EXHIBIT 2
SALE AND EXCHANGE AGREEMENT
This Agreement (the "Agreement") made and entered into this 13th day of
September, 1999, by and among B & N POULTRY, a Texas general partnership,
SEARCY FARMS, LTD., KLESEL FARMS, LTD., HARWOOD POULTRY FARMS, LTD.,
BERGER/NOVAK CATTLE, LTD. and SMITH FARMS, LTD., all Texas limited
partnerships, SMITH FARMS, INC., a Texas corporation, and HENRY J. NOVAK,
individually, and BRYAN BERGER, individually (collectively "Sellers") and
CAL-MAINE FOODS, INC., a Delaware corporation.
RECITALS:
WHEREAS, Sellers own and operate a shell egg business and support
facilities at two locations (the "Locations"), one in Texas located near
Flatonia, Texas, and the other in Arkansas located near Searcy, Arkansas; and
WHEREAS, Sellers wish to sell to Cal-Maine certain real property and the
poultry, inventory items, equipment and other items of personal property used
in their shell egg business, and Cal-Maine wishes to acquire such property;
and
WHEREAS, Sellers wish to exchange certain of the equipment and certain
real property used in their shell egg business for other equipment and real
property in a transaction qualifying as a nontaxable exchange under Section
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1031 of the Internal Revenue Code of 1986 and its accompanying regulations;
and
NOW, THEREFORE, in consideration of the terms and conditions set forth
below, the parties agree as follows:
ARTICLE I
SALE OF ASSETS AND ASSIGNMENT OF CONTRACTS
SECTION 1.01 SCOPE OF AGREEMENT. Anything herein to the contrary
notwithstanding, it is expressly agreed that Cal-Maine is acquiring only the
specified assets of Sellers utilized by Sellers in the conduct of their
commercial shell egg businesses at their Texas and Arkansas locations. Any
reference to Sellers in the context of any assets to be acquired by Cal-Maine
or in relation to any contract or obligation assumed by Cal-Maine is deemed to
be limited to the assets or obligations of Sellers that are specifically
described in this Agreement. No other asset or obligation of Sellers is
involved. It is expressly agreed that Cal-Maine is not acquiring or assuming
any liabilities of Sellers except as specifically set forth in this Agreement.
SECTION 1.02 SALE OF REAL PROPERTY AND SALE OF PERSONAL PROPERTY
ASSOCIATED WITH SELLER'S SHELL EGG BUSINESS. Subject to the terms and
conditions of this Agreement, Sellers will sell, transfer, assign, and deliver
to Cal-Maine on the Closing Date (defined in Section 9.01 below) all of the
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real and personal property specifically described in Exhibit 1.02 of this
Agreement. The personal property consists of the flocks, feed, feed
ingredients, egg inventories, packaging inventories, vehicles, and other
personal property and equipment utilized in Seller's shell egg business.
Cal-Maine agrees that it is not purchasing any equipment or other personal
property related to Seller's general or cattle farming business and that
Sellers will retain all such assets. Further, Cal-Maine agrees it is not
purchasing any cash and investments, including the assets of Smith Holding
Company, Inc., and Sellers will retain all cash and investments, including the
assets of Smith Holding Company, Inc.
It is agreed that from the real property described in Exhibit 1.02 there
shall be excluded from the conveyance from Sellers to Cal-Maine approximately
284 acres, the ownership of which shall be retained by Sellers. It is agreed
that such 284 acres to be retained will only be property which is not
considered as essential to the ongoing shell egg business to be conducted by
Cal-Maine. As provided by Section 1.08, the total purchase price has been
reduced by $340,800, which is the assigned value for the 284 acres. As to such
excluded property Sellers hereby grant to Cal-Maine the right of first refusal
to acquire such property if sold by Sellers and further agree that such
retained property shall not be subdivided or used for residential purposes or
for commercial use. Provided, however, Sellers shall be permitted to use the
retained property for grazing and cattle operations. Such right of first
refusal and restriction of use shall be for a period of twenty-five years
after Closing.
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SECTION 1.03 ASSIGNMENT OF CONTRACTS.
(a) GENERAL. On the Closing Date, Sellers agree to assign to Cal-Maine
all rights which Sellers have in the contracts listed in Exhibit
1.03(a) of this Agreement, which exclude leases and contract
producer and grower agreements. Subject to the following
paragraph, Cal-Maine agrees to assume all obligations of Sellers
under all contracts listed in Exhibit 1.03(a) as of the Closing
Date.
Any contract scheduled in Exhibit 1.03(a) which cannot be
assigned to Cal-Maine for whatever reason, or which Cal-Maine
elects not to assume, shall be excluded and shall be retained by
Sellers without any price adjustment to this Agreement.
(b) CONTRACT PRODUCERS AND GROWERS. Sellers have, or will have,
entered into written contracts with the individuals or entities
that raise and grow pullet chicks or produce eggs on a contract
basis. These contracts are identified on Exhibit 1.03(b). On the
Inventory Date, Sellers shall assign all of the contracts listed
on Exhibit 1.03(b) to Cal-Maine, and Cal-Maine agrees to assume
all of such contracts approved by Cal-Maine. Sellers shall be
liable for all accrued liability, including, but not limited to,
any bonus earned but not paid as of Inventory Date, under all of
the contracts described in Exhibit 1.03(b) to the Inventory Date.
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Such bonus cannot be calculated as of Inventory Date or Closing
Date. Therefore, such amount shall be calculated and paid pursuant
to Sellers' assigned Contracts and Sellers shall reimburse
Cal-Maine for their pro rata share, computed as of Inventory Date,
upon request of Cal-Maine.
SECTION 1.04 ASSIGNMENT OF LEASES ON SUBLEASES OTHER THAN CONSTRUCTION
IN PROGRESS AND VEHICLE LEASES. Sellers currently lease certain equipment and
buildings from Farm Credit Leasing Services Corporation, utilized in the
operations of Seller's shell egg business. Sellers shall assign all equipment
and building leases scheduled in Exhibit 1.04 to Cal-Maine. Cal-Maine shall
assume or sublease such equipment and building leases, subject to approval of
the Lessors. Cal-Maine will exert its best efforts to obtain a release of
Berger, Novak and their entities from such lease obligations.
SECTION 1.05 TRANSFER OF BUSINESS RECORDS. Sellers shall transfer to
Cal-Maine on the Closing Date all customer lists, records of sales to
customers, customer credit information, product specifications, feed
formulations, flock records, personnel records of all Seller's employees hired
by Cal-Maine, plant performance and maintenance records, and operations
records of the facilities being acquired by Cal-Maine. Cal-Maine agrees to
cooperate and give Sellers reasonable access to such records if needed in the
case of an examination by any governmental or other agency.
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SECTION 1.06 INTELLECTUAL PROPERTY. Cal-Maine shall acquire all rights
to, or interest in, any intellectual property of Sellers, such as brands,
labels and trademarks, utilized by Sellers in their shell egg business except
the "Smith Farms" name, which Sellers agree Cal-Maine shall have the right to
use for a period of two years following the Closing.
SECTION 1.07 LICENSES AND PERMITS. Sellers shall assign or transfer to
Cal-Maine on or before the Closing Date all licenses, permits, registrations,
and other written forms of authorization required or utilized in the operation
of Sellers' shell egg business (collectively the "Licenses") described on
Exhibit 1.07 of this Agreement. Sellers shall assist Cal-Maine in obtaining
any necessary Licenses which are not assignable or transferable from Sellers.
SECTION 1.08 PAYMENT FOR NON-INVENTORIED ASSETS. In consideration of the
sale of certain real estate and personal property (other than construction in
progress under Section 1.09 and property subject to inventory under Section
1.10 below), the assignment of contracts described in Section 1.03,
intellectual and intangible personal property, the transfer of business
records pursuant to Section 1.05 of this Agreement, and the transfer of
Licenses, Cal-Maine will pay to Sellers by wire transfer on the Closing Date
the sum of $28,719,700. Such purchase price shall be reduced by the amount of
any payment obligation remaining on leases assumed by Cal-Maine other than
construction in progress or vehicle leases or to be paid on any sublease to
Cal-Maine pursuant to Section 1.04 hereof. The allocation of this purchase
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price to these assets is as shown in Exhibit 1.08 to this Agreement.
SECTION 1.09 CONSTRUCTION IN PROGRESS. Cal-Maine will purchase the
"construction in progress" accounts for the Klesel Complex and the Arkansas
Complex at their balances as of the Inventory Date. The amounts of such
accounts are estimated to be, as of September 18, 1999, as shown on Exhibit
1.09, and shall be verified to Cal-Maine's satisfaction prior to Closing.
Cal-Maine shall assume the existing leases with Farm Credit Leasing Services
Corporation attributable to construction in progress and will assume Seller's
obligation to Farm Credit Leasing Services Corporation on construction in
progress not yet closed to Lease. Cal-Maine shall pay to Sellers at closing by
wire transfer any Seller equity in construction in progress as of Inventory
Date. As used in ss. 1.09, the term "Equity" shall be defined as the amount of
the original obligation, less any remaining sum owed, plus the amount of
interim interest paid by Seller.
SECTION 1.10 CALCULATION OF PRICE FOR ASSETS SUBJECT TO INVENTORY. In
consideration for the sale of flock inventories (including flocks under
contracts which Cal-Maine agrees to assume as provided in Section 1.03(b)),
egg inventories, packaging inventories, finished feed and feed ingredients,
veterinary supplies, fuel, and certain vehicles and rolling stock, Cal-Maine
shall pay Sellers by wire transfer on the Closing Date an amount calculated as
the total purchase price for all such items as calculated under the provisions
of this Section 1.10.
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(a) MANNER OF VALUATION. All items covered by this Section 1.10 shall
be valued on the Inventory Date by mutual act of the parties using
the valuation methods set forth herein.
(b) INVENTORY DATE. The Inventory Date shall be September 18, 1999.
(c) FLOCK INVENTORIES. (1) Laying Flocks. The price for all flocks of
commercial layers located at Sellers and contract producers
facilities shall be the book value of such flocks as of the
Inventory Date which book value shall be computed consistent with
the flock inventory and value schedule furnished by Sellers to
Cal-Maine and dated May 31, 1999. Sellers agree to follow a
consistent depreciation schedule subsequent to May 31, 1999, as
that used prior thereto. The quantity of birds as of Inventory
Date may be established by a check of perpetual house records,
actual count, or spot check, as agreed by the parties. A copy of
the May 31, 1999 inventory and a copy of Seller's August 31, 1999
flock inventory is attached as Exhibit 1.10(c).
(2) Pullet Flocks. The purchase price for all pullets in place
at Sellers' facilities, or in the premises of Seller's Contract
Growers, shall be the book value of such flocks as of the
Inventory Date. Sellers have provided Cal-Maine with a schedule of
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pullet flock inventories and accumulated costs of each flock as of
May 31, 1999. Sellers shall follow the same method of accumulating
cost from May 31, 1999 to Inventory Date, on a consistent basis,
as was used in arriving at the values shown on the schedule dated
May 31, 1999. The quantity of birds as of Inventory Date may be
established by a check of perpetual house records, actual count,
or spot check, as agreed by the parties. A copy of the May 31,
1999 inventory and a copy of Seller's August 31, 1999 pullet flock
inventory is attached as Exhibit 1.10(c)(2).
(d) EGG INVENTORIES. The price for all packaged eggs ready for
delivery shall be the actual net selling price less actual
delivery costs and less one cent per dozen. The quantity of eggs
present on the Inventory Date shall be established by joint
inventory of Sellers and Cal-Maine. Ungraded eggs shall be counted
as of Inventory Date and priced in accordance with Exhibit 1.10(d)
hereto.
(e) PACKAGING MATERIALS AND FUEL. The price for all packing materials
and fuel shall be the actual net cost to Sellers consistent with
historical records and practices as verified to Cal-Maine's
satisfaction. The quantity shall be determined by physical count
on the Inventory Date, excluding obsolete inventories or material
that cannot be used in the normal course of business.
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(f) FINISHED FEED AND FEED INGREDIENTS.
(i) FINISHED FEED AT FARMS. The price shall be the actual
ingredient cost verified by invoices, plus $8.00 per ton.
(ii) FEED AT MILL. Such feed shall be priced at actual ingredient
cost, verified by invoice, plus actual milling costs.
(iii) FEED INGREDIENTS. The price for all feed ingredients shall
be the actual net cost thereof to Sellers.
(iv) DETERMINATION OF QUANTITY. The quantity of finished feed and
feed ingredients shall be determined by a physical count (or by
using reasonable methods of estimation where a physical count is
impractical) at mill and farm storage tanks on the Inventory Date.
(g) VETERINARY SUPPLIES. The price for all current and usable
vaccines, medications, and feed supplements in inventory on
Inventory Date shall be actual cost verified by invoice.
(h) VEHICLES, ROLLING STOCK AND FARM EQUIPMENT. The vehicles, rolling
stock and farm equipment for which a purchase price is to be
determined are scheduled in Exhibit 1.10(h) of this Agreement. The
price for these vehicles shall be their fair value on the
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Inventory Date as determined by the parties. At the option of
Sellers, if Sellers and Cal-Maine cannot agree on price on a
vehicle or vehicles, rather than conducting an appraisal, Sellers
can elect to retain the vehicle or vehicles for which a price
cannot be agreed to. Sellers will provide a complete list of
vehicles at each location. Such list will show description, model
number and year, serial number and Seller's estimate of value on
each vehicle. Sellers currently lease certain vehicles, rolling
stock and farm equipment from Farm Credit Leasing Services
Corporation, which leases are scheduled in Exhibit 1.10(h) of this
Agreement, utilized in the operation of Seller's shell egg
business. Sellers shall assign all such leases scheduled in
Exhibit 1.10(h) to Cal-Maine, except for retained vehicles.
Cal-Maine shall assume or sublease such vehicles, rolling stock
and farm equipment subject to the approval of the Lessors.
(i) ACCOUNTS RECEIVABLE. The value of accounts receivable to be
purchased by Cal-Maine shall be the face value thereof as of the
Inventory Date. Any receivable purchased by Cal-Maine and not paid
in full within thirty (30) days of Closing shall be repurchased in
full by Sellers upon demand by Cal-Maine.
(j) EGG BASKETS AND PLASTIC FLATS. On all usable egg baskets and
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plastic flats, the price therefor shall be 60% of the replacement
cost.
(k) PAYMENT FOR INVENTORIED ITEMS. On the Closing Date, Cal-Maine
shall pay Seller the purchase price for inventoried items by wire
transfer.
SECTION 1.11 TAXES, ASSESSMENTS AND FEES. Sellers shall pay any real
estate transfer fees imposed as a result of the transfers made under this
Agreement. Cal-Maine and Sellers shall prorate ad valorem taxes or assessments
with respect to the property transferred to Cal-Maine as of the date of
Closing.
SECTION 1.12 DESIGNATION OF GRANTEE. So long as Cal-Maine shall remain
obligated as to all of its duties, responsibilities and obligations hereunder,
Cal-Maine may designate one or more of its wholly owned subsidiaries to be the
Grantee to receive any or all of the assets of Sellers to be sold to Cal-Maine
under the provisions of this Agreement.
ARTICLE II
DEFERRED EXCHANGE OF PROPERTY
SECTION 2.01 CONVEYANCE OF REAL PROPERTY. On the Closing Date, Sellers
will convey to Cal-Maine the real property described on Exhibit 2.01 hereto
and all improvements situated thereon with all oil, gas, mineral and water
rights (the "Real Property") as more specifically described and at the values
shown in such Exhibit 2.01. The conveyance shall be by General Warranty Deed,
free and clear of any lien or encumbrance, except as may be specifically
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assumed by Cal-Maine.
The real property described in Exhibit 2.01(a), if any, shall be subject
to the exchange provisions of this ARTICLE II. Exhibit 2.01(a), if any, shall
be attached to this Agreement on or before the date of Closing.
SECTION 2.02 TRANSFER OF PERSONAL PROPERTY. On the Closing Date, Sellers
will transfer to Cal-Maine the personal property at the values shown in
Exhibit 2.02. The transfer shall be by Bill of Sale, free and clear of any
lien or encumbrance. The personal property described in Exhibit 2.02(a), if
any, shall be subject to the exchange provisions of this Article II.
SECTION 2.03 CREATION OF QUALIFIED ESCROW ACCOUNT. On or before the
Closing Date, Cal-Maine and Sellers shall enter into an escrow agreement ("the
Escrow Agreement") with Austin Trust Company ("the Escrow Agent") for the
creation of a "Qualified Escrow Account" within the meaning of Treasury
Regulation 1.1031(k)-1(g)(3). A copy of the Escrow Agreement shall be attached
as Exhibit 2.03 to this Agreement and incorporated herein by reference on or
before the date of Closing.
SECTION 2.04 DEPOSIT OF ESCROW FUNDS. On or before the Closing Date,
Cal-Maine shall deposit with the Escrow Agent the sum designated on Exhibit
2.01(a), if any, ("the Escrow Funds") to be held subject to the Escrow
Agreement and applied to the purchase of the personal property and one or more
parcels of real estate ("the Exchange Property") as described in Exhibits
2.01(a) and 2.02(a) for transfer and conveyance to Sellers. Sellers shall have
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no interest in or right to the Escrow Funds other than as provided in the
Escrow Agreement. Sellers shall pay all expenses associated with the Escrow
Agreement and shall hold Cal-Maine harmless as to all activities engaged in by
Cal-Maine with respect to the exchange transactions, the escrow funds, and the
Escrow Agreement. Sellers shall have the right to defend and to control the
defense against any claims made against Cal-Maine with respect to the
transactions for which indemnity is provided by this Section 2.04.
SECTION 2.05 IDENTIFICATION OF EXCHANGE PROPERTY. No later than
forty-five (45) days after the Closing Date, Sellers shall deliver to
Cal-Maine a writing identifying the personal property and one or more parcels
of real estate which shall serve as the Exchange Property.
SECTION 2.06 ACQUISITION AND CONVEYANCE OF EXCHANGE PROPERTY. Upon
receipt of the writing identifying the Exchange Property, Cal-Maine shall
direct the Escrow Agent to disburse the Escrow Funds to purchase as much of
the designated Exchange Property as possible. If the Escrow Funds are
insufficient to purchase all of the Exchange Property, Sellers shall have the
right to contribute the additional funds necessary for such purchase;
otherwise, Cal-Maine may decline to purchase one or more of the identified
terms. Cal-Maine shall direct the seller or sellers of the Exchange Property
to convey title free and clear of all liens and encumbrances by a Bill of Sale
and/or a General Warranty Deed directly to Sellers within 180 days of the
Closing Date; provided, however, that Sellers may in writing waive this
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requirement and accept an item of Exchange Property which is subject to
particular liens.
SECTION 2.07 PROCEDURE IF NO EXCHANGE PROPERTY IDENTIFIED. If Sellers
have failed to identify any Exchange Property within the time allotted by
Section 2.05 of this Agreement, Cal-Maine shall inform the Escrow Agent in
writing of this occurrence.
SECTION 2.08 CONSTRUCTION AND INTERPRETATION OF ARTICLE II AND THE
ESCROW AGREEMENT. It is the intent of the parties that the transfer of the
personal property and the conveyance of real estate provided for in this
Article II shall accomplish a delayed nontaxable exchange in compliance with
Section 1031(a)(3) of the Internal Revenue Code of 1986 and Section
1.1031(k)-1 of the Treasury Regulations. ARTICLE II of this Agreement and the
Escrow Agreement shall be construed and interpreted in a manner consistent
with this intent.
ARTICLE III
ASSOCIATED AGREEMENTS
SECTION 3.01 RIGHT TO RUN CATTLE ON LAND. Cal-Maine and Sellers shall
enter into an agreement whereby Cal-Maine will grant to Sellers the right to
run not more than seven hundred (700) mature head of cattle on approximately
two thousand two hundred twenty-three (2,223) acres of Texas land acquired by
Cal-Maine from Sellers for a period of one year after Closing. Such right
shall be without fee to Cal-Maine other than Cal-Maine receiving an indemnity
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against liability of loss in such agreement. During the one year period of the
lease, Cal-Maine and Sellers will review the future extension of the lease on
all or part of the 2,223 acres, under terms mutually acceptable to Cal-Maine
and Sellers.
SECTION 3.02 CONSULTING AND NON-COMPETITION AGREEMENTS. On the Closing
Date, Cal-Maine, Novak and Berger shall enter into contracts ("the
Agreements") whereby Novak and Berger will perform agreed services for
Cal-Maine and agree not to compete. Copies of the Agreements in the form to be
executed at Closing are attached as Exhibits 3.03(a), (b), (c) and (d).
ARTICLE IV
OPERATION OF FACILITY AFTER INVENTORY DATE
SECTION 4.01 PROFIT AND LOSS. The parties agree that beginning at 12:00
midnight on the Inventory Date, Cal-Maine shall assume possession of, and
shall operate all of, the assets of Sellers being acquired by Cal-Maine
pursuant to this Agreement. All profit, losses and expenses after 12:00
midnight on the Inventory Date shall be for the account of Cal-Maine and shall
be Cal-Maine's responsibility.
SECTION 4.02 UTILITIES. Sellers shall be responsible for paying all
utility charges incurred up to 12:00 midnight on the Inventory Date. Cal-Maine
shall pay all utility charges after 12:00 midnight on the Inventory Date.
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Sellers shall transfer utilities to Cal-Maine the day following Inventory
Date.
SECTION 4.03 DEPOSITS. All of Sellers' deposits, utility or otherwise,
shall be returned to Sellers, and Cal-Maine shall post any required deposits
for continuation of such services.
SECTION 4.04. RISK OF LOSS; INSURANCE. The risk of loss as to all assets
transferred from Sellers to Cal-Maine (including the risks associated with the
shell egg business) shall shift from Sellers to Cal-Maine at 12:00 midnight on
the Inventory Date. Sellers alone shall be responsible to maintain insurance
coverage on assets and the operations of the shell egg business until 12:00
midnight on the Inventory Date. Cal-Maine alone shall be responsible to
maintain insurance coverage on such assets and the operations of the shell egg
business after 12:00 midnight on the Inventory Date.
SECTION 4.05 ASSISTANCE OF CAL-MAINE PERSONNEL. After the Inventory
Date, Cal-Maine agrees to make available to Sellers such Cal-Maine personnel
as may be reasonably necessary at one or more of the facilities purchased by
Cal-Maine under the terms of this Agreement to assist Sellers in paying
Sellers' payables that have resulted from Sellers' operation of Sellers' shell
egg business. All such payments shall be made with funds of Sellers.
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ARTICLE V
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLERS
SECTION 5.01. Sellers hereby represent, warrant and covenant to
Cal-Maine, such representations and warranties to be true and correct on the
date hereof, and on the Closing Date, that:
(a) ORGANIZATION, QUALIFICATION AND GOOD STANDING. Sellers are duly
organized, validly existing, and in good standing under the laws
of the State of Texas, as set forth in the opening paragraph of
this Agreement, with the exception of Smith Farms, Ltd., who will
ratify this Agreement as of the date of Closing.
(b) AUTHORIZATION. The execution and delivery of this Agreement to
Cal-Maine and the consummation of the sales contemplated herein
have been duly authorized by all necessary individual, corporate,
partnership or other entity action on the part of Sellers. The
execution, delivery, and performance of this Agreement by Sellers
will not conflict with or result in the breach or violation of any
term or provision of Sellers' Articles of Incorporation,
Partnership Agreement, By-Laws, or of any agreement to which
Sellers are a party.
(c) LITIGATION CLAIMS. There are no claims, actions, suits, or
proceedings, either administrative or judicial, pending or
threatened; and, no adverse orders of any governmental,
administrative, or regulatory body have been or will be issued,
against or relating to the property to be transferred hereunder,
that could adversely affect or prevent the sale thereof, the
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ongoing operation of Sellers' business, or the value of the assets
being purchased hereunder.
(d) NO MATERIAL OR ADVERSE CHANGE. Sellers will not make any material
or adverse change in their shell egg business subsequent to the
date hereof without the prior written consent of Cal-Maine.
(e) CAPITAL EXPENDITURES. There are no contractual obligations of
Sellers in existence as of the date hereof, except as disclosed on
Exhibit 5.01(e), for expenditures involving fixed or capital
assets, including, but not limited to, purchase orders for
machinery and equipment (hereinafter collectively referred to as
"Capital Expenditures"). Sellers agree not to enter into any such
obligations prior to Closing without the written consent of
Cal-Maine.
(f) CONDUCT OF BUSINESS.
(i) Sellers have and shall, until 12:00 midnight of the
Inventory Date, continue to operate their shell egg facilities
from the date of execution of this Agreement until 12:00 midnight
of the Inventory Date in a prudent and normal fashion, consistent
with past practices. All profits and losses from 12:00 midnight of
the Inventory Date until Closing shall be for Cal-Maine's account.
Prior to 12:00 midnight of the Inventory Date, all profits or
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losses shall be for the account of Sellers. Sellers shall take no
actions after the date hereof and prior to the Inventory Date
except those normal in the ordinary course of Sellers' business or
as contemplated hereunder.
(ii) Sellers will at all times use their best efforts to preserve
their shell egg business and to maintain the goodwill of the
present customers, suppliers, and employees of such business.
(iii) In the event of damage to any personal property used in
their shell egg business or to improvements on the Real Property
prior to the Inventory Date, Sellers shall repair the damaged
item. In the event of destruction of any such item prior to the
Inventory Date, Sellers shall replace such item with a like item
of the same value, or at the option of Cal-Maine, the sale price
established by this Agreement shall be adjusted to account for
such destruction.
(g) DEFAULT. Sellers shall not be in default at Closing under any
contract or lease to be assigned to, or assumed by, Cal-Maine.
(h) LIENS. At Closing, there will be no lien or encumbrance of any
nature on any asset to be purchased by Cal-Maine, except as
specifically accepted by Cal-Maine and scheduled on Exhibit
5.01(h).
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(i) ACCESS TO INFORMATION. Sellers will cooperate with and support
Cal-Maine following Closing by making available to Cal-Maine any
data reasonably requested by Cal-Maine relating to the assets and
the operations of Sellers' shell egg business and their employees.
(j) ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. Sellers represent
and warrant that they have obtained and maintained all permits,
licenses and other authorizations that are required of them under
all Environmental Laws. As used herein, the term "Environmental
Laws" means any and all federal, state and local statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions related to the protection of the
environment or the release of any materials into the environment,
including but not limited to, those related to hazardous
substances or waste, air omissions and discharge to waste or
public systems. Sellers further represent and warrant that they
have complied with all terms and conditions of such permits,
licenses and authorizations, and with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and time tables contained in all
Environmental Laws or in any regulation, ordinance or code
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applicable to them, any plan, order, decree, judgment, injunction,
notice or demand letter issued in or promulgated or approved
thereunder directly applicable to them, and that Sellers have
operated all property subject to this Agreement in a manner so
that no claims or obligations, including clean-up obligations,
shall arise under any Environmental Law.
Sellers agree, for a period of seven (7) years after the
date of Closing, jointly and severally, to defend, indemnify and
to hold Cal-Maine and its respective affiliates, employees,
agents, officers and directors harmless from and against any
claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way
relating to the violation of, non-compliance with, or liability
under any Environmental Laws applicable to the Seller's property
which is being acquired by Cal-Maine, or any orders, requirements,
or demands of any governmental authority relating thereto,
including without limitation, reasonable attorneys and consultant
fees, response costs, court costs, litigation expenses, except to
the extent that any of the foregoing directly results from the
gross negligence or willful misconduct of Cal-Maine or its agents,
servants or employees.
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SECTION 5.02 ACCESS TO ASSETS. Prior to the Inventory Date, Cal-Maine
shall, upon prior reasonable notice to Sellers, have the right of access to
the assets subject to this Agreement and to have a reasonable number of
Cal-Maine personnel present at the facilities. Prior to the Inventory Date,
Cal-Maine personnel shall not interfere with or impede Sellers' employees in
the performance of their duties. Cal-Maine agrees to defend, indemnify, and
hold Sellers harmless from and against any loss, cost, damage or liability
which is the result of any physical injury or damage sustained by any person,
or any damage to real or personal property, or any third-party liability, as a
direct result of the presence on the Locations of Cal-Maine personnel.
Seller's employees will become Cal-Maine employees as of the day after
Inventory Date. From the date hereof until Closing, Novak and Berger will
devote their full time and efforts to running and managing the assets being
sold to Cal-Maine and will cooperate with Cal-Maine in such transition. Novak
and Berger agree to manage and run the assets from the date hereof until
Closing in a manner acceptable to Cal-Maine and consistent with their past
practices.
SECTION 5.03 DISCLAIMER OF CERTAIN WARRANTIES.
(a) CONDITION OF VEHICLES, ROLLING STOCK & EQUIPMENT. Sellers make no
warranties, express or implied, to Cal-Maine regarding the
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condition of vehicles, rolling stock and equipment. Cal-Maine
agrees that it is buying the vehicles, rolling stock and equipment
in an "as is" condition. Cal-Maine has inspected the vehicles,
rolling stock and equipment and is satisfied with their condition.
(b) OTHER PROPERTY. Cal-Maine agrees that it is buying all other items
of tangible personal property in "as is" condition. Cal-Maine
agrees that it has inspected or had the opportunity to inspect all
of such property and is satisfied with its condition. Sellers
disclaim all express or implied warranties with respect to such
property, including any warranties as to the health of the flocks
being sold to Cal-Maine.
SECTION 5.04 SURVIVAL OF WARRANTIES; INDEMNIFICATION.
(a) GENERAL. All the warranties and representations given by Sellers
in this Agreement, all of which are relied upon by Cal-Maine,
shall survive the Closing Date hereof. Sellers agree to defend,
indemnify, and hold Cal-Maine harmless from and against any loss,
damage, claim, liability, cost or expense (including reasonable
attorney fees) which Cal-Maine may incur or sustain, before or
after the Closing Date, resulting from or arising out of any
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breach of any of said representations and warranties. Sellers
shall have the right to defend and to control the defense against
any such loss, damage, claim, liability, cost or expense.
ARTICLE VI
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF CAL-MAINE
SECTION 6.01. Cal-Maine represents, warrants and covenants to Sellers,
such representations and warranties to be true and correct on the date hereof,
and on the Closing Date, that:
(a) ORGANIZATION, QUALIFICATION, AND GOOD STANDING. Cal-Maine is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware and is registered to do
business and is in good standing under the laws of each state in
which Cal-Maine does business. All corporate proceedings required
to be taken by Cal-Maine to authorize the execution, delivery and
consummation of this Agreement have been duly and validly taken
and will be in full force and effect on the Closing Date. At the
Closing, Cal-Maine will provide to Sellers a Certificate of Good
Standing from the State of Delaware.
(b) AUTHORITY; BINDING EFFECT. Cal-Maine has full power and authority
to execute and perform this Agreement and all related agreements,
and this Agreement and all related agreements constitute the
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legal, valid and binding obligation of Cal-Maine enforceable
against Cal-Maine in accordance with their terms.
(c) COMPLIANCE WITH OTHER INSTRUMENTS. Cal-Maine is neither a party
to, nor otherwise subject to, any agreement or other instrument
which would prevent or prohibit Cal-Maine from the execution or
consummation hereof or any part hereof.
SECTION 6.02 SURVIVAL OF WARRANTIES; INDEMNIFICATION. All the warranties
and representations given by Cal-Maine in this Agreement, all of which are
relied upon by Sellers, shall survive the Closing Date hereof. Cal-Maine
agrees to defend, indemnify and hold Sellers harmless from and against any
loss, damage, claim, liability, costs or expense (including reasonable
attorney fees) which Sellers may incur or sustain, before or after the Closing
Date, resulting from or arising out of any breach of any of said
representations and warranties. Cal-Maine shall have the right to defend and
to control the defense against any such loss, damage, claim, liability, cost
or expense.
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ARTICLE VII
EMPLOYEE AND CONTRACTOR MATTERS
SECTION 7.01 CAL-MAINE'S HIRING OBLIGATIONS. It is agreed that Cal-Maine
is under no obligation to hire and provide employment for any of Sellers'
existing salaried or exempt employees. It is Sellers' obligation to terminate
all such employees. However, Cal-Maine intends to offer employment to many of
the Sellers' employees involved in the operation of the assets being acquired
by Cal-Maine. Sellers consent to such hiring.
Employees of Sellers hired by Cal-Maine shall be given credit for
existing seniority or time of employment with Sellers at such time as they
become Cal-Maine employees, except for Cal-Maine service awards. However,
Cal-Maine shall not assume or be responsible for any earned but unpaid
benefits, such as vacation or sick leave time. As to such earned benefits,
Sellers shall either pay such benefits directly to the eligible employee or
reimburse Cal-Maine for the amount thereof if Cal-Maine agrees to make such
payment to any employee. Similarly, Sellers shall be responsible for paying
any earned but unpaid bonus or other earned benefit due any employee.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
SECTION 8.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF CAL-MAINE. The
obligation of Cal-Maine to consummate the transactions contemplated by this
Agreement is subject to the fulfillment by Sellers on or before the Closing
Date of all of the following conditions, which conditions may only be waived
30
by Cal-Maine in writing:
(a) REPRESENTATIONS AND WARRANTIES TRUE. All of the representations
and warranties of Sellers contained in this Agreement shall be
true and correct on and as of the Closing Date. Sellers shall
provide Cal-Maine a certificate to this effect as of the Closing
Date signed by an authorized representative of each Seller.
(b) COVENANTS AND ASSIGNMENTS PERFORMED. Prior to or on the Closing
Date, Sellers shall have performed and complied with all
covenants, agreements, or conditions and delivered all documents
required by this Agreement to be performed, complied with, or
delivered by Sellers.
(c) CONSENTS TO ASSIGNMENTS. Cal-Maine shall have received duly
executed originals of any consents necessary to effectuate
assignments of any contracts, leases, licenses, or permits to be
assigned by Sellers to Cal-Maine.
(d) OPINION OF COUNSEL TO SELLERS. Sellers shall have delivered to
Cal-Maine the opinion of Sellers' counsel, dated as of the Closing
Date, in a form and substance satisfactory to Cal-Maine and its
counsel, to the effect that:
(i) Sellers are entities as described in the first introductory
paragraph hereof and are validly existing, and in good standing
under the laws of the State of their formation and are duly
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qualified in all jurisdictions where their properties or
activities require such qualification.
(ii) Sellers have the power to sell the assets to be sold to
Cal-Maine hereunder.
(iii) The execution and delivery of this Agreement and the sale by
Sellers hereunder have been duly authorized by all necessary
required actions and parties.
(iv) Sellers have fully complied with all the requirements of
this Section 8.01, and the instruments executed and delivered to
Cal-Maine at Closing are sufficient to convey to Cal-Maine good,
marketable, and unencumbered title to the property transferred at
such time.
(e) WARRANTY DEED, SURVEYS AND CERTIFICATE OF TITLE. At least two (2)
days prior to Closing, Sellers shall deliver to Cal-Maine land
surveys of all real property being acquired by Cal-Maine which
shall meet the requirements of the State of Texas for title
insurance, without survey exceptions, and an attorney's
Certificate of Title on the state of the title to the Real
Property and a deed conveying the Real Property with general
warranty covenants, free and clear of all liens or encumbrances,
and including all oil, gas and mineral rights and water rights
held by Seller, which surveys and Certificate of Title shall
evidence good, merchantable and insurable title, with only such
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exceptions as are acceptable to Cal-Maine. If title insurance is
desired, Cal-Maine shall procure it at its own expense. At the
date of Closing, if all surveys are not available, an amount equal
to the value of the unsurveyed property shall be escrowed until
the survey is completed and approved by Cal-Maine. All surveys
shall be delivered by Sellers to Cal-Maine within thirty (30) days
of Closing.
(f) ENVIRONMENTAL SURVEY. At least two (2) days prior to Closing,
Sellers shall have delivered to Cal-Maine Phase One Environmental
Surveys showing the environmental condition of all property to be
acquired by Cal-Maine to be acceptable to Cal-Maine for such
properties' intended use.
SECTION 8.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. The
obligation of Sellers to consummate the transactions contemplated by this
Agreement is subject to the fulfillment on or before the Closing Date of all
the following conditions, any of which may be waived by Sellers:
(a) REPRESENTATIONS AND WARRANTIES TRUE. All of the representations
and warranties of Cal-Maine contained in this Agreement shall be
true and correct in all material respects on and as of the Closing
Date.
(b) COVENANTS AND AGREEMENTS PERFORMED. Cal-Maine shall have delivered
33
all documents required by this Agreement and shall have performed
and complied with all covenants and agreements required by this
Agreement to be performed.
(c) OPINION OF COUNSEL OF CAL-MAINE. Cal-Maine shall have delivered to
Sellers the opinion of Cal-Maine's counsel, dated as of the
Closing Date in a form and substance satisfactory to Sellers and
their counsel, to the effect that:
(i) Cal-Maine is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of
Delaware.
(ii) Cal-Maine has the corporate power to buy the assets to be
sold by Sellers hereunder.
(iii) The execution, delivery, and consummation of this Agreement,
have been duly authorized by all necessary corporate and
shareholder actions, and all such documents have been properly
executed and delivered and are valid, binding obligations of
Cal-Maine.
ARTICLE IX
CLOSING
SECTION 9.01 CLOSING DATE. The Closing Date shall be September 30, 1999.
The parties shall meet at the offices of Norwest Bank in Austin, Texas
34
(Highway 183), to deliver documents and funds to each other as required by
this Agreement; provided, however, that the Closing Date and the meeting place
may be altered by mutual consent of the parties.
SECTION 9.02 SELLERS' OBLIGATIONS AT CLOSING. On the Closing Date,
Sellers shall have complied with ARTICLE VIII hereunder and shall further
deliver or cause to be delivered to Cal-Maine the following:
(a) Bills of Sale in the form of Exhibit 9.02(a) and such other
documents (e.g., Certificates of Title), containing warranties of
good and marketable title, necessary to transfer title to all
personal property free and clear of any and all liens or
encumbrances.
(b) General Warranty Deeds to the Real Property being acquired by
Cal-Maine.
(c) A Certificate of Title as required by Section 8.01(e).
(d) Certified resolutions of Sellers' Board of Directors approving the
making and performance of this Agreement, the Escrow Agreement,
and the agreements referred to in ARTICLE III of this Agreement.
(e) The opinion of Sellers' counsel required pursuant to Section
8.01(d).
(f) The allocations required pursuant to Section 1.08, signed and
dated by both parties.
35
(g) Such other documents or evidence as Cal-Maine or its counsel may
reasonably request.
SECTION 9.03 CAL-MAINE'S OBLIGATION TO SELLERS AT CLOSING. On the
Closing Date, Cal-Maine shall have complied with ARTICLE VIII hereunder and
shall further deliver to Sellers the following:
(a) The wire transfer of the funds provided for in Sections 1.08, 1.09
and 1.10 and confirmed receipt of such funds.
(b) Written or telephonic evidence of the deposit of the Escrow Funds
with the Escrow Agent as provided by Section 2.03 of this
Agreement and the Escrow Agreement.
(c) Certified resolutions of Cal-Maine's Board of Directors approving
the making and performing of this Agreement, the Escrow Agreement,
and the agreements referred to in ARTICLE III of this Agreement.
(d) The opinion of Cal-Maine's counsel required pursuant to Section
8.02(c).
(e) The allocations required pursuant to Section 1.08 and the
appraisal report required by Section 1.09, signed and dated by
both parties.
(f) Such other documents or evidence as Sellers or their counsel may
reasonably request.
36
SECTION 9.04 AUTHORITY. The representatives of both parties present at
the Closing provided in Section 9.01 shall have full authority to execute the
Escrow Agreement and the agreements referred to in ARTICLE III of this
Agreement on behalf of their respective principals.
SECTION 9.05. DOCUMENTATION OF SALE AFTER CLOSING. From time to time at
either party's request, whether at or after the Closing Date and without
additional consideration, the other party at its expense, will execute and
deliver such further instruments of conveyance and take such other action as
the requesting party may reasonably require to more effectively complete the
transfer and delivery of the Property, and other items transferred hereunder.
SECTION 9.06 EXPENSES. Each party to this Agreement shall be responsible
for and pay their own expenses in connection with the negotiations, execution
and consummation of this Agreement, the transfers and assignments provided
herein and all other duties, obligations and responsibilities hereunder
including, but not limited to, their respective attorneys, accounts,
surveyors, appraisers and engineers. Each party represents that it has not
utilized the services of any broker or agent in connection with the
transaction described in this Sale and Exchange Agreement. Each party hereby
indemnifies and agrees to defend and hold harmless the other party from and
against any and all claims, actions, liabilities, expenses and losses relating
to any finder's or brokers' fees of, or other claims by, any finder or broker
engaged or purported to have been engaged by the indemnifying party in
37
connection with the transactions described in this Sale and Exchange
Agreement.
ARTICLE X
BULK SALES
SECTION 10.01. WAIVER. Cal-Maine hereby waives compliance by Sellers
with the requirement of any applicable laws relating to bulk sales and
transfer, and Sellers hereby agree to indemnify and hold harmless Cal-Maine
from any and all claims, liabilities, or costs arising with respect thereto,
including reasonable attorney's fees. The foregoing indemnification shall
survive the Closing Date.
ARTICLE XI
MISCELLAENOUS PROVISIONS
SECTION 11.01. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors
in interest. This Agreement and the rights and obligations of any party
hereunder shall not be assignable except with the written consent of the other
parties hereto, which consent shall not be unreasonably withheld.
SECTION 11.02 NOTICES. Any notice required or permitted under this
Agreement shall be deemed given on the date sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows or to
any other address as shall be furnished in writing by any addressee:
38
If to Sellers: c/o John P. Bender, Attorney
1405 Lorrain Street
Austin, Texas 78703
If to Cal-Maine: Cal-Maine Foods, Inc.
Post Office Box 2960
Jackson, Mississippi 39207
Attn: Fred R. Adams, Jr.
Dolph Baker
B. J. Raines
Sellers shall provide written wire transfer instructions to Cal-Maine at
least two (2) business days prior to Closing.
SECTION 11.03 GOVERNING LAW. This Agreement shall be governed by the law
of the State of Texas in all respects except the following:
(a) All questions of a corporate party's authority to make or perform
this Agreement shall be determined under the laws of the state of
that party's incorporation.
SECTION 11.04 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretations of
this Agreement.
SECTION 11.05 INCORPORATION BY REFERENCE. Exhibits 1.02 through 9.02(a)
are hereby incorporated by reference. Any Exhibits which are incomplete upon
the execution of this Agreement shall be produced and agreed to by the parties
prior to the Closing Date, and incorporated into this Agreement as though
originally attached.
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SECTION 11.06 WAIVERS AND AMENDMENTS. This Agreement and the other
instruments to be executed pursuant to this Agreement may be amended,
superseded, cancelled, renewed, or extended, and their terms or covenants may
be waived only by a written waiver by the party entitled to demand compliance.
The failure of any party at any time or times to require performance of any
provision shall in no manner affect its right at a later time to enforce that
provision. No waiver by any party of the breach of any term or covenant
contained in this Agreement or in any other such instrument, whether by
conduct or otherwise, in any one or more instances, shall be deemed or
construed as a further or continuing waiver of any breach of that term any
other term or covenant contained herein. The parties reserve the right by
mutual written consent to amend, modify, supersede, and cancel this Agreement,
or waive the terms or conditions hereof, without the consent of any other
person (natural or otherwise).
SECTION 11.07 SEVERABILITY. In case any provision of this Agreement or
any application thereof shall be deemed invalid, illegal or unenforceable, the
validity, legality, and enforceability of the remaining provisions and
statements and any other application thereof shall not be affected or
impaired.
SECTION 11.08 ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto set forth the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements, arrangements, and understandings, written or oral, relating to its
subject matter.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the day, month, and year first above written.
B & N POULTRY, by B&N GP, Inc., general
partner of B Berger, L.P. and H. Novak,
L.P., its general partners
By: ________________________________________
Henry J. Novak, President B&N GP, Inc.
and executive director of H. Novak, L.P.
By: ________________________________________
Bryan Berger, executive director of
B. Berger, L.P.
Searcy Farms, Ltd., Klesel Farms, Ltd.,
Harwood Poultry Farms, Ltd., Berger/Novak
Cattle, Ltd., by B&N GP, Inc., its general
partner
By: ________________________________________
Henry J. Novak, President B&N GP, Inc.
and executive director of Searcy Farms,
Ltd., Klesel Farms, Ltd., Harwood
Poultry Farms, Ltd., Berger/Novak
Cattle, Ltd.
Smith Farms, Ltd., by Smith Farms, Inc., its
general partner
By: ________________________________________
Henry J. Novak, President Smith Farms,
Inc. and executive director of Smith
Farms, Ltd.
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Smith Farms, Inc.
By: ________________________________________
Henry J. Novak, its President and
President of Smith Holding Company,
Inc.
________________________________________
Henry J. Novak
________________________________________
Bryan Berger
________________________________ CAL-MAINE FOODS, INC.
________________________________ By:________________________________
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TABLE OF EXHIBITS
1. Agreement for Custodial Account
2. Assignment of Accounts Receivable
3. Assignment of Contracts
4. Assignment of Contract for Producers and Growers
5. Assignment of Leases
6. Assignment of Licenses and Permits
7. Bill of Sale of Personal Property and Equipment
8. Certificates of Corporate Resolution and Authorization for Transactions
a. Bryan Berger and Henry J. Novak
b. B&N GP, Inc.
c. Harwood Poultry Farms, Ltd.
d. Klesel Farms, Ltd.
e. Searcy Farms, Ltd.
f. Smith Egg Farms, Ltd.
g. Smith Farms, Inc.
h. Smith Holding Company, Inc.
9. Certificates of Incorporation and Limited Partnership
10. Closing Memorandum and Agreement
11. Consulting Agreement - Bryan Berger
12. Agreement Not to Compete - Bryan Berger
13. Consulting Agreement - Henry Novak
14. Agreement Not to Compete - Henry Novak
15. Right of First Refusal
16. Opinion of Counsel - John P. Bender
17. Warranty Deeds
a. Deed #1 - Lonoke County, AR
b. Deed #2 - Lonoke and White Counties, AR
c. Deed #3 - Fayette County, TX
d. Deed #4 - Fayette County, TX (Lots 7 & 8 in Block 20 of Flatonia
on W 6th Street
e. Deed #5 - Caldwell County, TX
f. Deed #6 - Caldwell County, TX
g. Deed #7 - Gonzales County, TX
h. Deed #8 - Gonzales County, TX
i. Deed #9 - Gonzales County, TX
j. Deed #10 - Fayette County, TX
43