Entity, except for
such consents, authorizations, filings, approvals and registrations
that are listed on the ABE Disclosure Schedule.
Section
5.4
SEC Filings . Each report, registration statement and
definitive proxy statement filed by ABE with the Securities and
Exchange Commission (the documents, the “ ABE SEC
Documents ”), including the consolidated financial
statements contained therein (the “ABE Financial
Statements” ): (i) complied as to form in all material
respects with the published rules and regulations of the SEC
applicable thereto and were timely filed; and (ii) as of the
respective dates thereof did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in light
of the circumstances under which they were made not misleading. The
ABE Financial Statements (i) are in accordance with the books and
records of ABE; (ii) were prepared in accordance with GAAP on a
consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and, in the
case of unaudited statements, as permitted by Form 10-QSB of the
SEC, and except that unaudited financial statements may not contain
footnotes and are subject to year-end adjustments; and (iii) fairly
present the consolidated financial position of ABE and its
subsidiaries as of the respective dates thereof and the
consolidated results of operations, cash flows and the changes in
members’ equity of ABE and its subsidiaries for the periods
covered thereby. Except as set forth in the ABE Financial
Statements, neither ABE nor its subsidiaries has any material debt,
liability or obligation of any nature, whether accrued, absolute,
contingent or otherwise, whether due or to become due other than
liabilities incurred in the ordinary course of business subsequent
to June 30, 2006, and liabilities of the type not required under
GAAP to be reflected in such financial statements.
Section
5.5
Tax Matters .
(a)
All Returns required to be filed prior to the date hereof by or on
behalf of ABE have been duly filed on a timely basis, and such
Returns are true, complete and correct in all material respects.
All Taxes shown to be payable on such Returns or on subsequent
assessments with respect thereto, and all payments of estimated
Taxes required to be made prior to the date hereof by or on behalf
of ABE with respect to such Returns have been paid in full on a
timely basis and no other Taxes are payable by ABE with respect to
items or periods covered by such Returns (whether or not shown on
or reportable on such Returns). ABE has withheld and paid over all
Taxes required to have been withheld and paid over, and complied
with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto, in
connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party. There are no liens on
any of the assets of ABE with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that ABE is
contesting in good faith through appropriate proceedings and for
which appropriate reserves have been established on the most recent
balance sheet included in the ABE SEC Documents (the “Most
Recent ABE Balance Sheet ”). ABE has not at any time been
(i) a member of an affiliated group of companies filing
consolidated, combined or unitary income or franchise tax returns,
or (ii) a member of any partnership or joint venture for a period
for which the statue of limitations for any Tax potentially
applicable as a result of such membership has not
expired.
(b)
The amount of ABE’s liability for unpaid Taxes (whether
actual or contingent) for all periods through the date of the Most
Recent ABE Balance Sheet does not, in the aggregate, exceed the
amount of the current liability accruals for Taxes reflected on the
Most Recent ABE Balance Sheet, and the Most Recent ABE Balance
Sheet reflects proper accrual in accordance with GAAP of all
liabilities for Taxes payable after the date of the Most Recent ABE
Balance Sheet attributable to transactions and events occurring
prior to such date. No material amount of taxable income or
liability for Taxes has been realized or incurred (or prior to and
including the First Closing Date will be realized or incurred)
since such date other than in the ordinary course of
business.
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(c)
HGF and the Selling HGF Partners have been furnished by ABE with
true and complete copies of (i) income tax audit reports,
statements of deficiencies, closing or other agreements received by
or on behalf of ABE relating to Taxes, and (ii) all federal and
state income or franchise tax Returns and state sales and use tax
Returns for or including ABE for all periods since the inception of
ABE. ABE does not do business in or derive income from any state
other than states for which Returns have been duly filed and
furnished to HGF and the Selling HGF Partners.
(d)
The Returns of ABE have never been audited by a government or
taxing authority, nor is any such audit in process, pending or, to
ABE’s knowledge, threatened. No deficiencies have been
asserted, and ABE has not received notice (in writing) that it has
not filed a Return or paid Taxes required to be filed or paid. ABE
is neither a party to any action or proceeding for assessment or
collection of Taxes, nor has such event been asserted or threatened
(in writing) against ABE or any of its assets. No waiver or
extension of any statute of limitations is in effect with respect
to Taxes or Returns of ABE. ABE has disclosed on its federal and
state income and franchise Returns all positions taken therein that
could give rise to a substantial understatement penalty or
comparable provisions of applicable state, local, foreign or other
Tax laws.
(e)
Except as may be required as a result of the transactions
contemplated hereby, ABE has not been and will not be required to
include any material adjustment in taxable income for any Tax
period (or portion thereof) or any comparable provision under state
or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the First Closing.
(f)
ABE is not, nor has it ever been, a party to any Tax sharing
agreement.
(g)
ABE is not, nor has it ever been, taxable as a corporation under
the Code. Since its organization, Acquisition Sub has been treated
as a disregarded entity for federal income tax purposes and
wholly-owned by ABE.
Section
5.6
Absence of Certain Changes or Events . Since the date of the
Most Recent ABE Balance Sheet, other than as set forth in the ABE
Disclosure Schedule, ABE has operated its business in the ordinary
course consistent with its past practices, and, other than as set
forth in the ABE Disclosure Schedule, since such date there has not
been with respect to ABE any:
(a)
Material Adverse Effect on ABE or any change, event, circumstance,
condition or effect that would reasonably be expected to result in
a Material Adverse Effect on ABE;
(b)
amendment or change in its Certificate of Organization or Operating
Agreement or the organizational documents of any of its
subsidiaries;
(c)
incurrence, creation or assumption of: (i) any material Encumbrance
on any of its assets or properties (other than Permitted
Encumbrances), (ii) any material liability for borrowed money or
(iii) any material liability as a guarantor or surety with respect
to the obligations of others;
(d)
payment or discharge of any material Encumbrance on any of its
assets or properties, other than in the ordinary course of
business, or payment or discharge of any of its liabilities, other
than in the ordinary course of business, after the date of the Most
Recent ABE Balance Sheet;
(e)
material damage, destruction or loss of any material property or
material asset, whether or not covered by insurance;
(f)
distribution made in respect of, the ABE Units, any direct or
indirect purchase or other acquisition of any ABE Units or any
change in any rights, preferences, privileges or restrictions of
any ABE Units;
20
(g)
material change or increase in the compensation payable or to
become payable to any of its officers, managers, employees,
members, agents, consultants, or independent contractors, or in any
bonus, commission, expense reimbursement, pension, severance,
retention, or insurance plan of ABE or in any other benefit payment
or arrangement made to or with any of such officers, managers,
employees, members, agents, consultants, or independent contractors
or any material modification of any “nonqualified deferred
compensation plan” as defined in Code Section
409A;
(h)
material change with respect to its management, supervisory or
other key personnel of ABE, termination of employment of a material
number of employees of ABE; termination of the engagement of a
material number of agents, consultants, or independent contractors
of ABE; or any union organizing activity at any ABE
facility;
(i)
liability incurred by it to any of its officers, managers,
employees, members, agents, consultants, or independent contractors
except for normal and customary compensation and expense allowances
in the ordinary course of its business consistent with its past
practices;
(j)
loan, advance (other than ordinary advances for work-related
expenses) or capital contribution to, or any investment in, any of
its officers, managers or members or any firm or business
enterprise in which any such person had a direct or indirect
material interest at the time of such loan, advance, capital
contribution or investment;
(k)
entering into, amendment of, relinquishment, termination or
nonrenewal of any ABE Material Contract other than in the ordinary
course of its business consistent with its past practices, default
by ABE under any such Material Contract; or written assertion by
the other party thereto of any material problems with its services
or performance under such Material Contract or such other
party’s desire to so amend in any material respect,
relinquish, terminate or not renew any such Material
Contract;
(l)
entering into any Contract that by its terms requires or
contemplates a current and/or future financial commitment, expense,
or obligation on its part that involves any individual payment in
excess of $10,000 or aggregate payments in excess of $120,000 in
any twelve month period;
(m)
making or entering into any Contract with respect to any
acquisition, sale, or transfer of any material asset of ABE that is
not entered into in the ordinary course of its business consistent
with past practices;
(n)
material change in accounting policies, methods or practices
(including any change in depreciation or amortization policies or
rates or revenue recognition policies); change in Tax elections or
methods; or revaluation of any asset, other than as a result of
transactions contemplated by this Agreement;
(o)
deferral of the payment of any material accounts payable, or any
material discount, accommodation or other concession made in order
to accelerate or induce the collection of any receivable, in each
case other than in the ordinary course of business consistent with
past practice;
(p)
payment, directly or indirectly, of any material liability before
the same became due and payable in accordance with its terms or
otherwise than in the ordinary course of business consistent with
past practice; or
(q)
announcement of, any negotiation by or any entry into any Contract
to do any of the things described in the preceding clauses (a)
through (p) (other than negotiations and agreements with HGF, DF,
SDWG and HP and their representatives regarding the transactions
contemplated by this Agreement).
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Section
5.7
Title