10-Q
Cal-Maine Foods Inc (CALM)
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Index
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM
10-Q
☑
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended
March 1, 2025
or
☐
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number:
001-38695
CAL-MAINE FOODS, INC.
(Exact name of registrant as specified in its charter)
Delaware
64-0500378
(State or other jurisdiction of incorporation or organization)
(I.R.S Employer Identification No.)
1052 Highland Colony Pkwy
,
Suite 200
,
Ridgeland
,
Mississippi
39157
(Address of principal executive offices)
(Zip Code)
(
601
)
948-6813
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
CALM
The
NASDAQ
Global Select Market
Indicate
by
check
mark
whether
the
registrant: (1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities Exchange Act of
1934 during the
preceding 12 months (or
for such shorter period
that the registrant was
required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
☑
No
☐
Indicate by check mark
whether the registrant has
submitted electronically every Interactive Data
File required to be
submitted
pursuant to
Rule 405 of
Regulation S-T (§232.405
of this
chapter) during
the preceding
12 months
(or for
such shorter period
that the registrant was required to submit such files).
Yes
☑
No
☐
Indicate by check
mark whether the
registrant is a
large accelerated filer,
an accelerated filer,
a non-accelerated filer,
a smaller
reporting
company,
or
an
emerging
growth
company.
See
the
definitions
of
“large
accelerated
filer,”
“accelerated
filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filer
☑
Accelerated filer
☐
Non – Accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If
an
emerging
growth
company,
indicate
by
check
mark
if
the
registrant
has
elected
not
to
use
the
extended
transition
period
for
complying
with
any
new
or
revised
financial
accounting
standards
provided
pursuant
to
Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐
No
☑
There were
44,245,955
shares of Common
Stock, $0.01 par
value, and
4,800,000
shares of Class
A Common Stock,
$0.01 par
value, outstanding as of April 8, 2025.
Index
2
INDEX
Page
Number
Part I.
Financial Information
Item 1.
Financial Statements
Condensed Consolidated Balance Sheets -
March 1, 2025 and June 1, 2024
3
Condensed Consolidated Statements of Income -
Thirteen and Thirty-nine Weeks Ended March 1, 2025 and March 2, 2024
4
Condensed Consolidated Statements of Comprehensive Income -
Thirteen and Thirty-nine Weeks Ended March 1, 2025 and March 2, 2024
5
Condensed Consolidated Statements of Cash Flows -
Thirteen and Thirty-nine Weeks Ended March 1, 2025 and March 2, 2024
6
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
20
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
32
Item 4.
Controls and Procedures
32
Part II.
Other Information
Item 1.
Legal Proceedings
33
Item 1A.
Risk Factors
33
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
35
Item 5.
Other Information
35
Item 6.
Exhibits
38
Signatures
39
Index
3
PART
I.
FINANCIAL
INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except for par value amounts)
(Unaudited)
March 1, 2025
June 1, 2024
Assets
Current assets:
Cash and cash equivalents
$
497,239
$
237,878
Investment securities available-for-sale
743,134
574,499
Trade and other receivables, net
417,939
151,983
Income tax receivable
10,459
10,459
Inventories
307,291
261,782
Prepaid expenses and other current assets
7,220
5,238
Total current assets
1,983,282
1,241,839
Property, plant & equipment, net
1,005,464
857,234
Investments in unconsolidated entities
12,969
11,195
Goodwill
46,776
45,776
Intangible assets, net
15,627
15,996
Other long-term assets
17,451
12,721
Total Assets
$
3,081,569
$
2,184,761
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
170,384
$
75,862
Accrued wages and benefits
47,217
32,971
Accrued income taxes payable
106,711
43,348
Dividends payable
169,503
37,760
Accrued expenses and other liabilities
19,843
37,802
Total current liabilities
513,658
227,743
Other noncurrent liabilities
51,961
17,109
Deferred income taxes, net
128,442
142,866
Total liabilities
694,061
387,718
Commitments and contingencies - see Note 10
—
—
Stockholders’ equity:
Common stock ($
0.01
par value):
Common stock - authorized
120,000
shares, issued
70,261
shares
703
703
Class A convertible common stock - authorized and issued
4,800
shares
48
48
Paid-in capital
79,677
76,371
Retained earnings
2,337,597
1,756,395
Accumulated other comprehensive loss, net of tax
(757)
(1,773)
Common stock in treasury at cost –
26,015
shares at March 1, 2025 and
26,022
shares
at June 1, 2024
(35,496)
(31,597)
Total Cal-Maine Foods, Inc. stockholders’ equity
2,381,772
1,800,147
Noncontrolling interest in consolidated entity
5,736
(3,104)
Total stockholders’ equity
2,387,508
1,797,043
Total Liabilities and Stockholders’ Equity
$
3,081,569
$
2,184,761
See Notes to Condensed Consolidated Financial Statements.
Index
4
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
March 1, 2025
March 2, 2024
Net sales
$
1,417,685
$
703,076
$
3,158,227
$
1,685,654
Cost of sales
701,570
484,504
1,838,852
1,330,519
Gross profit
716,115
218,572
1,319,375
355,135
Selling, general and administrative
79,967
66,020
219,532
194,844
(Gain) loss on involuntary conversions
—
(9,929)
156
(9,929)
(Gain) loss on disposal of fixed assets
478
(306)
(1,001)
(44)
Operating income
635,670
162,787
1,100,688
170,264
Other income (expense):
Interest income, net
12,628
7,554
32,183
21,887
Patronage dividends
11,197
11,298
11,197
11,298
Other, net
3,534
3,520
5,875
4,561
Total other income, net
27,359
22,372
49,255
37,746
Income before income taxes
663,029
185,159
1,149,943
208,010
Income tax expense
154,876
38,796
273,841
44,658
Net income
508,153
146,363
876,102
163,352
Less: Loss attributable to noncontrolling
interest
(380)
(349)
(1,471)
(1,295)
Net income attributable to Cal-Maine Foods,
Inc.
$
508,533
$
146,712
$
877,573
$
164,647
Net income per common share:
Basic
$
10.42
$
3.01
$
17.99
$
3.38
Diluted
$
10.38
$
3.00
$
17.92
$
3.37
Weighted average shares outstanding:
Basic
48,798
48,727
48,774
48,702
Diluted
48,971
48,884
48,962
48,865
See Notes to Condensed Consolidated Financial Statements.
Index
5
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of
Comprehensive Income
(In thousands)
(Unaudited)
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
March 1, 2025
March 2, 2024
Net income
$
508,153
$
146,363
$
876,102
$
163,352
Other comprehensive income, before tax:
Unrealized holding gain on available-for-sale
securities, net of reclassification adjustments
200
132
1,342
1,813
Income tax expense related to items of other
comprehensive income
(49)
(32)
(326)
(441)
Other comprehensive income, net of tax
151
100
1,016
1,372
Comprehensive income
508,304
146,463
877,118
164,724
Less: Comprehensive loss attributable to the
noncontrolling interest
(380)
(349)
(1,471)
(1,295)
Comprehensive income attributable to Cal-
Maine Foods, Inc.
$
508,684
$
146,812
$
878,589
$
166,019
See Notes to Condensed Consolidated Financial Statements.
Index
6
Cal-Maine Foods, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
Cash flows from operating activities:
Net income
$
876,102
$
163,352
Depreciation and amortization
69,430
59,151
Deferred income taxes
(14,749)
13,488
Other adjustments, net
(119,057)
1,613
Net cash provided by operations
811,726
237,604
Cash flows from investing activities:
Purchases of investment securities
(813,130)
(243,518)
Sales and maturities of investment securities
654,392
273,915
Investment in unconsolidated entities
—
(363)
Distributions from unconsolidated entities
1,550
1,000
Acquisition of businesses
(116,193)
(53,746)
Purchases of property, plant and equipment
(115,395)
(95,969)
Net proceeds from disposal of property, plant and equipment
3,650
243
Net cash used in investing activities
(385,126)
(118,438)
Cash flows from financing activities:
Payments of dividends
(160,805)
(42,965)
Purchase of common stock by treasury
(3,953)
(1,688)
Principal payments on long-term debt
(2,481)
—
Principal payments on finance lease
—
(214)
Net cash used in financing activities
(167,239)
(44,867)
Net change in cash and cash equivalents
259,361
74,299
Cash and cash equivalents at beginning of period
237,878
292,824
Cash and cash equivalents at end of period
$
497,239
$
367,123
See Notes to Condensed Consolidated Financial Statements.
Index
7
Cal-Maine Foods, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
Basis of Presentation
The
unaudited
condensed
consolidated
financial
statements
of
Cal-Maine
Foods,
Inc.
and
its
subsidiaries
(the
“Company,”
“we,” “us,” “our”) have
been prepared in accordance
with the instructions to
Form 10-Q and Article
10 of Regulation S-X
and
in accordance
with generally
accepted accounting
principles in
the United
States of
America (“GAAP”)
for interim
financial
reporting and should
be read in
conjunction with our
Annual Report on
Form 10-K for
the fiscal year
ended June 1,
2024 (the
“2024
Annual Report”).
These
statements
reflect
all
adjustments
that
are,
in
the
opinion
of
management,
necessary
to
a
fair
statement of the results for the interim periods presented and,
in the opinion of management, consist of adjustments of a
normal
recurring nature. Operating results
for the interim periods
are not necessarily indicative
of operating results for
the entire fiscal
year.
Fiscal Year
The Company’s
fiscal year
ends on
the Saturday
closest to
May 31.
Each of
the three-month
periods and
year-to-date periods
ended on March 1, 2025 and March 2, 2024 included
13
and
39 weeks
, respectively.
Use of Estimates
The preparation
of the
condensed consolidated
financial statements
in conformity
with GAAP
requires management
to make
estimates
and
assumptions
that
affect
the
amounts
reported
in
the
condensed
consolidated
financial
statements
and
accompanying notes. Actual results could differ from those estimates.
Investment Securities Available-for-Sale
The Company has
determined that its
debt securities
are available-for-sale
investments. We
classify these securities
as current
because the
amounts invested
are available
for current
operations. Available
-for-sale securities
are carried
at fair
value, based
on quoted market prices as of the balance sheet
date, with unrealized gains and losses recorded in other comprehensive income.
The
amortized cost
of
debt
securities is
adjusted
for
amortization of
premiums and
accretion of
discounts
to
maturity and
is
recorded in interest income. The Company regularly evaluates
changes to the rating of its debt
securities by credit agencies and
economic conditions to
assess and record
any expected credit
losses through allowance
for credit losses,
limited to the
amount
that fair value was less than the amortized cost basis.
The cost basis
for realized gains
and losses on
available-for-sale securities is
determined by the
specific identification method.
Gains
and
losses
are
recognized
in
other
income
(expenses)
as
Other,
net
in
the
Company’s
Condensed
Consolidated
Statements of Income. Interest and dividends on securities classified as available-for-sale are recorded in interest income.
Trade Receivables
Trade receivables are
stated at their carrying values,
which include a reserve for
credit losses. As of March
1, 2025 and June
1,
2024, reserves for credit losses were $
875
thousand and $
490
thousand, respectively. The Company extends credit to customers
based
on
an
evaluation
of
each
customer’s
financial
condition
and
credit
history.
Collateral
is
generally
not
required.
The
Company minimizes
exposure to
counter party
credit risk
through credit
analysis and
approvals, credit
limits, and
monitoring
procedures.
In
determining
our
reserve
for
credit
losses,
receivables
are
assigned
an
expected
loss
based
on
historical
loss
information adjusted as needed for economic and other forward-looking factors.
Dividends Payable
We
accrue dividends at the
end of each quarter
according to the Company’s
dividend policy adopted by its
Board of Directors.
The Company pays
a dividend to
shareholders of its
Common Stock and Class
A Common Stock
on a quarterly
basis for each
quarter for
which the
Company reports net
income attributable
to Cal-Maine
Foods, Inc.
computed in
accordance with
GAAP
in an amount equal
to
one-third
(1/3) of such quarterly
income. Dividends are paid
to shareholders of record as
of the 60th day
following the last
day of such
quarter, except
for the fourth
fiscal quarter.
For the fourth
quarter, the
Company pays dividends
to shareholders of record on the 65th day after the quarter end. Dividends are payable on the 15th day following the record date.
Index
8
Following a quarter for which the Company does not report net income attributable to Cal-Maine Foods, Inc., the Company will
not pay a dividend for a subsequent
profitable quarter until the Company is profitable on
a cumulative basis computed from the
date of the most recent quarter for which a dividend was paid. The dividend policy is subject to periodic review by the Board of
Directors.
Revenue Recognition
The Company
recognizes revenue
through sale
of its
products to
customers through
retail, foodservice
and other
distribution
channels.
The
majority
of
the
Company’s
revenue
is
derived
from
agreements
or
contracts
with
customers
based
upon
the
customer
ordering
its
products
with
a
single
performance
obligation
of
delivering
the
product.
The
Company
believes
the
performance
obligation
is
met
upon
delivery
and
acceptance
of
the
product
by
our
customers,
which
generally
occurs
upon
shipment
or
delivery
to
a
customer
based
on
terms
of
the
sale.
Costs
paid
to
third
party
brokers
to
obtain
agreements
are
expensed as the Company’s agreements are generally less than one year.
Revenues are
recognized in
an amount
that reflects
the net
consideration we
expect to
receive in
exchange for
delivery of
the
products.
The
Company
periodically
offers
sales
incentives
or
other
programs
such
as
rebates,
discounts,
coupons,
volume-
based incentives, guaranteed sales
and other programs.
The Company records an
estimated allowance for costs
associated with
these programs, which is recorded as
a reduction in revenue at the
time of sale using historical trends
and projected redemption
rates
of
each
program.
The
Company
regularly
reviews
these
estimates
and
any
difference
between
the
estimated
costs
and
actual realization of these programs would be recognized the subsequent period.
Business Combinations
The Company applies the acquisition method of accounting, which requires that once control is obtained, all
the assets acquired
and liabilities assumed, including amounts
attributable to noncontrolling interests, are
recorded at their respective fair
values at
the date of acquisition. We determine the fair values of identifiable assets and liabilities internally,
which requires estimates and
the
use
of
various
valuation
techniques.
When
a
market
value
is
not
readily
available,
our
internal
valuation
methodology
considers the remaining estimated life of the assets acquired and what management believes is the market value for those assets.
We
typically use the income method approach for intangible assets
acquired in a business combination. Significant estimates in
valuing
certain
intangible
assets
include,
but
are
not
limited
to,
the
amount
and
timing
of
future
cash
flows,
growth
rates,
discount rates and useful lives. The
excess of the purchase price over
fair values of identifiable assets and
liabilities is recorded
as goodwill.
Loss Contingencies
Certain
conditions
may
exist
as
of
the
date
the
consolidated
financial
statements
are
issued
that
may
result
in
a
loss
to
the
Company but which will
only be resolved when
one or more future
events occur or fail
to occur.
The Company’s
management
and
its
legal
counsel
assess
such
contingent
liabilities,
and
such
assessment
inherently
involves
an
exercise
of
judgment.
In
assessing loss
contingencies related
to legal
proceedings that
are pending
against the
Company or
unasserted claims
that may
result in such
proceedings, the Company’s
legal counsel evaluates
the perceived merits
of any
legal proceedings or
unasserted
claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment
of a contingency
indicates it is
probable that a
material loss has
been incurred and
the amount of
the liability
can
be
estimated,
the
estimated
liability
would
be
accrued
in
the
Company’s
consolidated
financial
statements.
If
the
assessment
indicates
a
potentially
material
loss
contingency
is
not
probable,
but
is
reasonably
possible,
or
is
probable
but
cannot
be
estimated,
then
the
nature
of
the
contingent
liability,
together
with
an
estimate
of
the
range
of
possible
loss
if
determinable and
material, would
be disclosed.
Loss contingencies
considered remote
are generally
not disclosed
unless they
involve guarantees, in which case the nature of the guarantee would be disclosed.
The Company expenses the costs of litigation as they are incurred.
New Accounting Pronouncements and Policies
In
November
2023,
the
FASB
issued
Accounting
Standards
Update
(“ASU”)
2023-07,
Segment
Reporting
(Topic
280):
Improvements to Reportable Segment Disclosures
. This ASU requires enhanced disclosures about significant segment expenses
regularly provided
to the
chief operating
decision maker
that are
included within
each reported
measure of
segment profit
or
loss, and
requires all
annual disclosures
currently required by
Topic
280 to
be included
in interim
periods. ASU 2023-07
is to
be applied
retrospectively for
all periods
presented in
the financial
statements and
is effective
for fiscal
years beginning
after
Index
9
December 15, 2023, and
interim periods within fiscal years
beginning after December 15,
2024, with early adoption
permitted.
The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statement disclosures.
In
December
2023,
the
FASB
issued ASU
2023-09,
Income
Taxes
(Topic
740)
–
Improvements
to
Income
Tax
Disclosures
.
This ASU
requires that
an entity,
on an
annual basis,
disclose additional
income tax
information, primarily
related to
the rate
reconciliation and income
taxes paid. The
ASU is intended
to enhance the
transparency and decision
usefulness of income
tax
disclosures.
ASU
2023-09
is
effective
for
annual
periods
beginning
after
December
15,
2024.
The
Company
is
currently
evaluating the impact of ASU 2023-09 on its consolidated financial statement disclosures.
In
November
2024,
the
FASB
issued
ASU
2024-03,
Income
Statement
—
Reporting
Comprehensive
Income
—
Expense
Disaggregation Disclosures (Subtopic
220-40)
. The objective of ASU 2024-03 is to improve
disclosures about a public entity’s
expenses, primarily through
additional disaggregation of
income statement expenses. Additionally,
in January 2025,
the FASB
further
clarified
the
effective
date
of
ASU
2024-03
with
the
issuance of ASU
2025-01.
ASU
2024-03 is effective
for
annual
periods beginning after December
15, 2026, and
interim periods within annual
reporting periods beginning after
December 15,
- Early adoption
is permitted and
may be applied
either on a
prospective or retrospective basis.
The Company is
currently
evaluating the impact of ASU 2024-03 on its consolidated financial statement disclosures.
There are no other
new accounting pronouncements issued or
effective during the fiscal
year that had or
are expected to have a
material impact on our Consolidated Financial Statements.
Note 2 - Acquisitions
Acquisition of ISE America, Inc. Assets
Effective
June 28, 2024
, the
Company acquired
substantially all
of the
commercial shell
egg production,
processing and
egg
products breaking facilities
of ISE America,
Inc. and certain
of its affiliates
(“ISE”). The assets
acquired included commercial
shell
egg
production
and
processing
facilities
with
a
capacity
at
the
time
of
acquisition
of
approximately
4.7
million
laying
hens, including
1.0
million cage-free, and
1.2
million pullets, feed mills,
approximately
4,000
acres of land, inventories
and an
egg products breaking facility. The acquired assets also include an extensive customer distribution network across the Northeast
and
Mid-Atlantic
states,
and
production
operations
in
Maryland,
New
Jersey,
Delaware
and
South
Carolina.
The
Company
accounted for the acquisition as a business combination.
The
following
table
summarizes
the
consideration
paid
for
the
ISE
assets
and
the
amounts
of
assets
acquired
and
liabilities
assumed recognized at the acquisition date (in thousands):
Cash consideration paid
$
111,521
Recognized amounts of identifiable assets acquired and liabilities assumed
Inventories
$
20,547
Property, plant and equipment
90,572
Intangible assets
710
Liabilities assumed
(308)
Total identifiable net assets
$
111,521
Inventories consisted primarily of flock, feed ingredients, packaging, and egg inventory. Flock inventory was valued at carrying
value
as
management
believes
that
its
carrying
value
best
approximates
its
fair
value.
Feed
ingredients,
packaging
and
egg
inventory were all valued based on market prices as of June 28, 2024.
Property,
plant and
equipment were valued
utilizing the
cost approach which
is based on
replacement or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration and/or functional or economic obsolescence.
Intangible
assets
consisted
primarily
of
customer
lists
acquired.
Customers
lists
were
valued
using
the
income
method
approach.
Acquisition of Deal-Rite Feeds, Inc. Assets
Effective
February 3, 2025
, the
Company acquired
certain assets
of Deal-Rite
Feeds, Inc.
and certain
of its
affiliates (“Deal-
Rite”)
for
approximately $
4.7
million.
The
assets
acquired
included
two
feed
mills,
storage
facilities, usable
grain,
vehicles,
Index
10
related equipment and
a retail feed
sales business located
in North Carolina.
The acquired assets
will produce and
deliver feed
to our nearby shell egg production facilities. The Company accounted for the acquisition as a business combination.
Property,
plant and
equipment were valued
utilizing the
cost approach which
is based on
replacement or reproduction
costs of
the assets and subtracting any depreciation resulting from physical deterioration and/or functional or economic obsolescence.
Goodwill
recorded
in
connection
with
the
Deal-Rite
acquisition
is
primarily
attributable
to
improved
efficiencies
from
integrating the assets of Deal-Rite with
the operations of the Company.
The Company recognized goodwill of $
1.0
million as a
result of the acquisition.
Other Acquisitions
Effective
November 30, 2024
,
the
Company
acquired
the
remaining
9.23
%
interest
in
our
majority-owned
subsidiary,
MeadowCreek Foods LLC.
Note 3 - Investment
Securities
The following represents the Company’s investment securities as of March 1, 2025 and June 1, 2024 (in thousands):
March 1, 2025
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
10,378
$
—
$
6
$
10,372
Commercial paper
95,471
—
51
95,420
Corporate bonds
342,503
422
—
342,925
Certificates of deposits
6,115
—
7
6,108
US government and agency obligations
166,073
—
134
165,939
Asset backed securities
450
5
—
455
Treasury bills
121,926
—
11
121,915
Total current investment securities
$
742,916
$
427
$
209
$
743,134
June 1, 2024
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Estimated
Fair Value
Municipal bonds
$
4,100
$
—
$
41
$
4,059
Commercial paper
137,856
—
121
137,735
Corporate bonds
233,289
—
697
232,592
Certificates of deposits
3,505
—
14
3,491
US government and agency obligations
154,520
—
251
154,269
Asset backed securities
3,154
—
30
3,124
Treasury bills
39,239
—
10
39,229
Total current investment securities
$
575,663
$
—
$
1,164
$
574,499
Available-for-sale
Proceeds from
sales and
maturities of
investment securities
available-for-sale
were $
654.4
million and
$
273.9
million during
the
thirty-nine
weeks
ended March
1,
2025
and
March
2,
2024,
respectively.
Gross
realized
gains
for
the
thirty-nine
weeks
ended
March
1,
2025
and
March
2,
2024
were
$
36
thousand
and
$
18
thousand,
respectively.
There
were
no
gross
realized
losses for the thirty-nine weeks ended March 1, 2025. Gross realized losses for the thirty-nine weeks ended March 2, 2024 were
$
8
thousand. There was
no
allowance for credit losses at March 1, 2025 and June 1, 2024.
Index
11
Actual maturities may differ
from contractual maturities as
some borrowers have
the right to call
or prepay obligations
with or
without penalties. Contractual maturities of current investments at March 1, 2025 are as follows (in thousands):
Estimated Fair Value
Within one year
$
424,063
1-5 years
319,071
Total
$
743,134
Note 4 - Fair Value Measurements
The Company
is required
to categorize
both financial
and nonfinancial
assets and
liabilities based
on the
following fair
value
hierarchy. The
fair value
of an
asset is
the price
at which
the asset
could be
sold in
an orderly
transaction between
unrelated,
knowledgeable, and willing parties able to engage in the
transaction. A liability’s fair value
is defined as the amount that would
be paid
to transfer
the liability
to a
new obligor
in a
transaction between
such parties,
not
the amount
that would
be paid
to
settle the liability with the creditor.
•
Level 1
- Quoted prices in active markets for identical assets or liabilities
•
Level 2
- Inputs
other than
quoted prices
included in
Level 1
that are
observable for
the asset
or liability,
either
directly or indirectly, including:
◦
Quoted prices for similar assets or liabilities in active markets
◦
Quoted prices for identical or similar assets in non-active markets
◦
Inputs other than quoted prices that are observable for the asset or liability
◦
Inputs derived principally from or corroborated by other observable market data
•
Level 3
- Unobservable inputs for the asset or liability that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities
The disclosures of fair value of certain financial assets and liabilities that are recorded at cost are as follows:
Cash and Cash Equivalents, Accounts Receivable, and Accounts Payable
The carrying amount approximates fair value due to the short maturity of these instruments.
Assets and Liabilities Measured at Fair Value
on a Recurring Basis
In
accordance with
the
fair value
hierarchy described
above, the
following
table shows
the
fair value
of
financial assets
and
liabilities measured at fair value on a recurring basis as of March 1, 2025 and June 1, 2024 (in thousands):
March 1, 2025
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
10,372
$
—
$
10,372
Commercial paper
—
95,420
—
95,420
Corporate bonds
—
342,925
—
342,925
Certificates of deposits
—
6,108
—
6,108
US government and agency obligations
—
165,939
—
165,939
Asset backed securities
—
455
—
455
Treasury bills
—
121,915
—
121,915
Total assets measured at fair value
$
—
$
743,134
$
—
$
743,134
Liabilities
Contingent consideration
$
—
$
—
$
16,500
$
16,500
Total liabilities measured at fair value
$
—
$
—
$
16,500
$
16,500
Index
12
June 1, 2024
Level 1
Level 2
Level 3
Balance
Assets
Municipal bonds
$
—
$
4,059
$
—
$
4,059
Commercial paper
—
137,735
—
137,735
Corporate bonds
—
232,592
—
232,592
Certificates of deposits
—
3,491
—
3,491
US government and agency obligations
—
154,269
—
154,269
Asset backed securities
—
3,124
—
3,124
Treasury bills
—
39,229
—
39,229
Total assets measured at fair value
$
—
$
574,499
$
—
$
574,499
Liabilities
Contingent consideration
$
—
$
—
$
6,500
$
6,500
Total liabilities measured at fair value
$
—
$
—
$
6,500
$
6,500
Investment securities
–
available-for-sale
classified as
Level 2
consist of
securities with
maturities of
three months
or longer
when purchased. We
classified these securities as current because amounts invested are readily available
for current operations.
Observable inputs for these securities are yields, credit risks, default rates, and volatility.
Contingent consideration
classified as
Level 3
consists of
the potential
obligation to
pay an
earnout to
Fassio Egg
Farms, Inc.
(“Fassio”)
contingent
on
the
acquired
business
meeting
certain
return
on
profitability
milestones
over
a
three-year
period,
commencing on the date of the acquisition in the second quarter of fiscal
- The fair value of the contingent consideration is
estimated
using
a
discounted
cash
flow
model.
Key
assumptions
and
unobservable
inputs
that
require
significant
judgement
used
in
the
estimate
include
weighted
average
cost
of
capital,
egg
prices,
projected
revenue
and
expenses
over
which
the
contingent considered
is measured,
and the
probability assessments
with respect
to the
likelihood of
achieving the
forecasted
projections.
The following table shows the beginning and ending balances in fair value of the contingent consideration:
Fassio Contingent Consideration
Balance, June 1, 2024
$
6,500
Fair value adjustments
10,000
Balance, March 1, 2025
$
16,500
Adjustments to the fair value of contingent consideration are recorded within selling, general and administrative expenses in the
condensed consolidated statements of income.
Note 5 - Inventories
Inventories consisted of the following as of March 1, 2025 and June 1, 2024 (in thousands):
March 1, 2025
June 1, 2024
Flocks, net of amortization
$
164,561
$
149,985
Eggs and egg products
35,339
25,217
Feed and supplies
107,391
86,580
$
307,291
$
261,782
We
grow
and
maintain
flocks
of
layers
(mature
female
chickens),
pullets
(female
chickens,
under
18
weeks
of
age),
and
breeders (male and female chickens used to produce fertile eggs to
hatch for egg production flocks). Our total flock at March 1,
2025 and June 1, 2024
consisted of approximately
12.3
million and
11.8
million pullets and breeders and
48.9
million and
39.9
million layers, respectively.
Index
13
Note 6 - Equity
On
February
25,
2025,
the
Company
entered
an
Agreement
Regarding
Conversion
(the
“Conversion
Agreement”)
by
and
among the
Company,
DLNL, LLC,
a Delaware
limited liability
company (“Daughters’
LLC”), and
Fred R. Adams
Jr.’s
four
daughters
and
Adolphus
B.
Baker,
Board
Chair
and
Mr. Adams’
son-in-law
(the
“Members”
and
together
with
Daughters’
LLC, the “Stockholder Parties”).
The Company’s
entry into the Conversion
Agreement was a result
of the Members informing
the
Company
that
they
were
potentially
interested
in
diversifying
their
respective
financial
portfolios,
including
through
the
potential sale of
all or
a portion of
the shares of
the Company’s
Common Stock, underlying
the Class A
Common Stock, held
by Daughters’
LLC, as
most of
them have
become more
focused on
their individual
estate planning
efforts and
philanthropic
endeavors.
The Conversion Agreement provides for the following:
●
The approval by
the Company’s
Board of Directors,
and approval by
Daughters’ LLC by
majority written consent, of
the
Third
Amended
and
Restated
Certificate
of
Incorporation
of
the
Company
(“Third
Amended
and
Restated
Charter”),
which
has
occurred.
The
Third
Amended
and
Restated
Charter
became
effective
upon
filing
with
the
Delaware Secretary of State on March 27, 2025 (the “Restated Charter Effective Date”).
●
The approval by the
Company’s Board of
Directors of the Amended
and Restated Bylaws of
the Company (“Restated
Bylaws”), which has occurred. The Restated Bylaws became effective on the Restated Charter Effective Date.
●
The agreement by the Stockholder Parties not to convert any shares of Class A Common Stock (“Class A Shares”) into
shares of
Common Stock
(“Common Shares”)
prior to
the later
of (i)
the Restated
Charter Effective
Date or
(ii) the
date
the
Company
obtained
an
amendment
to
its
Amended
and
Restated
Credit
Agreement
such
that
the
Class
A
Conversion, defined
below,
would not
result in
a “Change
of Control”
within the
meaning of
such agreement.
Both
conditions were met on March 27, 2025.
●
The agreement by the Stockholder Parties that if Daughters’ LLC converts any Class A Shares into Common Shares, it
will simultaneously convert all (but not less than all) Class A Shares into Common Shares (the “Class A Conversion”).
●
After
the
effective
date
of
the
Class
A
Conversion
(the
“Class
A
Conversion
Date”),
and
ending
on
the
12-month
anniversary
of
the
Class
A
Conversion
Date
(or,
if
earlier,
December 31, 2026),
certain
registration
rights
of
the
Members to offer or sell Common Shares in a registered offering under the Securities Act of 1933, as amended.
●
The adoption by the
Stockholder Parties of an
amended and restated limited
liability company operating agreement of
Daughters’ LLC, which provides
for certain changes
to permit Daughters’ LLC
to take the
actions provided for
in the
Conversion Agreement.
The
Conversion
Agreement,
including
the
documents
contemplated
by
that
agreement,
are
referred
to
collectively
as
the
“Transactions.”
The
Transactions
do
not
require
any
Stockholder
Party
to
convert
Class
A
Common
Shares
into
Common
Shares or to sell any Common Shares.
On February
25, 2025,
the Company’s
Board of
Directors approved
a new
$
500
million share
repurchase program.
The share
repurchase program authorizes
the Company,
in management’s
discretion, to repurchase
Common Stock from
time to time
for
an
aggregate purchase
price up
to $
500
million (exclusive
of any
fees, taxes,
commissions or
other expenses
related
to such
repurchases), subject to
market conditions and
other factors. The
actual timing, number
and value of
shares repurchased under
the
program
will be
determined by
management in
its discretion
and
will depend
on
a
number
of
factors,
including, but
not
limited to, the market price of the Common Stock and general market and economic conditions.
Index
14
The following reflects equity activity for the thirteen weeks ended March 1, 2025 and March 2, 2024 (in thousands):
Thirteen Weeks Ended March 1, 2025
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at November
30, 2024
$
703
$
48
$
(31,661)
$
78,600
$
(908)
$
1,998,585
$
6,116
$
2,051,483
Other comprehensive
income, net of tax
—
—
—
—
151
—
—
151
Stock compensation
plan transactions
—
—
(3,835)
1,077
—
—
—
(2,758)
Dividends ($
3.456
per share)
Common
—
—
—
—
—
(152,932)
—
(152,932)
Class A common
—
—
—
—
—
(16,589)
—
(16,589)
Net income (loss)
—
—
—
—
—
508,533
(380)
508,153
Balance at March 1,
2025
$
703
$
48
$
(35,496)
$
79,677
$
(757)
$
2,337,597
$
5,736
$
2,387,508
Thirteen Weeks Ended March 2, 2024
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at December
2, 2023
$
703
$
48
$
(30,014)
$
74,214
$
(1,614)
$
1,583,071
$
(2,444)
$
1,623,964
Other comprehensive
income, net of tax
—
—
—
—
100
—
—
100
Stock compensation
plan transactions
—
—
(1,583)
1,012
—
—
—
(571)
Dividends ($
0.997
per share)
Common
—
—
—
—
—
(44,111)
—
(44,111)
Class A common
—
—
—
—
—
(4,786)
—
(4,786)
Net income (loss)
—
—
—
—
—
146,712
(349)
146,363
Balance at March 2,
2024
$
703
$
48
$
(31,597)
$
75,226
$
(1,514)
$
1,680,886
$
(2,793)
$
1,720,959
Index
15
Thirty-nine Weeks Ended March 1, 2025
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at June 1,
2024
$
703
$
48
$
(31,597)
$
76,371
$
(1,773)
$
1,756,395
$
(3,104)
$
1,797,043
Other comprehensive
income, net of tax
—
—
—
—
1,016
—
—
1,016
Stock compensation
plan transactions
—
—
(3,899)
3,306
—
—
—
(593)
Contributions to
Crepini Foods LLC
—
—
—
—
—
—
6,485
6,485
Acquisition of
noncontrolling
interest in
MeadowCreek Foods
LLC
—
—
—
—
—
(3,826)
3,826
—
Dividends ($
5.965
per share)
Common
—
—
—
—
—
(263,918)
—
(263,918)
Class A common
—
—
—
—
—
(28,627)
—
(28,627)
Net income (loss)
—
—
—
—
—
877,573
(1,471)
876,102
Balance at March 1,
2025
$
703
$
48
$
(35,496)
$
79,677
$
(757)
$
2,337,597
$
5,736
$
2,387,508
Thirty-nine Weeks Ended March 2, 2024
Cal-Maine Foods, Inc. Stockholders
Common Stock
Class A
Treasury
Paid In
Accum.
Other
Retained
Noncontrolling
Amount
Amount
Amount
Capital
Comp. Loss
Earnings
Interest
Total
Balance at June 3,
2023
$
703
$
48
$
(30,008)
$
72,112
$
(2,886)
$
1,571,112
$
(1,498)
$
1,609,583
Other comprehensive
loss, net of tax
—
—
—
—
1,372
—
—
1,372
Stock compensation
plan transactions
—
—
(1,589)
3,114
—
—
—
1,525
Dividends ($
1.119
per share)
Common
—
—
—
—
—
(49,501)
—
(49,501)
Class A common
—
—
—
—
—
(5,372)
—
(5,372)
Net income (loss)
—
—
—
—
—
164,647
(1,295)
163,352
Balance at March 2,
2024
$
703
$
48
$
(31,597)
$
75,226
$
(1,514)
$
1,680,886
$
(2,793)
$
1,720,959
Note 7 - Net Income per Common Share
Basic net income per
share is based on
the weighted average Common Stock
and Class A Common
Stock outstanding. Diluted
net
income
per
share
is
based
on
weighted-average
common
shares
outstanding
during
the
relevant
period
adjusted
for
the
dilutive effect of share-based awards.
Index
16
The
following
table
provides
a
reconciliation
of
the
numerators
and
denominators
used
to
determine
basic
and
diluted
net
income per common share (amounts in thousands, except per share data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
March 1, 2025
March 2, 2024
Numerator
Net income
$
508,153
$
146,363
$
876,102
$
163,352
Less: Loss attributable to
noncontrolling interest
(380)
(349)
(1,471)
(1,295)
Net income attributable to Cal-Maine
Foods, Inc.
$
508,533
$
146,712
$
877,573
$
164,647
Denominator
Weighted-average common shares
outstanding, basic
48,798
48,727
48,774
48,702
Effect of dilutive restricted shares
173
157
188
163
Weighted-average common shares
outstanding, diluted
48,971
48,884
48,962
48,865
Net income per common share
attributable to Cal-Maine Foods, Inc.
Basic
$
10.42
$
3.01
$
17.99
$
3.38
Diluted
$
10.38
$
3.00
$
17.92
$
3.37
Note 8 - Revenue from Contracts with Customers
Net revenue is primarily generated through the sales of shell eggs and egg products. The Company’s shell egg product offerings
include specialty and conventional shell eggs.
Specialty shell eggs include cage-free, organic,
brown, free-range, pasture-raised
and nutritionally enhanced eggs. Conventional shell egg sales represent all other shell egg sales not
sold as specialty shell eggs.
The Company’s
egg products
offerings include
liquid and
frozen egg
products, as
well as
ready-to-eat products
such as
hard-
cooked
eggs,
egg
wraps,
protein
pancakes,
crepes
and
wrap-ups.
Liquid
and
frozen
egg
products
are
primarily
sold
to
the
institutional,
foodservice
and
food
manufacturing
sectors.
Ready-to-eat
products
are
sold
primarily
within
the
retail
and
foodservice channels.
The following table provides revenue disaggregated by product category (in thousands):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
March 1, 2025
March 2, 2024
Conventional shell egg sales
$
1,016,438
$
413,619
$
2,118,065
$
919,498
Specialty shell egg sales
328,944
262,293
872,691
688,879
Egg products
61,024
21,759
136,850
63,994
Other
11,279
5,405
30,621
13,283
$
1,417,685
$
703,076
$
3,158,227
$
1,685,654
Note 9 - Stock Based Compensation
Total
stock-based compensation expense was
$
3.4
million and $
3.2
million for the thirty-nine
weeks ended March 1,
2025 and
March 2, 2024, respectively.
Unrecognized compensation
expense as
a result
of non-vested
shares of
restricted stock
outstanding under
the Amended
and
Restated 2012 Omnibus
Long-Term Incentive
Plan at March
1, 2025 of
$
9.2
million will be
recorded over a
weighted average
period of
2.3
years.
Refer to
Part II
Item 8,
Notes to
Consolidated Financial
Statements and
Supplementary Data,
Note 14
-
Stock Compensation Plans in our 2024 Annual Report for further information on our stock compensation plans.
Index
17
The Company’s restricted share activity for the thirty-nine weeks ended March 1, 2025 follows:
Number of
Shares
Weighted
Average Grant
Date Fair Value
Outstanding, June 1, 2024
277,954
$
49.38
Granted
47,700
109.97
Vested
(108,058)
41.32
Forfeited
(4,324)
53.43
Outstanding, March 1, 2025
213,272
$
66.93
Note 10 - Commitments and Contingencies
LEGAL PROCEEDINGS
Civil Investigative Demand
In March 2025, the Company received a
civil investigative demand from the Department of Justice
(“DOJ”) in connection with
an antitrust investigation
to determine whether
there is, has
been or may
be a violation
of the antitrust
laws by anticompetitive
conduct
by
and
among
egg
producers.
The
Company
is
cooperating
with
the
investigation.
Management
cannot
predict
the
eventual scope,
duration or
outcome of
this investigation
and is
unable to
estimate the
amount or
range of
potential losses,
if
any, at this time.
State of Texas v.
Cal-Maine Foods, Inc. d/b/a Wharton; and Wharton County Foods, LLC
On April 23,
2020, the Company
and its subsidiary
Wharton County Foods,
LLC (“WCF”) were
named as defendants
in State
of
Texas
v.
Cal-Maine Foods,
Inc. d/b/a
Wharton; and
Wharton County
Foods, LLC,
Cause No.
2020-25427,
in the
District
Court of
Harris County,
Texas.
The State
of Texas
(the “State”)
asserted claims
based on
the Company’s
and WCF’s
alleged
violation
of
the
Texas
Deceptive
Trade
Practices—Consumer
Protection
Act,
Tex.
Bus.
&
Com.
Code
§§
17.41-17.63
(“DTPA”).
The
State
claimed
that
the
Company
and
WCF
offered
shell
eggs
at
excessive
or
exorbitant
prices
during
the
COVID-19
state
of
emergency
and
made
misleading
statements
about
shell
egg
prices.
The
State
sought
temporary
and
permanent
injunctions
against
the
Company
and
WCF
to
prevent
further
alleged
violations
of
the
DTPA,
along
with
over
$
100,000
in damages. On August 13, 2020, the court granted the defendants’ motion to dismiss the State’s original petition with
prejudice. On September 11,
2020, the State filed a
notice of appeal, which was
assigned to the Texas
Court of Appeals for the
First
District.
On
August
16,
2022,
the
appeals
court
reversed
and
remanded
the
case
back
to
the
trial
court
for
further
proceedings. On October 31, 2022, the Company and WCF appealed the First District Court’s
decision to the Supreme Court of
Texas.
On September
29, 2023,
the Supreme
Court of
Texas
denied the
Company’s
Petition for
Review and
remanded to
the
trial court
for further
proceedings. The
district court
entered a
pre-trial order
scheduling pre-trial
proceedings and
tentatively
setting
a
trial
date
for
August
11,
2025.
On
November 30,
2024,
the
State
filed
an
amended petition,
primarily
to
address
a
procedural
deficiency
that
required
the
State
to
generally
plead
it
was
seeking
monetary
relief
over
$
1.0
million
including
restitution,
civil
penalties,
attorney’s
fees
and
costs.
Pre-trial
proceedings
are
progressing
in
accordance
with
the
court’s
schedule. Management believes the risk of material loss related to this matter to be remote.
Kraft Foods Global, Inc. et al. v. United Egg Producers, Inc. et al.
As previously
reported, on
September 25,
2008, the
Company was
named as
one of
several defendants
in numerous
antitrust
cases involving
the United
States shell
egg industry.
The Company
settled all
of these
cases, except
for the
claims of
certain
plaintiffs who sought substantial damages allegedly arising from the purchase of egg products
(as opposed to shell eggs). These
remaining plaintiffs are
Kraft Food Global,
Inc., General Mills, Inc.,
and Nestle USA, Inc.
(the “Egg Products Plaintiffs”)
and,
until a subsequent settlement was reached as described below, The Kellogg Company.
On September
13, 2019,
the case
with the
Egg Products
Plaintiffs was
remanded from
a multi-district
litigation proceeding
in
the
United
States
District
Court
for
the
Eastern
District
of
Pennsylvania,
In
re
Processed
Egg
Products
Antitrust
Litigation,
MDL No. 2002, to the United States District Court for
the Northern District of Illinois, Kraft Foods Global, Inc. et
al. v. United
Egg Producers,
Inc. et
al., Case
No. 1:11
-cv-8808, for
trial. The
Egg Products
Plaintiffs
alleged that
the Company
and other
defendants
violated
Section
1
of
the
Sherman
Act,
15.
U.S.C.
§
1,
by
agreeing
to
limit
the
production
of
eggs
and
thereby
illegally
to
raise
the
prices
that plaintiffs
paid
for processed
egg products.
In
particular,
the
Egg Products
Plaintiffs
attacked
Index
18
certain features of the United
Egg Producers animal-welfare guidelines and program
used by the Company and many
other egg
producers.
On October 24, 2019, the Company entered into a
confidential settlement agreement with The Kellogg Company dismissing all
claims against the Company
for an amount that
did not have
a material impact on
the Company’s
financial condition or results
of operations.
On November
11,
2019, a
stipulation for
dismissal was
filed with
the court,
and on
March 28,
2022, the
court
dismissed the Company with prejudice.
The trial of this case began on October 17, 2023. On December 1, 2023, the jury returned a decision awarding the
Egg Products
Plaintiffs $
17.8
million in damages. On
November 6, 2024, the
court entered a final
judgement against the Company and
other
defendants,
jointly
and
severally,
totaling
$
43.6
million
after
trebling.
On
December
4,
2024,
the
Company
filed
a
renewed
motion for judgment as a matter of law or for a new trial, and a motion to alter or amend the judgment.
On December 13, 2024,
the
court
granted
defendants’
November
20,
2024
motion
to
stay
enforcement
of
the
judgment
and
entered
an
agreed
order
requiring the
defendants to
post security
during post-judgment
proceedings and
appeal, and
stayed proceedings
to enforce
the
judgment until the disposition of the post-judgment motions and ultimate appeals. On
December 17, 2024, the Company posted
a bond
in the
approximate amount
of $
23.9
million, representing
a portion
of the
total bond
required to
preserve the
right to
appeal the trial court’s
decision. Another defendant posted a
bond for the remaining amount.
The Company intends to continue
to vigorously defend the claims asserted by the Egg Products Plaintiffs.
If the
jury’s
decision is
ultimately upheld,
the Company
would be
jointly and
severally liable
with other
defendants for
treble
damages,
or
$
43.6
million,
subject
to
credit
for
certain
settlements
with
previous
settling
defendants,
plus
the
Egg
Product
Plaintiffs’
reasonable
attorneys’
fees.
During
our
second
fiscal
quarter
of
2024,
we
recorded
an
accrued
expense
of
$
19.6
million in
selling, general
and administrative
expenses in
the Company’s
Condensed Consolidated
Statements of
Income and
classified
as
other
noncurrent
liabilities
in
the
Company’s
Condensed
Consolidated
Balance
Sheets.
Although
less
than
the
bond
posted
by
the
Company,
the
accrual
represents
our
estimate
of
the
Company’s
proportional
share
of
the
reasonably
possible ultimate damages award, excluding the Egg Product Plaintiffs’
attorneys’ fees that we believe would be approximately
offset by the credits noted
above. We
have entered into a judgment allocation
and joint defense agreement with the
other major
producer
defendant
remaining
in
the
case
and
are
in
discussions
with
other
defendants
regarding
their
contributions.
Our
accrual may change
in the future
based on the
outcome of those
discussions and may
also be revised
in whole or
in part in
the
future to the extent we are successful in further proceedings in the litigation.
State of Oklahoma Watershed Pollution Litigation
On June
18, 2005, the
State of Oklahoma
filed suit, in
the United States
District Court for
the Northern District
of Oklahoma,
against Cal-Maine
Foods, Inc.
and Tyson
Foods, Inc.,
Cobb-Vantress,
Inc., Cargill,
Inc., George’s,
Inc., Peterson
Farms, Inc.
and
Simmons Foods,
Inc.,
and
certain
of
their affiliates.
The
State of
Oklahoma claims
that
through
the disposal
of
chicken
litter the defendants
polluted the Illinois
River Watershed.
This watershed provides
water to eastern
Oklahoma. The complaint
sought
injunctive relief
and
monetary damages,
but
the
claim for
monetary damages
was
dismissed by
the
court. Cal-Maine
Foods,
Inc.
discontinued
operations
in
the
watershed
in
or
around
2005.
Since
the
litigation
began,
Cal-Maine
Foods,
Inc.
purchased
100
%
of
the
membership
interests
of
Benton
County
Foods,
LLC,
which
is
an
ongoing
commercial
shell
egg
operation within
the Illinois
River Watershed.
Benton County
Foods, LLC
is not
a defendant
in the
litigation. We
also have
a
number of small contract producers that operate in the area.
The non-jury trial in the case began in September 2009 and concluded in February 2010. On January 18, 2023, the court entered
findings of fact
and conclusions of
law in favor
of the State
of Oklahoma, but
no penalties were
assessed. The court
found the
defendants
liable
for
state
law
nuisance,
federal
common
law
nuisance,
and
state
law
trespass.
The
court
also
found
the
producers
vicariously
liable for
the
actions of
their
contract producers.
The
court directed
the
parties
to
confer
in attempt
to
reach
agreement
on
appropriate
remedies.
On
June
12,
2023,
the
court
ordered
the
parties
to
mediate
before
retired
Tenth
Circuit
Chief
Judge
Deanell
Reece
Tacha,
but
the
mediation
was
unsuccessful.
On
June
26,
2024,
the
district
court
denied
defendants’
motion
to
dismiss
the
case.
On
September
13,
2024,
a
status
hearing
was
held
and
the
court
scheduled
an
evidentiary hearing
for December
3, 2024,
to determine
whether any
legal remedy
is available
based on
the now
14 year
old
record
and
changed
circumstances
of
the
Illinois
River
watershed.
On
November
5,
2024
the
court
denied
defendants’
September 20,
2024 motion
to certify
an interlocutory
appeal. The
evidentiary hearing
proceeded as
scheduled and
concluded
on
December
17,
2024.
The
court
directed
the
parties
to
present
their
proposed
findings
of
fact
and
conclusions
of
law
and
supporting
briefs
by
January
30,
2025.
The parties
submitted their
post-trial briefs
on
January 20,
2025.
While
management
believes there
is a
reasonable possibility
of a
material loss
from the
case, at
the present
time, it
is not
possible to
estimate the
amount
of
monetary
exposure,
if
any,
to
the
Company
due
to
a
range
of
factors,
including
the
following,
among
others:
uncertainties
inherent
in
any
assessment
of
potential
costs
associated
with
injunctive
relief
or
other
penalties
based
on
a
decision in a case tried
over 14 years ago based
on environmental conditions that existed at
the time, the lack of
guidance from
the
court
as
to
what
might
be
considered
appropriate
remedies,
the
ongoing
litigation
with
the
State
of
Oklahoma,
and
Index
19
uncertainty regarding what our proportionate share of any remedy would be, although we believe that our share compared to the
other defendants is small.
Other Matters
In addition to the above,
the Company is involved in
various other claims and litigation
incidental to its business. Although
the
outcome of
these matters
cannot be determined
with certainty,
management, upon the
advice of counsel,
is of
the opinion that
the final outcome should not have a material effect on the Company’s consolidated results of operations or financial position.
Note 11 - Subsequent Events
Second Amendment to Amended and Restated Credit Agreement
On
March
25,
2025,
the
Company
entered
into
the
Second
Amendment
(the
“Second
Amendment”)
to
its
Amended
and
Restated Credit
Agreement (as
amended,
the “Credit
Agreement”)). Under
the
Credit Agreement,
a Change
of
Control is
an
event
of
default.
The
Second
Amendment
amended
the
definition
of
Change
of
Control
to
exclude
from
that
definition
the
conversion (the “Class A Conversion”) of all outstanding shares of the Company’s Class A Common Stock into Common Stock
in accordance with the Conversion Agreement.
Under the Second Amendment, prior to the Class A Conversion, the definition of Change of Control is unchanged. On and after
the Class A
Conversion, Change of Control
will mean any
of (i) the
acquisition by any “person”
or “group” (as
such terms are
used in
sections 13(d)
and 14(d)
of the
Securities Exchange
Act of
1934, as
amended) at
any time
of beneficial
ownership of
30.0
% or more of
the outstanding capital stock
or other equity interests
of the Company on
a fully-diluted basis, (ii)
the failure
of individuals who
are members of
the board of
directors (or similar
governing body) of
the Company on
the effective date
of
the Second Amendment (together with any new or replacement directors whose initial nomination for election was approved by
a majority of the directors who were either directors on the effective date of the Second Amendment or previously so approved)
to constitute a majority
of the board of
directors (or similar governing
body) of the
Company, or
(iii) any “Change of
Control”
(or words of
like import), as
defined in any
agreement or indenture
relating to any
issue of Material
Indebtedness of any
Loan
Party or any Subsidiary of a Loan Party (each as defined in the Credit Agreement), shall occur.
For
additional
information
regarding
the
Credit
Facility,
see
Note
10
–
Credit
Facility
to
the
audited
consolidated
financial
statements included in the 2024 Annual Report.
Third Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
On
March
27,
2025,
the
Company’s
Third
Amended
and
Restated
Certificate
of
Incorporation
was
filed
with
the
Delaware
Secretary
of
State
and
became
effective.
Also
on
March
27,
2025,
the
Company’s
Amended
and
Restated
Bylaws
became
effective.
Agreement to Acquire Echo Lake Foods, Inc.
On
April
8,
2025,
the
Company
signed
a
definitive
agreement
to
acquire
Echo
Lake
Foods,
Inc.
(“Echo
Lake
Foods”)
for
approximately $
258
million, excluding
expected tax
assets resulting
from the
transaction, to
be funded
with available
cash on
hand. Echo
Lake Foods
was founded
in 1941
and acquired
by the
Meinerz family
in 1981.
Based in
Burlington, Wisconsin,
Echo Lake Foods produces, packages, markets and distributes ready-to-eat egg products and
breakfast foods, including waffles,
pancakes, scrambled eggs, frozen cooked omelets, egg patties,
toast and diced eggs. The transaction has
been approved by both
companies’ boards of directors and
is expected to close
by the end of
fiscal 2025 following completion of
regulatory approvals
and subject to customary closing conditions.
The transaction is not subject to shareholder approval.
Index
20
ITEM
2.
MANAGEMENT’S
DISCUSSION
AND
ANALYSIS
OF
FINANCIAL
CONDITION
AND
RESULTS
OF
OPERATIONS
The following
should be
read in
conjunction with
Management’s
Discussion and
Analysis of
Financial Condition
and Results
of Operations included
in Part II
Item 7 of
the Company’s
Annual Report on
Form 10-K for
its fiscal year
ended June 1,
2024
(the “2024 Annual Report”), and the accompanying financial statements and notes included in Part II Item 8 of the 2024 Annual
Report and in
Part I Item 1
of this Quarterly Report on Form 10-Q (“Quarterly Report”).
This
report contains
numerous forward-looking
statements within
the meaning
of
Section 27A
of
the Securities
Act of
1933
(the “Securities
Act”) and
Section 21E
of the
Securities Exchange Act
of 1934
(the “Exchange
Act”) relating
to our
shell egg
and egg products
business, including estimated future
production data, expected
construction schedules, projected
construction
costs, potential
future supply
of and
demand for
our products,
potential future
corn and
soybean price
trends, potential
future
impact on our business of the resurgence in United States (“U.S.”) commercial table egg layer flocks of highly pathogenic avian
influenza (“HPAI”),
potential future impact
on our business
of inflation and
changing interest rates,
potential future impact
on
our business of
new legislation, rules
or policies, potential
outcomes of legal
proceedings, including loss
contingency accruals
and factors that may result in
changes in the amounts recorded, and other
projected operating data, including anticipated results
of operations
and financial
condition. Such
forward-looking statements
are identified
by the
use of
words such
as “believes,”
“intends,” “expects,”
“hopes,” “may,”
“should,” “plans,”
“projected,” “contemplates,”
“anticipates,” or
similar words.
Actual
outcomes
or
results
could
differ
materially
from
those
projected
in
the
forward-looking
statements.
The
forward-looking
statements are
based on
management’s
current intent,
belief, expectations,
estimates, and
projections regarding
the Company
and its
industry.
These statements
are not
guarantees of
future performance
and involve
risks, uncertainties,
assumptions, and
other factors
that
are difficult
to predict
and may
be beyond
our control.
The factors
that
could cause
actual results
to differ
materially from those
projected in the
forward-looking statements include,
among others, (i)
the risk factors
set forth in
Part II
Item 1A
Risk Factors
of this
Quarterly Report
on Form
10-Q and
Part I
Item 1A
Risk Factors
of our
Annual Report
on Form
10-K
for
the
year
ended
June
1,
2024,
as
well
as
those
included
in
other
reports
we
file
from
time
to
time
with
the
SEC
(including our Quarterly Reports on Form 10-Q and Current Reports on Form
8-K), (ii) the effect of the potential conversion of
all of
the Company’s
Class A
Common Stock
into Common
Stock and
resulting loss
by the
Company of
controlled company
status under
the rules
of The
Nasdaq Stock
Market on
the trading
price of
the Company’s
Common Stock,
the ability
of the
Company to
retain and
hire key
personnel and
maintain relationships
with its
customers and
suppliers, and
on the
Company’s
operating results
and business
generally,
(iii) the
impact on
the
trading price
of the
Company’s
Common Stock
as a
result of
the sale
or marketing, or
potential sale or
marketing, of a
significant number of
shares of
the Company’s
Common Stock held
by the family of our
late founder, Fred R.
Adams Jr., as
part of their potential portfolio diversification
efforts, (iv) the risks and
hazards
inherent
in
the
shell
egg
business
(including
disease,
pests,
weather
conditions,
and
potential
for
product
recall),
including but not limited to the current outbreak of HPAI affecting poultry
in the U.S., Canada and other countries that was first
detected in commercial flocks in the U.S. in February 2022
and that first impacted our flocks in December 2023, (v)
changes in
the
demand for
and
market prices
of
shell eggs
and feed
costs, (vi)
the impacts
and potential
future
impacts of
government,
customer and consumer
reactions to recent
high market prices
for eggs, including
but not limited
to efforts
to increase imports
of
eggs
and
egg
products,
pressure
to
change
long-standing pricing
frameworks,
lower
consumer demand
for
eggs,
and
the
pending DOJ
antitrust investigation,
(vii) our
ability to
predict and
meet demand
for cage-free
and other
specialty eggs,
(viii)
risks,
changes, or
obligations that
could result
from our
recent or
future acquisition
of new
flocks or
businesses and
risks
or
changes that
may cause
conditions to
completing a
pending acquisition,
such as
the pending
acquisition of
Echo Lake
Foods,
not to
be met,
(ix) risks
relating to
changes in
inflation and
interest rates,
(x) our
ability to
retain existing
customers, acquire
new
customers
and
grow
our
product
mix,
(xi)
adverse
results
in
pending
litigation
and
other
legal
matters,
and
(xii)
global
instability,
including as
a result
of the
war in
Ukraine, the
conflicts in
Israel and
surrounding areas
and attacks
on shipping
in
the Red
Sea. Readers
are cautioned
not to
place undue
reliance on
forward-looking statements
because, while
we believe
the
assumptions on
which the
forward-looking statements
are based
are reasonable,
there can
be no
assurance that
these forward-
looking
statements
will
prove
to
be
accurate.
Further,
forward-looking
statements
included
herein
are
made
only
as
of
the
respective dates
thereof, or
if
no
date
is
stated,
as
of
the date
hereof.
Except
as otherwise
required by
law,
we
disclaim any
intent or obligation to update
publicly these forward-looking statements, whether because
of new information, future events,
or
otherwise.
GENERAL
Cal-Maine
Foods,
Inc.
(the
“Company,”
“we,”
“us,”
“our”)
is
primarily
engaged
in
the
production,
grading,
packaging,
marketing and
distribution of
fresh shell
eggs. Our
operations are
fully integrated
and we
have one
operating and
reportable
segment.
We
are
the
largest
producer
and
distributor
of
fresh
shell
eggs
in
the
U.S.
Our
total
flock
of
approximately
48.9
million
layers
and
12.3
million
pullets
and
breeders
is
the
largest
in
the
U.S.
We
sell
our
shell
eggs
and
egg
products
to
a
diverse group of customers,
including national and regional
grocery store chains, club
stores, companies servicing independent
Index
21
supermarkets in
the U.S.,
foodservice distributors
and egg
product customers
throughout the
majority of
the U.S.
and aim
to
maintain efficient, state-of-the-art operations located close to our customers.
Our operating
results are
materially impacted
by market
prices for
eggs and
feed grains
(corn
and soybean
meal), which
are
highly
volatile,
independent
of
each
other,
and
out
of
our
control.
Generally,
higher
market
prices
for
eggs
have
a
positive
impact
on
our
financial
results
while
higher
market
prices
for
feed
grains
have
a
negative
impact
on
our
financial
results.
Although we
use a
variety of
pricing frameworks
with our
customers for
conventional and specialty
eggs, we
sell most
of our
conventional
shell
eggs
based
on
formulas
that
consider,
in
varying
ways,
independently
quoted
regional
wholesale
market
prices for shell eggs or formulas related to our costs of production which include the cost of corn and soybean meal. We
sell the
majority
of
our
specialty
eggs
at
prices
and
terms
negotiated
directly
with
our
customers.
We
do
not
sell
eggs
directly
to
consumers or set the prices at which eggs are sold to consumers.
Retail
sales
of
shell
eggs
historically
have
been
highest
during
the
fall
and
winter
months
and
lowest
during
the
summer
months. Prices
for shell
eggs fluctuate
in response
to seasonal
demand factors
and a
natural increase
in egg
production during
the
spring
and
early
summer.
Historically,
shell
egg
prices
tend
to
increase
with
the
start
of
the
school
year
and
tend
to
be
highest
prior
to
holiday
periods,
particularly
Thanksgiving,
Christmas
and
Easter.
Consequently,
and
all
other
things
being
equal, we would expect to
experience lower selling prices, sales volumes
and net income (and may
incur net losses) in our
first
and
fourth
fiscal
quarters
ending
in
August/September
and
May/June,
respectively.
Because
of
the
seasonal
and
quarterly
fluctuations,
comparisons
of
our
sales
and
operating
results
between
different
quarters
within
a
single
fiscal
year
are
not
necessarily meaningful comparisons.
We
routinely
fill
our
storage
bins
during
harvest
season
when
prices
for
feed
ingredients
are
generally
lower.
To
ensure
continued availability
of feed
ingredients, we
may enter
into contracts
for future
purchases of
corn and
soybean meal,
and as
part
of
these
contracts,
we
may
lock-in
the
basis
portion
of
our
grain
purchases
several
months
in
advance.
Basis
is
the
difference between
the local
cash price
for grain
and the
applicable futures
price. A
basis contract
is a
common transaction
in
the grain
market that
allows us
to lock-in
a basis
level for
a specific
delivery period
and wait
to set
the futures
price at
a later
date. Furthermore,
due to
the more
limited supply
for organic
ingredients,
we may
commit to
purchase organic
ingredients in
advance to help ensure supply. Ordinarily,
we do not enter into long-term contracts beyond a year to purchase corn and soybean
meal
or
hedge
against
increases
in
the
prices
of
corn
and
soybean
meal.
Corn
and
soybean
meal
are
commodities
and
are
subject
to
volatile
price
changes
due
to
weather,
various
supply
and
demand
factors,
transportation
and
storage
costs,
speculators, agricultural,
energy and
trade policies
in the
U.S. and
internationally,
and global
instability that
could disrupt
the
supply chain.
An important competitive advantage for Cal-Maine Foods is our ability to meet
our customers’ evolving needs with a favorable
mix of branded
and private-label products
of conventional and
specialty eggs, including
cage-free, organic,
brown, free-range,
pasture-raised and nutritionally-enhanced eggs as well as egg products.
HPAI
Outbreaks of HPAI
have continued to
occur in U.S.
poultry flocks. In
calendar year 2024,
40.2 million commercial
layer hens
and pullets
were depopulated
due to
HPAI,
and in
calendar year
2025, an
additional 32.9
million commercial
layer hens
and
pullets
have
been
depopulated
through
March.
The
United
States
Depart
of
Agriculture
(the
“USDA”)
reported
that
the
estimated table-egg layer flock was approximately 285 million as of March 1, 2025, the lowest level since September 2015.
HPAI
is
currently
widespread
in
the
wild
bird
population
worldwide.
We
remain
dedicated
to
robust
biosecurity
programs
across our
locations and
have invested
more than
$70 million
in biosecurity
technology,
equipment, procedures,
and training
across our locations since the last major HPAI outbreak in 2015. However,
no farm is immune from HPAI. For example, during
the third and
fourth quarters of
fiscal 2024, we
experienced HPAI
outbreaks within our
facilities located in
Kansas and Texas,
which
are now
fully
operational. According
to
the
U.S.
Centers for
Disease Control
and Prevention
(“CDC”), as
of April
1,
2025,
there were
outbreaks
in 996
herds
of
dairy
cows
in
17
states,
and 70
human
cases
in
the
U.S., almost
entirely
among
poultry and dairy workers. However,
in 2024, one of the human
cases resulted in severe illness after
the patient was exposed to
sick and
dead birds
in backyard
flocks. The
patient, who
was reported
to have
underlying health
conditions, died
in January
- There have
been no reported
cases of person-to-person
spread. According to
the CDC, the
human health risk
to the U.S.
public from the
HPAI
virus is considered
to be low.
The extent of
possible future outbreaks among
U.S. commercial egg
layer
flocks,
with
heightened
risk
during
migration
seasons,
cannot
be
predicted.
According
to
the
USDA,
HPAI
cannot
be
transmitted through safely handled and properly cooked eggs. There is no
known risk related to HPAI
associated with eggs that
are currently in the market and no eggs have been recalled. For additional information, see the 2024 Annual Report, Part II Item
7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – HPAI.”
Index
22
We
have taken proactive
steps to help
mitigate the tight
egg supply situation
across the country.
Our efforts
resulted in a
14%
increase
in
the
average
number
of
layer
hens
(reflecting
both
organic
and
inorganic
expansion)
and
a
24%
increase
in
total
chicks hatched during
the third quarter
of fiscal 2025
compared to the
prior-year quarter.
Our breeder flocks
increased 33% as
of
the
end
of
the
third
fiscal
quarter
of
2025
compared
to
the
end
of
the
prior-year
quarter.
We
also
continue
to
invest
in
expansion
projects,
including
expected
completion
in
calendar
2025
of
approximately
$60
million
in
ongoing
expansion
projects
within
our
current
operations
that
are
expected
to
add
approximately
1.1
million
cage-free
layer
hens
and
250,000
pullets,
and
the
successful
conversion
of
a
new
egg
processing
facility
and
hatchery
in
Dexter,
Missouri,
projected
to
add
additional capacity of 1.2 million free range hens by calendar year end.
CAGE-FREE EGGS
Ten
states have
passed
legislation or
regulations mandating
minimum space
or
cage-free requirements
for
egg production
or
mandated
the
sale
of
only
cage-free
eggs
and
egg
products
in
their
states,
with
implementation
of
these
laws
ranging
from
January 2022
to January
- These
states represent
approximately 27%
of
the U.S.
total population
according to
the 2020
U.S. Census.
California, Massachusetts,
Colorado, Michigan,
Oregon, Washington,
and Nevada,
which collectively
represent
approximately 23% of the total estimated U.S. population, have cage-free legislation currently in effect.
Due to the national egg
shortage caused
by HPAI,
Nevada temporarily
suspended the
cage-free egg
mandate and
other states
are considering
similar
actions.
A significant number of our customers have announced goals
to either exclusively offer cage-free eggs or
significantly increase
the
volume
of
cage-free
egg
sales
in
the
future,
subject
in
most
cases
to
availability
of
supply,
affordability
and
consumer
demand, among
other contingencies.
Our customers
typically do
not
commit to
long-term purchases
of specific
quantities or
types
of
eggs
with
us,
and
as
a
result,
it
is
difficult
to
accurately
predict
customer
requirements
for
cage-free
eggs.
We
are
focused
on
adjusting
our
cage-free production
capacity
with
a
goal
of
meeting
the
future
needs
of
our
customers
in
light
of
changing state requirements
and our customers’
goals. As always,
we strive to
offer a product
mix that aligns
with current and
anticipated
customer purchase
decisions.
We
are
engaging with
our
customers
to
help
them
meet
their
announced
goals
and
needs. We have
invested significant capital in recent years to acquire and construct cage-free facilities, and
we expect our focus
for future
expansion will
continue to
include cage-free
facilities. Our
volume of
cage-free egg
sales has
continued to
increase
and account
for a
larger share
of our
product mix.
Cage-free egg
revenue represented
approximately 19.2%
of our
total shell
egg revenue for the third quarter of fiscal year 2025. At the same time, we understand the importance of our continued ability to
provide
conventional
eggs
in
order
to
provide
our
customers
with
a
variety
of
egg
choices
and
to
address
hunger
in
our
communities.
For
additional
information,
see
the
2024
Annual
Report,
Part
I
Item
1,
“Business
–
Specialty
Eggs,”
“Business
–
Growth
Strategy” and
“Business –
Government Regulation,”
and the
first risk
factor in
Part I
Item 1A,
“Risk Factors”
under the
sub-
heading “Legal and Regulatory Risk Factors.”
ACQUISITIONS
Effective February
3, 2025,
we acquired
certain assets
of Deal-Rite
Foods, Inc.
and certain
of its
affiliates (“Deal-Rite”).
The
assets
acquired
included
two
feed
mills,
storage
facilities,
usable
grain,
vehicles,
related
equipment
and
a
retail
feed
sales
business
located
in
North
Carolina.
The
acquired
assets
will
produce
and
deliver
feed
to
our
nearby
shell
egg
production
facilities.
During the
first quarter
of fiscal
2025, we
acquired substantially
all the
commercial shell
egg production,
processing and
egg
products
breaking
assets
of
ISE
America,
Inc.
and
certain
of
its
affiliates
(“ISE”).
The
assets
acquired
included
commercial
shell
egg
production
and
processing
facilities
with
a
capacity
at
the
time
of
acquisition
of
approximately
4.7
million
laying
hens, including 1.0 million
cage-free, and 1.2 million
pullets, feed mills, approximately
4,000 acres of land,
inventories and an
egg products breaking facility. The acquired assets also include an extensive customer distribution network across the Northeast
and Mid-Atlantic
states, and
production operations
in Maryland,
New Jersey,
Delaware and
South Carolina.
These production
assets
are
our
first
in
Maryland,
New
Jersey
and
Delaware.
We
believe
this
acquisition
provides
us
with
an
opportunity
to
significantly enhance our market reach
in the Northeast and Mid-Atlantic
states. See further discussion in
Note 2 – Acquisition
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
Effective on
September 9,
2024, we
completed a
strategic investment
with Crepini
LLC, establishing
a new
egg products
and
prepared foods venture.
Crepini LLC, founded
in 2007, grew
its brand throughout
the United States
and Mexico featuring
egg
wraps, protein pancakes, crepes, and
wrap-ups, which are sold
online and in over 3,500
retail stores. The new entity,
located in
Hopewell Junction,
New York,
operates as
Crepini Foods
LLC (“Crepini”).
We
capitalized Crepini
with approximately
$6.75
million in cash to purchase additional equipment and other assets and fund working capital in exchange for a 51% interest in the
new venture. Crepini LLC contributed its existing assets and business in exchange for a 49% interest in the new venture.
Index
23
In
fiscal
2022,
we
announced
a
strategic
investment
in
a
new
entity,
MeadowCreek
Food,
LLC
(“MeadowCreek”),
which
became
a
majority-owned
subsidiary.
During
March
2023,
MeadowCreek
began
operations
with
a
focus
on
being
a
leading
provider of
hard-cooked eggs.
During second
quarter 2025,
we acquired
the remaining
ownership interests
in MeadowCreek
and it became a wholly-owned subsidiary.
In
second
quarter
2024,
we
acquired
the
assets
of
Fassio
Egg
Farms,
Inc.
(“Fassio”)
related
to
its
commercial
shell
egg
production and processing business. Fassio
owned and operated commercial shell
egg production and processing facilities
with
a
capacity
at
the
time
of
acquisition
of
approximately
1.2
million
laying
hens,
primarily
cage-free,
a
feed
mill,
pullets,
a
fertilizer production and composting operation and land located in Erda, Utah, outside Salt Lake City. This acquisition provided
us with
an opportunity
to expand
our market
presence in
Utah and
the western
U.S., particularly
for cage-free
eggs. In
fourth
quarter 2024, we
acquired a broiler
processing plant, hatchery
and feed mill
in Dexter,
Missouri, which we
repurposed for use
in shell egg production.
EXECUTIVE OVERVIEW
For the
third quarter
and first
three quarters of
fiscal 2025,
we recorded
a gross
profit of
$716.1 million
and $1,319.4
million,
respectively, compared to $218.6
million and $355.1 million, respectively,
for the same periods of fiscal 2024, primarily driven
by an
increase in
the net
average selling
price of
shell eggs,
primarily conventional
egg prices,
as well
as an
increase in
total
dozens
sold.
Our
results
were
also
positively
impacted
by
lower
feed
costs
and
our
recent
acquisitions
discussed
above,
partially offset by an increase in the volume and price of outside egg purchases.
Our net
average selling
price per
dozen for
the third
quarter of
fiscal 2025
was $4.060
compared to
$2.247 in
the prior-year
period. Conventional egg
prices per dozen
were $4.766
compared to $2.152
for the prior-year
period, and specialty
egg prices
per dozen were $2.784 compared to $2.415 for the prior-year period. Egg prices in the third quarter of fiscal 2025 were elevated
compared to the prior-year period primarily due to the resurgence of HPAI
outbreaks, which decreased supply during the higher
seasonal demand cycle. According to
the USDA, the monthly average
size of the layer hen
flock from December 2024 through
February
(which most
closely
aligns with
our
third fiscal
quarter)
2025
was
approximately 302.7
million
hens,
which
was a
decrease of
11.0 million
layers,
or 3.5%,
compared to
the same
period in
the prior
year.
The daily
average price for
the Urner
Barry southeast
large index
for the
third quarter
of fiscal
2025 increased
156% from
the comparable
period in
the prior
year.
Subsequent to third quarter fiscal
2025, the Urner Barry southeast
large index decreased to
$3.99 per dozen as of
April 4, 2025
from a high of $8.69 per dozen as of February 28, 2025. For more information about historical shell egg prices, see Part I Item I
of our 2024 Annual Report.
Our dozens sold for
the third quarter of
fiscal 2025 increased 10.2%
compared to the third
quarter of fiscal 2025.
Demand was
strong
during
the
third
fiscal
quarter,
which
is
typically
a
period
of
higher
seasonal
demand.
We
believe
that
other
factors
positively
impacting
demand
included
severe
weather
events
during
the
quarter,
including
the
historic
snowstorms
in
the
southern U.S. in
January 2025, which
prompted families to
stock up on
staples including eggs,
and reported recommendations
of
eggs
as
a
good
source
of
lean
protein
for
individuals
taking
GLP-1
medications.
In
addition
to
strong
consumer
demand
during the quarter,
we had an
increase in production capacity
with the acquisitions of
the commercial shell egg
production and
processing business of ISE during the first quarter of fiscal 2025.
Our farm
production costs
per dozen
produced for
the third
quarter of
fiscal 2025
decreased 5.7%,
or $0.06
compared to
the
prior year period,
primarily due to
lower feed costs.
Feed costs per
dozen produced decreased 9.6%,
or $0.05, compared
to the
third quarter
of fiscal
2024, primarily
due to
lower feed
ingredient prices.
For information
about historical
corn and
soybean
meal prices,
see Part
I Item
I of
our 2024
Annual Report.
Our egg
purchases and
other cost
of sales
increased $163.8
million
quarter-over-quarter and
$397.8 million
comparing year-to-date
periods, primarily
due to
higher shell
egg prices
as well
as an
increase
in
dozens
purchased
to
supply
eggs
for
our
customers,
including
those
acquired
in
our
ISE
acquisition,
during
the
higher seasonal demand cycle while the nation experienced lower supply due to HPAI.
Index
24
RESULTS OF OPERATIONS
The following table sets
forth, for the periods
indicated, certain items from
our Condensed Consolidated Statements
of Income
expressed as a percentage of net sales.
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
March 1, 2025
March 2, 2024
Net sales
100.0
%
100.0
%
100.0
%
100.0
%
Cost of sales
49.5
%
68.9
%
58.2
%
78.9
%
Gross profit
50.5
%
31.1
%
41.8
%
21.1
%
Selling, general and administrative
5.6
%
9.3
%
7.0
%
11.6
%
(Gain) loss on involuntary conversions
—
%
(1.4)
%
—
%
(0.6)
%
Operating income
44.9
%
23.2
%
34.8
%
10.1
%
Total other income, net
1.9
%
3.2
%
1.6
%
2.2
%
Income before income taxes
46.8
%
26.4
%
36.4
%
12.3
%
Income tax expense
10.9
%
5.5
%
8.7
%
2.6
%
Net income
35.9
%
20.9
%
27.7
%
9.7
%
Less: Loss attributable to noncontrolling
interest
—
%
—
%
—
%
(0.1)
%
Net income attributable to Cal-Maine
Foods, Inc.
35.9
%
20.9
%
27.7
%
9.8
%
NET SALES
Total
net sales
for the
third quarter
of fiscal
2025 were
$1.4 billion
compared to
$703.1 million
for the
same period
of fiscal
2024.
Shell egg sales
represented 94.9% and 96.1%
of total net
sales for the
third quarters of fiscal
2025 and 2024,
respectively.
The
Company’s
shell
egg
offerings,
for
both
branded
and
private-label
products,
include
specialty
and
conventional
shell
eggs.
Specialty shell eggs include cage-free, organic, brown, free-range, pasture-raised and nutritionally enhanced eggs. Conventional
shell
eggs
sales
represent
all
other
shell
egg
sales
not
sold
as
specialty
shell
eggs.
The
Company’s
egg
products
offerings
include liquid and frozen egg products and ready-to-eat products such as hard-cooked eggs, egg wraps, protein pancakes, crepes
and wrap-ups. Other sales represent feed sales, miscellaneous byproducts and resale products.
Total
net sales
for the
thirty-nine weeks
ended March
1, 2025
were $3.2
billion, compared
to $1.7
billion for
the comparable
period of fiscal 2024.
Shell egg
sales represented
94.7% and
95.4% of
total net
sales for
the thirty-nine
weeks ended
March 1,
2025 and
March 2,
2024, respectively.
Index
25
The table below presents net sales in key categories (in thousands, except percentage data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
% Change
March 1, 2025
March 2, 2024
% Change
Shell Eggs
$
1,345,382
$
675,912
99.0
%
$
2,990,756
$
1,608,377
85.9
%
Egg products
61,024
21,759
180.5
136,850
63,994
113.8
Other
11,279
5,405
108.7
30,621
13,283
130.5
Total net sales
$
1,417,685
$
703,076
101.6
%
$
3,158,227
$
1,685,654
87.4
%
The table below presents an analysis of our shell egg sales (in thousands, except percentage data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
March 1, 2025
March 2, 2024
Shell egg sales
Conventional
$
1,016,438
75.6
%
$
413,619
61.2
%
$
2,118,065
70.8
%
$
919,498
57.2
%
Specialty
328,944
24.4
262,293
38.8
%
872,691
29.2
688,879
42.8
Total shell egg sales
$
1,345,382
100.0
%
$
675,912
100.0
%
$
2,990,756
100.0
%
$
1,608,377
100.0
%
Dozens sold
Conventional
213,247
64.3
%
192,182
63.9
%
622,833
64.1
%
566,174
65.7
%
Specialty
118,148
35.7
108,597
36.1
348,385
35.9
295,904
34.3
Total dozens sold
331,395
100.0
%
300,779
100.0
%
971,218
100.0
%
862,078
100.0
%
Net average selling price per dozen
Conventional
$
4.766
$
2.152
$
3.401
$
1.624
Specialty
$
2.784
$
2.415
$
2.505
$
2.328
All shell eggs
$
4.060
$
2.247
$
3.079
$
1.866
Shell egg sales
Third Quarter – Fiscal 2025 vs. Fiscal 2024
-
In the
third quarter of
fiscal 2025,
conventional egg sales
increased $602.8 million,
or 145.7%,
compared to the
third
quarter
of
fiscal
2024,
primarily
due
to
a
121.5%
increase
in
the
prices
for
conventional
eggs,
which
resulted
in
a
$557.4 million increase in net sales, and a 11.0%
increase in the volume of conventional eggs sold, which resulted in a
$45.3 million increase in net sales. Results for
the third quarter of 2025 were positively impacted
by our acquisition of
ISE during the
current fiscal year
as well as
the resumption of
full operations at
our facility in
Chase, KS, which
was
shut down in the prior year quarter due to an HPAI outbreak.
-
Specialty egg sales increased
$66.7 million, or 25.4%,
in the third quarter
of fiscal 2025 compared
to the third quarter
of
fiscal
2024,
primarily
due
to
a
15.3%
increase
in
prices
for
specialty
eggs,
which
resulted
in
a
$43.6
million
increase
in
net
sales
and
a
8.8%
increase
in
the
volume
of
specialty
eggs
sold,
which
resulted
in
a
$23.1
million
increase in net sales.
-
See “Executive Overview” above for additional discussion.
Thirty-nine weeks – Fiscal 2025 vs. Fiscal 2024
-
For the thirty-nine weeks ended March 1, 2025,
conventional egg sales increased $1.2 billion, or 130.4%, compared to
the
same
period
of
fiscal
2024,
primarily
due
to
the
increase
in
the
prices
for
conventional
shell
eggs.
Prices
for
conventional
eggs increased
109.4%, which
resulted in
a $1.1
billion increase
in net
sales. A
10.0% increase
in the
volume of conventional eggs sold resulted in a $92.0 million increase in net sales.
-
Specialty egg
sales increased
$183.8 million,
or 26.7%,
for the
thirty-nine weeks
ended March
1, 2025
compared to
the same period in
fiscal 2024, primarily due
to a 17.7% increase
in the volume of
specialty eggs sold, which
resulted
in a
$122.2 million
increase in
net sales
and a
7.6% increase
in prices
for specialty
eggs, which
resulted in
a $61.7
million increase in net sales.
Index
26
Egg products sales
Third Quarter – Fiscal 2025 vs. Fiscal 2024
-
Egg
products
sales
increased
$39.3
million,
or
180.5%,
for
the
third
quarter
of
fiscal
2025
compared
to
the
same
period of
fiscal 2024,
primarily due
to a
200.5% increase
in sales
of liquid
eggs, which
had a
$22.0 million
positive
impact on net
sales, and
a 46.1% increase
in liquid eggs
pounds sold, which
resulted in a
$6.6 million increase
in net
sales. Results for the third quarter of 2025 were positively impacted by our
recent acquisition of ISE, which included a
breaking facility.
-
Sales from
hard-cooked eggs
increased $6.6
million or
181.5% in
the third
quarter of
fiscal 2025
compared to
fiscal
2024 as more processing capabilities are coming online from our investments in MeadowCreek.
Thirty-nine weeks – Fiscal 2025 vs. Fiscal 2024
-
Egg
products
sales
increased
$72.9
million,
or
113.8%,
primarily
due
to
a
118.0%
increase
in
sales
of
liquid
eggs,
which
had
a
$31.6
million
positive
impact
on
net
sales,
and
a
42.0%
increase
in
liquid
eggs
pounds
sold,
which
resulted in a $17.4 million increase in net sales.
-
Sales from hard-cooked eggs increased $18.7
million, or 188.6%, in the
first three quarters of fiscal 2025
compared to
the same period in fiscal 2024, primarily for the reasons described above.
Other
-
Other
sales
increased
compared
to
the
prior
year
periods
primarily
due
to
higher
feed
sales
related
to
our
ISE
acquisition.
COST OF SALES
Cost of
sales consists
of costs
directly related
to producing,
processing and
packing shell
eggs, purchases
of shell
eggs from
outside
sources,
processing
and
packing
of
egg
products
and
other
non-egg
costs. Farm
production
costs
are
those
costs
incurred
at
the
egg
production
facility,
including
feed,
facility
(including
labor),
hen
amortization
and
other
related
farm
production costs.
The following table presents the key variables affecting our cost of sales (in thousands, except cost per dozen data):
Thirteen Weeks Ended
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
%
Change
March 1, 2025
March 2, 2024
%
Change
Cost of sales
Farm production
$
266,056
$
248,650
7.0
%
$
766,003
$
760,525
0.7
%
Processing, packaging,
and warehouse
101,631
86,423
17.6
292,165
253,096
15.4
Egg purchases and other
cost of sales
291,703
127,925
128.0
658,182
260,375
152.8
Egg products
42,180
21,506
96.1
122,502
56,523
116.7
Total cost of sales
$
701,570
$
484,504
44.8
%
$
1,838,852
$
1,330,519
38.2
%
Farm production costs (per
dozen produced)
Feed
$
0.492
$
0.544
(9.6)
%
$
0.489
$
0.564
(13.3)
%
Other
$
0.418
$
0.421
(0.7)
%
$
0.420
$
0.431
(2.6)
%
Total farm production cost
$
0.910
$
0.965
(5.7)
%
$
0.909
$
0.995
(8.6)
%
Outside egg purchases
(average cost per dozen)
$
5.10
$
2.44
109.0
%
$
3.69
$
2.09
76.6
%
Dozens produced
293,087
259,527
12.9
%
847,962
774,984
9.4
%
Percent produced to sold
88.4%
86.3%
2.4
%
87.3%
89.9%
(2.9)
%
Index
27
Farm Production
Third Quarter – Fiscal 2025 vs. Fiscal 2024
-
Feed
costs
per
dozen
produced
decreased
9.6%
in
the
third
quarter
of
fiscal
2025
compared
to
the
third
quarter
of
fiscal 2024.
This decrease
was primarily
due to
lower prices
for soybean
meal, one
of our
primary feed
ingredients.
The decrease in feed cost per dozen resulted in a decrease in cost of sales of $15.2 million for the third quarter of fiscal
2025 compared to the prior period quarter.
-
For the
third quarter of
fiscal 2025,
the average Chicago
Board of Trade
(“CBOT”) daily
market price was
$4.68 per
bushel
of
corn
and
$298
per
ton
of
soybean
meal,
representing
an
increase
of
3.8%
and
a
decrease
of
19.3%,
respectively, as compared to the average CBOT daily market prices for the third quarter of fiscal 2024.
-
Other farm production
costs decreased primarily due
to lower flock
amortization. Feed costs reached
their peak in the
second quarter of
fiscal 2023 and
have since trended
downward. Lower costs
result in lower
capitalized values of
the
flocks during the grow out phase, which reduced amortization cost over time.
Thirty-nine weeks – Fiscal 2025 vs. Fiscal 2024
-
Feed costs per
dozen produced decreased
13.3% in the
thirty-nine weeks ended
March 1, 2025
compared to the
same
period of
fiscal 2024, primarily
due to
lower feed
ingredient prices. The
decrease in
feed cost
per dozen
resulted in a
decrease in cost of sales of $63.6 million compared to the prior year period.
-
For the
year-to-date period,
the average
CBOT daily
market price
was $4.29
per bushel
of corn
and $316
per ton
of
soybean meal, representing decreases of
11.8%
and 21.5%, respectively,
compared to the average CBOT
daily market
prices for the comparable period in the prior year.
-
Other farm production costs decreased due to lower flock amortization, for the reasons described above.
Current
indications
for
corn
and
soybean
project
a
favorable
stocks-to-use
ratio
near
the
levels
prevailing
today
for
the
remainder of
fiscal 2025;
however,
as long
as outside
factors remain
uncertain (including
weather patterns
and global
supply
chain disruptions), volatility could remain.
Processing, packaging, and warehouse
Third Quarter – Fiscal 2025 vs. Fiscal 2024
-
Processing,
packaging,
and
warehouse
costs
increased
17.6%
compared
to
the
third
quarter
of
fiscal
2024
due
to
a
13.5% increase in the volume of processed dozens as well as an increase in costs of packaging materials.
Thirty-nine weeks – Fiscal 2025 vs. Fiscal 2024
-
Processing,
packaging,
and
warehouse
costs
increased
15.4%
compared
to
the
first
three
quarters
of
fiscal
2025,
primarily
due
a
10.3%
increase
in
the
volume
of
processed
dozens
as
well
as
an
increase
in
costs
of
packaging
materials.
Egg purchases and other cost of sales
Third Quarter – Fiscal 2025 vs. Fiscal 2024
-
Costs in
this category
increased primarily due
to higher
shell egg
prices as
the average
cost per
dozen of
outside egg
purchases increased 109.0%
compared to third
quarter of fiscal
2024, as well
as due to
an increase of
8.8% in dozens
purchased.
Dozens
purchased
increased
due
to
purchasing
more
eggs
to
supply
our
customers
during
the
higher
seasonal demand cycle while the nation experienced lower supply due to HPAI.
Thirty-nine weeks – Fiscal 2025 vs. Fiscal 2024
-
Costs in
this category
increased primarily due
to higher
shell egg
prices as
the average
cost per
dozen of
outside egg
purchases increased
76.6% compared
to fiscal
2024, as
well as
an increase
of 46.2%
in dozens
purchased, primarily
for the reasons described above.
GROSS PROFIT
Gross profit for the thirteen weeks ended
March 1, 2025 was $716.1 million compared
to $218.6 million for the same period
of
- Gross
profit for
the thirty-nine
weeks ended
March 1,
2025 was
$1.3 billion
compared to
$355.1 million
for the
same
period of
- The
increases were
primarily due
to higher
net average
selling prices,
particularly for
conventional eggs,
and
Index
28
higher
volumes,
as
well
as
lower
feed
ingredient
prices,
partially
offset
by
the
increase
in
volume
and
price
of
outside
egg
purchases.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling,
general,
and
administrative
(“SGA”)
expenses
include
costs
of
delivery,
marketing,
and
other
general
and
administrative expenses. Delivery expense
includes contract trucking expense
and all costs to
maintain and operate our
fleet of
trucks to
deliver products
to customers
including the
related payroll
expenses. Marketing
expense includes
franchise fees
that
are
submitted
to
Eggland’s
Best,
Inc.
(“EB”)
to
support
the
EB
brand,
brokerage
and
commission
fees,
and
other
general
marketing expenses
such as
payroll expenses
for our
in-house sales
team. Other
general and
administrative expenses
include
corporate payroll
related expenses
and other
general corporate
overhead costs.
The following
table presents
an analysis
of our
SGA expenses (in thousands):
Thirteen Weeks Ended
March 1, 2025
March 2, 2024
$ Change
% Change
Delivery expense
$
23,476
$
18,832
$
4,644
24.7
%
Marketing expense
11,240
14,149
(2,909)
(20.6)
%
Other general and administrative
expenses
45,251
33,039
12,212
37.0
%
Total
$
79,967
$
66,020
$
13,947
21.1
%
Third Quarter – Fiscal 2025 vs. Fiscal 2024
Delivery expense
-
The increased delivery expense is primarily due to an increase
in our sales volumes of egg and egg products
compared
to
the
prior
year
period.
Contract
trucking
expenses
increased
in
connection
with
our
acquisition
of
ISE
and
our
facility in
Chase, KS
being
fully
operational in
the
current fiscal
quarter.
We
also obtained
some new
business and
additional shipping routes in order to meet our customers’ needs at their locations.
Marketing expense
-
The decrease in marketing
expense is primarily due to
a decrease in franchise fees.
The higher prices for conventional
eggs compared to specialty eggs diminished the need to promote specialty eggs; as a result EB temporarily reduced the
related franchise fees for certain specialty egg brands to encourage continued production of these branded
eggs.
Other general and administrative expense
-
The
increase
in
other
general
and
administrative
expense
is
primarily
due
both
to
an
increase
in
the
accrual
for
anticipated employee bonuses
and to the
increased adjustment to
the fair value
of contingent consideration
associated
with the
Fassio acquisition.
See further
discussion in
Note 4 – Fair Value Measurements
of the
Notes to
Condensed
Consolidated Financial Statements included in this Quarterly Report.
Thirty-nine Weeks Ended
March 1, 2025
March 2, 2024
$ Change
% Change
Delivery expense
$
68,206
$
54,229
$
13,977
25.8
%
Marketing expense
40,666
38,809
1,857
4.8
%
Litigation loss contingency accrual
—
19,648
(19,648)
(100.0)
%
Other general and administrative
expenses
110,660
82,158
28,502
34.7
%
Total
$
219,532
$
194,844
$
24,688
12.7
%
Thirty-six weeks – Fiscal 2025 vs. Fiscal 2024
Delivery expense
-
The increased delivery expense is primarily due to the reasons described above
Index
29
Marketing expense
-
The increase
in marketing
expense is
primarily due
to an
increase in
franchise fees
in the
first half
of fiscal
2025 as
specialty
egg
sales
increased,
partially
offset
by
the
reduction
in
fees
in
the
third
quarter
of
fiscal
2025
described
above.
Litigation loss contingency accrual
-
In the second quarter of fiscal 2024, we accrued a $19.6 million loss contingency relating to a jury decision returned in
pending
anti-trust
litigation.
See
further
discussion
in
Note 10 - Commitments and Contingencies
of
the
Notes
to
Condensed Consolidated Financial Statements included in this Quarterly Report.
Other general and administrative expense
-
The increase in other
general and administrative expense
is primarily for the
reasons described above, as
well as costs
associated with the acquisition of ISE assets that occurred during the first quarter of fiscal 2025.
GAIN ON INVOLUNTARY
CONVERSION
In the third quarter of fiscal 2024, we recorded a gain of $9.9 million due to recoveries under indemnity and insurance programs
that exceeded the amortized book value of the covered assets and our direct
costs, primarily related to the HPAI
outbreak at our
Kansas facility.
OPERATING
INCOME
For the
third quarter of
fiscal 2025,
we recorded
operating income of
$635.7 million
compared to
operating income of
$162.8
million for the same period of fiscal 2024.
For the thirty-nine weeks ended March 1,
2025, we recorded operating income of $1.1 billion
compared to operating income of
$170.3 million for the same period of fiscal 2024.
OTHER INCOME (EXPENSE)
Total
other
income
(expense)
consists
of
items
not
directly
charged
or
related
to
operations,
such
as
interest
income
and
expense, equity in
income or loss of
unconsolidated entities, and patronage
dividends, among other
items. Patronage dividends
are paid to us from our membership in the EB cooperative.
For the third quarter of fiscal 2025, we
earned $12.8 million of interest income compared to $7.8 million for
the same period of
fiscal 2024, primarily due to higher average cash and cash
equivalents and investment securities available-for-sale balances and
yields. The Company recorded interest expense of $146 thousand and $247 thousand for the third quarters ended March 1, 2025
and March 2, 2024, respectively.
For the
thirty-nine weeks ended
March 1, 2025,
we earned $32.6
million of
interest income compared
to $22.4 million
for the
same period
of fiscal
2024, primarily due
to higher
average cash
and cash
equivalents and
investment securities
available-for-
sale balances and yields. The Company recorded interest expense of $457 thousand and $523 thousand for the thirty-nine weeks
ended March 1, 2025 and March 2, 2024, respectively.
INCOME TAXES
For the third quarter
of fiscal 2025, our
pre-tax income was $663.0
million, compared to $185.2 million
for the third quarter
of
fiscal 2024. Income tax expense of $154.9 million
was recorded for third quarter 2025 with
an effective tax rate of 23.4%.
This
includes the
discrete tax
benefit of
$5.7 million
associated with
the fiscal
2024 provision-to-return
adjustments. Excluding the
discrete tax
benefit, income
tax expense
was $160.8
million for
the third
quarter of
fiscal 2025
with an
adjusted effective
tax
rate
of
24.2%.
For
the
third
quarter
2024,
income
tax
expense
was
$38.8
million
with
an
effective
tax
rate
of
21.0%.
This
includes the
discrete tax
benefit of
$6.4 million
associated with
the fiscal
2023 provision-to-return
adjustments. Excluding the
discrete tax benefit, income tax expense was $45.2 million with an adjusted effective tax rate of 24.4%.
For
the
thirty-nine
weeks
ended
March
1,
2025,
pre-tax
income
was
$1.1
billion,
compared
to
$208.0
million
for
the
same
period of fiscal
- Income tax
expense of $273.8
million was recorded
for the thirty-nine
weeks ended March
1, 2025 with
an effective tax rate of 23.8%. This includes the discrete tax benefit of $5.7 million associated with the fiscal 2024 provision-to-
return adjustments.
Excluding the
discrete tax
benefit, income
tax expense
was $279.5
million with
an adjusted
effective
tax
rate of
24.3%. For
the same
period of
fiscal 2024,
income tax
expense was
$44.7 million
with an
effective tax
rate of
21.5%.
Index
30
This includes the discrete tax benefit
of $6.4 million associated with the
fiscal 2023 provision-to-return adjustments. Excluding
the discrete tax benefit, income tax expense was $51.0 million with an adjusted effective tax rate of 24.5%.
Items causing
our effective
tax rate
to differ
from the
federal statutory
income tax
rate of
21% are
state income
taxes, certain
federal tax credits
and certain items included
in income or
loss for financial reporting
purposes that are
not included in taxable
income or loss
for income tax
purposes, including tax exempt
interest income, certain nondeductible
expenses, and net
income
or loss attributable to noncontrolling interest.
NET INCOME ATTRIBUTABLE
TO CAL-MAINE FOODS, INC.
Net income attributable
to Cal-Maine Foods,
Inc. for the
third quarter ended
March 1, 2025
was $508.5 million,
or $10.42 per
basic and $10.38 per diluted common share, compared to net income attributable to Cal-Maine Foods, Inc. of $146.7 million, or
$3.01 per basic and $3.00 per diluted common share, for the same period of fiscal 2024.
Net income attributable to Cal-Maine Foods, Inc. for the thirty-nine weeks ended March 1, 2025, was $877.6 million, or
$17.99
per
basic
and
$17.92
per
diluted
common
share,
compared
to
net
income
attributable
to
Cal-Maine
Foods,
Inc.
of
$164.6
million or $3.38 per basic and $3.37 per diluted common share, for the same period of fiscal 2024.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Current Ratio
Our working
capital was
$1.5 billion
at March
1, 2025
compared to
$1.0 billion
at June
1, 2024.
The calculation
of working
capital is defined as current
assets less current liabilities. Our current ratio
was 3.9 at March 1,
2025 compared to 5.5 at June
1,
- The
decrease in
our current
ratio is
primarily due
to the
increase in
both income
taxes and
trade payables.
The current
ratio is calculated by dividing current assets by current liabilities.
Cash Flows from Operating Activities
For the
thirty-nine weeks
ended March
1, 2025,
$811.7 million
in net
cash was
provided by
operating activities,
compared to
$237.6
million
provided
by
operating
activities
for
the
comparable
period
in
fiscal
2024.
The
increase
in
cash
flow
from
operating
activities
resulted
primarily
from
higher
net
average
selling
prices
per
dozen,
particularly
for
conventional
eggs,
increased
volume
of
sales
and
a
decrease
in
feed
ingredient
costs
compared
to
the
prior-year
period,
partially
offset
by
the
increase in volume and price of outside egg purchases.
Cash Flows from Investing Activities
For the thirty-nine weeks ended March 1, 2025,
$385.1 million was used in investing activities, primarily due
to the acquisition
of assets of
ISE, and purchases of
property, plant
and equipment compared
to $118.4
million used in
investing activities in the
same period of fiscal 2024, primarily
due to purchases of investment securities.
Purchases of investment securities were $813.1
million during the thirty-nine weeks ended March 1, 2025 and sales and maturities of investment securities were $654.4
million
during the period. Sales
and maturities of investment securities
were $273.9 million in the
prior year period while
purchases of
investment
securities were
$243.5
million
during
the
period.
The
increase
in
sales
and
maturities
of
investment
securities
is
primarily due
to the
maturities of
short-term investments
during the
first three
quarters of
fiscal 2025.
Cash paid
for business
acquisitions
was
$116.2
million
in
the
thirty-nine
weeks
ended
March
1,
2025,
primarily
related
to
the
ISE
acquisition,
and
$53.7 million in the prior year period, related to the Fassio acquisition. Purchases of property,
plant and equipment were $115.4
million and
$96.0 million
in the
first three
quarters of
fiscal 2025
and 2024,
respectively,
primarily reflecting
progress on
our
construction projects.
Cash Flows from Financing Activities
We
paid
dividends of
$160.8 million
for the
thirty-nine weeks
ended March
1,
2025
compared to
$43.0 million
in the
same
prior-year period.
As of
March 1,
2025, cash
increased $259.4
million since
June 1,
2024, compared
to $74.3
million during
the same
period of
fiscal 2024. The increase is primarily due to the increase in net sales during fiscal 2025.
Index
31
Credit Facility
On
November
15,
2021,
we
entered
into
a
credit
agreement
that
provides
for
a
senior
secured
revolving
credit
facility
(the
“Credit Facility”), in an initial aggregate principal amount of up to
$250 million with a five-year term. As of March 1, 2025,
no
amounts were borrowed under
the Credit Facility and
we had $4.7
million in outstanding
standby letters of
credit issued under
our Credit Facility for the
benefit of certain insurance companies. On
March 25, 2025, we entered
into the Second Amendment
to
the
Credit
Facility.
Refer
to
Part
I.
Item
I,
Notes
to
Consolidated
Financial
Statements,
Note 11 – Subsequent Events
,
included
in
this
report,
Exhibit
10.2
to
this
report
and
Part
II
Item
8,
Notes
to
Consolidated
Financial
Statements
and
Supplementary Data, Note 10
- Credit Facility included
in our 2024
Annual Report for further
information regarding our long-
term debt.
Share Repurchase Program
On February
25, 2025,
the Board
of Directors
approved a
new $500
million share
repurchase program.
The share
repurchase
program authorizes the Company, in management’s discretion, to repurchase Common Stock from time to time for an aggregate
purchase price
up to
$500 million
(exclusive of
any fees,
taxes, commissions
or other
expenses related
to such
repurchases),
subject to
market conditions
and other
factors. The
actual timing,
number and
value of
shares repurchased
under the
program
will be
determined by
management in
its discretion
and will
depend on
a number
of factors,
including, but
not limited
to, the
market price of the Common Stock and general market and economic conditions.
The Company expects to strategically and opportunistically repurchase shares from time to time through solicited or unsolicited
transactions in the
open market, in
privately negotiated transactions
or by other
means in accordance
with securities laws.
It is
also
possible
that
the
Company could
use
a
portion of
its share
repurchase
program to
repurchase
some of
the
shares
of
the
Company’s
Common
Stock
held
by
the
family
of
our
late
founder,
Fred
R.
Adams
Jr.,
as
part
of
their
potential
portfolio
diversification.
Any
repurchases
from
the
family
would
require
special
approval
from
a
Special
Committee
of
the
Board
of
Directors.
The
Company
expects
that
share
repurchases
under
the
program
will
be
funded
from
one
or
a
combination
of
existing cash
balances and
future free
cash flow.
The share
repurchase program
does not
obligate the
Company to
repurchase
any specific
amount of
shares, does
not have
an expiration
date, and
may be
suspended, modified
or discontinued
at any
time
without prior notice.
Dividends
In
accordance
with
our
variable
dividend
policy,
we
will
pay
a
cash
dividend
totaling
approximately
$169.5
million,
or
approximately $3.456 per share, to holders
of our Common Stock and Class
A Common Stock with respect to
our third quarter
of fiscal 2025. The amount paid per share will vary based on
the number of outstanding shares on the record date. The dividend
is payable on May 15, 2025 to holders of record on April 30, 2025.
Material Cash Requirements
Material cash
requirements for operating
activities primarily consist
of feed
ingredients, processing, packaging
and warehouse
costs, employee related costs, and
other general operating expenses, which
we expect to be paid
from our cash from operations
and cash and investment
securities on hand for
at least the next
12 months. While volatile
egg prices and feed
ingredient costs,
among
other
things, make
long-term predictions
difficult,
we
have
substantial liquid
assets and
availability under
our
Credit
Facility to fund future operating requirements.
Our material cash
requirements for capital expenditures
consist primarily of our
construction projects to
increase our cage-free
production
capacity.
We
continue to
monitor the
increasing demand
for cage-free
eggs and
to
engage with
our
customers
in
efforts
to achieve
a smooth
transition toward
their announced
timelines for
cage-free egg
sales. The
following table
presents
material construction projects approved as of March 1, 2025 (in thousands):
Project(s) Type
Projected
Completion
Projected Cost
Spent as of March 1,
2025
Remaining
Projected Cost
Cage-Free Layer & Pullet Houses
Fiscal 2025
$
4,396
$
3,796
$
600
Feed Mills
Fiscal 2026
16,593
8,055
8,538
Egg Products Expansion
Fiscal 2026
20,213
7,093
13,120
Cage-Free Layer & Pullet Houses
Fiscal 2026
199,667
155,444
44,223
$
240,869
$
174,388
$
66,481
Index
32
These projects
include the
addition of
five new
cage-free layer
houses and
two pullet
houses across
our locations
in Florida,
Georgia,
Utah
and
Texas.
We
expect
the
projects
to
be
completed
in
calendar
2025
with
expected
additional
production
capacity
for
approximately
1.1
million
cage-free
layer
hens
and
250
thousand
pullets.
We
are
also
investing
$15
million
to
expand our egg products processing facility in Blackshear, Georgia to add extended shelf-life liquid eggs products.
We
believe our
current cash
balances, investments,
projected cash
flows from
operations, and
available borrowings
under our
Credit
Facility
will
be
sufficient
to
fund
our
capital
expenditure
cash
needs
for
at
least
the
next
12
months
and
to
fund
our
capital commitments currently in place thereafter.
IMPACT OF RECENTLY
ISSUED/ADOPTED ACCOUNTING STANDARDS
For
information
on
changes
in
accounting
principles
and
new
accounting
policies,
see
Note 1 - Summary of Significant
Accounting Policies
of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting
estimates are
those estimates
made in
accordance with
U.S. generally
accepted accounting
principles that
involve
a
significant
level
of
estimation
uncertainty
and
have
had
or
are
reasonably
likely
to
have
a
material
impact
on
our
financial condition
or results
of operations.
There have
been no
changes to
our critical
accounting estimates
identified in
our
2024 Annual Report.
ITEM 3. QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
There have been no material changes in our exposure to market risk during the thirty-nine weeks ended March 1, 2025 from the
information provided in Part II Item 7A, Quantitative and Qualitative Disclosures About Market Risk in our 2024 Annual
Report.
ITEM 4.
CONTROLS
AND
PROCEDURES
Disclosure Controls and Procedures
Our disclosure controls
and procedures are
designed to
provide reasonable assurance
that information required
to be disclosed
by us in the reports we file
or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time
periods specified
in the
Securities and
Exchange Commission’s
rules and
forms. Disclosure controls
and procedures
include,
without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports
that
we file or submit under
the Exchange Act is accumulated and
communicated to management, including our principal
executive
and
principal
financial
officers,
or
persons
performing
similar
functions,
as
appropriate
to
allow
timely
decisions
regarding
required disclosure. Based on an evaluation of our disclosure controls and procedures conducted by our Chief Executive Officer
and
Chief
Financial
Officer,
together
with
other
financial
officers,
such
officers
concluded
that
our
disclosure
controls
and
procedures were effective as of March 1, 2025 at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change
in our internal control
over financial reporting that
occurred during the quarter
ended March 1, 2025
that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Index
33
PART
II. OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
Refer
to
the
discussion
of
certain
legal
proceedings
involving
the
Company
and/or
its
subsidiaries
in
(i)
our
2024
Annual
Report,
Part I
Item 3
Legal Proceedings,
and Part
II
Item 8,
Notes
to Consolidated
Financial
Statements and
Supplementary
Data,
Note
16
-
Commitments
and
Contingencies,
and
(ii)
in
this
Quarterly
Report
in
Note 10
- Commitments and
Contingencies
of
the
Notes
to
Condensed
Consolidated
Financial
Statements,
which
discussions
are
incorporated
herein
by
reference.
ITEM 1A.
RISK
FACTORS
Except as set
forth below,
there have been
no material changes
in the risk
factors previously disclosed
in the Company’s
2024
Annual Report.
Provisions of
our certificate
of incorporation,
bylaws, and
Delaware law
may make
an acquisition
of us
or a
change in
our management more difficult.
Certain
provisions of
our certificate
of
incorporation and
bylaws could
discourage, delay
or
prevent a
merger,
acquisition or
other change
in control
that stockholders may
consider favorable,
including transactions
in which
an investor
might otherwise
receive a premium for
its shares. These provisions
also could limit the
price that investors might
be willing to pay
in the future
for
shares
of
our
Common
Stock,
thereby
depressing
the
market
price
of
our
Common
Stock.
Stockholders
who
wish
to
participate in these transactions may not
have the opportunity to do
so. Furthermore, these provisions could prevent or
frustrate
attempts by our stockholders to replace or remove our management. These provisions:
●
provide for the
division of the
Board into three
classes as nearly
equal in size as
practicable with staggered three-year
terms and limit the removal of directors and the filling of vacancies;
●
authorize our Board to set the
terms of and issue preferred stock, without
stockholder approval, that could be issued to
persons friendly to management
or could operate as
a “poison pill” to
dilute the stock ownership
of a potential hostile
acquirer to prevent an acquisition that is not approved by our Board;
●
prohibit stockholder action by written consent;
●
prohibit stockholders from calling special meetings of stockholders;
●
establish advance notice
requirements for stockholder
nominations to our
Board or for
stockholder proposals that
can
be acted on at stockholder meetings; and
●
require the
approval of
the holders
of
at
least 66-2/3%
of
the voting
power of
all then
outstanding shares
of capital
stock of the Company entitled to vote generally in the election of directors, voting together as a single class, in order to
amend our certificate of incorporation and bylaws.
In addition,
we are
governed by
the provisions
of Section
203 of
the Delaware
General Corporation
Law,
which may,
unless
certain criteria
are met,
prohibit large
stockholders, in
particular those
owning 15%
or more
of our
outstanding voting
stock,
from merging or combining with us for a prescribed period of time.
The potential loss, or loss, of controlled company status could disrupt our business.
Our Company has been
controlled by members of
the family of our
founder, Fred
R. Adams, Jr.
since its founding and
since it
became
a
public
company.
As
previously
disclosed,
family
members
have
informed
the
Company
that
they
are
potentially
interested
in diversifying
their respective
financial
portfolios,
including through
the
potential sale
of
all
or
a
portion
of
their
equity
interests
in
the
Company
(the
“Potential
Portfolio
Diversification”),
which
could
involve
the
conversion
of
all
of
the
outstanding
Class
A
Common
Stock.
Such
a
conversion
would
result
in
the
family
no
longer
controlling
a
majority
of
the
voting
power
of
our
outstanding
equity
securities
and
in
our
Company
ceasing
to
be
a
“controlled
company”
under
Nasdaq
rules. Adolphus B. Baker,
Board Chair and a family
member, has indicated
that he is willing to
serve as executive Board Chair
at least
through
our 2027
annual meeting
of stockholders.
The effect
of the
loss of
controlled company
status on
the trading
price of our Common Stock and on our business is uncertain, including our ability to retain and hire key personnel and maintain
relationships
with
customers and
suppliers, and
on
our
operating
results. In
addition, our
business
may
be
more
likely
to
be
disrupted by persons seeking
to influence or effect
a change of control,
change of management or
change in governance of
our
Company. Any such disruptions to our business could have a material adverse effect on our operations and financial results.
Index
34
Sales of substantial amounts of our Common Stock in
the public markets, or the perception that
such sales might occur,
could cause the trading price of our Common Stock to decline.
Sales of a substantial number of shares of
our Common Stock into the public markets in
connection with the Potential Portfolio
Diversification, or the perception that such sales might occur, could cause the trading price of our Common Stock to decline.
The recent
high market
prices for
eggs, primarily caused
by the
HPAI-related
reduction in
supply,
has led
to pressure
from
customers
to
change
long-standing
market-based
pricing
frameworks
and/or
otherwise
reduce
the
price
of
our
eggs. A
material
change
in
our
sales
arrangements
with
key
customers
could
have
a
material
adverse
effect
on
our
revenues,
gross
profits
and
net
income.
Other
reactions
to
high
egg
prices,
including
by
state
or
federal
government
agencies, may also adversely impact our business.
Market prices for wholesale shell eggs have been volatile
and cyclical over time. Market prices for eggs
tend to increase during
and following outbreaks
of agricultural diseases
in the
egg industry
that reduce the
supply of
eggs, which has
occurred during
the current
HPAI
outbreak, until
the supply
and demand
balance is
restored. Many
of our
sales arrangements
with customers,
particularly for conventional eggs, are based on formulas that take into account, in varying ways, independently quoted regional
wholesale market prices
for eggs. The
recent high market
prices for eggs
have led to
pressure from customers
to change
long-
standing market-based pricing frameworks and/or otherwise
reduce the price of our
eggs. To
remain competitive and retain our
customers
and
gain
new
ones,
we
must
consider
our
customer
relationships
and
the
reactions
and
potential
reactions
of
competitors.
A
material
change
in
our
sales
arrangements
with
key
customers
could
have
a
material
adverse
effect
on
our
revenues and gross profits.
Other
reactions
to
high
egg
prices
may
also
adversely
impact
our
business.
On
February
26,
2025,
the
U.S.
Secretary
of
Agriculture announced
a $1
billion-dollar comprehensive
strategy to
curb HPAI,
protect the
U.S. poultry
industry,
and lower
egg prices. The Secretary’s
five-pronged strategy includes an additional $500
million for biosecurity measures, $400 million
in
financial relief for affected
farmers, and $100 million
for vaccine research, actions
to reduce regulatory burdens,
and exploring
temporary
egg
import
options.
As
disclosed
elsewhere
herein,
in
March
2025,
we
received
a
civil
investigative
demand
in
connection with a widely publicized investigation
by the Antitrust Division of
the Department of Justice into
the causes behind
nationwide increases
in egg
prices. In
addition, persistent
high egg
prices during
the peak
of the
current HPAI
outbreak may
have caused
and may
in the
future cause
some consumers
to purchase
fewer eggs.
Such persistent
high-price cycles
may also
increase
attention
on
the
egg
industry
by
state
and
federal
government
agencies,
which
may
lead
to
additional
government
investigations or related
activities. The potential impacts
of these reactions
on our business
are unclear,
unpredictable and may
divert our resources and attention from our core business activities, and they may have an adverse effect that could be material.
For
additional
information,
see,
in
this
report,
Part
I.
Item
1.
Notes
to
the
Consolidated
Financial
Statements,
Note 10 -
Commitments and Contingencies
and Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of
Operations –
HPAI.
See
also the
following risk
factors in
Part I.
Item IA.
in our
2024 Annual
Report:
“Market prices
of
wholesale shell eggs are
volatile, and decreases in
these prices can adversely impact our revenues
and profits.”; “Agricultural
risks, including outbreaks of avian diseases such as HPAI,
have harmed and in the future could harm our business.”
Current and
future
litigation and
other legal
matters could
expose us
to significant
liabilities and
adversely affect
our
business reputation.
We
and
certain of
our
subsidiaries are
involved in
various legal
proceedings and
other
legal matters.
Litigation, government
investigations and
other legal
matters are
inherently unpredictable,
and although
we believe
we have
meaningful defenses
in
these matters,
we may
incur liabilities
due to
adverse judgments
or enter
into settlements
of claims
that could
have a
material
adverse effect
on our
results of operations,
cash flow
and financial condition.
For further
discussion, see, in
this report,
Part I.
Item 1.
Notes to
the Consolidated
Financial Statements,
Note 10
– Commitments
and Contingencies
and, in
our 2024
Annual
Report,
Part
I.
Item
3.
Legal
Proceedings
and
Part
II.
Item
8.
Notes
to
the
Consolidated
Financial
Statements,
Note
16
–
Commitments and Contingencies. Such lawsuits, investigations
and other legal matters are
expensive to respond to and
defend,
divert management’s
attention, and may
result in
significant adverse judgments
or settlements.
Legal proceedings may
expose
us
to
negative
publicity,
which
could
adversely
affect
our
business
reputation
and
customer
preference
for
our
products
and
brands.
The Company’s pending Echo Lake Acquisition may not be completed and, if completed, may not achieve the results we
anticipate.
The completion
of the
Company’s
pending acquisition
of Echo
Lake Foods
is subject
to a
number of
risks and
uncertainties,
many of which are outside of the Company’s control, including:
●
conditions to the closing of the proposed transaction may not be satisfied;
Index
35
●
antitrust clearance required for the proposed transaction may not be obtained, or required antitrust clearance may delay
the
proposed
transaction
or
result
in
the
imposition
of
conditions
that
could
have
a
material
adverse
effect
on
the
Company
or
Echo
Lake
Foods
or
cause
certain
conditions
to
closing
not
to
be
satisfied,
which
could
result
in
the
termination of the acquisition agreement;
●
the timing of completion of the proposed transaction is uncertain;
●
the
business
of
the
Company
or
Echo
Lake
Foods
may
suffer
as
a
result
of
uncertainty
surrounding
the
proposed
transaction;
●
events, changes or other circumstances could occur that could give rise to the termination of the acquisition agreement;
●
there are
risks related
to disruption of
management’s
attention from
the ongoing
business operations
of the
Company
or Echo Lake Foods due to the proposed transaction;
●
the
announcement
or
pendency
of
the
proposed
transaction
could
affect
the
relationships
of
the
Company
or
Echo
Lake
Foods
with
its
customers,
supplier,
operating
results
and
business
generally,
including
on
the
ability
of
the
Company or Echo Lake Foods to retain employees; and
●
the Company or
Echo Lake Foods
may be adversely
affected by other
economic, business, and/or
competitive factors
as well as management’s response to any of the aforementioned factors.
Although we have already
diversified our business with
ready-to-eat product offerings,
the Echo Lake Acquisition
represents a
significant expansion of
this strategy.
Accordingly, we
may experience unexpected
challenges in integrating
and managing the
business of
Echo Lake
Foods. Integrating
Echo Lake
Foods’ business
may be
more costly
or time
consuming than
we expect.
Even if
the acquisition
is completed
and the
business of
Echo Lake
Foods is
successfully integrated,
we may
not realize
the
benefits
we
expect
from
the
acquisition,
including
the
synergies,
cost
savings,
reduction
in
earnings
volatility,
margin
expansion, financial returns, expanded customer relationships, or sales or growth opportunities.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table is a summary of our third quarter 2025 share repurchases:
Issuer Purchases of Equity Securities
Total Number of
Maximum Approximate
Shares Purchased
Dollar Value of
Total Number
Average
as Part of Publicly
Shares that May Yet
of Shares
Price Paid
Announced Plans
Be Purchased Under
Period
Purchased (1)
per Share
Or Programs
the Plans or Programs (2)
12/01/24 to 12/28/24
—
$
—
—
$
—
12/29/24 to 01/25/25
35,202
109.97
—
—
01/26/25 to 03/01/25
198
107.78
—
500,000,000
35,400
$
109.96
—
$
500,000,000
(1)
As permitted under our Amended and Restated 2012 Omnibus Long-Term
Incentive Plan, 32,023 shares were withheld by us to satisfy tax withholding
obligations
for employees
in connection
with the
vesting of
restricted common
stock.
To
assist
outside
directors with
the payment
of taxes
due
upon
vesting of restricted stock, 3,377 shares were purchased.
(2)
On February 25, 2025, the Company announced a new $500 million share repurchase
program. The share repurchase program authorizes the Company,
in
management’s discretion,
to repurchase shares of
Common Stock from time
to time for an
aggregate purchase price
up to $500 million
(exclusive of any
fees, taxes, commissions or other expenses related to such repurchases), subject to market conditions
and other factors.
ITEM 5.
OTHER INFORMATION
Echo Lake Purchase Agreement
On
April 8, 2025,
the
Company
entered
into
a
Securities
Purchase
Agreement
(the
“Purchase
Agreement”),
with
Echo
Lake
Foods,
Inc.
(“Echo
Lake
Foods”),
Scott
Meinerz,
as
Sellers’
Representative,
and
certain
selling
entities
owned
by
the
Wisconsin-based
Meinerz
family
(collectively,
the
“Sellers”).
Under
the
Purchase
Agreement,
the
Company
has
agreed
to
acquire Echo
Lake Foods
and certain
related companies
(collectively,
the “Echo
Lake Company
Group”) for
a cash
purchase
price of
approximately $258 million, excluding
expected tax
assets resulting from
the transaction,
to be
funded from
available
cash
on
hand
(the
“Echo
Lake
Acquisition”).
The
purchase
price
is
subject
to
customary
working
capital
and
related
adjustments.
Echo
Lake Foods
was
founded
in 1941
and
acquired by
the
Meinerz
family
in
- Based
in
Burlington, Wisconsin,
Echo
Lake
Foods
produces,
packages,
markets
and
distributes
ready-to-eat
egg
products
and
breakfast
foods,
including
waffles,
pancakes, scrambled
eggs, frozen
cooked omelets, egg
patties, toast and
diced eggs.
Echo Lake Foods
had annual
revenues of
Index
36
approximately $240 million
in 2024.
Echo Lake
Foods will
operate as
a stand-alone
component of
the Company’s
integrated
operations with its four production facilities strategically located in Wisconsin, Indiana and Kentucky.
The transaction
is expected
to close
in the
Company’s
fourth fiscal
quarter.
The transaction
is not
subject to
approval by
the
Company’s stockholders
or by the
equityholders of any
member of the
Echo Lake Company
Group. The consummation
of the
Echo Lake Acquisition
is subject to
customary closing conditions, including,
among others, (i) the
expiration or termination of
the applicable waiting
period under the
Hart-Scott-Rodino Antitrust Improvements
Act of 1976,
as amended (the
“HSR Act”),
(ii) the
accuracy
of
the
representations
and
warranties
of
each
party
(subject
to
certain
materiality
qualifiers),
and
(iii) the
performance in all material respects by each party of its obligations under the Purchase
Agreement. The Company’s obligations
are also conditioned upon the absence of a material adverse effect on the Echo Lake Company Group.
The Purchase
Agreement also
contains customary
representations, warranties
and covenants,
including covenants
by the
Echo
Lake
Company Group
to conduct
its business
in
the ordinary
course consistent
with past
practice
and to
refrain from
taking
certain actions prior to the closing of the transaction without the Company’s
consent. In addition, the Sellers and the Echo Lake
Group have agreed
not to directly
or indirectly solicit
competing acquisition proposals
or to
enter into discussions
concerning,
or provide confidential information in connection with, any unsolicited competing acquisition proposals.
If
the
Echo
Lake
Acquisition
has
not
closed by
July 7, 2025
(“Outside
Date”),
then
either
the
Sellers’
Representative or
the
Company
may
terminate
the
Purchase
Agreement.
However,
if
the
closing
has
not
occurred
solely
because
the
applicable
waiting period under the HSR Act
has not expired or been terminated,
and all other conditions to closing
have been satisfied or
waived
(other than
those pre-closing
restructuring steps
and
conditions that
by
their terms
are to
be satisfied
at
the closing),
either the Company or the Sellers’ Representative may extend the Outside Date for up to an additional 30 days.
The
foregoing
summary
of
the
Purchase Agreement
and
the
transactions contemplated
by
the
Purchase
Agreement does
not
purport
to
be
complete
and
is
subject
to,
and
qualified
in
its
entirety
by,
the
full
text
of
the
Purchase Agreement,
a
copy
of
which is attached to this
Form 10-Q as Exhibit 10.5 and is incorporated
herein by reference. The Purchase Agreement
has been
included
to
provide
investors
and
stockholders
with
information
regarding
its
terms.
It
is
not
intended
to
provide
any
other
factual
information
about
the
Company,
or
the
Echo
Lake
Company
Group.
The
representations,
warranties
and
covenants
contained in the
Purchase Agreement were
made only for
purposes of the
Purchase Agreement as
of the specific
dates therein,
were
solely
for
the
benefit
of
the
parties
to
the
Purchase
Agreement,
may
be
subject
to
limitations
agreed
upon
by
the
contracting parties,
including being
qualified by
confidential disclosures
made for
the purposes
of
allocating contractual
risk
between the parties to the Purchase Agreement instead of establishing these matters
as facts, and may be subject to standards of
materiality
applicable
to
the
contracting
parties
that
differ
from
those
applicable
to
investors.
Investors
are
not
third-party
beneficiaries
under
the
Purchase
Agreement
and
should
not
rely
on
the
representations,
warranties
and
covenants
or
any
descriptions thereof
as characterizations
of the
actual state
of facts
or condition
of the
Company or
the Echo
Lake Company
Group. Moreover, information concerning
the subject matter of the
representations and warranties may change
after the date of
the Purchase Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Severance and Change in Control Agreements
Effective as of April 8, 2025, the Company entered into a Severance and Change in Control Agreement (each, an “Agreement”)
with
each
of
Sherman
Miller,
Max
Bowman,
Todd
Walters,
Rob
Holladay
and
Scott
Hull
(each,
an
“Executive”
and
collectively,
the “Executives”).
The Agreements
continue in
effect through
May 31,
2030, after
which they
will automatically
renew
for
additional one-year
periods unless
prior
written notice
of
non-renewal
is
provided by
the Company
in
accordance
with the terms of the Agreement.
Under each
Agreement, if
the Company
terminates the
Executive without
Cause or
the Executive
terminates employment
for
Good Reason during the term of
the Agreement and prior to a
Change in Control (as such terms
are defined in the Agreement),
the Executive will receive
a lump-sum cash payment
equal to the sum
of (a) an amount
in lieu of his
annual bonus for the
year
of
termination
equal
to
the
average
of
the
annual
bonuses
awarded
to
the
Executive
for
the
three
fiscal
years
immediately
preceding
the termination
date (the
“Termination
Bonus”), plus
(b)
two times
for Mr.
Miller
and one
and
one-half times
for
each other
Executive the
sum of
(i) the
Executive’s
base salary
in effect
at the
time of
termination plus
(ii) the
average of
the
annual bonuses awarded to
the Executive for the
three fiscal years immediately
preceding the termination date.
In addition, the
Company shall continue
to provide insurance
and welfare benefits
to the Executive
until the
earlier of the
third anniversary of
the termination date or the date the Executive accepts new employment (the “Benefit Continuation”).
Additionally,
if
the
Company
or
its
successor
terminates
the
Executive
during
the
two-year
period
following
a
Change
in
Control, other than
by reason of
death, disability or
Cause, or the
Executive terminates employment for
Good Reason (as
such
terms
are
defined
in
the
Agreement),
the
Executive
will
receive
a
lump-sum
cash
payment
equal
to
the
sum
of
(a)
his
Termination
Bonus plus
(b) three
times for
Mr.
Miller and
two times
for each
other Executive
the sum
of (i)
the Executive’s
base salary
in effect
at the
termination date,
or if
higher, immediately
preceding the
Change in
Control (with
such base
salary
Index
37
being determined without
regard to any
reduction that would
provide the Executive
a basis to
terminate employment for
Good
Reason),
plus
(ii)
the
average
of
the
annual
cash
bonuses
paid
to
the
Executive
for
the
three
full
fiscal
years
immediately
preceding the date of the Change in Control,
or, if a higher amount
results, the termination date. In addition, the Company shall
provide
the
Benefit
Continuation.
If
any
part
of
the
payments
or
benefits
received
by
the
Executive
in
connection
with
a
termination following a Change in Control constitutes an excess parachute payment under Section 4999 of the Internal Revenue
Code,
the
Executive
will
receive
the
greater
of
(a)
the
amount
of
such
payments
and
benefits
reduced
so
that
none
of
the
amount constitutes an
excess parachute payment,
net of income
taxes, or (b)
the amount of
such payments and
benefits, net of
income taxes and net of excise taxes under Section 4999 of the Internal Revenue Code.
The
Agreements
also
require
the
Executives
to
deliver
a
release
in
favor
of
the
Company
in
order
to
receive
the
severance
benefits.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the form
of the Severance and Change in Control Agreement, which is filed as Exhibit 10.6 hereto and incorporated herein by reference.
Performance Share Unit Awards
The Compensation
Committee (the
“Committee”) of the
Company’s Board
of Directors
has implemented
a new
performance-
based component under the Company’s
long-term executive compensation program, which provides for awards of performance
share units (“PSUs”) to certain key
executives. On April 8, 2025, the
Committee approved awards of PSUs to
each of Sherman
Miller, Max Bowman, Todd
Walters, Rob
Holladay, Adolphus Baker
and Scott Hull, which awards will be
effective on June 1,
2025
(the
“Grant
Date”).
The
number
of
PSUs
granted,
which
amount
represents
the
target
award,
will
be
determined
by
dividing 40%
of each
executive’s current
base salary
by the
per share
closing price
of the
Company’s Common
Shares on
the
Grant Date, and
rounding down to
the nearest unit.
Each PSU represents
the right to
receive one Common
Share, provided the
applicable service and performance conditions are met. Specifically, the terms of the PSUs provide that they will pay out
after a
three-year performance
period contingent
on (a)
the executive’s
continued service
through the
performance period,
except as
otherwise
provided
in
the
Performance
Share
Unit
Agreement,
and
(b)
the
Company’s
achievement
of
specific
performance
goals
tied
to
the
following
two
equally
weighted
measures:
the
Company’s
cumulative
adjusted
EBITDA
and
relative
total
shareholder
return
compared
to
a
peer
group.
Depending
on
the
level
of
achievement
of
these
two
measures
over
the
performance period, the PSUs will pay out between 0% and 150% of the target award.
The foregoing description does not purport to be complete and is qualified in its entirety by reference to the full text of the form
of the Performance Share Unit Agreement, which is filed as Exhibit 10.7 hereto and incorporated herein by reference.
Index
38
ITEM 6. EXHIBITS
Exhibits
No.
Description
3.1
Exhibit 3.1 to the Registrant’s Form 8-K, filed March 27, 2025)
3.2
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the
Registrant’s Form 8-K, filed March 27, 2025)
10.1
Agreement Regarding Conversion dated February 25, 2025 by and among Cal-Maine Foods, Inc., DLNL,
10.2
Second Amendment entered into as of March 25, 2025 to Amended and Restated Credit Agreement
10.3
to the Registrant’s Form 8-K, filed March 27, 2025)
10.4
Amendment No. 1 to the Amended and Restated Cal-Maine Foods, Inc. 2012 Omnibus Long-Term
Severance and Change in Control Agreements
31.1*
Rule 13a-14(a) Certification of the Chief Executive Officer
31.2*
Rule 13a-14(a) Certification of the Chief Financial Officer
32**
Section 1350 Certification of the Chief Executive Officer and the Chief Financial Officer
101.SCH*+
Inline XBRL Taxonomy Extension Schema Document
101.CAL*+
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*+
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*+
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*+
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Filed herewith as an Exhibit.
**
Furnished herewith as an Exhibit.
+
Submitted electronically with this Quarterly Report.
Index
39
SIGNATURES
Pursuant to the
requirements of the
Securities Exchange Act
of 1934, the
registrant has duly
caused this report
to be signed
on
its behalf by the undersigned, thereunto duly authorized.
CAL-MAINE FOODS, INC.
(Registrant)
Date:
April 8, 2025
/s/ Max P.
Bowman
Max P.
Bowman
Vice President, Chief Financial Officer
(Principal Financial Officer)
Date:
April 8, 2025
/s/ Matthew S. Glover
Matthew S. Glover
Vice President – Accounting
(Principal Accounting Officer)
exhibit105
i
SECURITIES PURCHASE AGREEMENT
By and Among
ECHO LAKE FOODS, INC.,
ELT, LLC,
ECHO LAKE HUNTINGTON, INC.,
XENITEL, INC.,
ECHO LAKE HUNTINGTON 435, LLC,
BLUE GRASS REAL ESTATE CO, LLC,
ECHO YORKVILLE, LLC,
ECHO LAKE PROPERTIES, LLC,
ELKIN PROPERTIES, LLC,
THE VOTING SECURITYHOLDERS SIGNATORY HERETO,
SCOTT MEINERZ, in his capacity as Sellers’
Representative,
and
CAL-MAINE FOODS, INC.
Dated as of April 8, 2025
i
ARTICLE I DEFINITIONS; CERTAIN INTERPRETIVE MATTERS
.........................................
2
1.1
Definitions
............................................................................................................
2
1.2
Certain Interpretive Matters ...............................................................................
19
ARTICLE II SALE AND PURCHASE OF SECURITIES; CLOSING
.......................................
21
2.1
Pre-Closing Actions; Sale and Purchase of Equity ............................................
21
2.2
Closing Date Payment
........................................................................................
23
2.3
Closing Certificate
..............................................................................................
24
2.4
Post-Closing Adjustment
....................................................................................
24
2.5
Withholding Rights ............................................................................................
27
2.6
Closing
................................................................................................................
27
2.7
Relationship Among the Sellers; Sellers’ Representative
..................................
27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE SELLERS REGARDING THE
COMPANY GROUP
AND TRANSFERORS...............................................................................
29
3.1
Organization; Qualification; Authorization
........................................................
29
3.2
Non-Contravention; Consents
............................................................................
30
3.3
Governmental Authorizations ............................................................................
30
3.4
Capitalization
......................................................................................................
31
3.5
Financial Statements
...........................................................................................
31
3.6
No Adverse Changes
..........................................................................................
32
3.7
Sufficiency of Assets
..........................................................................................
32
3.8
Real Property
......................................................................................................
33
3.9
Title to Assets
.....................................................................................................
34
3.10
Litigation, Orders, Etc.
.......................................................................................
34
3.11
Compliance With Laws ......................................................................................
34
3.12
Intellectual Property and Intellectual Property Licenses; Data Protection
.........
34
3.13
Material Contracts
..............................................................................................
37
3.14
Environmental Laws
...........................................................................................
39
3.15
Taxes ..................................................................................................................
40
3.16
Employee Plans
..................................................................................................
42
3.17
Labor Matters .....................................................................................................
44
3.18
Company Group Employee List; Contractor List ..............................................
45
3.19
Brokerage Agreements
.......................................................................................
46
3.20
Suppliers
.............................................................................................................
46
3.21
Customers
...........................................................................................................
46
3.22
Product Liability
.................................................................................................
46
3.23
Food Safety Requirements .................................................................................
47
3.24
Inventory ............................................................................................................
48
3.25
Certain Business Relationships with the Company Group ................................
48
3.26
Insurance ............................................................................................................
48
3.27
Certain Payments
................................................................................................
48
3.28
Trade Control Laws; Sanctions ..........................................................................
49
3.29
No Other Representations or Warranties
............................................................
49
ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF SECURITYHOLDERS
...........
50
4.1
Representations of the Securityholders
..............................................................
50
ARTICLE V REPRESENTATIONS AND
WARRANTIES OF BUYER ....................................
52
5.1
Organization and Qualification ..........................................................................
52
5.2
Authorization of Agreement; No Violation; No Consents; No Litigation .........
52
ii
5.3
Financial Ability
.................................................................................................
53
5.4
Brokerage Agreements
.......................................................................................
53
5.5
Investment Intention
...........................................................................................
53
ARTICLE VI CERTAIN COVENANTS
......................................................................................
53
6.1
Conduct of the Business Prior to the Closing Date
............................................
53
6.2
Access by Buyer
.................................................................................................
56
6.3
Satisfaction of Closing Conditions; Competition Filings; Required Consents
..
57
6.4
Further Actions
...................................................................................................
58
6.5
D&O Indemnification; D&O Insurance
.............................................................
58
6.6
Employee Matters
...............................................................................................
60
6.7
Tax Matters
.........................................................................................................
62
6.8
Confidentiality
....................................................................................................
67
6.9
Access to Books and Records ............................................................................
68
6.10
R&W Insurance Policy
.......................................................................................
69
6.11
Notices of Certain Events
...................................................................................
69
6.12
Director, Manager and Officer Resignations .....................................................
70
6.13
Termination of Affiliate
Contracts
.....................................................................
70
6.14
Exclusivity
..........................................................................................................
70
6.15
Non-Compete and Non-Solicit
...........................................................................
71
ARTICLE VII CONDITIONS TO CLOSING
..............................................................................
72
7.1
Conditions of Buyer to Closing
..........................................................................
72
7.2
Conditions of the Sellers to Closing
...................................................................
73
ARTICLE VIII NON-SURVIVAL OF REPRESENTATIONS
.....................................................
74
8.1
Survival of Representations and Warranties ......................................................
74
8.2
Survival of Covenants and Agreements
.............................................................
74
8.3
Statute of Limitations
.........................................................................................
74
8.4
No Post-Closing Liability for Representations or Pre-Closing Covenants
........
74
ARTICLE IX SPECIAL INDEMNIFICATION
............................................................................
75
9.1
Indemnification Provision
..................................................................................
75
9.2
Indemnification Procedure .................................................................................
75
9.3
Determination of Losses
.....................................................................................
76
9.4
Payments ............................................................................................................
77
9.5
Tax Treatment
of Indemnification Payments
.....................................................
77
9.6
Potential Partial Release from the Indemnification Escrow Account
................
77
ARTICLE X TERMINATION, AMENDMENT
AND WAIVER
.................................................
78
10.1
Termination ........................................................................................................
78
10.2
Effect of Termination .........................................................................................
79
ARTICLE XI MISCELLANEOUS
...............................................................................................
79
11.1
No Third-Party Beneficiaries .............................................................................
79
11.2
Expenses
.............................................................................................................
79
11.3
Notices
................................................................................................................
80
11.4
Headings
.............................................................................................................
80
11.5
Entire Agreement ...............................................................................................
80
11.6
Waiver ................................................................................................................
81
11.7
Amendment ........................................................................................................
81
11.8
Public Statements ...............................................................................................
81
iii
11.9
Assignment
.........................................................................................................
81
11.10
Independent Covenants ......................................................................................
81
11.11
Governing Law
...................................................................................................
81
11.12
Jurisdiction; Venue .............................................................................................
81
11.13
Counterparts .......................................................................................................
82
11.14
Withholding or Granting of Consent
..................................................................
82
11.15
Specific Enforcement .........................................................................................
83
11.16
Non-Recourse
.....................................................................................................
83
11.17
Waiver of
Conflicts ............................................................................................
84
ARTICLE XII CAPITALIZED
TERMS USED BUT NOT DEFINED IN THIS EXHIBIT A (THESE
“ACCOUNTING PRINCIPLES”) SHALL HAVE
THE RESPECTIVE MEANINGS ASCRIBED TO
SUCH TERMS IN THE AGREEMENT. .......................................................................................
2
ARTICLE XIII THE CLOSING CERTIFICATE
AND CLOSING STATEMENT
(TOGETHER, THE
“STATEMENTS
”) SHALL BE PREPARED
ON A COMBINED BASIS FOR THE COMPANY
GROUP
IN ACCORDANCE WITH THE FOLLOWING POLICIES AND PROCEDURES IN THE
FOLLOWING ORDER OF PRIORITY: ........................................................................................
2
13.1
the accounting principles, policies, practices, methodologies and procedures set out in
these Accounting Principles (“Specific Accounting Policies”); .................................................
2
13.2
to the extent not covered by clause 13.1 above, consistent with accounting principles,
policies, treatments, categorizations, practices, methods, and bases as were used in the preparation of
the unaudited combined interim balance sheets as of February 28, 2025, included in the Unaudited
Financial Statements; and
............................................................................................................
2
13.3
to the extent not covered by clauses 13.1 and 13.2 above, in accordance with GAAP as of
the Calculation Time. ..................................................................................................................
2
ARTICLE XIV THE SOLE REFERENCE FOR THE PREPARATION
OF THE STATEMENTS
SHALL
BE THE ASSOCIATED
DEFINITIONS SET OUT IN THE AGREEMENT AND THESE
ACCOUNTING PRINCIPLES, AND IN THE EVENT OF A CONFLICT BETWEEN THE
DEFINITIONS SET OUT IN THE AGREEMENT AND THESE ACCOUNTING PRINCIPLES THE
DEFINITIONS SET OUT IN THE AGREEMENT SHALL PREVAIL.
......................................
2
ARTICLE XV THE STATEMENTS
SHALL:
...............................................................................
2
15.1
be prepared on the basis the Company Group is a going concern and shall exclude the
effect of any change of Law or GAAP after the Calculation Time.
............................................
2
15.2
be interpreted to avoid double counting (whether positive or negative) of any item to be
included in the Statements.
..........................................................................................................
2
15.3
be prepared in accordance with the specific procedures that would be adopted at a
financial year-end, including detailed analyses of prepayments and accruals and performance of cut-off
procedures.
2
15.4
be prepared in a format set out in Schedule B-1 to the Agreement (the “Reference
Balance Sheet”) by reference to the trial balance account codes of the Company Group.
The underlying
assets and liabilities shall be classified between the columns labeled “Cash,” “Working Capital,”
“Indebtedness,” “Company Group Expenses,” “Tax Liability Amount” and “Other” on a basis
consistent with the classification of the equivalent line item set forth in the Reference Balance Sheet.
To the extent the methodologies utilized in calculating the underlying amounts set forth in the
Reference Balance Sheet conflict with the Accounting Principles, the Accounting Principles shall
prevail.
To the extent any new account codes are created between the date of the Reference Balance
Sheet and the Calculation Time, the amounts included therein will be (i) classified and allocated to an
existing trial balance account code based on the nature of the new account code and (ii) included in or
excluded from “Cash,” “Working
Capital,” “Indebtedness,” “Company Group Expenses,” “Tax
Liability Amount” and “Other” on a basis consistent with the existing account code. ..............
2
iv
15.5
exclude any right-of-use assets or liabilities required to be recorded as such by FASB
Accounting Standards Codification Topic 842, Accounting for Leases, in respect of any operating
leases (except for any past due related liabilities, which shall be included as a liability in Working
Capital).
3
15.6
not exclude any item or amount solely on the grounds of materiality. ................
3
ARTICLE XVI ANY INTERCOMPANY
BALANCES BETWEEN OR AMONG THE COMPANY
GROUP SHALL BE RECONCILED AND ELIMINATED
PRIOR TO THE CALCULATION
TIME.
ANY BALANCES THAT
ARE NOT RECONCILED AS OF THE CALCULATION
TIME SHALL BE
EXCLUDED FROM WORKING CAPITAL.
................................................................................
3
ARTICLE XVII FOR PURPOSE OF CALCULATING
WORKING CAPITAL:
........................
3
17.1
there shall be no change in the classification (i) to a current asset or a current liability of
any asset or liability that has not previously been characterized as a current asset or current liability in
the Reference Balance Sheet or (ii) to a long-term asset or long-term liability of any asset or liability
that has not previously been characterized as a long-term asset or long-term liability in the Reference
Balance Sheet, in each case, other than such a change resulting solely from the passage of time between
the date of the Reference Balance Sheet and the Calculation Time.
...........................................
3
17.2
prepayments made as of the Calculation Time shall be included in Working
Capital only
to the extent they give rise to an economic benefit to Buyer after the Closing...........................
3
ARTICLE XVIII THE OBLIGATION
FOR FISCAL YEAR 2025 ANNUAL BONUS EARNED AND
UNPAID
AS OF IMMEDIATELY
PRIOR TO CLOSING SHALL BE INCLUDED IN
INDEBTEDNESS, CALCULATED
ON A PRO RATA
BASIS, BASED ON (A) THE NUMBER OF
DAYS
BETWEEN JANUARY 1, 2025 AND THE CLOSING DATE
AND (B) THE EMPLOYEE
BONUS BUDGET FOR FISCAL YEAR 2025.
FOR AVOIDANCE
OF DOUBT, THE EMPLOYER
PORTION OF ANY TAXES
DUE ON SUCH AMOUNTS SHALL BE CALCULATED
AND
INCLUDED IN INDEBTEDNESS IN ADDITION TO THE PRO RATA
PORTION OF THE UNPAID
BONUSES EARNED AS OF IMMEDIATELY
PRIOR TO CLOSING.
TO THE EXTENT THE
BONUS IS EXPECTED TO EXCEED THE EMPLOYEE BONUS BUDGET FOR FISCAL YEAR
2025, THE BONUS LIABILITY SHALL BE EQUAL TO THE PRO-RATA
AMOUNT BASED ON
THE REVISED EMPLOYEE BONUS BUDGET FOR FISCAL YEAR 2025.
............................
3
ARTICLE XIX THE REFUND FROM KENTUCKY RELATED
TO SALES AND USE TAX
RECORDED IN
ACCOUNT #1212-00 (TAX RECEIVABLES)
, SHALL BE INCLUDED IN THE
CALCULATION
OF CASH.
..........................................................................................................
3
ARTICLE XX ESTIMATED
ADJUSTMENT AMOUNT:
...........................................................
5
20.1
Estimated Cash
.....................................................................................................
5
20.2
Estimated Company Group Expenses
..................................................................
5
20.3
Estimated Indebtedness
........................................................................................
5
20.4
Estimated Working
Capital over Target
Working Capital ...................................
5
20.5
Target
Working Capital over Estimated Working
Capital
...................................
5
20.6
Estimated Tax Liability Amount ..........................................................................
5
20.7
Estimated Adjustment Amount
(I.A minus I.B minus I.C plus the excess, if any, of I.D
minus the excess, if any, of I.E minus I.F)
..................................................................................
5
ARTICLE XXI ESTIMATED
ADJUSTED EQUITY PRICE:
......................................................
5
21.1
Purchase Price ......................................................................................................
6
21.2
Estimated Adjustment Amount ............................................................................
6
1.
Echo Lake Foods Group
.......................................................................................
6
2.
Echo Lake Properties Group ................................................................................
6
3.
Elkin Properties Group
.........................................................................................
6
v
21.3
Adjustment Escrow Amount ................................................................................
6
21.4
Indemnification Escrow Amount .........................................................................
6
21.5
Estimated Adjusted Equity Price
(II.A minus II.B, if II.B is negative or plus II.B, if
II.B is positive minus II.C minus II.D) .......................................................................................
6
1.
Echo Lake Foods Group
.......................................................................................
6
2.
Echo Lake Properties Group ................................................................................
6
3.
Elkin Properties Group
.........................................................................................
6
ARTICLE XXII CLOSING DATE
PAYMENT:
............................................................................
$[●]
6
ARTICLE XXIII ALLOCATION
OF PURCHASE PRICE:
.........................................................
9
THE PURCHASE PRICE SHALL BE ALLOCATED
AMONG THE TRANSFEROR GROUPS AS
FOLLOWS:
9
23.1
Echo Lake Foods Group
.......................................................................................
9
23.2
Echo Lake Properties Group ................................................................................
9
23.3
Elkin Properties Group
.........................................................................................
9
ARTICLE XXIV ESTIMATED
ADJUSTMENT AMOUNT / FINAL ADJUSTMENT AMOUNT (
AS
APPLICABLE
):
9
24.1
Estimated Cash / Closing Cash (as applicable)
....................................................
9
24.2
Estimated Company Group Expenses / Company Group Expenses (as applicable)
9
24.3
Estimated Indebtedness / Closing Indebtedness (as applicable) ..........................
9
24.4
Estimated Working
Capital over Target
Working Capital / Closing Working
Capital over
Target
Working Capital (as applicable) ......................................................................................
9
24.5
Target
Working Capital over Estimated Working
Capital / Target
Working Capital over
Closing Working
Capital (as applicable) ....................................................................................
9
24.6
Estimated Tax Liability Amount / Closing Tax
Liability Amount (as applicable)9
24.7
Estimated Adjustment Amount / Final Adjustment Amount (as applicable)
(II.A
minus II.B minus II.C plus the excess, if any, of II.D minus the excess, if any,
of II.E minus II.F)
9
ARTICLE XXV ESTIMATED
ADJUSTED EQUITY PRICE / FINAL ADJUSTED EQUITY PRICE (
AS
APPLICABLE
):
10
25.1
Purchase Price ....................................................................................................
10
1.
Echo Lake Foods Group
.....................................................................................
10
2.
Echo Lake Properties Group ..............................................................................
10
3.
Elkin Properties Group
.......................................................................................
10
25.2
Estimated Adjustment Amount / Final Adjustment Amount (as applicable)
.....
10
1.
Echo Lake Foods Group
.....................................................................................
10
2.
Echo Lake Properties Group ..............................................................................
10
3.
Elkin Properties Group
.......................................................................................
10
25.3
Adjustment Escrow Amount (allocated in the same proportions as the Purchase Price)
10
1.
Echo Lake Foods Group
.....................................................................................
10
2.
Echo Lake Properties Group ..............................................................................
10
3.
Elkin Properties Group
.......................................................................................
10
25.4
Indemnification Escrow Amount (allocated in the same proportions as the Purchase
Price)
10
1.
Echo Lake Foods Group
.....................................................................................
10
2.
Echo Lake Properties Group ..............................................................................
10
3.
Elkin Properties Group
.......................................................................................
10
25.5
Estimated Adjusted Equity Price / Final Adjusted Equity Price (as applicable)
(III.A
minus III.B, if III.B is negative or plus III.B, if III.B is positive minus III.C minus III.D)
......
10
vi
1.
Echo Lake Foods Group
.....................................................................................
10
2.
Echo Lake Properties Group ..............................................................................
10
3.
Elkin Properties Group
.......................................................................................
10
vii
ARTICLE XXVI EFFECTIVE AS OF IMMEDIATELY
AFTER THE CONVERSIONS, ASSIGNOR
HEREBY DISTRIBUTES, TRANSFERS AND ASSIGNS TO ASSIGNEE ALL RIGHT,
TITLE AND
INTEREST IN AND TO THE EXCLUDED ASSETS, AND ASSIGNEE HEREBY ACCEPTS SUCH
ASSIGNMENT.
12
ARTICLE XXVII THE PARTIES
AGREE THAT
THE TRANSACTIONS CONTEMPLATED
BY
THIS AGREEMENT ARE INTENDED TO BE TREATED
AS DISREGARDED FOR FEDERAL AND
APPLICABLE STATE
AND LOCAL INCOME TAX PURPOSES, AND SHALL FILE ALL TAX
RETURNS IN A MANNER CONSISTENT WITH SUCH INTENT. ........................................
12
ARTICLE XXVIII IN THOSE CASES WHERE (A) ANY EXCLUDED ASSET IS NOT BY ITS
TERMS ASSIGNABLE OR (B) THE ASSIGNMENT OF SUCH EXCLUDED ASSETS REQUIRES
THE CONSENT OF A THIRD PARTY
IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED
BY THIS AGREEMENT, ASSIGNOR AND ASSIGNEE WILL, PRIOR TO
AND
AFTER THE CLOSING, COOPERATE
AND USE THEIR RESPECTIVE REASONABLE BEST
EFFORTS TO OBTAIN
ALL CONSENTS AND WAIVERS
AND TO RESOLVE
ALL
IMPRACTICALITIES OF ASSIGNMENTS AND TRANSFERS NECESSARY TO CONVEY OR GIVE
ASSIGNEE THE RIGHT TO ANY SUCH EXCLUDED ASSETS.
IF ASSIGNOR COLLECTS ANY
PAYMENTS
WITH RESPECT TO THE EXCLUDED ASSETS, ASSIGNOR WILL REMIT SUCH
AMOUNTS, WITHOUT OFFSET OR HOLDBACK, TO ASSIGNEE NO LATER
THAN FIVE
BUSINESS D
AY
S AFTER THE DATE
ON WHICH SUCH COLLECTION OCCURS.
.........
12
ARTICLE XXIX THE TERMS AND CONDITIONS OF THIS AGREEMENT SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF THE PARTIES
AND THEIR RESPECTIVE
SUCCESSORS, ASSIGNS AND HEIRS.
THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF DELAWARE,
REGARDLESS OF CONFLICT OF LAW PRINCIPLES.
THIS AGREEMENT MAY
BE EXECUTED
IN ONE OR MORE COUNTERPARTS,
EACH OF WHICH SHALL BE DEEMED AN ORIGINAL
AND ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE DOCUMENT.
THIS AGREEMENT
MAY
BE SIGNED AND DELIVERED BY FACSIMILE OR ELECTRONICALLY
IN PORTABLE
DOCUMENT FORMAT
(“.PDF”) OR ANY SIMILAR ELECTRONIC FORMAT,
AND FACSIMILE
OR .PDF SIGNATURES
SHALL BE BINDING FOR ALL PURPOSES HEREOF. ................ 12
1.
THE CERTIFICATE
OF FORMATION
OF THE COMPANY,
FILED WITH THE
DELAWARE
SECRETARY
OF STATE
,
EFFECTIVE AS OF [__], 2025, PURSUANT TO THE
CONVERSION OF ECHO LAKE FOODS, INC., A WISCONSIN CORPORATION,
INTO A
DELAWARE
LIMITED LIABILITY COMPANY
,
IS HEREBY ADOPTED, RATIFIED
AND
CONFIRMED.
15
2.
THIS OPERATING
AGREEMENT, TOGETHER
WITH THE APPLICABLE
PROVISIONS OF THE DELAWARE
LIMITED LIABILITY COMPANY
ACT (THE “ACT”), AS
SUPPLEMENTED BY THIS OPERATING
AGREEMENT, SHALL GOVERN ALL RIGHTS AND
OBLIGATIONS
OF THE MEMBER.
..........................................................................................
15
3.
THE SOLE MEMBER AND EQUITY OWNER OF THE COMPANY
SHALL BE THE
MEMBER, WHO SHALL OWN 100% OF THE ISSUED AND OUTSTANDING EQUITY INTERESTS
IN THE COMPANY,
CONSISTING OF ONE CLASS CALLED LIMITED LIABILITY COMPANY
MEMBERSHIP INTERESTS.
......................................................................................................
15
4.
THE MEMBER SHALL BE ENTITLED TO A 100% INTEREST IN THE
CONTRIBUTIONS, PROFITS, LOSSES AND DISTRIBUTIONS OF THE COMPANY.
ANY
DISTRIBUTION OR RETENTION OF THE PROFITS AND ASSETS OF THE COMPANY
SHALL BE
MADE IN THE DISCRETION OF THE MEMBER. ..................................................................
15
viii
5.
THE COMPANY
SHALL BE MEMBER-MANAGED AND SHALL CONDUCT
SUCH OPERATIONS
AND BUSINESS AS THE MEMBER SHALL DETERMINE ARE IN THE
COMPANY
’S BEST INTERESTS.
..............................................................................................
15
6.
UNLESS OTHERWISE SET FORTH
IN A WRITTEN AGREEMENT, ALL DEBTS,
OBLIGATIONS
AND LIABILITIES OF THE COMPANY,
WHETHER ARISING IN CONTRACT OR
OTHERWISE, SHALL BE THE DEBTS, OBLIGATIONS
AND LIABILITIES OF THE COMPANY
AND NOT OF ANY MEMBER.
..................................................................................................
15
7.
THE MEMBER IS HEREBY AUTHORIZED AND DIRECTED, FOR AND ON
BEHALF OF THE COMPANY,
TO TAKE
ANY ACTIONS AND EXECUTE, DELIVER AND
PERFORM ANY DOCUMENTS, AGREEMENTS AND OTHER INSTRUMENTS AS THE MEMBER
DEEMS NECESSARY OR APPROPRIATE
TO ORGANIZE THE COMPANY
AND CONDUCT ITS
BUSINESS.
ALL OF SUCH DOCUMENTS, AGREEMENTS AND OTHER INSTRUMENTS ARE TO
BE IN SUCH FORM AND CONTAIN SUCH PROVISIONS AS THE MEMBER EXECUTING THE
SAME SHALL APPROVE, AND THE SIGNATURE
OF THE MEMBER APPEARING THEREON
SHALL BE CONCLUSIVE EVIDENCE OF ITS APPROVAL
THEREO
F.
.............................
15
8.
THE MEMBER MAY
BESTOW UPON EMPLOYEES OR REPRESENTATIVES
OF
THE COMPANY
SUCH TITLES AS THE MEMBER DEEMS NECESSARY OR EXPEDIENT TO
ENABLE IT TO CARRY OUT ITS DUTIES ON BEHALF OF THE COMPANY
.
SUCH TITLES MAY
INCLUDE “CHAIR,” “PRESIDENT,”
“CHIEF EXECUTIVE OFFICER,” “CHIEF FINANCIAL
OFFICER,” ONE OR MORE “VICE PRESIDENTS,” “TREASURER” OR “SECRETARY
,” OR SUCH
OTHER POSITIONS OR TITLES AS THE MEMBER DEEMS ADVISABLE.
SUCH PERSONS, IN
THEIR RESPECTIVE ROLES AS OFFICERS OF THE COMPANY,
MUST DISCHARGE THEIR
DUTIES IN GOOD FAITH WITH THE CARE THAT
AN ORDINARY,
PRUDENT PERSON IN A
LIKE POSITION WOULD EXERCISE UNDER SIMILAR CIRCUMSTANCES, AND IN A MANNER
THE MEMBER REASONABLY
BELIEVES TO BE IN THE BEST INTERESTS OF THE COMPANY.
15
9.
NO OFFICER OR AGENT APPOINTED BY THE MEMBER SHALL BE LIABLE,
RESPONSIBLE OR ACCOUNTABLE IN DAMAGES OR OTHERWISE
TO THE COMPANY
OR
THE MEMBER FOR ANY ACTS PERFORMED OR OMITTED BY SUCH PERSON IN GOOD
FAITH, EXCEPT FOR ACTS OR OMISSIONS THAT
CONSTITUTE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.
THE OFFICERS SHALL BE INDEMNIFIED AND HELD HARMLESS
BY THE COMPANY,
TO THE EXTENT OF THE COMPANY
’S ASSETS, AGAINST OBLIGATIONS
AND LIABILITIES ARISING OR RESULTING
FROM OR INCIDENTAL TO
THE MANAGEMENT
OF THE COMPANY
’S AFFAIRS AND, IN ALL CASES, TO
THE EXTENT THAT
THE ACT
PROVIDES FOR INDEMNIFICATION
OF SUCH PERSONS; PROVIDED, HOWEVER, THAT
NO
PARTY
SHALL BE ENTITLED TO INDEMNIFICATION
HEREUNDER FOR ACTS OR
OMISSIONS CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. .....
16
10.
AT
ANY TIME WHEN THERE IS ONLY
ONE MEMBER OF THE COMPANY
AND
THERE IS AN EVENT OF DISSOCIATION,
INCLUDING A MEMBER CEASING TO BE A
MEMBER OF THE COMPANY
BY REASON OF DEATH,
A SALE OR OTHER TRANSFER OF
INTEREST OR BANKRUPTCY,
ANY PERSON OR ENTITY SUCCEEDING TO THE MEMBER’S
INTEREST AS A RESULT
OF SUCH EVENT OF DISSOCIATION
SHALL BE A MEMBER
WITHOUT FURTHER ACTION ON THE PART
OF THE TRANSFEREE, THE COMPANY
OR THE
DISSOCIATED
MEMBER, AND SUCH EVENT OF DISSOCIATION
SHALL NOT CAUSE OR
RESULT
IN THE DISSOLUTION OF THE COMPANY. ..........................................................
16
ix
LIST OF SCHEDULES
Schedule A
Employment Agreement Counterparties
Schedule B-1
Reference Balance Sheet
Schedule B-2
Allocation Methodology
Schedule C
R&W Insurance Policy
Schedule
1.1-
1
Company Group Employees Employed by Company Group Affiliates
Schedule
1.1-
2
Excluded Assets
Schedule
1.1-
3(a)
Knowledge of the Company Group
Schedule
1.1-
3(b)
Knowledge of Buyer
Schedule
1.1-
4
Permitted Liens
Schedule
3.1(a)
Foreign Qualification
Schedule
3.2
Non-Contravention; Consents
Schedule
3.3
Governmental Authorizations
Schedule
3.4
Capitalization Matters
Schedule
3.5(a)
Financial Statements
Schedule
3.5(b)
Deviations from GAAP
Schedule
3.5(c)
Liabilities
Schedule
3.5(d)
Internal Controls
Schedule
3.6
No Adverse Changes
Schedule
3.7
Sufficiency of Assets
Schedule
3.8(a)
Owned Real Property
Schedule
3.8(b)
Leased Real Property
Schedule
3.8(c)
Improvements
Schedule
3.10(a)
Litigation
Schedule
3.10(b)
Orders
Schedule
3.11
Compliance with Laws
Schedule
3.12(a)-
1
Registered Intellectual Property
Schedule
3.12(a)-
2
Unregistered Trademarks
Schedule
3.12(b)
Domain Names
Schedule
3.12(c)
Intellectual Property Exceptions
Schedule
3.12(d)
Intellectual Property Licenses
Schedule
3.12(f)
Personal Data
Schedule
3.13
Material Contracts
Schedule
3.13(b)
Material Contract Breaches and Defaults
Schedule
3.14(a)
Environmental Laws
Schedule
3.14(b)
Environmental Proceedings
Schedule
3.14(c)
Environmental Permits
Schedule
3.14(d)
Environmental Notices
Schedule
3.14(e)
Releases
Schedule
3.15
Taxes
Schedule
3.16(a)
Employee Plans
Schedule
3.16(b)
Employee Plans
Schedule
3.16(h)
Employee Plans
Schedule
3.17
Labor Matters
Schedule
3.18(a)
Company Group Employees
Schedule
3.18(b)
Consultants and Individual Independent Contractors
Schedule
3.19
Brokerage Agreements
Schedule
3.20
Suppliers
Schedule
3.21
Customers
Schedule
3.22
Product Liability
x
Schedule
3.24
Inventory
Schedule
3.25
Affiliate Transactions
Schedule
3.26
Insurance
Schedule
6.1
Pre-Closing Conduct of the Business
Schedule
6.13
Termination of Affiliate Contracts
Schedule
6.15(a)
Restricted Parties
Schedule
9.1
Specified Liabilities
LIST OF EXHIBITS
Exhibit A
Accounting Principles
Exhibit B
Form of Closing Certificate
Exhibit C
Form of Consideration Allocation Schedule
Exhibit D
Form of Excluded Asset
Assignment Agreement
Exhibit E
Form of Echo Lake LLC Agreement
1
SECURITIES PURCHASE AGREEMENT
This Securities
Purchase Agreement (this
“Agreement”), dated
as of
the 8th day
of April, 2025, is
by and among:
(a)
Cal-Maine Foods, Inc., a Delaware corporation (“Buyer”);
(b)
the
following companies
to
be
acquired,
directly
or
indirectly,
by
Buyer
on
the
terms
and
subject to
the conditions
set forth
in this Agreement
(each, a
“Company” and,
collectively,
the “Companies” or the “Company Group”):
(i)
Echo Lake Foods, Inc., a Wisconsin corporation (“Echo Lake Foods”);
(ii)
ELT, LLC, a Wisconsin limited liability company (“ELT”);
(iii)
Echo Lake Huntington, Inc., a Wisconsin corporation (“Huntington”);
(iv)
Xenitel, Inc., a Wisconsin corporation (“Xenitel”);
(v)
Echo
Lake
Huntington
435,
LLC,
a
Wisconsin
limited
liability
company
(“Huntington 435”);
(vi)
Blue
Grass Real
Estate Co,
LLC, a
Wisconsin
limited liability
company (“Blue
Grass”); and
(vii)
Echo Yorkville, LLC, a Wisconsin limited liability company (“Yorkville”);
(c)
the following transferring entities and securityholders (each, a “Seller” and, collectively, the
“Sellers”):
(i)
Echo Lake
Properties, LLC,
a Wisconsin
limited liability
company (“Echo
Lake
Properties”);
(ii)
Elkin
Properties,
LLC,
a
Wisconsin
limited
liability
company
(“Elkin
Properties”);
(iii)
the holders, collectively, of 100% of the issued and outstanding shares of Class A
voting
common
stock
of
Echo
Lake
Foods,
as
set
forth
on
the
signature
pages
hereto
(each,
a
“Voting
Securityholder”
and,
collectively,
the
“Voting
Securityholders”); and
(d)
Scott Meinerz, in his capacity as Sellers’ Representative.
The
Persons
listed
above
in
subparagraphs
(a)
–
(d)
are
sometimes
referred
to
individually
as
a
“Party” and
collectively as
the “Parties.”
Capitalized terms
used but
not defined
elsewhere in
the text
of
this Agreement have the respective meanings set forth in
Article I
below.
WITNESSETH
WHEREAS, the Securityholders collectively own all of the issued and outstanding Equity Interests
of Echo
Lake Foods
(the “Echo
Lake Foods
Equity Interests”),
ELT (the
“ELT Equity
Interests”), Echo
Lake
Properties
and
Elkin
Properties
in
the
respective
amounts
set
forth
on
Schedule
3.4
,
in
each
case
which
interests are the only issued and outstanding Equity Interests of those Companies;
WHEREAS, Echo Lake
Foods owns all
of the issued
and outstanding Equity
Interests of Huntington
and Xenitel;
WHEREAS,
Echo
Lake
Properties
owns
all
of
the
issued
and
outstanding
Equity
Interests
of
Huntington 435 (the “Huntington 435 Equity Interests”);
2
WHEREAS, Elkin Properties owns all of the issued and outstanding
Equity Interests of Blue Grass
(the “Blue Grass Equity Interests”) and of Yorkville (the “Yorkville Equity Interests”);
WHEREAS, on the
terms and subject
to the conditions
of this Agreement, the
Sellers wish to
sell,
and Buyer wishes to purchase,
(a) all of the Echo
Lake Foods Equity Interests, (b) the
ELT Equity Interests,
(c) the
Huntington
435
Equity
Interests,
(d) the
Blue
Grass
Equity
Interests
and
(e) the Yorkville
Equity
Interests (collectively, the “Purchased Equity Interests”); and
WHEREAS, prior to or concurrently with
the execution of this
Agreement, and as a condition to
the
willingness
of,
and
material
inducement
to,
Buyer
to
enter
into
this
Agreement,
each
person
listed
on
Schedule A has entered
into an
employment agreement
with Buyer
or one
of its Affiliates,
each of
which
restrictive
covenant
agreements
and
employment
agreements
shall
become
effective
at
and
conditioned
upon the Closing;
NOW, THEREFORE,
in consideration
of the
foregoing and
of the
mutual representations,
warranties
and covenants
contained herein,
as well
as other
good and
valuable consideration,
the receipt
and sufficiency
of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I
DEFINITIONS; CERTAIN INTERPRETIVE MATTERS
1.1
Definitions
.
In addition to the terms defined elsewhere herein, the following terms have the
following respective meanings when used herein with initial capital letters:
“2023 Financial Statements” has the meaning set forth in Section
3.5(a).
“2024 Financial Statements” has the meaning set forth in Section
3.5(a).
“Accounting
Principles”
the
accounting
methods,
policies,
practices,
principles,
bases
and
procedures, including classification and estimation methodology as set forth on Exhibit A.
“Adjusted Equity
Price” means
the Estimated Adjusted
Equity Price
or the
Final Adjusted Equity
Price, as applicable.
“Adjustment Escrow
Account” means a
bank account designated
in writing by
the Escrow
Agent for
the purpose of holding and administering the Adjustment Escrow
Amount.
“Adjustment Escrow Amount” means an amount equal to
$4,000,000, as established in accordance
with
Section
2.2(d)(i)
,
together
with
any
interest
or
other
earnings
accrued
thereon
while
held
in
the
Adjustment Escrow Account.
“Affiliate” means, with respect to a specified entity, an entity
that directly, or indirectly through one
or more intermediaries,
controls, is controlled
by or is
under common control
with, the entity
specified.
The
term “control” (including, with correlative meaning, the terms “controlled by” and “under common control
with”)
means
the
possession,
directly
or
indirectly,
of
the
power
to
direct
or
cause
the
direction
of
the
management and
policies of
a Person,
whether through
the ownership
of voting
securities, by
contract or
otherwise.
“Affiliate Contracts” has the meaning set forth in Section
3.13(a)(iv).
“Agreement” has the meaning set forth in the Preamble.
3
“Allocation Methodology” has the meaning set forth in Section
6.7(e).
“Ancillary
Agreements”
means
each
of
the
Escrow
Agreement
and
the
Transition
Services
Agreement.
“Annual Financial Statements” has the meaning set forth in Section
3.5(a).
“Anti-Corruption Laws” has the meaning set forth in Section
3.27.
“Blue Grass” has the meaning set forth in the Preamble.
“Blue Grass Equity Interests” has the meaning set forth in the Recitals.
“Business” means the business of the Company Group, as conducted as of the date hereof.
“Business Day”
means any
day other
than (a) a
Saturday or
Sunday or
(b) a day
on which
the national
banking institutions in New York, New York or Milwaukee,
Wisconsin are required to be closed.
“Buyer” has the meaning set forth in the Preamble.
“Buyer
Closing
Date
Transaction”
means
any
transaction
engaged
in
by
any
member
of
the
Company Group
on the
Closing Date
that occurs
after the Closing
or at
the direction
of Buyer,
that is outside
the ordinary
course of
business, including
any transaction
engaged in
by any
member of
the Company
Group
in connection with the financing of any obligations of Buyer (or its Affiliate) to make a payment under this
Agreement.
“Buyer Indemnified Parties” has the meaning set forth in Section
9.1.
“Buyer Plan” has the meaning set forth in Section
6.6(d).
“Buyer Prepared Return” has the meaning set forth in Section
6.7(b)(iii).
“Buyer Tax Claim” has the meaning set forth in Section
6.7(d).
“Calculation
Time”
means
11:59 p.m. (Milwaukee,
Wisconsin
time)
on
the
day
immediately
preceding the Closing Date.
“Capital
Lease
Obligations”
means,
with
respect
to
any
Person,
for
any
applicable
period,
the
obligations of such
Person that are
required to be
classified and accounted
for as capital
obligations under
GAAP, and the amount of such obligations at any date will be the capitalized amount
of such obligations at
such
date
determined
by
the
Company
Group
(but
calculated
separately
based
on
the
subtotals
for
each
Transferor Group) in accordance with the Accounting Principles.
“Cash” means, with respect to
the Company Group (but calculated
separately based on the subtotals
for each
Transferor Group),
at any
particular time,
the sum
of the
fair market
value (expressed
in United
States dollars)
of the
aggregate cash
and cash
equivalents determined
in accordance
with the Accounting
Principles
(including
marketable
securities,
deposits,
short
term
investments,
treasury
bills
and
treasury
notes with,
in each
case, an
original maturity
date of
three months
or less,),
held by
the Company
Group.
Cash
shall
(a) not
include
any
cash
security
deposits
made
or
held
by
the
Company
Group,
cash
collateralizing
any
obligation,
cash
in
reserve,
custodial
cash
and
cash
subject
to
a
dominion,
control
or
similar agreement (other than those terminated at Closing)
or otherwise subject to any legal, contractual or
other restriction on the ability to freely transfer or use
such cash for any lawful purpose, including any cash
subject to
repatriation and
the imposition
of any
withholding Taxes
or other
Taxes on
any such
cash if
it
4
were to be distributed or otherwise repatriated to the Company Group, (b) not include any cash held in any
third-party account owned solely by
one or more Excluded Companies,
(c) be reduced by all overdrafts
and
issued and uncleared
checks in excess
of bank balances
that would be
reported as accounts
payable or short-
term borrowings
under GAAP
and (d) not
include any
amounts paid
to satisfy
or discharge
any Indebtedness,
Company
Group
Expenses
or
any
cash
distributions
by
the
Company
Group,
in
each
case
where
such
amounts
are paid
after
the Calculation
Time
but immediately
prior
to the
Closing.
For the
avoidance of
doubt, Closing
Cash will
be reduced
for checks,
drafts and
other wire
transfers issued
but not
yet cleared
and will include checks,
other wire transfers and
drafts deposited or available
for deposit but not
yet cleared
for the account of the Company Group.
“cGMP” has the meaning set forth in Section
3.23(a).
“Closing” has the meaning set forth in Section
2.6.
“Closing Cash”
means the
aggregate sum
of Cash
held by
Company Group
(but calculated
separately
based on the subtotals for each Transferor Group) as of immediately prior to the Closing.
“Closing Certificate” has the meaning set forth in Section
2.3.
“Closing Date” has the meaning set forth in Section
2.6.
“Closing Date Payment” has the meaning set forth in Section
2.2(c).
“Closing Indebtedness”
means the
aggregate sum
of the
Indebtedness of
the Company
Group (but
calculated
separately
based
on
the
subtotals
for
each
Transferor
Group)
as
of
immediately
prior
to
the
Closing.
“Closing Statement” has the meaning set forth in Section
2.4(a).
“Closing
Tax
Liability Amount”
means
the
Tax
Liability Amount
as
of
immediately
prior
to
the
Closing.
“Closing
Working
Capital”
means
the
Working
Capital
as
of
the
Calculation
Time,
which,
for
accounting purposes,
shall be
based on the
facts and
circumstances and
information available
to Buyer
as
of the date on which the Closing Statement is delivered by Buyer to Sellers’
Representative with regards to
conditions
as
they
exist
as
of
the
Calculation
Time
in
accordance
with
Financial Accounting
Standards
Board Accounting Standard
Codification Topic 855,
Subsequent Events
and shall
exclude (a) all
fees and
expenses
incurred
by
or
for
the
account
of
Buyer
or
any
of
its
Affiliates,
(b) the
effects
of
purchase
accounting arising from the Transactions, and
(c) the effects of any actions
taken by Buyer or its Affiliates
after the Closing and (d) any asset in respect of which any amounts have been included in Closing Cash.
“Code” means the Internal Revenue Code of 1986.
“Company” has the meaning set forth in the Preamble.
“Company Group” has the meaning set forth in the Preamble.
“Company Group Access Contact” has the meaning set forth in Section
6.2.
“Company Group
Data” means
all data
contained in the
Company Group Information
Technology
Systems
or
the
Company
Group’s
databases
and
all
other
information
and
data
compilations
used
by,
or
necessary to the Business.
5
“Company Group Domain Names” has the meaning set forth in Section
3.12(b).
“Company Group Employee List” has the meaning set forth in Section
3.18(a).
“Company
Group
Employees”
means
individuals
who
(a) are
employed
by
a
member
of
the
Company Group
or (b) (i) are
employed by
an Affiliate of
a member
of the
Company Group,
(ii) provide
services primarily in respect of the Business, and (iii) are listed on Schedule
1.1-
1.
“Company
Group
Expenses”
means,
without
duplication,
all
fees,
charges,
expenses
and
other
payments incurred or payable
by the Company Group (but
calculated separately based on the
subtotals for
each
Transferor
Group)
prior
to
the
Closing
and
in
connection
with
the
negotiation,
preparation
and
execution
of
this
Agreement
and
the
consummation
of
the
Transactions
(including
the
Pre-Closing
Restructuring) that have not
been paid as of immediately
prior to the Closing (but
calculated assuming the
Closing has
been consummated),
including (a) fees
and disbursements
of attorneys,
accountants, investment
bankers and
other advisory
or transaction
service providers
that are
payable by
the Company
Group and
(b) all
severance
payments
or
similar
benefits,
and
all
change
of
control,
transaction,
sale
or
retention
bonuses or other
similar payments (other
than grants or
other issuances of
Equity Interests) that
any member
of the Company Group is obligated to pay
in connection with the Transactions and that have not
been paid
as
of
immediately
prior
to
the
Closing
(including,
in
each
case,
the
employer
portion
of
any
associated
payroll, employment, social security,
Medicare, national insurance, contributions,
unemployment or similar
Taxes
or
similar
obligations
related
to
any
such
payments,
determined
without
regard
to
whether
the
remittance of any
such amounts to
the applicable Governmental
Authority has been
deferred), but excluding
any arrangements implemented at the direction of
Buyer or its
Affiliates; provided, however, that Company
Group Expenses
shall in
no event
include, without
duplication, (i) the portion
of the
costs, fees and
expenses
of the
D&O Tail
Policy to
be paid
by Buyer
pursuant to
Section
6.5
, (ii) the
portion of
the costs
fees and
expenses of the R&W
Insurance Policy to be paid
by Buyer pursuant to Section
6.10
, (iii) any such items to
the extent
included in
the computation
of Closing
Indebtedness or
Working Capital
and (iv) any
fees and
expenses to the extent they have been paid by or on behalf of the Company Group prior to the Closing.
“Company
Group
Information
Technology
Systems”
has
the
meaning
set
forth
in
Section
3.12(c)(vi).
“Company Group Intellectual Property” means
any and all Intellectual Property
used or held for
use
by, owned or
purported to be
owned by, or
licensed to, any
member of the
Company Group, in
each case,
that is material to the Business, excluding Open Source Licenses and Off the Shelf Software.
“Company Group
Lease” means
any Contract
pursuant to
which any
member of
the Company
Group
leases, subleases, licenses or
occupies Leased Real Property
from another Person, and any
amendments or
modifications thereto.
“Company
Group
Plan”
means
any
Employee
Plan
that
(a) is
sponsored
by
a
member
of
the
Company Group or (b) primarily covers current or former Company Group Employees.
“Company Group Privacy and Data Security
Policies” means the Company Group’s past
or present,
internal or public-facing
policies, notices and
statements concerning the
privacy, security or
Processing of
Personal Data.
“Competing Business” has the meaning set forth in Section
6.15(a)(i).
“Competitive Activity”
means
being
directly
or
indirectly
engaged
in
and/or
being
employed
by,
promoting, assisting (financially or otherwise), consulting for the benefit of, having any governance role
or
rights
with
respect
to
or
having
a
financial
or
ownership
interest
in,
any
Competing
Business;
provided,
6
however, that
a passive
investment in
the capital
stock or
other interest
of an
issuer whose
securities are
listed on
a national securities
exchange or quotation
system or traded
in the over-the-counter
market shall
not
constitute
a
Competitive Activity
so
long
as
such
Person
does
not,
directly
or
indirectly
(including
through
such Person’s
Affiliates), hold
in the
aggregate
more than
2% of
the outstanding
shares or
other
interests so listed or traded.
“Confidential Information” has the meaning set forth in Section
6.8.
“Confidentiality
Agreement”
means
that
certain
confidentiality
agreement,
dated
as
of
November 20, 2024, by and between Echo Lake Foods and Buyer.
“Conflicting Transaction”
means any (a) reorganization,
liquidation, dissolution or
recapitalization
involving
any
member
of
the
Company
Group
or
any
Transferor
thereof,
(b) merger
or
consolidation
involving any member
of the Company
Group or any
Transferor thereof, (c) sale
of all
or any material
assets
of
any
of
the
members
of
the
Company
Group
(other
than
sales
of
inventory
in
the
ordinary
course
of
business and sales
of assets that
are obsolete or
no longer useful
to the business
of the applicable
member
of the
Company Group) or,
except as not
prohibited by Section
6.1,
all or any
equity securities (including
any rights to
acquire, or securities
convertible into or
exchangeable for, any
such equity securities)
of any
member of the
Company Group or
any Transferor
thereof or (d) similar
transaction or business
combination
involving
any
member
of
the
Company
Group,
any
Transferor
thereof
or
their
respective
businesses
or
assets.
“Consideration Allocation Schedule” has the meaning set forth in Section
2.3.
“Continuing Employee” has the meaning set forth in Section
6.6(a).
“Contract” means any contract, agreement, indenture, note, bond, loan, license, instrument, lease or
other
agreement,
whether
oral
or
written,
and
in
each
case,
that
is
legally
binding,
but
excluding
any
Employee Plans or purchase orders.
“Conversions” has the meaning set forth in Section
2.1(a)(v).
“Copyrights”
means
all
copyrights
and
works
of
authorship
(including
any
moral
and
economic
rights however
denominated), and
all copyright
registrations and
pending copyright
applications, and
any
renewals or extensions of any of the foregoing.
“D&O Expenses” has the meaning set forth in Section
6.5(b).
“D&O Indemnifiable Claim” has the meaning set forth in Section
6.5(b).
“D&O Indemnified Party” has the meaning set forth in Section
6.5(b).
“D&O Indemnifying Party” has the meaning set forth in Section
6.5(b).
“D&O Losses” has the meaning set forth in Section
6.5(b).
“D&O Tail Policy” has the meaning set forth in Section
6.5(c).
“Domain Names” means all Internet domain names and all Uniform Resource Locators (URLs).
“Echo Lake Foods” has the meaning set forth in the Preamble.
“Echo Lake Foods Contribution”
has the meaning set forth in Section
2.1(a)(ii).
7
“Echo Lake Foods Equity Interests” has the meaning set forth in the Recitals.
“Echo Lake Foods Group” means, collectively, Echo Lake Foods, Huntington and Xenitel.
“Echo Lake Foods Transferor”
has the meaning set forth in Section
2.1(a)(i).
“Echo
Lake LLC
Agreement”
means
the
Limited Liability
Company Agreement
of the
Delaware
limited liability company
into which Echo
Lake Foods, Inc.
is converted pursuant
to Section
2.1(a)(v)(A)
,
the form of which is attached hereto as Exhibit E.
“Echo Lake Properties” has the meaning set forth in the Preamble.
“Echo Lake Properties Group” means, collectively, Huntington 435 and ELT.
“Elkin Properties” has the meaning set forth in the Preamble.
“Elkin Properties Group” means, collectively, Blue Grass and Yorkville.
“ELT” has the meaning set forth in the Preamble.
“ELT Contribution” has the meaning set forth in Section
2.1(a)(vi).
“ELT Equity Interests” has the meaning set forth in the Recitals.
“Employee
Plan”
means
each
“employee
benefit
plan”
(as
defined
in
Section 3(3)
of
ERISA,
whether or not subject
to ERISA), and each
other compensation or benefit
plan, contract, program, policy,
arrangement or agreement, including any
severance, termination, retention, change in
control, incentive or
bonus,
deferred
compensation,
pension,
profit
sharing,
retirement,
welfare,
unemployment
benefits,
sick
leave, vacation pay, paid time
off, disability, hospitalization, health, medical,
life insurance, fringe benefit,
tax gross-up, tuition reimbursement,
flexible spending account or
scholarship, stock purchase, stock option,
equity or equity-based incentive compensation, employment, consulting or similar plan, contract, program,
policy, arrangement
or agreement,
in each
case, whether
written or
unwritten, and
that is
(a) sponsored or
maintained by
any member
of the
Company Group
or to
which any
member of
the Company
Group is
a
party, (b) to which any
member of the Company
Group is required to contribute,
(c) in which any employee
or service provider of any member of the Company Group
participates related to their services provided to
such member of the Company Group
or (d) with respect to which any
member of the Company Group has
any liability or obligation (including contingent liability).
“Environmental Laws”
means all
Laws pertaining
to the
prevention of
pollution and
protection of
health and
safety (to
the extent
relating to
Hazardous Materials),
the environment
or natural
resources or
relating
to
the
use,
generation,
management,
manufacture,
processing,
treatment,
storage,
transportation,
remediation,
cleanup,
handling,
disposal
or
Release
or
threatened
Release
of,
or
exposure
to,
Hazardous
Materials currently in effect
in any and all
jurisdictions in which the
Company Group’s facilities are
located
or in
which its
operations are
conducted, including
the Clean Air Act,
the Comprehensive
Environmental
Response, Compensation, and Liability Act of
1980, the Federal Water Pollution Control
Act, the Resource
Conservation and
Recovery Act of
1976, the
Safe Drinking Water Act,
the Toxic Substances
Control Act,
the Hazardous Materials Transportation
Act, the Emergency Planning and Community Right-to-Know Act,
the Oil
Pollution Act, the
Occupational Safety
and Health Act
and any
state or
local Laws
similar thereto
and any regulations promulgated under any of the foregoing Laws.
“EPIA” has the meaning set forth in Section
3.23(a).
“Equity Interests” has the meaning set forth in Section
3.4.
8
“Equity Purchase” has the meaning set forth in Section
2.1(b).
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA
Affiliate” means any trade or business (whether or not incorporated) that together with any
member of
the Company
Group would
be treated
as a
single employer
under Section 414
of the
Code or
Section 4001 of ERISA.
“Escrow Agent” means Citibank, N.A.,
as the Escrow Agent under the Escrow
Agreement.
“Escrow Agreement” means the Escrow
Agreement, to be entered into at the Closing by and
among
the Sellers’
Representative, Buyer and
the Escrow
Agent, in a
form mutually agreeable
to the parties
thereto.
“Estimated
Adjusted
Equity
Price”
means
an
amount
with
respect
to
the
Company
Group
(but
calculated separately based
on the subtotals
and Purchase Price
allocations for each
Transferor Group) equal
to (a) the Purchase Price,
minus
(b) if the Estimated Adjustment
Amount is a negative number, the absolute
value
of
the
Estimated Adjustment
Amount,
plus
(c) if
the
Estimated Adjustment
Amount
is
a
positive
number,
the
Estimated
Adjustment
Amount,
minus
(d) the
Adjustment
Escrow
Amount,
minus
(e) the
Indemnification Escrow Amount.
“Estimated
Adjustment
Amount”
means
an
amount
with
respect
to
the
Company
Group
(but
calculated separately based
on the subtotals
for each
Transferor Group) equal
to, without duplication,
(a) the
Estimated Cash,
minus
(b) the Estimated Company Group Expenses,
minus
(c) the Estimated Indebtedness,
plus
(d) the excess, if any, of the Estimated Working Capital
over the Target Working Capital,
minus
(e) the
excess, if any,
of the Target Working
Capital over the
Estimated Working Capital,
minus
(f) the Estimated
Tax Liability Amount.
“Estimated Cash”
means the
estimated Closing
Cash, as
set forth
on the
Closing Certificate
delivered
to Buyer pursuant to Section
2.3.
“Estimated Company Group Expenses”
means the estimated
Company Group Expenses, as
set forth
in the Closing Certificate delivered to Buyer pursuant to Section
2.3.
“Estimated
Indebtedness”
means
the
estimated
Closing
Indebtedness,
as
set
forth
on
the
Closing
Certificate delivered to Buyer pursuant to Section
2.3.
“Estimated Tax
Liability Amount”
means
the
estimated Tax
Liability Amount,
as
set
forth
in
the
Closing Certificate delivered to Buyer pursuant to Section
2.3.
“Estimated
Working
Capital”
means
the
estimated
Working
Capital
of
the
Company
Group
(but
calculated
separately
based
on
the
subtotals
for
each
Transferor
Group),
as
set
forth
on
the
Closing
Certificate delivered to Buyer pursuant to Section
2.3.
“Excluded Asset Assignment Agreement” means the
Excluded Asset Assignment Agreement to be
entered into between
Echo Lake Foods
and Echo Lake
Foods Transferor to distribute
the Excluded Assets
from Echo Lake Foods to Echo Lake Foods Transferor, which instrument shall be substantially in the
form
set forth on Exhibit D.
“Excluded
Assets”
means
those
assets,
properties,
claims,
rights
and
interests
set
forth
on
Schedule
1.1-
2.
“Excluded Assets Distribution” has the meaning set forth in Section
2.1(a)(v)(D).
9
“Excluded Companies” means, collectively,
The Elkin Company, LLC,
a Wisconsin limited
liability
company,
Elkin
Operations,
Inc.,
a
Wisconsin
corporation,
Ailco
Equipment
Finance
Group,
Inc.,
a
Wisconsin
corporation, Aluma Tec
Industries, Inc.,
a Wisconsin
corporation, Seller
Tank Truck
Services,
Inc., a Wisconsin corporation.
“Existing Credit
Facility” means
that certain
Credit Agreement, dated
as of
July 31, 2018, by
and
among Associated Bank,
National Association, as
administrative agent,
Echo Lake
Foods and
the lenders
party thereto, as the same has been amended from time to time.
“F Reorganization” has the meaning set forth in Section
2.1(a)(iii).
“FCPA” has the meaning set forth in Section
3.27.
“FDA” means the U.S. Food and Drug Administration.
“FDCA” has the meaning set forth in Section
3.23(a).
“Final Adjusted Equity
Price” means an amount with respect
to the Company Group (but calculated
separately based on the subtotals and Purchase Price allocations for
each Transferor Group) equal to (a) the
Purchase Price,
minus
(b) if the
Final Adjustment Amount is a
negative number,
the absolute
value of
the
Final
Adjustment
Amount,
plus
(c) if
the
Final
Adjustment
Amount
is
a
positive
number,
the
Final
Adjustment
Amount,
minus
(d) the
Adjustment
Escrow
Amount,
minus
(e) the
Indemnification
Escrow
Amount.
“Final Adjustment Amount” means an amount
with respect to
the Company Group
(but calculated
separately based
on the
subtotals for
each Transferor
Group) equal
to, without
duplication, (a) Closing
Cash,
minus
(b) Company
Group
Expenses,
minus
(c) Closing
Indebtedness,
plus
(d) the
excess,
if
any,
of
the
Closing Working
Capital over
the Target
Working Capital,
minus
(e) the excess,
if any,
of the
Target Working
Capital over the Closing Working Capital,
minus
(f) the Closing Tax Liability Amount.
“Final Adjustment Amount Determination Date” has the meaning set forth in Section
2.4(d).
“Final Closing Certificate” has the meaning set forth in Section
2.3.
“Financial Statements” has the meaning set forth in Section
3.5(b).
“Food and Beverage Laws” has the meaning set forth in Section
3.23(a).
“Fraud” means, with
respect to any
Party, an actual
and intentional fraud
involving a knowing
and
intentional misrepresentation
or a
knowing and
intentional omission,
in each
case, of
a material
fact with
respect to
the applicable
representations and
warranties made
by such
Party in Article
III,
IV
or
V
in this
Agreement or any certificate delivered pursuant to this
Agreement, made with the specific intent to deceive
or mislead (as opposed to any
fraud claim based on constructive knowledge,
negligent misrepresentation or
omission or a similar theory).
“FSIS” has the meaning set forth in Section
3.23(c).
“FTC” means the Federal Trade Commission.
“FTCA” has the meaning set forth in Section
3.23(d).
“GAAP” means generally
accepted accounting principles
in effect from
time to time
in the United
States of America.
10
“Governmental Authority”
means any international
organization or agency,
any U.S. and
non-U.S.
national, federal, state, county, city,
local, municipal and any other
political subdivision or government, any
governmental, regulatory or
quasi-governmental authority of
any nature (including
any agency, department,
commission,
board,
branch,
self-regulatory
organization,
court,
official,
entity,
arbitrator,
bureau
or
instrumentality)
and
any
body
exercising,
or
entitled
to
exercise
any
administrative,
executive,
judicial,
legislative, police, regulatory or Tax authority or power of any nature.
“Hazardous Material”
means any substance,
material or waste
that is listed,
classified or regulated
as
hazardous
or
toxic
or
as
a
pollutant
or
contaminant
pursuant
to
any
Environmental
Law,
or
that
is
otherwise
regulated
by
or
for
which
liability
or
standards
of
care
may
be
imposed
under
Environmental
Laws,
including
petroleum
or
petroleum
products,
radioactive
materials,
asbestos
or
asbestos-containing
material, lead or
lead-containing materials, urea
formaldehyde foam insulation,
polychlorinated biphenyls
and per- and polyfluoroalkyl substances.
“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
“Huntington” has the meaning set forth in the Preamble.
“Huntington 435” has the meaning set forth in the Preamble.
“Huntington 435 Equity Interests” has the meaning set forth in the Recitals.
“Improvements” has the meaning set forth in Section
3.8(c).
“Inactive Company Group Employee” has the meaning set forth in Section
6.6(b).
“Income Tax”
means the
United States
federal income
Tax and
any United
States state
or local
or
non-U.S. net
income Tax or
any franchise
or business
profits Tax
incurred in
lieu of
a Tax
on net
income
(but
excluding,
for
the
avoidance
of
doubt,
any
sales,
use,
real
or
personal
property,
transfer
or
similar
Taxes).
“Indebtedness” means, with respect
to the Company Group
(but calculated separately based
on the
subtotals and Purchase Price allocations
for each Transferor
Group), at any date, without
duplication, (a) all
obligations
of
the
Company
Group
for
borrowed
money
(or
issued
in
substitution
for
or
exchange
of
indebtedness
for
borrowed money),
whether
short-term
or long-term,
and whether
secured
or unsecured,
(b) all obligations of the Company Group
evidenced by bonds, debentures, notes or
similar instruments and
all reimbursement obligations of the Company
Group under or pursuant to letters
of credit or other similar
instruments
or
arrangements
by
which
the
Company
Group
assures
a
creditor
against
loss,
in
each
case,
solely
to
the
extent
drawn,
(c) all
obligations
of
the
Company
Group
upon
which
interest
charges
are
customarily paid (other
than any Taxes or
any trade payables
incurred in the
ordinary course of
business),
(d) all obligations of the Company Group under conditional sale or other title retention agreements relating
to property or assets purchased
by the Company Group, (e) all
guarantees, whether direct or indirect,
by the
Company Group of Indebtedness of others
or Indebtedness of any other Person
secured by any assets of the
Company Group, (f) all Capital Lease
Obligations of the Company Group,
(g) any “applicable employment
taxes” (as defined
in Section 2302(d)(1) of
the CARES Act) that
the Company Group
has elected to
defer
in
respect
of a
Pre-Closing Tax
Period
pursuant
to
Section 2302
of
the
CARES Act,
in
each
case,
to
the
extent not subsequently paid prior to the Closing; (h) all obligations in respect of (i) non-qualified deferred
compensation, post-retirement welfare benefits and/or
pensions under any Employee Plan, in
each case, to
the
extent
unfunded
or
underfunded,
(ii) accrued
deferred
compensation
and
gain
and
profit
sharing
obligations,
(iii) accrued
severance
expense
or
similar
accrued
exit
payments
or
termination
indemnities
payable
to
any
current
or
former
employee,
director,
officer
or
independent
contractor
of
the
Company
Group (but excluding for clarity, any such expenses, payments and indemnities that can be triggered solely
11
due to an
involuntary termination
or constructive termination
(e.g., good reason
event) of
employment by
Buyer,
or
any
member
of
the
Company
Group
after
Closing),
(i) the
employer-side
employment
Taxes,
social or national insurance contributions or similar obligations payable with respect to the items described
in the foregoing clause (h), (j) any
dividends or distributions payable by
the Company Group on
or after the
Calculation Time
to
any
pre-Closing
holder
of
Equity
Interests,
(k) any
payables
between
the
Company
Group, on
the one
hand, and
any Seller
or any Affiliate of
any Seller,
on the
other hand
(to the
extent not
included in
Company Group
Expenses); (l) all
obligations of
the Company
Group for
accrued but
unpaid
interest, unpaid prepayment
or redemption penalties,
overdrafts, premiums or
payments and unpaid
fees and
expenses that are payable in
connection with retirement or prepayment
of any of the foregoing
obligations
as if
such obligations
were repaid
at the
Closing, (m) all
outstanding legal
expense obligations
related to
litigation settled on or prior to Closing, including
obligations related to unpaid legal settlements and
unpaid
legal fees, in each case, whether or not accrued, (n) all accounts receivable credit balances of the Company
Group, (o) all remaining obligations related to fiscal year 2024 audit fees, (p) all obligations under forward
currency
exchanges,
interest
rate
protection
agreements,
swap
agreements
and
hedging
arrangements,
in
each
case,
at
the
value
due
assuming
the
obligation
is
terminated
or
settled
at
the
Closing,
and
(q) all
obligations
of
any
deferred
or
unpaid
purchase
price
of
property,
business,
asset,
equipment,
service,
purchase price
settlement or
adjustment obligations,
and contingency
payments (other
than accounts
payable
included
in
the
calculation
of
Working
Capital),
in
each
case,
to
the
maximum
amount
payable.
Indebtedness shall not include (1) any amounts reflected in Working Capital or Company Group Expenses,
(2) any amounts available under
any debt instrument to
the extent undrawn or
uncalled, (3) trade payables
incurred in
the ordinary
course of
business, (4) any
amounts reflected
in the
Tax Liability
Amount, or
(5) any
payables or indebtedness between a member of the Company Group, on
the one hand, and another member
of the Company Group, on the other hand.
“Indemnification Escrow
Account” means
a bank
account designated
in writing
by the
Escrow
Agent
for the purpose of holding and administering the Indemnification Escrow Amount.
“Indemnification
Escrow
Amount”
means
an
amount
equal
to
$5,000,000,
as
established
in
accordance with Section
2.2(d)(ii)
, together with any
interest or other earnings
accrued thereon while held
in the
Indemnification Escrow Account;
provided, however,
that a
portion of
the Indemnification
Escrow
Amount may be released
on the terms and
subject to the conditions
set forth in accordance
with Section
9.6.
“Indemnified Taxes” means, without
duplication, any of
the following:
(a) all Taxes of any
Seller,
Securityholder or their respective
Affiliates imposed on any member of the Company Group,
including any
Taxes
of
any
Seller,
Securityholder
or
their
respective
Affiliates
resulting
from
the
Pre-Closing
Restructuring;
(b) all Taxes
imposed
on
any
member
of
the Company
Group
that
are
incurred
for
a
Pre-
Closing Tax Period; (c) all Taxes for which any member
of the Company Group is held liable
by reason of
being included
in any
“affiliated group”
(as defined
in Section 1504(a)
of the
Code without
regard to
the
limitations contained in Section 1504(b) of the Code) or any other group of corporations filing
Tax Returns
on a
combined, consolidated,
unitary or
similar basis
that, at
any time
on or
before the
Closing Date,
includes
or has included any member of the Company Group or any direct or
indirect predecessor of any member of
the Company Group;
(d) all Taxes
of any Person
(other than the
members of the
Company Group) for
which
any member of the
Company Group is liable
as a transferee or
successor, by contract, or
otherwise, which
Taxes are
attributable to
an event
or transaction
occurring
prior to
the Closing,
(e) all Transfer
Taxes for
which Sellers
are
liable pursuant
to Section
6.7(e)
, and
(f) all Taxes
attributable to
Echo Lake
Foods not
qualifying as an
“S corporation” for purposes
of Subchapter S of
the Code and
Huntington and Xenitel each
not qualifying as a “qualified subchapter S subsidiary” as defined under Section 1361(b)(3)(B) of the Code
(and, in each case, as of the respective
Qualification Dates set forth in Section
3.15(n))
; provided, however,
that “Indemnified Taxes”
shall not include any
Taxes included as a
liability for purposes of
determining Tax
Liability Amount,
Working
Capital,
Company
Group
Expenses,
or
Indebtedness,
in
each
case,
as
finally
determined under this Agreement.
12
“Independent Accountant”
means
Grant
Thornton;
provided,
however,
that
if
Grant
Thornton
is
unable
or
unwilling
to
accept
such
engagement,
then
the
Independent Accountant
will
be
a
nationally
recognized
independent accounting,
financial
advisory
or boutique
specialty firm
with an
active practice
area
focused
on
post-mergers
and
acquisitions
purchase
price
dispute
resolution
that
is
reasonably
acceptable to both the Sellers and Buyer.
“Intellectual Property” means all
Patents, Copyrights, Marks and Trade Secrets,
including the right
to
sue
or
otherwise
recover
for
any
and
all
past,
present
and
future
infringements
and
misappropriations
thereof.
“Intellectual Property
Licenses” means
(a) licenses or
sublicenses of
Intellectual Property
granted
by any member
of the Company
Group to any
third party (excluding non-exclusive
licenses and sublicenses
of
Intellectual
Property
entered
into
in
the
ordinary
course
of
business);
(b) licenses
or
sublicenses
of
Intellectual Property or
Software granted by
any third party
to any member
of the Company
Group (other
than
licenses
for
Off-the-Shelf
Software
and
Open
Source
Licenses)
and
(c) trademark
co-existence
or
consent agreements.
“Intended Tax Treatment” has the meaning set forth in Section
6.7(f).
“IRS” means the Internal Revenue Service.
“Key Customers” has the meaning set forth in Section
3.21.
“Key Suppliers” has the meaning set forth in Section
3.20.
“Knowledge” and any derivations thereof
means, the actual knowledge, after
reasonable inquiry of
those employees reporting directly
to such Persons who
would reasonably be expected
to have knowledge
of the fact, event or circumstance in
question that is in their area of
responsibility of (a) with respect to the
Company
Group
or
any
Transferor,
the
individuals
identified
on
Schedule
1.1-
3(a);
(b) with
respect
to
Buyer, the
individuals identified
on Schedule
1.1-
3(b); and
(c) with respect
to any
Voting Securityholder,
such Voting Securityholder.
“Law” means any
U.S. federal,
state, county, city
and any non-U.S.
or other government
statute, law,
regulation, rule, Order, ordinance, principle
of common law or
code and any permit or
license granted by or
under the authority of any of the foregoing.
“Leased Real
Property” means
the real
property that
is leased,
subleased, licensed
or occupied
by
any member of the Company Group from another Person.
“Lien”
means
with
respect
to
any
property
or
asset,
any
mortgage,
deed
of
trust,
lien,
pledge,
hypothecation, assignment,
license, charge,
easement, encumbrance
or security
interest in
respect of
such
property or asset.
“Losses” means,
without duplication,
losses, damages,
claims, reasonable
and documented
costs and
expenses, interest,
awards, judgments
and penalties
(including reasonable
and documented
attorneys’ and
consultants’ fees
and
expenses
and
other
reasonable
costs
of
defending,
investigating
or
settling
claims)
suffered or incurred by an indemnified party.
“Marks”
means all
trademarks, service
marks,
trade dress,
trade names,
logos,
slogans, corporate
names, fictitious
and other
business names
used in
connection with
the conduct
of an
entity’s business
to
identify any
product, service,
business or
company, and
registrations and
applications for
registration and
13
any renewals or extensions thereof, together in each
case with the goodwill of the business connected
with
the use of or symbolized by each of the foregoing.
“Material
Adverse
Effect”
means
any
change,
event,
circumstance,
occurrence,
state
of
facts,
development or
effect that,
individually or
in the
aggregate, (a) has,
or could
reasonably be
expected to
have,
a material adverse effect
on the business, assets,
results of operations or
financial condition of the
Company
Group, taken as
a whole or
(b) prevents or materially
impairs, or could
reasonably be expected
to prevent
or
materially
impair,
the
consummation
of
the
Transactions;
provided,
however,
that,
with
respect
to
clause (a),
changes,
events,
circumstances,
occurrences,
facts,
developments
or
effects
relating
to
the
following shall
not be
taken into
account in
determining whether
a Material Adverse Effect
has occurred:
(i) changes
in economic,
financial,
regulatory
or political
conditions
or events
or the
financing,
banking,
currency or
capital markets;
(ii) changes after
the date
hereof in
Laws or
Orders or
interpretations thereof
or
changes
after
the
date
hereof
in
accounting
rules
(including
GAAP)
or
any
interpretation
thereof;
(iii) changes affecting generally
any of the industries
(or segments thereof),
markets or geographical
areas
in
which
the
Company
Group
conducts
the
Business;
(iv) any
disaster,
calamity,
epidemic,
pandemic,
weather
condition,
military
action,
armed
hostilities
or
war
(regardless
of
whether
declared)
or
any
escalation or worsening thereof,
regardless of whether occurring
or commenced before or
after the date of
this Agreement; (v) any national or international political, labor or social conditions, (vi) any failure by the
Company Group to meet
any projections, forecasts, estimates
or financial analyses (provided,
however, that
the underlying cause
or causes of
such failure may
constitute a Material Adverse Effect);
(vii) any actions
taken or omitted
to be taken
by, with the
express written consent
of, or at
the express request
of, Buyer or
any of
its Affiliates (other than
compliance with Section
6.1)
; or
(viii) the negotiation
or execution
of this
Agreement of
the announcement
or existence
thereof, the
identity of
Buyer or
its
Affiliates or
the compliance
by any Person with any term of any agreement,
certificate or document in connection with the
Transactions
(including,
in
each
case,
the
impact
thereof
on
relationships,
contractual
or
otherwise,
with,
or
actual
or
potential
loss
or
impairment
of,
customers,
suppliers,
vendors,
partners,
employees
or
Governmental
Authorities); provided, however,
that, in the
case of the
foregoing clauses (i), (ii),
(iii), (iv) and
(v), any such
change,
event,
circumstance,
occurrence,
state
of
facts,
development
or
effect
shall
not
be
deemed
to
be
excluded solely to the extent it
has a materially disproportionate adverse effect
on the results of operations
or
financial
condition
of
the
Company
Group,
taken
as
a
whole,
as
compared
to
other
Persons
similarly
situated in
the same
industry.
For the
avoidance of
doubt, a
“Material Adverse Effect”
will be
measured
against
only
past
performance
of
the
Company
Group
and
not
against
any
forward-looking
statements,
projections or forecasts of the Company Group or any other Person.
“Material Contracts” has the meaning set forth in Section
3.13(a).
“Maximum Premium” has the meaning set forth in Section
6.5(c).
“Nonparty Affiliates” has the meaning set forth in Section
11.16.
“Objection Notice” has the meaning set forth in Section
2.4(c).
“Off-the-Shelf
Software”
means
non-exclusive
licenses
for
software
that
is
(a) licensed
under
“shrink-wrap”
or
“click-through”
contracts
or
agreements;
(b) generally
commercially
available;
and
(c) licensed for a fee of no more than $100,000 per year.
“Open Source License”
means non-exclusive licenses
for software
that (a) licenses software
or other
material as “free software” or
“open source software” or (b) is,
or is substantially similar to,
a license now
or in
the future
approved by
the Open
Source Initiative
and listed
at http://www.opensource.org/licenses,
which
licenses
include
all
versions
of
the
GNU
GPL,
the
GNU
LGPL,
the
GNU Affero
GPL,
the
MIT
license, the
Eclipse Public
License, the
Common Public
License, the
CDDL, the
Mozilla Public
License,
the Academic Free License, the BSD license and the
Apache License.
14
“Order”
means
any
judgment,
injunction,
order,
ruling,
award,
writ
or
decree
that
is
issued
by
a
Governmental Authority.
“Organizational Documents”
means any
charter, certificate
of incorporation,
certificate of
formation,
articles
of
association,
bylaws,
limited
liability
company
agreement,
operating
agreement,
partnership
agreement
or
similar
formation
or
governing
documents
and
instruments
of
(a) each
member
of
the
Company Group and (b) the respective Transferors thereof.
“Other Indemnitors” has the meaning set forth in Section
6.5(f).
“Outside Date” has the meaning set forth in Section
10.1(d).
“Owned
Real
Property”
means
all
real
property
that
is
owned
by
any
member
of
the
Company
Group.
“Party” or “Parties” has the meaning set forth in the Preamble.
“Passthrough Return” has the meaning set forth in Section
6.7(b)(ii).
“Patents” means all patents and patent
applications of any kind, including design
patents and design
registrations,
utility
models,
gebrauchsmuster,
patentable
inventions
and
invention
disclosures
and
all
reissues,
divisionals,
continuations,
continuations-in-part,
provisionals,
reexaminations,
substitutes
and
extensions of any of the foregoing.
“PCI DSS” has the meaning set forth in Section
3.12(f).
“Permits” has the meaning set forth in Section
3.3.
“Permitted Equity Interest Encumbrances” means Liens arising pursuant to applicable federal, state
and provincial
securities Laws,
Liens arising
as a
result of
actions taken
by Buyer
or any
of its Affiliates,
and Liens imposed by the Organizational Documents.
“Permitted Liens”
means
(a) Liens
for
utilities, Taxes,
assessments
or other
similar governmental
charges that
are not
delinquent, that
may hereafter
be paid
without penalty,
or that
are being
contested in
good
faith
by
appropriate
proceedings
and
for
which
appropriate
reserves
have
been
established
in
accordance
with
GAAP,
(b) any
construction,
mechanics’,
carriers’,
workmen’s,
repairmen’s,
materialmen’s,
warehousemen’s
and
other
similar
Liens
arising
or
incurred
in
the
ordinary
course
of
business, (c) non-exclusive licenses of Intellectual Property entered into in the ordinary course of business,
(d) Liens under the Existing Credit Facility, to the extent
paid off in full at the Closing, (e) Liens arising
in
the ordinary
course of
business that are
immaterial, individually
or in
the aggregate,
(f) Liens reflected
or
reserved against or otherwise disclosed on the balance sheets included
in the Financial Statements or notes
thereto
or securing
liabilities reflected
in such
balance sheets
or notes
thereto;
(g) Liens arising
under or
created by this Agreement or any of the Ancillary Agreements; (h) zoning, entitlement, building codes and
other land
use Laws
regulating the
use or
occupancy of
real property
or the
activities conducted
thereon;
(i) Liens arising under workmen’s
compensation, unemployment insurance, social
security, retirement and
similar Laws; (j) pledges and deposits to secure the performance
of bids, trade Contracts, leases, surety and
appeal
bonds,
performance
bonds
and
other
obligations
of
a
similar
nature,
in
each
case
in
the
ordinary
course of business; and (k) Liens listed on Schedule
1.1-
4.
“Person”
means
an
individual,
a
corporation,
a
partnership,
a
limited
liability
company,
an
association, a trust, a joint
stock company, a joint venture, an
unincorporated organization, a business entity
or any Governmental Authority.
15
“Personal
Data”
means
any
information
defined
as
“personal
data,”
“personally
identifiable
information,”
“individually
identifiable
health
information,”
or
“personal
information”
or
similar
or
comparable term under any Privacy Law.
“Pre-Closing Covenant” has the meaning set forth in Section
8.2.
“Pre-Closing Restructuring” has the meaning set forth in Section
2.1(a)(vi).
“Pre-Closing Tax Period”
means (a) for
purposes of Income
Taxes, any Tax
period that
ends on or
before the Closing Date,
and with respect to
any Straddle Period, the
portion of such Straddle
Period ending
on and including the Closing Date,
and (b) for purposes of non-Income Taxes, any Tax period that
ends on
or before the Calculation Time, and
with respect to any Straddle Period, the
portion of such Straddle Period
ending on the Calculation Time.
“Privacy Laws”
means all
Laws relating
to the
protection or
Processing of
Personal Data
that are
applicable to the Company Group.
“Pro Rata
Share” means,
with respect
to each
Transferor, the
applicable percentage
as set
forth in
the Closing Statement of any additional payments or
liabilities to which such Transferor is
entitled or liable
pursuant to this Agreement following the Closing Date.
“Proceedings” has the meaning set forth in Section
3.10(a).
“Processing” means
any operation
performed on
Personal Data,
including the
collection, creation,
receipt,
access,
use,
handling,
compilation,
analysis,
monitoring,
maintenance,
retention,
storage,
transmission, transfer, protection, disclosure, distribution or disposal of Personal Data.
“Property Taxes” has the meaning set forth in Section
6.7(b)(iv).
“Proposed Allocation” has the meaning set forth in Section
6.7(f).
“PTE Election” means any
election under applicable state
or local Income
Tax Law made by
or with
respect to any member of the Company Group pursuant to
which such member of the Company Group will
incur or
otherwise be
liable for any
state or
local Income Tax
liability under applicable
state or local
Law
that would have been borne (in whole or in part) by the direct or indirect equity owners
of such member of
the Company
Group had
no such
election been
made (including
any “Specified
Income Tax Payment”
as
defined in IRS Notice 2020-75).
“Purchase Price” means an amount equal to $258,080,663.
“Purchased Equity Interests” has the meaning set forth in the Recitals.
“QSub Election” has the meaning set forth in Section
2.1(a)(iii).
“Qualification Dates” has the meaning set forth in Section
3.15(n).
“Qualifying Order” has the meaning set forth in Section
9.6.
“R&W Insurance Policy”
means any
Buyer-Side Representations
and Warranties Insurance
Policy
obtained by Buyer, a copy of which is attached hereto as Schedule C.
“Registered Intellectual Property” has the meaning set forth in Section
3.12(a).
16
“Reinhart” has the meaning set forth in Section
11.17.
“Related Parties” has the meaning set forth in Section
3.13(a)(iv).
“Release”
means
any
release,
spill,
emission,
leaking,
pumping,
pouring,
emptying,
escape,
injection,
deposit,
disposal, discharge,
dispersal, dumping,
leaching
or migration
of Hazardous
Materials
into or through
the indoor or
outdoor environment or
into or out
of any property,
including the movement
of Hazardous Materials through or in the air, soil, sediment, surface water or groundwater.
“Restricted Party” has the meaning set forth in Section
6.15(a).
“Restricted Territory” has the meaning set forth in Section
6.15(a)(i).
“Sanctioned Country” means
a country that
is, at the
then-relevant time, the
target of comprehensive
territory-based applicable
Sanctions (which,
as of
the date
of this
Agreement, includes
the so-called
People’s
Republic of Luhansk, and
the so-called People’s Republic
of Donetsk, and the
Crimea regions of Ukraine,
Cuba, Iran, North Korea and Syria).
“Sanctions”
means
economic
or
financial
sanctions or
trade
embargoes
imposed,
administered
or
enforced from
time to
time by
(a) the U.S.
government, including
those administered
by OFAC,
the U.S.
Department of State,
the USDA
and the FDA,
(b) the United Nations
Security Council,
the European Union,
any
European
Union
member
state
or
Her
Majesty’s
Treasury
of
the
United
Kingdom,
or
(c) any
other
applicable economic or
financial sanctions or
trade embargoes imposed,
administered, or enforced
by any
other country, except to the extent inconsistent with U.S. Law.
“Schedule”
means
any
disclosure
schedule
delivered
in
connection
with
the
execution
of
this
Agreement.
“Securities Act” has the meaning set forth in Section
5.5.
“Security Incident” has the meaning set forth in Section
3.12(g).
“Securityholders”
means
the
holders,
collectively,
of
100%
of
the
issued
and
outstanding
Equity
Interests of Echo Lake Foods, Echo Lake Properties, ELT and Elkin Properties.
“Seller Returns” has the meaning set forth in Section
6.7(b)(i).
“Seller Tax Claim” has the meaning set forth in Section
6.7(d).
“Sellers” has the meaning set forth in the Preamble.
“Sellers’ Representative” has the meaning set forth in Section
2.7(a).
“Software”
means
computer
software
programs,
including
tool
sets,
compilers,
higher
level
“proprietary” languages and related documentation, whether
in source code, object code or
human readable
form; provided, however, that Software does not include Off-the-Shelf Software.
“Specified Liabilities” has the meaning set forth in Section
9.1.
“Specified
Tax
Refund”
means
the
Kentucky
sales
and
use
Tax
refund
receivable
by
Echo
Lake
Foods with
respect
to the
2018 through
2021 Tax
period
in an
estimated amount
equal to
approximately
$900,000.
17
“Statement Date” has the meaning set forth in Section
3.5(a).
“Straddle Period”
means (a) for
purposes of
Income Taxes, any
Tax period
that includes
(but does
not end on) the Closing
Date, and (b) for purposes of non-Income Taxes,
any Tax period that includes (but
does not end on) the Calculation Time.
“Submission” has the meaning set forth in Section
2.4(d).
“Submission Deadline” has the meaning set forth in Section
2.4(d).
“Subsidiary”
means,
with
respect
to
a
specified
entity,
(a) in
the
case
of
a
corporation
or
limited
liability company,
25% or
more of
the capital
stock or
membership interests,
as applicable, the
holders of
which are regularly entitled to vote for the election of directors or
managers, is owned directly or indirectly
by such entity, or (b) in the case of a trust, partnership or other entity, a trust, partnership or entity of which
such specified entity owns directly or indirectly 25% or more of the beneficial interest or equity.
“Target Working Capital” means an amount equal to $36,000,000.
“Tax Claim” has the meaning set forth in Section
6.7(d).
“Tax Liability Amount”
means with
respect to
the Company
Group (but
calculated separately
for
each
Transferor
Group),
without
duplication
and
determined
as
of
the
Closing
Date,
the
amount
of
any
unpaid Income Taxes
of any member
of the
Company Group itself
(whether or not
then due) for
any Pre-
Closing Tax Period
and solely to
the extent such
unpaid Income
Taxes relate to
Tax Returns of
the Company
Group that have not
yet come due and
been filed as of
the Closing Date or
a Tax Return
with respect to such
Income Taxes has been filed but the amount shown as due thereon has not been
paid as of the Closing Date
(which amount shall not be an amount less than zero in any jurisdiction or in the aggregate), which amount
shall
be
calculated:
(i) by
calculating
any
Income
Taxes
for
Straddle
Periods
in
accordance
with
Section
6.7(f)
herein;
(ii) by
including
any
Income Taxes
incurred
as
a
result
of
a
PTE
Election;
(iii) by
treating any agreed or required
adjustments initiated prior to Closing
in respect of a Tax period
(or portion
thereof) ending after
the Closing Date
pursuant to Section 481
of the Code
(or any similar
provision of state,
local
or
non-U.S. Law)
for
any
Pre-Closing Tax
Period
as
having
occurred in
a
Pre-Closing Tax
Period;
(iv) by using the Company Group’s past practices to the extent permitted by applicable Law under a “more
likely
than
not”
(or
higher)
level
of
authority;
(v) by
taking
into
account
any
applicable
prepayments
or
estimated payments of Income Taxes by the Company
Group on or before the Closing Date;
(vi) by taking
into
account
any
Transaction
Tax
Deductions
to
the
extent
deductible
by
the
applicable
member
of
the
Company Group under
applicable Law under
a “more likely
than not” (or
higher) level of
authority to the
extent they will actually reduce the relevant unpaid Income Tax liability as a matter of applicable Law; and
(vii) by
excluding
all
deferred
Tax
liabilities
and
deferred
Tax
assets;
provided,
however,
that
the
Tax
Liability Amount shall
not include
any Taxes
included as
a liability
for purposes
of determining Working
Capital,
Company
Group
Expenses,
or
Indebtedness,
in
each
case,
as
finally
determined
under
this
Agreement.
“Tax Refund” has the meaning set forth in Section
6.7(h).
“Tax Return” means
any report, statement,
form, return, election,
schedule, claim for
refund or other
document
or
information
relating
to
Taxes
or
required
to
be
supplied
to
a
Governmental
Authority
in
connection with Taxes, including any amendment or supplement thereto.
“Taxes” means
any and
all U.S.
federal, state,
local or
non-U.S. income,
franchise, gross
receipts,
alternative or add-on
minimum, ad valorem,
property, sales, use,
value added, excise,
stamp, withholding,
payroll, employment, unemployment, occupation, license, excise or
windfall profit tax or any customs
duty
18
and any other tax, levy or other
similar assessment by a Governmental
Authority or other tax of any kind
or
any
charge
of
any
kind
in
the
nature
of
(or
similar
to)
taxes
whatsoever
imposed
by
a
Governmental
Authority, together with any interest,
fine, penalty or other
additional amount imposed by
a Governmental
Authority with respect thereto.
“Third Party Claim” has the meaning set forth in Section
9.2.
“Trade Control Laws” means
all applicable trade, export
control, import and antiboycott
Laws and
regulations imposed, administered or enforced by the U.S. government, including the
Arms Export Control
Act
(22
U.S.C. § 1778),
the
International
Emergency
Economic
Powers Act
(50
U.S.C. §§ 1701–1706),
Section 999 of the
Internal Revenue Code,
the U.S. customs
laws at Title
19 of the
U.S. Code, the
Export
Control Reform Act
of 2018
(50 U.S.C. §§ 4801-4861),
the International Traffic
in Arms Regulations
(22
C.F.R. Parts 120–130), the Export Administration Regulations (15 C.F.R. Parts 730-774), the U.S. customs
regulations at 19 C.F.R. Chapter 1 and the Foreign Trade Regulations (15 C.F.R. Part 30).
“Trade
Secrets”
means
all
trade
secrets,
know-how
and
confidential
or
proprietary
information,
including ideas, research in progress, algorithms, data, designs, processes, formulae, drawings, schematics,
blueprints, flow charts,
models, strategies, prototypes,
customer lists, supplier
lists, mailing lists,
business
plans and techniques that derive independent economic value, actual or potential, from not
being generally
known or
readily ascertainable
by others,
including all
rights to
limit the
use or
disclosure thereof
by any
Person.
“Transaction Tax
Deduction”
means all
Tax deductions
or losses
of any
member of
the Company
Group resulting
from the
payment of
the following
amounts related
to the
Transactions, without
duplication:
(a) any Company Group Expenses, or (b) any fees, expenses, interest (including unamortized
original issue
discount and other amounts treated as
interest for federal Income Tax
purposes), prepayment premiums and
penalties
paid or
payable
with
respect
to
the
prepayment
of
debt and
the
write-off
or
acceleration
of
the
amortization of deferred financing
costs incurred by any
member of the Company
Group with respect to
the
repayment or termination of Indebtedness.
“Transactions” means
the Equity
Purchase, the
F Reorganization, the
ELT Contribution
and the
other
transactions contemplated hereby and by the Ancillary
Agreements.
“Transfer Taxes” has the meaning set forth in Section
6.7(e).
“Transferor” means
(a) with respect
to the
Echo Lake
Foods Group,
Echo Lake
Foods Transferor,
(b) with respect to the Echo Lake Properties Group, Echo Lake Properties,
and (c) with respect to the Elkin
Properties Group, Elkin Properties.
“Transferor Group”
means each
of the
Echo Lake
Foods Group,
the Echo
Lake Properties
Group
and the Elkin Properties Group.
“Transition Services
Agreement” means a
Transition Services
Agreement to be
entered into between
the Excluded Companies and
the Company Group to
provide certain transition services
to and/or from the
Company Group in a form mutually acceptable to Buyer and the Sellers’ Representative.
“Unaudited Financial Statements” has the meaning set forth in Section
3.5(a).
“USDA” means the United States Department of Agriculture.
“Voting Securityholders” has the meaning set forth in the Preamble.
19
“WARN Act” means
the federal
Worker Adjustment and
Retraining Notification Act
of 1988,
and
similar applicable Laws related to plant closings, relocations, mass layoffs and employment losses.
“Working Capital” means,
with respect to
the Company Group
(but calculated separately
based on
the subtotals for each
Transferor Group), (a) the
current assets of
the Company Group,
minus
(b) the current
liabilities of the Company
Group, in each case,
calculated as of the
Calculation Time in
accordance with the
Accounting Principles, as
set forth in
Exhibit A; provided, however,
that Working Capital will
not include
(i) Cash,
(ii) Indebtedness,
(iii) Company
Group
Expenses,
(iv) the
Tax
Liability
Amount,
but
for
the
avoidance of
doubt, will
include any
sales, use,
real or
personal property,
payroll Taxes or
any other
non-
Income
Taxes
of
the
Company
Group,
(v) any
deferred
Tax
assets
and
liabilities
or
(vi) any
assets
or
liabilities to the
extent specifically excluded
from such calculations
as set forth
in the
Accounting Principles
on Exhibit A;
provided further
that Working
Capital shall
include any
receivables between
the Company
Group, on the one
hand, and any Seller
or any Affiliate of
any Seller, on the other
hand, to the extent
arising
in the ordinary course
of business and settled
to an account owned
by the Company Group
within 30 days
of Closing.
Solely for illustrative purposes,
set forth on Schedule
B-1 is a
Reference Balance Sheet as
if the
Closing had occurred on the Statement Date.
“Xenitel” has the meaning set forth in the Preamble.
“Yorkville” has the meaning set forth in the Preamble.
“Yorkville Equity Interests” has the meaning set forth in the Recitals.
1.2
Certain Interpretive Matters
.
For purposes of this Agreement:
(a)
unless otherwise specified, all references to Sections,
Articles, Schedules or Exhibits
are to the Sections, Articles, Schedules or Exhibits of or to this
Agreement;
(b)
each term defined in this Agreement has the meaning assigned to it;
(c)
each
accounting
term
not
otherwise
defined
in
this
Agreement
has
the
meaning
commonly applied to it in accordance with GAAP;
(d)
words in the singular
include the plural and
vice versa,
unless the context otherwise
expressly requires;
(e)
pronouns
in
masculine,
feminine
or
neuter
genders
shall
be
construed
to
state
and
include any other gender;
(f)
the
words
“herein,”
“hereby,”
“hereof,”
“hereunder”
and
other
words
of
similar
import
refer
to
this
Agreement
as
a
whole
and
not
to
any
particular
Section,
Article
or
other
subdivision;
(g)
the term “including” means “including, without limitation,”;
(h)
with respect to
the Company
Group, the
term “ordinary
course of business”
will be
deemed to refer
to the conduct
of the business
of the Company
Group in a
manner consistent with
the ordinary course of business of the Company Group consistent with past practice;
(i)
all references
to “$”
or dollar
amounts will
be to
the lawful
currency of
the United
States;
20
(j)
to
the
extent
the
term
“day”
or
“days”
is
used,
it
will
mean
calendar
days
unless
otherwise specified;
(k)
all references to any federal, state, local or foreign Law shall be deemed
to also refer
to all rules and regulations promulgated thereunder, unless the context requires otherwise;
(l)
except
as
otherwise
specifically
provided
in
this
Agreement,
any
statute,
rule
or
regulation
defined
or
referred
to
herein
means
such
statute
as
from
time
to
time
amended,
supplemented
or
modified,
including
by
succession
of
comparable
successor
statutes,
rules
or
regulations, as applicable;
(m)
unless the context
otherwise requires, all
references to any
agreement or instrument
means
such
agreement
or
instrument
as
from
time
to
time
amended,
modified
or
supplemented,
including by waiver or consent;
(n)
no provision of this Agreement will be
interpreted in favor of,
or against, any of
the
Parties by
reason of
the extent
to which
any such
Party
or its
counsel participated
in the
drafting
thereof or
by reason
of the
extent to
which any
such provision
is inconsistent
with any
prior draft
hereof or thereof;
(o)
any document
or item
will be
deemed “delivered,”
“provided” or
“made available”
within the meaning of this Agreement if such document or item (i) is included
in the electronic data
room or
(ii) actually delivered
or provided
to Buyer
or any
of its
representatives, including
via email,
in each case, at least one day prior to the date of this Agreement;
(p)
in the computation
of periods of
time from a
specified date to a
later specified date,
the word
“from” means
“from and
including” and
the words
“to” and
“until” mean
“to but
excluding”
and the
word “through”
means “to
and including.”
Whenever the
last day
for the
exercise of
any
privilege or the discharge of any duty hereunder shall fall upon a day that is not
a Business Day, the
Party having such privilege
or duty may exercise such
privilege or discharge such
duty on the next
succeeding day that is a Business Day; and
(q)
The
Schedules
constitute
a
part
of
this Agreement
and
are
incorporated
into
this
Agreement for all purposes as if fully set forth herein.
Any disclosure made in any Schedule to this
Agreement shall
be deemed
to be
disclosures made
with respect
to all
representations, warranties,
covenants
and
Schedules
contained
in
this
Agreement
to
the
extent
the
applicability
thereto
is
reasonably
apparent
from
the
disclosure.
Neither
the
specification
of
any
dollar
amount
in
any
representation, warranty or
covenant contained in
this Agreement nor the
inclusion of any
specific
item in any Schedule is intended to imply that
such amount, or higher or lower amounts, or
the item
so included or other items, are or are
not material.
No Party shall use the fact of setting forth
of any
such amount or the inclusion
of any such item in any
dispute or controversy between the
Parties as
to whether any
obligation, item or
matter not described
herein or included
in any Schedule
is or is
not material
or could
have a
Material Adverse Effect
for purposes
of this Agreement.
Neither the
specification
of
any
item
or
matter
in
any
representation,
warranty
or
covenant
contained
in
this
Agreement nor
the inclusion
of such
specific item
in any
Schedule is
intended to
imply that
such
item or matter, or other items or matters, are or are not in the ordinary course of business.
No Party
shall use the fact of the setting forth or the inclusion of any specific item or matter in any dispute or
controversy between the Parties as to whether any
obligation, item or matter not described herein or
included
in
any
Schedule
is
or
is
not
in
the
ordinary
course
of
business
for
purposes
of
this
Agreement.
Matters included in
the Schedules are
not necessarily limited
to matters required
by this
Agreement
to
be
included
in
the
Schedules
and
such
matters
may
be
set
forth
for
informational
purposes and do not necessarily include other matters of a similar nature.
The information set forth
21
in this Agreement and
the Schedules is
disclosed solely for
the purposes of
this Agreement and no
information set forth herein or therein shall be deemed to be an admission by any Party to any third
party
of
any
matter
whatsoever,
including
any
violation
of
any
Law
or
breach
of
any
Contract.
Nothing
in
the
Schedules
is
intended
to
broaden
the
scope
of
any
representation
or
warranty
contained in this Agreement or to create any covenant.
ARTICLE II
SALE AND PURCHASE OF
SECURITIES; CLOSING
2.1
Pre-Closing Actions; Sale and Purchase of Equity
.
(a)
Prior to the
Closing, the Sellers will
take the following actions
or cause the following
actions
to
be
taken
and
deliver
to
Buyer
for
review
and
comment,
five
Business
Days
prior
to
execution, drafts of documents reflecting the following steps:
(i)
At
least
two
Business
Days
prior
to
the
Closing,
each
Securityholder
will
cause a new corporation, Meinerz Holdings, Inc., to be duly incorporated under the Laws of
the State of Wisconsin (such new corporation, the “Echo Lake Foods Transferor”);
(ii)
The
Securityholders
will
contribute
all
issued
and
outstanding
Echo
Lake
Foods Equity
Interests to
Echo Lake
Foods Transferor,
in exchange
for shares
of capital
stock
of the Echo Lake Foods Transferor,
which the Securityholders will
own in the same classes
and
the
same
proportions
in
which
they
hold
their
Echo
Lake
Foods
Equity
Interests
(the
“Echo Lake Foods Contribution”);
(iii)
On, and effective as of, the date of the Echo
Lake Foods Contribution and as
an integrated “reorganization” effected in accordance with Section 368(a)(1)(F) of the Code
and Rev.
Rul. 2008-18, Echo
Lake Foods
Transferor shall
file a
valid IRS
Form 8869 electing
to
treat
Echo
Lake
Foods
as
a
“qualified
subchapter
S
subsidiary”
(as
defined
in
Section 1361(b)(3)(B) of
the Code)
for federal
and applicable
state Income
Tax purposes
(the
“QSub Election”);
(iv)
Echo Lake
Foods Transferor
will join
in the
execution of
this Agreement as
an
additional
Party
hereto,
with
the
rights
and
obligations
set
forth
herein
for
Echo
Lake
Foods Transferor as both a Transferor and a Seller;
(v)
At least one
Business Day after
the effective time
for and mailing
of the QSub
Election:
(A)
Echo
Lake
Foods
will
convert
from
a
Wisconsin
corporation
to
a
Delaware limited liability company;
(B)
Echo
Lake
Foods
will
cause
Xenitel
to
convert
from
a
Wisconsin
corporation to a Delaware limited liability company;
(C)
Echo Lake Foods will cause Huntington to convert from
a Wisconsin
corporation to a Delaware limited liability company
(such conversion, together with
the
conversions
set
forth
in
subparagraphs
(A)
and
(B)
,
the
“Conversions”
and,
together
with
the
Echo
Lake
Foods
Contribution
and
the
QSub
Election,
the
“F Reorganization”).
22
(D)
Echo
Lake
Foods
will
distribute
the
Excluded Assets
to
Echo
Lake
Foods
Transferor
pursuant
to
the
Excluded
Asset
Assignment
Agreement
(the
“Excluded Assets Distribution”).
(E)
Except as expressly set forth herein or the context otherwise requires,
any reference to Echo Lake Foods, Xenitel
or Huntington herein includes Echo Lake
Foods, Inc.,
Xenitel, Inc.
and Echo
Lake Huntington,
Inc., respectively,
as well
as,
for
all
periods
after
the
Conversions,
the
Delaware
limited
liability
company
into
which such entity was converted.
(vi)
The Securityholders who own
ELT Equity Interests will
contribute all of the
ELT Equity Interests
to Echo Lake
Properties as a
capital contribution for
no consideration
(the “ELT
Contribution” and,
collectively with
the F Reorganization
and the
Excluded
Assets
Distribution, the “Pre-Closing Restructuring”).
(vii)
The Sellers
will
complete the
Pre-Closing
Restructuring no
later
than three
Business Days
after all
other conditions
to Closing
set forth
in Section
7.1
have been
satisfied
(other
than
those
that
by
their
terms
are
to
be
satisfied
at
the
Closing,
but
subject
to
the
satisfaction thereof);
provided, however,
that if
the Sellers
fail to
meet that
deadline solely
because of one or more
Governmental Authority’s failure
to process, or provide evidence
of,
the Pre-Closing Restructuring within
such time period, then
such failure shall not
be deemed
to
be
a
breach
of
this
covenant;
provided
further
that
the
closing
condition
set
forth
in
Section
7.1(c)
shall nevertheless not be met until all such required actions are taken by each
such Governmental Authority.
Buyer and
its representatives
shall have
the right,
acting in
good
faith,
to
review
and
comment
upon
the
documentation
used
for
the
Pre-Closing
Restructuring.
The
Sellers’
Representative
will
review
Buyer’s
comments
to
the
documentation used
for the
Pre-Closing Restructuring
in good
faith and
shall incorporate
any
reasonable comments timely provided by Buyer with respect thereto.
(b)
At
the
Closing,
upon
the
terms
and
subject
to
the
conditions
contained
herein,
the
following transactions will occur (collectively, the “Equity Purchase”).
(i)
The Sellers will cause Echo Lake Foods Transferor to sell to
Buyer, free and clear of
any and
all Liens
(other than
Permitted Equity
Interest Encumbrances),
and Buyer
agrees to
purchase from
Echo Lake
Foods Transferor
all of
the issued
and outstanding
Echo Lake Foods Equity Interests;
(ii)
The Sellers
will cause
Echo Lake
Properties to
sell to
Buyer, free
and clear
of any
and all Liens (other
than Permitted Equity Interest
Encumbrances), and Buyer agrees
to purchase,
all
of the
issued and
outstanding Huntington
435 Equity
Interests
and
ELT Equity Interests; and
(iii)
The Sellers will cause Elkin Properties
to sell to Buyer, free and clear
of any and all
Liens
(other
than
Permitted
Equity
Interest
Encumbrances),
and
Buyer
agrees
to
purchase, all of the issued and outstanding Blue Grass Equity Interests and
Yorkville
Equity Interests.
(c)
Each of
the Sellers irrevocably
waives any rights
of first refusal,
preemptive rights,
consent rights, voting
rights, restrictions on
transfer or other
rights pertaining to
such transactions,
whether arising under
any Organizational Document
of any such
Person or otherwise.
In connection
with the acquisition by Buyer
of the Echo Lake Foods
Equity Interests pursuant to Section
2.1(b)(i)
,
23
effective as of
the Closing, Buyer
(i) shall be admitted
as a member
of Echo Lake
LLC and (ii) by
executing this Agreement agrees to be bound by the terms of the Echo Lake LLC
Agreement.
2.2
Closing
Date
Payment
.
At
the
Closing,
upon
the
terms
and
subject
to
the
conditions
contained herein, Buyer
will pay
or cause
to be
paid to
Transferors an aggregate
amount equal
to the
Closing
Date Payment, as follows:
(a)
to Echo Lake Foods Transferor,
cash in an amount equal to the applicable portion of
the Estimated
Adjusted Equity Price set
forth on the
Consideration Allocation
Schedule for the Echo
Lake
Foods
Group,
by
wire
transfer
of
immediately
available
funds
to
the
account
specified
in
writing by the Sellers’ Representative at least three Business Days prior to the Closing;
(b)
to
Echo
Lake
Properties,
cash
in
an
amount
equal
to
the
applicable
portion
of
the
Estimated Adjusted
Equity Price
set forth
on the
Consideration Allocation
Schedule
for
the
Echo
Lake Properties Group,
by wire transfer
of immediately available
funds to the
account specified in
writing by the Sellers’ Representative at least three Business Days prior to the Closing;
(c)
to Elkin
Properties, cash
in an
amount equal
to the
applicable portion
of the
Estimated
Adjusted Equity
Price set
forth on
the Consideration Allocation
Schedule for
the Elkin
Properties
Group, by
wire transfer
of immediately
available funds
to the
account specified
in writing
by the
Sellers’ Representative at
least three
Business Days
prior to
the Closing
(the amounts
set forth
in
subparagraphs
(a)
–
(c)
, collectively, the “Closing Date Payment”);
(d)
upon execution and
delivery of
the Escrow
Agreement by the
Sellers’
Representative,
Buyer and the Escrow
Agent, to the Escrow
Agent, by wire transfer of immediately available funds:
(i)
to
the
Adjustment
Escrow
Account,
cash
in
an
amount
equal
to
the
Adjustment Escrow Amount to be held in the
Adjustment Escrow Account; and
(ii)
to
the
Indemnification
Escrow
Account,
cash
in
an
amount
equal
to
the
Indemnification Escrow Amount to be held in the Indemnification Escrow
Account;
(e)
on behalf of the applicable Transferor and
Company, to each holder of Indebtedness
of the
Company Group
from which
Buyer shall
have received
a payoff
letter (including
under the
Existing Credit Facility), the amount
of Indebtedness to be repaid
as of the Closing Date
pursuant to
such payoff
letter (to
the extent
taken into
account in
determining the
amount of
the Closing
Date
Payment); and
(f)
on behalf of
the applicable
Transferor and Company,
to (i) each Person
to whom non-
compensatory Company Group
Expenses are owed,
as set forth
in the Closing
Certificate and (ii) the
Company Group, for further distribution via
the Company Group’s payroll to the
recipients thereof
as set
forth in
the Closing
Certificate, any
compensatory Company
Group Expenses,
in each
case,
the respective
amounts set forth
in the
Closing Certificate
and to the
respective accounts
specified
in writing by the Sellers’ Representative at least three Business Days prior to the Closing; and
(g)
The
Closing
Date
Payment
will
be calculated
in accordance
with
the
terms
of
this
Agreement, and the payment of the Closing Date
Payment pursuant to this Section
2.2
will be made
on
the
Closing
Date
by
Buyer
by
wire
transfer
of
immediately
available
funds
to
the
respective
accounts
of
the
Sellers
specified
in
writing
by
the
Sellers’ Representative
at
least
three
Business
Days prior to the Closing.
24
(h)
Notwithstanding
anything
to
the
contrary
in
this Agreement,
subject
to
the
actual
payment by
or on
behalf of
Buyer of
the amounts
required to
be paid
to Transferors
hereunder, Buyer
shall not have any liability to any Person for any payment made in accordance with the calculations
set forth in
the Consideration Allocation Schedule or
any other payment
made to or
for the benefit
of
the
Sellers
pursuant
to
this
Section
2.2
,
based
on
the
written
instructions
of
the
Sellers’
Representative (including
with respect
to any
claim that
the Consideration Allocation
Schedule or
such other written instruction is incomplete or inaccurate).
2.3
Closing Certificate
.
No later than three
Business Days prior to
the Closing Date, the
Sellers’
Representative will deliver
to Buyer (a) a
certificate in substantially
the form attached
hereto as Exhibit B
(for the avoidance of doubt, the
numbers in Exhibit B are for illustrative purposes
only and will be revised
for the
Closing in
accordance with
this Agreement) (the
“Closing Certificate”)
setting forth
in reasonable
detail the Sellers’ Representative’s good faith estimate of:
(i) the Estimated Adjustment
Amount (and each
component thereof
and including
the subtotal
for each
Transferor Group),
(ii) the Estimated
Adjusted Equity
Price (including the
subtotal for each Transferor
Group) and (iii) the
Closing Date Payment (including
the
subtotal for each
Transferor Group), in
each case, as
calculated in accordance
with the applicable
definitions
set forth in this Agreement and the
Accounting Principles, and (b) a schedule in the form of, and consistent
with the formulae and methodologies underlying, the Consideration
Allocation Schedule attached hereto as
Exhibit C (the
“Consideration Allocation Schedule”)
setting forth
the applicable
portion of
the Estimated
Adjusted Equity Price payable
to each Transferor.
While the numbers reflected
in Exhibit C are illustrative,
the formulae
and methodologies
underlying such
numbers shall
be the
same formulae
and methodologies
used in preparing the Consideration Allocation Schedule delivered pursuant to this Section
2.3
.
Buyer and
its
representatives
shall
have
the
right,
acting
in
good
faith,
to
review
and
comment
upon
the
Estimated
Working
Capital, the
Estimated Indebtedness
and the
Estimated Cash
and any
other item
set forth
in
the
Closing Certificate,
and shall
provide any
such comments
to the
Sellers’ Representative no later
than one
Business Day prior to the Closing
Date and the Sellers shall promptly
provide Buyer and its representatives
with
reasonable
access
to
the
books,
records,
work
papers,
employees
and
accountants
of
the
Company
Group and any information
reasonably requested by Buyer
and its representatives in
connection with their
review of the Closing Certificate and the Sellers will cause the Company Group to reasonably cooperate in
connection with such review, and such
review and access shall be
subject to the Confidentiality
Agreement.
The Sellers’
Representative will review Buyer’s comments to the Closing Certificate in good
faith and may
incorporate such comments into the Closing Certificate in its reasonable
judgment; provided, however, that
the Sellers’ Representative’s determination of the Closing Certificate, after giving good faith consideration
to any
such comments,
shall be
conclusive for
determining the
Estimated Adjustment Amount, Estimated
Adjusted Equity Price, the Closing Date Payment and the Consideration
Allocation Schedule.
The Closing
Certificate,
taking
into
account
any
adjustments
made
as
a
result
of
Buyer’s
comments
that
the
Sellers’
Representative
incorporates
therein,
as
well
as
any
other
adjustments
mutually
agreed
by
the
Sellers’
Representative and
Buyer
prior
to the
Closing, shall
be deemed
the
“Final Closing
Certificate.”
For the
avoidance of doubt, Buyer shall have no obligation to comment on the Closing Certificate.
Buyer’s failure
to identify any questions
or changes to the
Closing Certificate shall not indicate
any acceptance or waiver,
or otherwise affect Buyer’s right to prepare the Closing Statement in accordance with Section
2.4.
2.4
Post-Closing Adjustment
.
(a)
As promptly as practicable, but in no event later than 90 days following the Closing,
Buyer will
prepare in good
faith and deliver
to the Sellers’ Representative
a written statement
(the
“Closing
Statement”)
setting
forth
Buyer’s
calculation
of
(i) Closing
Cash,
(ii) Closing
Working
Capital,
(iii) Closing
Indebtedness,
(iv) Company
Group
Expenses,
(v) the
Final
Adjustment
Amount, (vi) the Closing
Tax Liability
Amount, and (vii) the
Adjusted Equity Price
calculated based
on items (i)
through (vi)
of this
sentence.
Each such
calculation shall
also include
the subtotal
of
such calculation for
each Transferor Group.
Buyer’s computations in
the Closing Statement
shall be
25
determined in a
manner consistent with
the applicable definitions
set forth in
this Agreement
and the
Accounting Principles,
and shall
not reflect
any changes
in accounting
policy or
any other
matter.
The Parties
agree that
(i) the adjustment
contemplated by
this Section
2.4
is intended
to show
the
change between Estimated Cash and Closing Cash, the change between Estimated Working Capital
and Closing
Working Capital,
the change
between Estimated
Indebtedness and
Closing Indebtedness
and Estimated Company
Group Expenses and
Company Group Expenses,
and that such
changes can
be measured only if each calculation is done in a manner consistent with Exhibit B, the Accounting
Principles and the applicable definitions in this Agreement, and (ii) Closing Cash, Closing Working
Capital, Closing
Indebtedness and
Company Group
Expenses shall
not include
any item
that is
an
asset
or
liability
of
an
Excluded
Company,
except,
and
solely
to
the
extent,
that
such
item
was
included in such calculation in the Closing Certificate.
(b)
After
receipt
of
the
Closing
Statement,
the
Sellers’
Representative
and
its
representatives will have reasonable access to, and be allowed to make copies of, all relevant books
and records (including accountant work papers, but subject to
entering into customary access letters
as required by such accountant), and reasonable access to accountants
and employees of Buyer and
the Company Group, in each case to
the extent reasonably necessary to complete their
review of the
Closing Statement
and during
normal business
hours and
in a
manner that
does not
unreasonably
interfere with normal operations of the Company Group, and Buyer will cause the Company Group
to cooperate in good faith
with the Sellers’
Representative and its representatives in
connection with
such review.
(c)
If, within 45 days
following the timely
delivery of the
Closing Statement by
Buyer,
the Sellers’
Representative has
not given
Buyer notice
of its
objection
to any
item in
the Closing
Statement
or
its
calculation
of
the
Final
Adjustment Amount
(an
“Objection
Notice”),
then
the
Closing Statement will be deemed final and binding on Buyer and the Sellers.
(d)
If the Sellers’
Representative timely delivers
an Objection Notice,
then Buyer and
the
Sellers’
Representative
will
consult
in
good
faith
to
resolve
the
disputed
items
set
forth
in
the
Objection Notice and the Final Adjustment Amount.
If all disputed items set forth in the Objection
Notice are resolved in writing by
the Sellers’
Representative and Buyer, then the Closing
Statement,
as revised to reflect the written resolution
of the Sellers’
Representative and Buyer, will be final and
binding
on
the
Parties.
If
the
Sellers’
Representative
and
Buyer
are
unable
to
resolve
the
disagreement
with respect
to any
disputed item
and the
Final Adjustment Amount
within 30 days
following delivery
of the
Objection Notice,
the remaining
disputed items
may be
submitted to
the
Independent Accountant
by either Buyer
or the Sellers’
Representative to make
a final determination
of
the
remaining
disputed
items
and
the
Final
Adjustment
Amount
in
accordance
with
this
Section
2.4(d)
.
If the remaining disputed items
are submitted to the Independent
Accountant, Buyer
and the Sellers’ Representative will each execute a customary engagement letter with respect to the
engagement
of
the
Independent
Accountant.
In
resolving
any
disputed
item,
the
Independent
Accountant shall (i) act
as an expert
and not as
an arbitrator and
(ii) limit its determination
to each
unresolved disputed item.
If resolution of
the final disputed
items and the
Final Adjustment
Amount
is submitted
to the
Independent Accountant, then (x) the
Sellers’ Representative will deliver
to the
Independent Accountant
the
relevant
Objection
Notice,
(y) Buyer
will
deliver
to
the
Independent
Accountant the Closing Statement and
(z) each of Buyer and the
Sellers’
Representative will submit
a supporting
brief to
the Independent Accountant,
each within
ten Business
Days of
retaining the
Independent
Accountant
(the
“Submission
Deadline”).
Each
of
Buyer
and
the
Sellers’
Representative may make an oral presentation to the
Independent Accountant, in which case Buyer
or the
Sellers’ Representative, as applicable,
will provide
prompt prior
notice of
such presentation
to
the
other
Party,
which
Party
will
be
entitled
to
attend
or
have
a
representative
attend
such
presentation
(the
supporting
brief, Closing
Statement
or Objection
Notice,
as
applicable, and
any
26
material submitted
at such
oral presentation
being referred
to as
a Party’s
“Submission”).
Neither
Party shall have
any
ex parte
communications or meetings
with the Independent
Accountant without
the prior written
consent of the
other Party.
Buyer and the
Sellers’ Representative will instruct the
Independent
Accountant
(A) to
determine
whether
Buyer’s
Submission
or
the
Sellers’
Representative’s Submission reflects the more accurate
calculation of the Final
Adjustment Amount
(
i.e.
, the Independent Accountant may select only the Final
Adjustment Amount proposed by Buyer
or
the
Sellers’
Representative,
as
applicable,
in
the
Closing
Statement
or
Objection
Notice,
as
applicable, as
further described
in their
respective Submissions,
as the
Final Adjustment Amount)
and (B) to
deliver its
written determination
of the
Final
Adjustment
Amount to
Buyer and
the Sellers’
Representative no
later than
the 20th day
after the
Submission Deadline.
For the
avoidance of
doubt,
the reference in
the immediately preceding
sentence to a
Party’s Submission of
the Final
Adjustment
Amount
refers
to
the
total
Final
Adjustment
Amount
for
the
Company
Group,
not
the
subtotal
calculation
for
an
individual
Transferor
Group.
The
Independent
Accountant
will
be
given
reasonable
access
to
all
the
records
of
Buyer
and
the
Company
Group
to
determine
the
Final
Adjustment
Amount,
and
the
Independent
Accountant
shall
have
the
authority
to
make
determinations only in respect
of those specific items
that remain in dispute
and all determinations
shall
be
based
solely
on
the
Submissions
and
not
by
independent
review.
The
Final Adjustment
Amount
determined
by
the
Independent Accountant
pursuant
to
this
Section
2.4(d)
will
be
final,
binding and conclusive on all Parties, absent manifest error or fraud.
The date that the Independent
Accountant notifies the
Parties of the
determination of the
Final Adjustment Amount is referred to
in
this Agreement
as
the
“Final Adjustment
Amount
Determination
Date.”
The
costs,
fees
and
expenses of the
Independent
Accountant shall be
borne by the
Party whose Submission
is not chosen
by the Independent Accountant as the Final
Adjustment Amount.
(i)
If,
upon
determination
of
the
Final
Adjustment
Amount
pursuant
to
this
Section
2.4
, the Final Adjusted Equity
Price exceeds the Estimated Adjusted Equity Price as
determined
at
the
Closing,
then,
no
later
than
five
Business
Days
following
the
Final
Adjustment
Amount
Determination
Date,
(A) Buyer
and
the
Sellers’
Representative
will
provide
a
joint
written
instruction
to
the
Escrow
Agent
to
release
the
amounts
in
the
Adjustment
Escrow Account
to the
Sellers’ Representative,
including
any interest
accrued
thereon,
for
disbursement
to
Transferors
in
accordance
with
the
Consideration Allocation
Schedule
and
their
respective
Pro
Rata
Shares,
and
(B) Buyer
will
pay
to
the
Sellers’
Representative, for
the benefit
of Transferors,
by wire
transfer of
immediately available
funds
to an account designated by the Sellers’ Representative (for disbursement to the Transferors
in
accordance
with
their
Pro
Rata
Shares),
an
amount
equal
to
the
amount
that
the
Final
Adjusted Equity Price exceeds the Estimated Adjusted Equity Price.
(ii)
If,
upon
determination
of
the
Final
Adjustment
Amount
pursuant
to
this
Section
2.4
, the
Estimated Adjusted Equity
Price as
determined at
the Closing
exceeds the
Final
Adjusted
Equity
Price,
then,
no
later
than
five
Business
Days
following
the
Final
Adjustment Amount Determination Date,
Buyer and the Sellers’
Representative will provide
a joint written
instruction to the
Escrow Agent to pay to
Buyer, on behalf
of the Sellers,
by
wire
transfer
of
immediately
available
funds
from
the Adjustment
Escrow Account
to
the
account designated by
Buyer, an amount
equal to such
excess, including any
interest accrued
thereon.
To the extent there
remains a balance of
the Adjustment Escrow Account after the
payment of such excess to
Buyer, including any interest accrued
thereon, then Buyer and the
Sellers’
Representative will provide a
joint written instruction
to the Escrow
Agent to release
the remaining balance in the Adjustment Escrow Account to the Sellers’ Representative, for
disbursement
to
Transferors
in
accordance
with
their
respective
Pro
Rata
Shares.
To
the
extent the absolute value of the excess
of the Estimated
Adjusted Equity Price over the Final
Adjusted Equity Price exceeds
the then-remaining funds in
the Adjustment
Escrow Account,
27
then, within five Business Days after the Final Adjustment
Amount Determination Date, the
Sellers shall
cause to
be paid
through the
Sellers’
Representative to
Buyer the
amount of such
Adjustment Escrow
Account shortfall, by wire
transfer of immediately
available funds to the
account designated by Buyer.
(iii)
For all Tax
purposes, Buyer and the Sellers agree to treat
any payment made
pursuant to this Section
2.4
as an adjustment to the Adjusted
Equity Price, unless otherwise
required by Law.
2.5
Withholding Rights
.
Buyer and any
of its Affiliates will
be entitled to
deduct and withhold
from the consideration otherwise payable
to any of Transferors
pursuant to this
Agreement such amounts as
are required to
be deducted and
withheld with respect
to the making
of such payment
under applicable Laws
related
to
Taxes.
Other
than
any
deduction
or
withholding
in
respect
of
payments
that
are
treated
as
compensation for
Tax purposes,
before either
Buyer or
any of
its Affiliates makes
any such
deduction or
withholding, Buyer shall promptly provide the Sellers’ Representative notice of the intention to make such
deduction or
withholding and,
in reasonable
detail, the
authority, basis,
and method
of calculation
for the
proposed deduction
or withholding
(and Buyer
shall use
commercially reasonable
efforts to
provide such
notice at least five days prior to
such deduction or withholding being made).
Buyer shall cooperate in good
faith
to
avoid
or
minimize
the
need
to
make
such
deduction
or
withholding
to
the
extent
permitted
by
applicable Law.
To the extent
that any such
amounts are so
deducted or withheld
by any Person
pursuant
to
this
Section
2.5
,
such
Person
shall
timely
and
properly
remit
such
amounts
to
the
appropriate
Governmental Authority
in
accordance
with
applicable
Law,
and
any
such
amounts
that
are
deducted
or
withheld
and
remitted
to
the
appropriate
Governmental Authority
will
be
treated
for
all
purposes
of
this
Agreement as
having been
paid to
such Person
in respect of
which such
deduction or
withholding was
made.
2.6
Closing
.
The
closing
of the
Transactions
(the “Closing”)
will
take place
remotely via
the
electronic
exchange
of documents
and signature
pages,
as soon
as
practicable, but
no later
than the
fifth
Business Day after
the satisfaction or
waiver of all
of the conditions
to the obligations
of the Parties
set forth
in
Article VII
(other than
(a) those that
by their
terms are
to be
satisfied at
the Closing,
but subject
to the
satisfaction thereof
at the
Closing and
(b) the completion
of the
Pre-Closing Restructuring,
but subject
to
the completion thereof in
accordance with Section
2.1(a))
, or at such
other time and place
and on such other
date as the Sellers’ Representative and Buyer shall agree (the “Closing Date”).
2.7
Relationship Among the Sellers; Sellers’
Representative
.
(a)
Each Seller, by executing this
Agreement and agreeing to the
terms hereof, including
the consideration
payable to
such Seller
hereunder, hereby
appoints Scott
Meinerz to
serve as
the
representative (the
“Sellers’ Representative”) of such
Seller to
act, with
full power
of substitution,
as a representative
by and for
the benefit of
the Sellers, as
the exclusive agent
and attorney-in-fact
to
act
on
behalf
of
each
Seller
in
connection
with,
and
to
facilitate
the
consummation
of
the
Transactions, the Escrow Agreement and any other
Ancillary Agreement.
(b)
Without
limiting
the
generality
of
Section
2.7(a)
,
the
scope
of
the
Sellers’
Representative’s appointment shall include:
(i) acceptance of any payments hereunder or under the
Escrow Agreement or
any other Ancillary Agreement
(in each
case, net
of applicable
withholding
Taxes) and delivery of wire
instructions to Buyer in connection therewith;
(ii) delivering any funds
hereunder
or
under
the
Escrow
Agreement
or
any
other
Ancillary
Agreement;
(iii) determining
whether
the
conditions
to
closing
in
Article VII
have
been
satisfied
and
supervising
the
Closing,
including waiving any such condition if the Sellers’ Representative, in the Sellers’ Representative’s
sole and absolute
discretion, determines that
such waiver is
appropriate; (iv) taking any
action that
may
be
necessary
or
desirable,
as
determined
by
the
Sellers’
Representative
in
the
Sellers’
28
Representative’s sole and absolute discretion, in connection with
the termination of this Agreement
in accordance
with
Article X
; (v) taking
any and
all actions
that may
be necessary
or desirable,
as
determined
by
the
Sellers’
Representative
in
the
Sellers’
Representative’s
sole
and
absolute
discretion, in
connection with
the amendment
of this Agreement
in accordance
with Section
11.7
;
(vi) accepting notices on behalf of such Seller in accordance with Section
11.3;
(vii) taking any and
all actions
that may
be necessary
or desirable,
as determined
by the
Sellers’ Representative in
the
Sellers’ Representative’s sole and
absolute discretion,
in connection
with the
payment of
the costs
and
expenses
incurred
with
respect
to
any
member
of
the
Company
Group
or
such
Seller
in
accordance
with
Section
11.2
;
(viii) executing
and
delivering,
in
the
Sellers’
Representative’s
capacity
as
the
representative
of
such
Seller,
any
and
all
notices,
documents
or
certificates
to
be
executed by the
Sellers’
Representative, on behalf
of such Seller,
in connection with
this Agreement,
the Escrow Agreement
and the
other Ancillary Agreements; (ix) granting
any consent
or approval
on behalf of such
Seller under this Agreement; (x) enforcing and
protecting the rights and
interests
of the Sellers and to enforce and protect the rights and interest of the Sellers’
Representative arising
out of
or under
or in
any manner
relating to
this Agreement, the
Escrow Agreement and
the other
Ancillary
Agreements;
(xi) refraining
from
enforcing
any
right
of
the
Sellers
or
the
Sellers’
Representative
arising
out
of,
under,
or
in
any
manner
relating
to
this
Agreement,
the
Escrow
Agreement and the
other
Ancillary Agreements;
provided, however, that
no such failure
to act on
the
part
of
the
Sellers’ Representative,
except
as
otherwise
provided
in
this Agreement,
the
Escrow
Agreement
and
the
other Ancillary
Agreements,
shall
be
deemed
a
waiver
of
any
such
right
or
interest by
the Sellers’ Representative
or by
the Sellers
unless such
waiver is
in writing
signed by
the waiving
party or
by the
Sellers’ Representative; and
(xii) taking any
and all
other actions
and
doing any
and all
other things
provided in
or contemplated
by this
Agreement, the
Escrow
Agreement
or any other Ancillary Agreement to
be performed by
such Seller or
by the Sellers’ Representative
on behalf of such Seller.
As the representative of the Sellers, the Sellers’ Representative will act as
the
agent
for
all
Sellers
and
shall
have
authority
to
bind
each
Seller
in
accordance
with
this
Agreement, and Buyer
may rely on
such appointment and
authority until
the receipt of
written notice
of the appointment of a
successor (in which case Buyer
may rely on such appointment
and authority
of
such
successor).
Such
agency
and
proxy
are
coupled
with
an
interest,
and
are
therefore
irrevocable without the consent of the Sellers’
Representative, and survive the death, incompetency,
bankruptcy or
liquidation of
any of
the Sellers
and the
consummation of
the Transactions,
the Escrow
Agreement or any other Ancillary
Agreement.
(c)
All
decisions,
actions,
consents
and
instructions
of
the
Sellers’
Representative
authorized to be made,
taken or given pursuant
to this Section
2.7
shall be final and
binding upon all
of the Sellers, and
no such Person shall
have any right to
object, dissent, protest or
otherwise contest
the
same,
except
for
the
fraud
or
willful
misconduct
of
the
Sellers’ Representative
in
connection
therewith.
Neither the
Sellers’
Representative nor
any agent
employed by
the Sellers’
Representative
shall incur any
liability to any
Seller relating to the
performance of in
the Sellers’ Representative’s
duties as authorized
hereunder or the
failure to act,
except for actions
or omissions constituting
fraud
or willful misconduct
of the Sellers’ Representative in
connection therewith as
may be determined
in a
final, non-appealable
Order of
a court
of competent
jurisdiction.
The Sellers’ Representative
shall not have by
reason of this Section
2.7
a fiduciary relationship or
other special relationship with
any Seller, except
in respect of
amounts actually
received on behalf
of such
Person.
The relationship
created between the Sellers’ Representative and any Seller
shall not be construed as
a joint venture
or any form
of partnership for
purposes of U.S.
federal or state
Law, including federal
or state Tax
purposes.
The Sellers’ Representative shall
not be required
to make any
inquiry concerning either
the performance or observance of any of the terms, provisions or conditions of this Agreement.
(d)
The Sellers’ Representative,
in the
Sellers’ Representative’s capacity
as the
Sellers’
Representative, shall
not have
any liability
to Buyer
for any
default under
this Agreement by
any
29
other Seller.
Buyer shall be entitled to rely upon, and shall be deemed to have relied upon and
shall
have
no
liability
therefor,
all
actions
taken
or
omitted
to
be
taken
by
the
Sellers’ Representative
pursuant to this Agreement.
(e)
In the
event that
the Sellers’ Representative becomes
unable to
perform the
Sellers’
Representative’s
responsibilities
or
resigns
from
such
position,
the
holders
of
a
majority
of
the
Class A Voting
Common
Stock
of
Echo
Lakes
Foods
as
of
the
date
hereof
shall
select
another
representative to fill such
vacancy and such substituted
representative shall (i) be deemed
to be the
Sellers’ Representative
(or,
if
applicable,
a
Person
included
in
the
Sellers’ Representative)
for
all
purposes
of
this
Agreement
and
(ii) exercise
the
rights
and
powers
of,
and
be
entitled
to
the
indemnity,
reimbursement
and
other
benefits
of,
the
Sellers’ Representative
(or,
if
applicable,
a
Person
included
in
the
Sellers’
Representative);
provided,
however,
that
any
such
replacement
Sellers’ Representative
must provide Buyer with prompt notice
that such Person has been appointed
replacement
Sellers’
Representative,
together
with
reasonable
documentary
evidence
of
such
appointment.
(f)
The Sellers
agree to indemnify
the Sellers’
Representative for,
and to hold
the Sellers’
Representative harmless
against, any
Losses incurred
without fraud
or willful
misconduct on
the part
of
the
Sellers’
Representative,
arising
out
of
or
in
connection
with
the
Sellers’
Representative
carrying out the
Sellers’
Representative’s duties under
this Section
2.7
, including costs
and expenses
of
successfully
defending
the
Sellers’ Representative
against
any
claim
of
liability
with
respect
thereto.
The Sellers’ Representative may consult with counsel of the Sellers’ Representative’s own
choice and
will have
full and
complete authorization
and protection
for any
action taken
and suffered
by it in
good faith and
in accordance with
the opinion of
such counsel.
The indemnity obligations
of
this
Section
2.7(f)
shall
survive
the
resignation,
replacement
or
removal
of
the
Sellers’
Representative
or
the
termination
of
this
Agreement
pursuant
to
Article X.
The
Voting
Securityholders agree, on behalf of all
Securityholders, that the Sellers’
Representative shall be able
to deduct his
out-of-pocket expenses (including
fees and expenses
of legal counsel,
accountants or
other agents or experts) incurred in serving in that capacity, and any amounts to
which he is entitled
pursuant
to the
indemnification
provisions in
this
Section
2.7
,
from
Echo Lake
Foods Transferor,
prior to any distribution to the Securityholders.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SELLERS
REGARDING THE COMPANY GROUP
AND TRANSFERORS
Except as
set forth in
a Schedule,
the Sellers
hereby jointly
and severally represent
and warrant to
Buyer as follows:
3.1
Organization; Qualification; Authorization
.
(a)
The
Companies
and Transferors
are corporations
or
limited
liability
companies,
as
applicable, duly formed,
duly organized, validly
existing and in
good standing under
the Laws of
the
State of Wisconsin, with full power and authority to own, operate and lease its properties and
assets
and to
carry on
the Business
in all
material respects.
Except as
disclosed on
Schedule
3.1(a),
the
Companies and Transferors
are duly qualified
to do business
and are in
good standing as
a foreign
corporation or limited
liability company in
each jurisdiction where
the character of
its properties and
assets or the nature
of the Business makes
such qualification necessary, except
where the failure to
be
so
qualified
or
in
good
standing,
individually
or
in
the
aggregate,
would
not,
and
could
not
reasonably be expected to be, material to the Company Group, taken as a whole.
30
(b)
The
Sellers
have
made
available
to
Buyer
true
and
complete
copies
of
the
Organizational
Documents.
No
Company
or
Transferor
is
in
default
or
violation
of
any
term,
condition or provision of the Organizational Documents.
(c)
Each Company and Transferor has all
necessary power and authority to execute
and
deliver
this Agreement
and
the Ancillary Agreements
to
which
such
Company
or Transferor
is
a
party and the capacity and authority to make
and perform the representations, warranties, covenants
and
agreements
made
by
such
Company
or
Transferor
herein
and
therein.
The
execution
and
delivery of
this Agreement and
the Ancillary Agreements by
each Company
or Transferor
and the
consummation of the Transactions have been
duly authorized by all necessary
action on the part of
such Company or Transferor,
and no other proceedings by
such Company or
Transferor or any other
Person are necessary to authorize this
Agreement and the other
Ancillary Agreements to
which such
Company
or
Transferor
is
a
party
or
for
such
Company
and
Transferor
to
consummate
the
Transactions.
This Agreement has
been duly
executed and
delivered by
the Company
Group and
Transferors and constitutes,
and as of
the Closing, each
Ancillary
Agreement to which
any Company
or Transferor
is a
party, will
constitute, when
executed and
delivered by
such Company
or Transferor,
in each
case assuming
the due
authorization, execution
and delivery
by Buyer
and the
Sellers and
the
other
parties
thereto
(other
than
the
applicable
Company
or
Transferor),
the
legal,
valid
and
binding obligation of such
Company or Transferor,
enforceable against such
Company or Transferor
in
accordance
with
its
terms,
subject
to
applicable
bankruptcy,
insolvency,
reorganization,
moratorium and other similar Laws affecting creditors’ rights generally and to general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at Law).
3.2
Non-Contravention; Consents
.
Except as set forth on Schedule
3.2
, neither the execution or
delivery of this Agreement or the
Ancillary Agreements to which any Company or
Transferor is a party nor
the consummation
of the
Transactions will
(a) conflict with
or result
in a
breach or
violation of,
or cause
acceleration, or constitute (with or without due notice or lapse
of time or both) a default under, or give rise
to any
right of
termination, cancellation,
acceleration, right
to payment
or loss
of right
under, any
of the
terms, conditions or provisions of
(i) any of the Organizational Documents
or the organizational documents
of
any
Company
or
Transferor
or
(ii) any
Contract,
Permit,
Law
or
Order
to
which
any
Company
or
Transferor is a
party or to
which any Company
or Transferor or the
assets thereof are
subject, (b) result in
the
creation
of
any
Lien
(other
than
a
Permitted
Lien)
on
any
properties
or
assets
of
any
Company
or
Transferor or (c) require any Company or Transferor to obtain the consent of or
provide notice to any third
party (other than a
Governmental Authority)
not already obtained, except,
in the case of
clauses (a)(ii) (with
respect to
any Contract
or Permit
only) and
(c), where
such conflict,
breach, default
or creation,
or the
failure
to obtain such consent, exemption or action or provide
such notice, would not reasonably be expected to be
material to
the Company
Group, taken
as a
whole.
Except as
expressly contemplated
by this Agreement,
no consent,
action, approval
or authorization
of, or
registration, declaration
or filing
with, any
Governmental
Authority is required
to authorize,
or is otherwise
required in
connection with,
the execution
and delivery
of
this Agreement
or
any Ancillary
Agreement
to
which
any
Company
or
Transferor
is
a
party
or
the
consummation of
the Transactions
by the
Company Group
or the
Transferors or
the validity
or enforceability
of this
Agreement or
such Ancillary Agreement,
except
for such
filings and
approvals, if
any, as
may be
required under the HSR Act.
3.3
Governmental
Authorizations
.
Except
as
set
forth
on
Schedule
3.3
,
the
Company
Group
holds all licenses, permits, consents, authorizations, approvals, registrations, listings, clearances,
variances,
exemptions,
orders
and
approvals
of
such
Governmental
Authorities
as
are
necessary
to
carry
on
the
Business or to own or lease
its properties and assets (the “Permits”).
The Company Group is in
compliance
in all material respects
with the terms
and requirements of its
Permits, and (a) the
Permits are in full
force
and effect; (b) no
violations or defaults are
or have been
recorded in respect
of any Permit and
the Company
Group
has
not
received
any
written
notice
or
other
written
communication,
or
to
the
Knowledge
of
the
31
Company
Group,
oral
notice
or
communication
from
any
Governmental Authorities
or
any
other
Person
regarding
any actual,
alleged
or
potential
violation
of,
or
failure
to
comply with
any of
the
Permits;
and
(c) no proceeding,
action or
claim is
pending or,
to the
Knowledge of
the Company
Group, threatened
to
revoke, withdraw,
modify, suspend,
cancel, terminate
or limit
any Permit,
except, in
each case,
where the
failure to
be in
compliance with
or in
possession of
such Permits,
individually or
in the
aggregate, is
not,
and could not reasonably be expected to be, material to the Company Group, taken as a whole.
3.4
Capitalization
.
Schedule
3.4
sets
forth,
as
of
the
date
hereof,
the
capitalization
of
each
Company and each
Transferor, including the
type and number
of issued and
outstanding Equity Interests for
each
Company
and
Transferor
and
the
record
and
beneficial
owner
thereof.
Except
as
set
forth
on
Schedule
3.4,
there are no authorized, outstanding or reserved for issuance (i) equity interests, membership
interests, shares of
capital stock or
other securities of
any member of
the Company Group
or any Transferor,
(ii) securities of
any member
of the
Company Group
or any
Transferor convertible
into, exchangeable
or
exercisable for equity interests or other securities of any member of the Company Group
or any Transferor,
(iii) options, warrants,
purchase rights,
subscription rights,
exchange rights
or other
rights to
purchase or
acquire from
any member
of the
Company Group
or any Transferor,
or obligations
of any
member of
the
Company Group or
any Transferor
to transfer, sell
or issue, any
equity interests or
other securities, including
securities convertible into
or exchangeable for,
or otherwise repurchase,
redeem or otherwise
acquire, any
equity
interests
or
other
securities
of
any
member
of
the
Company
Group
or
any Transferor,
(iv) profits
interests,
equity
appreciation
rights,
participations,
phantom
equity
or
similar
rights
with
respect
to
any
member
of
the
Company
Group
or
any
Transferor
or
(v) bonds,
debentures,
notes,
or
other
items
of
Indebtedness that entitle the holders to vote (or that
are convertible or exercisable for or exchangeable into
securities
that
entitle
the
holders
to
vote)
with
equityholders,
or
other
securities
of
any
member
of
the
Company
Group
or
any Transferor
on
any
matter
(the
items
in
clauses (i)
through
(v)
being
referred
to
collectively
as
the
“Equity
Interests”).
Except
as
set
forth
on
Schedule
3.4
or
as
set
forth
in
the
Organizational
Documents,
none
of the
Equity
Interests
is
subject to
any voting
trust agreement,
option,
proxy, right
of first
refusal or
contract restricting
or otherwise
relating to
the voting,
distribution rights
or
disposition of such Equity Interests.
All Equity Interests of each member of the Company
Group and each
Transferor were duly authorized
and validly issued in compliance
with applicable securities Laws and,
are
free of
and were
not issued
in violation
of, any
preemptive rights,
purchase or
call options,
rights of
first
refusal, subscription rights or similar rights, are not subject to any unsatisfied capital commitments and are
free and clear of any Liens (other than Permitted Equity Interest Encumbrances).
3.5
Financial Statements
.
(a)
Attached
as
Schedule
3.5(a)
are
true,
complete
and
correct
copies
of
(i)(A) the
Company
Group’s
audited
combined
balance
sheets
and
related
audited
combined
statements
of
income,
combined statements
of equity
and combined
statements of
cash flows
as, at
and for
the
year
ended
December 31, 2024,
together
with
any
notes
and
schedules
thereto
(collectively,
the
“2024 Financial Statements”), and
(B) the Company Group’s audited
combined balance sheets and
related
audited
combined
statements
of
income,
combined
statements
of
equity
and
combined
statements of cash
flows as, at
and for the
year ended December 31, 2023,
together with any
notes
and
schedules
thereto
(collectively,
the “2023
Financial
Statements,”
and, together
with
the
2024
Financial Statements, the “Annual Financial Statements”), and (ii) the Company Group’s unaudited
combined interim balance sheet and
related unaudited combined statement of
income as, at and for
the
two
months
ended
February 28, 2025
(the
“Statement
Date”)
(the
“Unaudited
Financial
Statements”).
(b)
The Annual Financial Statements and the Unaudited
Financial Statements (together,
the
“Financial
Statements”)
(i) fairly
present
in
all
material
respects
the
financial
position
of
the
Company Group as of the dates indicated therein, and the results of operation and cash flows of the
32
Company Group for the periods indicated therein, except as otherwise noted therein (subject, in the
case of the Unaudited Financial Statements, to normal year-end adjustments that are expected
to be
consistent with past practice and
not material, individually or
in the aggregate, in nature
or amount),
and
(ii) except
for
the items
set
forth
on
Schedule
3.5(b)
,
have been
prepared
in
accordance
with
GAAP, applied on a consistent basis (except
as may be indicated in the
notes thereto or, in the case
of Unaudited
Financial Statements,
for the
absence of
footnotes and
normal year-end
adjustments
that are
expected to
be consistent
with past
practice and
not material,
individually or
in the
aggregate,
in nature or amount).
(c)
No
member
of
the
Company
Group
has
any
liabilities
whether
or
not
of
a
nature
required by GAAP
to be reflected
on a balance
sheet of the
Company Group, other
than (i) liabilities
reflected in,
reserved against
or otherwise
described in
the 2024
Financial Statements
or the
notes
thereto
or
the
Unaudited
Financial
Statements,
(ii) liabilities
incurred
in
the
ordinary
course
of
business since
the Statement
Date (none of
which is
a liability
resulting from noncompliance
with
any applicable Laws
or Permits or
breach of any
Material Contract), (iii) liabilities
arising under this
Agreement, any
Ancillary
Agreement or
the Transactions,
(iv) the items
set forth
on Schedule
3.5(c),
or (v) liabilities that, individually or in the aggregate, are not, and could not reasonably be expected
to be, material to the Company Group, taken as a whole.
(d)
No member of the Company Group is
party to any “off balance sheet arrangement.”
The
Financial
Statements
have
been
prepared
in
accordance
with
the
books
and
records
of
the
Company Group that
(i) have been kept
in the ordinary
course consistent
with past practice,
(ii) have
been maintained in all material respects in compliance with GAAP, (iii) are true and complete in all
material respects
and (iv) correctly
and accurately
reflect all
material dealings
and transactions
in
respect
of
the
business,
assets,
liabilities
and
affairs
of
the
Company
Group.
All
corporate
proceedings and
actions reflected
in the
financial books
and records
of the
Company Group
have
been conducted or taken
in compliance in all
material respects with all
applicable Laws and with
the
respective Organizational Documents.
Except as disclosed
in Schedule
3.5(d)
, in the
past two years,
the
Company
Group’s
auditors
have
not
identified
any
material
weaknesses
or
significant
deficiencies in the Company Group’s internal
controls over financial reporting that adversely
affect,
or could reasonably
be expected to
adversely affect, the
Company Group’s ability
to record, process,
summarize and
report financial
information.
In the
past three
years, the
Company Group
has not
identified
and
has
not
received
written
notice
by
the
Company
Group’s
auditors
of
any
fraud
or
allegations
of
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have a role in the Company Group’s financial reporting.
3.6
No Adverse Changes
.
There has been no Material
Adverse Effect since December 31, 2024.
Except as set forth
on Schedule
3.6
, since December 31, 2024 to the
date of this Agreement, the Company
Group has operated
in the ordinary
course of business
and has not
taken any action
that, if taken
after the
date of this Agreement, would require Buyer’s consent under Section
6.1.
3.7
Sufficiency of Assets
.
Except for the Excluded Assets
or as set forth on Schedule
3.7,
(a) the
assets
and
properties
owned,
leased
and
licensed
by
the
members
of
the
Company
Group
(including
the
Company Group Leases,
contractual rights and
Intellectual Property) are
sufficient in all
material respects
for the conduct of the business of the Company Group
as currently conducted, and (b) without limiting the
generality of
the foregoing,
none of
the assets
and properties
used by
the Company
Group in
connection
with
the
conduct
of
the
business
of
the
Company
Group
(including
contractual
rights
and
Intellectual
Property) are owned, leased or
licensed by any Seller or
any Affiliate or Related Party thereof that is
not a
member of the Company Group.
33
3.8
Real Property
.
(a)
Schedule
3.8(a)
sets
forth
a
true,
correct
and
complete
list
of
the
addresses
of
all
Owned Real Property and the record owner thereof.
The Company Group has good and marketable
fee simple
title to
all Owned
Real Property,
free and
clear of
all Liens
other than
Permitted Liens.
There are no outstanding
options, rights of first
offer or rights of
first refusal to purchase
or lease the
Owned Real Property or any portion thereof or interest therein or any other real property.
(b)
Schedule
3.8(b)
sets
forth
a
true,
correct
and
complete
list
of
the
Company
Group
Leases.
The
Company
Group
holds
a
valid
and
existing
leasehold
interest
in
the
Leased
Real
Property, free and clear of all
Liens other than Permitted Liens, and
each Company Group Lease is
a valid and binding obligation
of the applicable Company,
enforceable by such Company
and, to the
Knowledge of the Company Group,
each other party thereto, in
accordance with their terms, subject
to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws of
general
applicability
relating
to
or
affecting
creditors’ rights,
and
by
general
equitable
principles.
None of
the Company
Group has
received any
written notice
regarding any
violation or
breach or
default under any Company Group
Lease that has not since
been cured.
No event, development or
condition has occurred that, with the giving of
notice or lapse of time (or both),
could reasonably be
expected
to
constitute
a
material
breach
of
or
default
under
any
Company
Group
Lease
by
any
member
of
the
Company
Group
or,
to
the
Knowledge
of
the
Company
Group,
any
other
party
thereto.
The
Company
Group
has
not
assigned,
transferred
or
pledged
any
interest
in
any
of
the
Company Group Leases.
Neither the whole
nor any part
of the Owned
Real Property or
Leased Real
Property
is
subject
to
any
pending
suit
for
condemnation
or
other
taking
by
any
Governmental
Authority, and, to the
Knowledge of the Company Group,
no such condemnation or
other taking is
threatened or contemplated.
The use and
occupancy of the
Owned Real Property
and Leased Real
Property by the
Company Group and
the conduct of
the business thereat
as presently conducted
does
not violate in
any material respect:
(i) any applicable Laws
(including zoning, building
and land use
Laws)
nor
(ii) any
easements,
covenants,
rights
of
way
or
other
encumbrances
applicable
to
the
Owned Real Property or Leased Real Property.
(c)
Except
as
set
forth
on
Schedule
3.8(c)
,
there
are
no
leases,
subleases,
licenses,
or
other agreements granting to any Person the right of use or occupancy
of any portion of the Owned
Real Property
or Leased
Real Property
(except under
the Company
Group Leases).
All buildings,
structures,
facilities
and
improvements
located
on
the
Owned
Real
Property
and
Leased
Real
Property, including all buildings, structures, facilities and improvements that are under construction
(collectively,
“Improvements”)
comply
in
all
material
respects
with
certificates
of
occupancy
or
similar
Permits
to
the
extent
required
by
Laws
for
the
use
thereof.
The
Improvements
are
in
all
material respects:
(A) in good operating condition and repair
(ordinary wear and tear excepted) and
(B) suitable and
adequate for
continued use
in the
manner in
which they
are presently
being used.
The Company Group has
rights of ingress and
egress to each Owned
Real Property and Leased Real
Property to conduct the Business in
the ordinary course of business.
No security deposit or portions
thereof deposited with respect
to any Leased Real
Property has been applied
in respect of a
breach
or default
with respect
to the
Company Group
Lease thereof
that has
not been
redeposited in
full.
No Company owes any brokerage commissions
with respect to any Owned
Real Property or Leased
Real Property (other
than any contingent
obligation in respect
of any future
lease extensions).
There
are
no
unpaid
and
presently
due
charges,
debts,
liabilities,
claims
or
obligations
arising
from
the
construction,
occupancy,
ownership,
use
or
operation
of
the
Owned
Real
Property
and/or
Leased
Real
Property
or
the
Business
operated
thereon
that
could
give
rise
to
any
mechanic
’
s
or
materialmen
’
s or
other statutory
Liens (A) against
the Owned
Real Property
or Leased
Real Property,
or any part thereof or (B) for which any member of the Company Group will be responsible.
There
34
are no outstanding disputes
with the owners of
the Leased Real Property
that have not been
resolved
prior to the date of this Agreement.
3.9
Title to
Assets
.
Except as
reflected or reserved
against or otherwise
disclosed in the
Financial
Statements, (i) and, except as a result of dispositions in the ordinary course of business since the Statement
Date, the Company Group has
good and valid title to,
a valid leasehold or licensed
interest in or otherwise
has
the
right
to
use
all
material
personal
tangible
and
intangible
property
and
assets,
claims
and
rights
reflected
in
the
balance
sheet
contained
in
the
Unaudited
Financial
Statements
or
acquired
since
the
Statement Date used (or held for use) in the Business, free and clear of all
Liens other than Permitted Liens
and
(ii) such
assets
described
in
the
foregoing
clause (i)
constitute
all
of
the
assets
necessary
for
the
Company Group to carry on the Business.
All material personal property owned or leased by
the Company
Group is in sufficiently good operating condition and repair (ordinary wear and tear excepted) to permit its
use in continuing
the operations of
the Business in
the manner in
which they are
presently being used
and
as consistent with past practice in all material respects.
3.10
Litigation, Orders, Etc.
(a)
Except
as
(i) set
forth
in
Schedule
3.10(a)
or
(ii) individually
or
in
the
aggregate,
(A) is not, and
could not reasonably
be expected to
be, material to
the Company Group,
taken as a
whole, or will not prevent
or materially delay, and (B) could
not reasonably be expected to
prevent
or materially
delay, the
consummation of
the Transactions,
there are
no, and
in the
last five
years
there have been no, actions, suits, proceedings, claims, demands, requests for injunctive relief or, to
the
Knowledge
of
the
Company
Group,
inquiries,
requests
for
information
or
investigations
(collectively,
“Proceedings”)
pending
or,
to
the
Knowledge
of
the
Company
Group,
threatened
against any member
of the Company Group
or any of their
respective assets in any
court or before
any other Governmental Authority, or before any arbitrator.
(b)
Except
as
(i) individually
or
in
the
aggregate,
is
not,
and
could
not
reasonably
be
expected to be, material
to the Company Group,
taken as a whole,
and (ii) could not
reasonably be
expected to
prevent or
materially delay,
the consummation
of the
Transactions, no
member of
the
Company Group is party to,
or otherwise bound by or
subject to (including with respect
to any of its
assets and properties) any
Order of any court
or other Governmental Authority or arbitrator having
jurisdiction over it or any
Order.
All Orders to which any
member of the Company Group
is subject
are listed in Schedule
3.10(b).
3.11
Compliance
With
Laws
.
Except
as
set
forth
in
Schedule
3.11,
(a) Each
member
of
the
Company
Group
is,
and
has
been
in
the
last
five
years,
in
compliance
in
all
material
respects
with
any
applicable Law
or Order,
and (b) no
member of
the Company
Group has
received at
any time
during the
past five
years any
written or,
to the
Knowledge of
the Company
Group, oral
notice, Order
or complaint
from any
Governmental Authority alleging
that any
member of
the Company
Group is
not in
compliance
with any applicable Law, and to
the Knowledge of the Company Group,
no such notice, Order or
complaint
is threatened, except, in each case, for such non-compliance that, individually or in the aggregate, is not, or
could not reasonably be expected to be, material to the Company Group, taken as a whole.
3.12
Intellectual Property and Intellectual Property Licenses; Data Protection
.
(a)
Schedule
3.12(a)-
1 contains a
complete and accurate
list of
all Intellectual
Property
that is
owned by
the Company
Group that
is subject
to an
application or
registration (collectively,
the “Registered
Intellectual Property”),
including, for
each item,
the name
of the
owner of
record,
and, where applicable, the
jurisdiction, registration or application
number, filing date and
issue date.
Schedule
3.12(a)-
2 contains a
complete and accurate
list of all
material unregistered Marks
owned
by the Company Group and the name of the owner thereof.
35
(b)
Schedule
3.12(b)
contains a complete and accurate
list of all Domain Names
owned
or purported to be owned by the Company Group (“Company Group Domain Names”).
(c)
Except as set forth on Schedule
3.12(c):
(i)
The Company Group is the owner
of the entire right, title
and interest in and
to
the
Registered
Intellectual
Property
identified
in
Schedule
3.12(a),
free
and
clear
of
all
Liens, except for Permitted
Liens.
The Company Group either
owns or has a
valid license,
or
otherwise
has
the
right
to
use
all
other
Company
Group
Intellectual
Property
and
the
Company
Group
Domain
Names.
The
Company
Group
possesses
sufficient
rights
in
the
formulae
of
the
products
commercially
distributed
by
the
Company
Group
as
of
the
date
hereof
such
that
the
Company
Group
would
be
able
to
provide
such
product
formulae
to
alternate third-party manufacturers to use
such formulae.
No funding, facilities or personnel
of any educational institution
or Governmental
Authority were used, directly
or indirectly, to
develop or create, in whole or in part, any owned Company Group Intellectual Property.
(ii)
(A) All
registrations
for
Registered
Intellectual
Property
identified
in
Schedule
3.12(a)
are
valid,
subsisting
and
enforceable
and
(B) all
applications
to
register
Registered
Intellectual
Property
so
identified
are
pending
and
in
good
standing.
To
the
Knowledge of the Company
Group, no written claim
has been made or
threatened in the past
five years that any of the Registered Intellectual Property is invalid or unenforceable.
(iii)
All
fees
necessary
to
maintain
the
Registered
Intellectual
Property
and
Domain Names have been
paid.
The consummation of the
Transactions will not result
in the
loss or
impairment of
or payment
of any
additional amounts
with respect
to the
Company
Group’s
right
to
own,
use
or
hold
for
use
any
Company
Group
Intellectual
Property
or
Company Group Domain Names.
(iv)
To
the
Knowledge
of
the
Company
Group,
no
third
party
is
currently
interfering
with,
infringing
upon,
violating
or
misappropriating
any
of
the
Intellectual
Property
identified
in
Schedule
3.12(a)
or
other
owned
Company
Group
Intellectual
Property.
(v)
The Company
Group and
the operation
of the
Business do
not violate,
infringe
or
misappropriate
any
Intellectual
Property
of
any
Person,
and
they
have
not
violated,
infringed
or misappropriated
any such
Intellectual Property.
No written
allegation, claim,
action
or
other
proceeding
has
been
brought
or
made
in
the
past
five
years,
and,
to
the
Knowledge of the Company Group, there is
no good faith basis for a
third party to bring any
action or
proceeding or to
claim or
allege, that
the Company Group
or the
operation of the
Business infringe
upon, misappropriate,
or violate
the Intellectual
Property rights
of any
third
party, or have infringed upon, misappropriated or violated such rights.
(vi)
The
Company
Group
has
taken
all
reasonable
steps
to
maintain
the
owned
Company Group
Intellectual Property
and to
protect and
preserve the
confidentiality of
all
Trade
Secrets
included
in
the
owned
Company
Group
Intellectual
Property,
including
requiring all Persons having access thereto to execute written non-disclosure agreements.
(vii)
No present or
former employee, officer,
consultant or individual
contractor of
the
Company
Group
has
any
right,
title
or
interest
in
any
Company
Group
Intellectual
Property.
Each
current
and
former
employee,
manager,
officer,
consultant
and
individual
contractor of
the Company
Group who
is or
has been
involved in
the development
of any
Intellectual
Property
by
or
for
the
Company
Group
has
executed
and
delivered
to
the
36
Company Group
a written,
valid and
enforceable contract
that assigns
to the
Company Group
all right, title and interest in and to any such Intellectual Property.
(viii)
To the Knowledge of the Company
Group, the Company Group owns or
has
a valid
right to
access and
use all
computer systems,
networks, hardware,
software, databases,
websites and
equipment used
to process,
store, maintain
and operate
data, information
and
functions
used
in
the
operation
of
the
Business
(collectively,
the
“Company
Group
Information Technology Systems”).
The Company Group Information Technology Systems
owned or controlled
by the Company Group
have been properly
maintained, in all
material
respects, in accordance with standards set by
manufacturers or otherwise in accordance with
industry
standards.
To
the
Knowledge
of
the
Company
Group,
the
Company
Group
Information Technology
Systems are
in good
working condition
to effectively
perform all
information technology operations used by the Company Group.
Since January 1, 2023, no
complaint
relating to
an improper
use or
disclosure
of,
or
a breach
in the
security
of, any
Company
Group
Data
has
been
made
or,
to
the
Knowledge
of
the
Company
Group,
threatened against
the Company
Group.
To the
Knowledge of
the Company
Group, since
January 1, 2023, there
has been
no (A) unauthorized
disclosure of
any third-party
proprietary
or
confidential
information
in
the
possession,
custody
or
control
of
any
of
the
Company
Group
or
(B) breach
of
any
of
the
Company
Group’s
security
procedures
wherein
confidential information has been disclosed to a third party.
(d)
Intellectual
Property
Licenses
.
Schedule
3.12(d)
contains
a
list
of
all
Intellectual
Property Licenses,
other than
licenses for
Off-the-Shelf Software
and Open
Source Licenses.
All
Intellectual Property
Licenses are
valid, binding
and enforceable
on all
parties thereto,
and, to
the
Knowledge of
the Company
Group, there
exists no
event or
condition that
violates or
breaches or
will result in
a violation or
breach of, or
otherwise constitutes (with
or without due
notice or lapse
of time or both) a default by any party thereunder.
(e)
The Company Group has implemented and maintained administrative, technical and
physical safeguards to
protect the confidentiality,
privacy and security
of Personal Data
that, when
implemented,
are
appropriate
to
the
nature
and
risks
that
are
presented
by
the
Personal
Data
Processed by the Company Group.
(f)
Except
as set
forth on
Schedule
3.12
(f)
, the
Company Group
has, in
the five
years
prior
to
the
date
of
this Agreement,
entered
into
written
agreements
with
each
material
service
provider, processor or other third party that Processes Personal Data for or on
its behalf that contain
commercially
reasonable
provisions
requiring
such
service
providers,
processors
and
other
third
parties to comply
with applicable Privacy
Laws.
To the Knowledge
of the Company
Group and with
respect
to
Personal
Data
Processed
on
the
Company
Group’s
behalf,
in
the
last
five
years,
such
service providers, processors
or other third
parties have materially complied
with the provisions
in
such agreements regarding
compliance with applicable
Privacy Laws and,
with respect to
credit card
information
processed
for
or
on
behalf
of
the
Company
Group,
the
Payment
Card
Industry
Data
Security Standard (“PCI DSS”).
(g)
In the past five years, to the Knowledge of the Company Group, no Personal Data in
the possession
or control
of the
Company Group
has been
subject to
any data
breach or
other security
incident that presented
a material risk
of unauthorized Processing
of such Personal
Data (a “Security
Incident”) and the Company Group
has not been required to
notify any Governmental Authority or
other Person of
any Security Incident
under any applicable
Privacy Law or
Contract.
In the past
five
years, the Company
Group has complied,
in all material
respects, with Privacy
Laws applicable to
Personal Data in its
custody, possession or control.
In the past five
years, to the Knowledge
of the
37
Company Group,
no Personal
Data held
or Processed
by any
service
provider, processor
or other
third
party
for
and
on
behalf
of
the
Company
Group
has
been
subject
to
any
Security
Incident,
including any Security Incident that would require the
Company Group to notify any Governmental
Authority or other Person of any Security Incident under any applicable Law or Contract.
(h)
In
the
past
five
years,
the
Company
Group
has
not
received
any
written
notice
(including any
enforcement notice),
letter or
complaint from
a Governmental Authority
or Person
alleging noncompliance
with any
Privacy Law,
and there
has not
been any
audit, investigation
(to
the
Knowledge
of
the
Company
Group),
enforcement
action
or
other
Proceeding
or
action
by
a
Governmental Authority relating
to any
actual, alleged
or suspected
Security Incident
or violation
of
any
Privacy
Law,
or
the
Company
Group
Privacy
and
Data
Security
Policies,
and,
to
the
Knowledge
of
the
Company
Group,
there
are
no
facts
or
circumstances
that
could
reasonably
be
expected to give rise to any of the foregoing.
(i)
The
Company
Group
has
conducted
security
risk
assessments
and
has
used
reasonable efforts
to address
and remediate
all material
threats and
deficiencies identified
in such
security
risk
assessments.
The
execution,
delivery
and
performance
of
this Agreement
and
the
consummation of the Transactions, including the transfer of
all Personal Data, will not conflict with
any applicable Privacy
Laws or the
Company Group Privacy and
Data Security Policies
and will not
require consent of or notice to any Person concerning such Person’s Personal Data.
3.13
Material Contracts
.
(a)
Schedule
3.13
sets
forth
a
list
as
of
the
date
hereof
of
the
following
contracts
(collectively, the “Material Contracts”):
(i)
all
of
the
contracts,
leases,
licenses
and
other
agreements
(other
than
any
Employee
Plan)
involving
payments
by
or
to
the
Company
Group
of
at
least
$300,000
annually;
(ii)
all of
the individual
purchase orders
for purchase
of goods
or raw
materials
(but excluding service requests, equipment purchases,
equipment maintenance or orders for
purchase
of
equipment
parts)
involving
payments
by
the
Company
Group
in
excess
of
$200,000;
(iii)
(A) all
notes,
bonds,
indentures
and
other
instruments
and
agreements
evidencing or creating Indebtedness
of the Company
Group, (B) all contracts that
restrict the
incurrence
of Indebtedness
or
payment
of
dividends,
or
(C) all
contracts that
grant
a Lien
(other than a Permitted
Lien) or restricts the
granting of Liens on
any property or
asset that
is material to the Company Group;
(iv)
all contracts between a member of
the Company Group, on the one
hand, and
(a) any Seller or any Affiliate, director, manager,
officer of the Company
Group (other than
another member of the
Company Group) or, to
the Knowledge of the
Company Group, any
direct
or indirect
beneficial
owner or
individual
related
by
blood, marriage
or
adoption to
any such individual
or any entity
in which any
such Person or
individual owns any
beneficial
interest (the “Related Parties”), on the other hand (such contracts, “Affiliate Contracts”);
(v)
all
joint
venture,
limited
liability
company,
development,
partnership
agreements or similar contracts that
involve a sharing of profits
or losses of any member
of
the Company Group;
38
(vi)
all contracts containing covenants
that (A) materially limit the
freedom of the
Company Group to engage, or to
compete with any Person, in the
Business; (B) granting the
other party “most favored nation” status or equivalent preferential pricing or payment terms
that materially limit the operations
or conduct of the
Company Group, (C) granting the
other
party exclusivity
or similar
rights that,
in each
case, materially
limit the
operations or
conduct
of
the
Company
Group,
or
(D) granting
a
right
of
first
refusal
or
right
of
first
offer
with
respect to an acquisition of any material asset of the Company Group;
(vii)
all
contracts
providing
for
employment,
severance
or
change
in
control
payments between
any member
of the
Company Group
and any
of its
employees, officers,
equityholders
or
directors,
in
each
case,
other
than
any
Employee
Plan
or
employment
agreement or offer letter that provides for at-will employment and may be terminated at any
time without liability for severance or similar benefits;
(viii)
any settlement
or similar
agreement, the
performance of
which will
involve
payment by any member of the Company Group after the Statement Date or that restricts or
imposes obligations on any member of the Company Group;
(ix)
all
contracts
regarding
acquisitions
or
dispositions
pursuant
to
which
any
member of the Company Group
has any continuing “earn out”
or other contingent payment
obligations (including any
potential purchase price
adjustment payments), or
any surviving
material obligations;
(x)
agreements under
which any
member of
the Company
Group has
advanced
or
loaned
monies
to
any
other
Person
or
otherwise
agreed
to
advance,
loan
or
invest
any
funds
(other
than
advances
to
the
Company
Group’s
employees
in
the
ordinary
course
of
business) to the
extent such advance
or loan remains
outstanding or the
obligation to make
future
advances
or
loans
remains
(regardless
of
whether
subject
to
any
condition
or
contingency);
(xi)
all
collective
bargaining
agreements
or
other
similar
contracts
with
a
labor
union or labor organization;
(xii)
(A) any contract with a Key
Customer or Key Supplier, (B) any
contract with
a
Governmental
Authority,
(C) any
material
Intellectual
Property
Licenses
and
(D) any
assignments
of
owned
Company
Group
Intellectual
Property
(excluding
assignments
of
owned
Company
Group
Intellectual
Property
to
the
Company
Group
by
any
employee,
officer, consultant
or contractor
of the
Company Group
entered into
in the
ordinary course
of business);
(xiii)
any
contract
containing
any
future
capital
expenditure
obligations
of
any
member of the Company Group in excess of $75,000; and
(xiv)
any
outstanding
and
binding
commitment
to
enter
into
any
Contract
of
the
types described in the foregoing clauses
(i)
through
(xiii).
(b)
Except
as
individually
or
in
the
aggregate,
are
not,
and
could
not
reasonably
be
expected to be
material to the
Company Group, taken
as a whole,
no member of
the Company Group
is, or, but for a requirement that notice be given or that a period of time elapse or both, would be, in
default under any
Material Contract and,
to the Knowledge
of the Company
Group, no other
party
to any Material Contract is in breach of any
Material Contract.
All of the Material Contracts of the
Company Group are legal, valid and binding obligations of the applicable member of the Company
39
Group
and,
to
the
Knowledge
of
the
Company
Group,
the
other
parties
thereto,
enforceable
in
accordance with their
respective terms (except
as the enforceability
thereof may be
limited by any
applicable
bankruptcy,
insolvency,
reorganization,
moratorium
and
other
similar
Laws
affecting
creditors’
rights
generally
and
to
general
principles
of
equity,
regardless
of
whether
such
enforceability is
considered in
a proceeding
in equity
or at
Law), and
are in
full force
and effect.
Except
as
set
forth
on
Schedule
3.13(b),
(i) in
the
past
five
years,
the
Company
Group
has
not
received
any
written
or, to
the
Knowledge
of
the
Company
Group,
other
notice
of
any
breach
or
default under any Material Contract, and
(ii) the Company Group has not received
any written or, to
the Knowledge of the
Company Group, other notice
that the counterparty to
any Material Contract
intends to
terminate, accelerate
or adversely
modify in
any material
respect the
terms of
any such
Material
Contract.
The
Company
Group
has
made
available
to
Buyer
copies
of
each
Material
Contract, including any amendment, modification or supplement thereto.
3.14
Environmental Laws
.
(a)
Except as set forth on Schedule
3.14(a)
, each member of the Company Group is,
and
has
been
in
the
last
five
years,
in
compliance,
in
all
material
respects,
with
all
applicable
Environmental Laws, and
no operations, properties
or assets of
the Company Group
are subject to
any remedial obligations under any Environmental Law.
(b)
Without
limiting
Section
3.14(a)
,
and
except
as
set
forth
on
Schedule
3.14(b),
no
member
of
the
Company
Group
is
subject
to
any
existing,
pending
or,
to
the
Knowledge
of
the
Company Group, threatened,
action, suit, inquiry,
investigation or proceeding
by or before
any court
or other Governmental Authority under any Environmental Law.
(c)
All Permits,
if any,
required to
be obtained,
filed or
issued by
the Company
Group
under any Environmental Law
have been duly obtained,
filed or issued, except,
in where the failures
to
obtain,
file
or
issue
such
Permits,
individually
or
in
the
aggregate,
are
not,
and
could
not
reasonably be expected to be,
material to the Company Group,
taken as a whole, and
the Company
Group is,
and has
been in
the last
five years,
in compliance
in all
material respects
with the
terms
and conditions of all such Permits except as may be set forth and described on Schedule
3.14(c).
(d)
Except
as
set
forth
on
Schedule
3.14(d)
,
in
the
past
five
years,
no
member
of
the
Company Group has received from any Person any written notice, claim,
demand, inquiry, Order or
request for information
alleging any violation
of or liability
under any Environmental
Law, which,
in
each
case,
either
remains
pending
or
unresolved,
or
is
the
source
of
ongoing
obligations
or
requirements.
(e)
Except as set forth
on Schedule
3.14(e)
, there has been
no Release of, or
exposure to,
any Hazardous Material
on, at, under
or from the
Owned Real Property,
the Leased Real
Property,
any real property formerly owned, leased
or operated by any member of
the Company Group or any
other location in a manner that
has given rise to, or
could reasonably be expected to give
rise to, any
remedial or corrective
action, obligation or
any material liability
on the part
of any member
of the
Company Group under Environmental Laws.
(f)
No member of the
Company Group has assumed or
provided indemnity against any
liability of any other Person under any
Environmental Laws, including any obligation for corrective
or remedial action.
40
3.15
Taxes
.
(a)
References to Echo
Lake Foods or
the Company Group
in this Section
3.15
include
any predecessor of Echo Lake Foods
or Person that merged with or
was liquidated or converted into
the Company (including prior to the Pre-Closing Restructuring).
(b)
Each member of the Company Group has timely filed (or has had filed on its behalf)
all income and other material
Tax Returns that it was
required to file (taking into
account extensions
properly obtained) under applicable Laws.
All such Tax Returns were true, correct and complete in
all material respects
and were prepared
in material compliance
with all applicable
Laws.
All income
and other material Taxes
required to be paid
by any member of
the Company Group that
are due and
payable
(whether
or
not
shown
on
a
Tax
Return)
either
have
been
paid
by
it
or
are
reflected
in
accordance
with
GAAP in
the
most
recent
financial
statements
of
such
member
of
the
Company
Group.
(c)
There are no
Liens for Taxes
outstanding against any
of the assets
or properties of
the
Company Group (other than Permitted Liens).
(d)
No
action,
suit,
proceeding
or
audit
is
pending,
being
conducted
or
threatened
in
writing
against
or
with
respect
to
the
members
of
the
Company
Group
regarding
Taxes.
No
outstanding deficiencies have been asserted in writing or assessments made in writing as a result of
any examinations of any
Tax Return of the
Company, in each case,
that have not been
settled or paid
in full.
(e)
The
members
of
the
Company
Group
have
withheld
and
paid
to
the
appropriate
Governmental Authority all material
amounts of Taxes
required to have
been withheld and
paid in
connection
with
any
amounts
paid
or
owing
to
any
employee,
independent
contractor,
creditor,
equity holder or other Person.
(f)
No
member
of
the
Company
Group
has
granted
an
extension,
or
become
the
beneficiary
of
any
extension
of
time,
in
which any
Tax
may
be
assessed
or
collected
by
any Tax
authority that remains in effect.
(g)
No
written
claim
has
been
made
by
a
Governmental Authority
in
a
jurisdiction
in
which a
member of
the Company
Group does
not file Tax
Returns that
such member
is or
may be
required to file a Tax Return in, or subject to taxation by, such jurisdiction.
(h)
No member of the Company Group (i) is or has been in the last five years a member
of any affiliated, combined, consolidated, unitary or similar group for
Tax purposes, (ii) is liable for
the Taxes
of another
Person under
Treasury Regulations Section
1.1502-6 (or comparable
provisions
of state, local or
non-U.S. Tax law),
as a transferee or
successor, by contract or
otherwise as a matter
of Law, or (iii) is currently party to or has any
obligation under any Tax allocation,
Tax sharing, Tax
indemnity, Tax reimbursement
agreement or similar
arrangement with respect
to Taxes (other
than
customary
commercial
agreements
entered
into
in
the
ordinary
course
of
business,
the
principal
purpose of which is not related to Taxes).
(i)
No member of the
Company Group will be
required to include any
material item of
income
in,
or
exclude
any
material
item
of
deduction
from,
taxable
income
for
any
Tax
period
beginning after
the Closing
Date as
a result
of any
(i) change in
or use
of an
incorrect method
of
accounting for a
taxable period ending
on or prior
to the Closing
Date, (ii) “closing agreement”
as
described in Section 7121
of the Code
(or any corresponding
or similar provision
of state, local
or
non-U.S. Law) entered into on or prior to the
Closing Date, (iii) installment sale or open transaction
41
disposition made
on or
prior to
the Closing
Date, or
(iv) prepaid amount
received or
paid, or
deferred
revenue accrued, on or prior to the Closing Date.
(j)
No member of the Company Group is or has been a
party to any “listed transaction”
within the meaning of Treasury Regulations Section 1.6011-4(b).
(k)
Each member of
the Company Group
has collected all
material sales and
use Taxes
required
to
be
collected,
and
has
remitted,
or
will
remit
on
a
timely
basis,
such
amounts
to
the
appropriate
Governmental
Authorities,
or
has
been
furnished
properly
completed
exemption
certificates and
has maintained
all such
records and
supporting documents
in the
manner required
by all applicable sales and use Tax statutes and regulations.
(l)
No member of the Company Group that is a partnership for U.S. federal Income Tax
purposes has made
any election to
apply the provisions
of Section 1101 of
the Bipartisan Budget
Act
of 2015 (Partnership Audits and
Adjustments) for any taxable period prior to January 1, 2018.
(m)
In
the
past
five
years,
no
member
of
the
Company
Group
has
distributed
Equity
Interests
of
another
Person,
or
has
had
its
Equity
Interests
distributed
by
another
Person,
in
a
transaction that was purported
or intended to be
governed in whole or
in part by Sections 355
or 361
of the Code.
(n)
At all times from
August 3, 2013 until immediately prior to the QSub Election,
Echo
Lake
Foods
has
been
and
shall
be
validly
treated
for
federal
Income
Tax
purposes
as
an
“S corporation” within the meaning of Sections 1361 and 1362
of the Code and was validly treated
in a similar manner for
purposes of the Income Tax
Laws of all states
and localities in which it
has
been
subject
to
taxation.
At
all
times
from
October 16, 2013
until
immediately
prior
to
the
Conversions, Huntington was treated as a “qualified subchapter S
subsidiary” of Echo Lake Foods,
within the
meaning of
Section 1361(b)(3)(B) of
the Code,
and was
validly treated
in a
similar manner
for
purposes
of
the
Income
Tax
Laws
of
all
states
and
localities
in
which
it
has
been
subject
to
taxation.
At all times
from August 27, 2022
until immediately prior to
the Conversions, Xenitel
was
treated
as
a
“qualified
subchapter S
subsidiary”
of
Echo
Lake
Foods,
within
the
meaning
of
Section 1361(b)(3)(B) of the Code,
and was validly treated
in a similar manner
for purposes of the
Income Tax Laws of all states and localities
in which it has been subject to taxation.
The respective
dates of
initial qualification
and termination
as an
S corporation or
qualified subchapter S
subsidiary,
as applicable,
represented in
this Section
3.15(n)
are
collectively referred
to as
the “Qualification
Dates.”
At all times from the QSub Election until the effective date of the Conversions, Echo Lake
Foods has
been and
shall be
treated as
a “qualified
subchapter S subsidiary”
of Echo
Lake Foods
Transferor, within
the meaning
of Section 1361(b)(3)(B)
of the
Code, and
was validly
treated in
a
similar manner for purposes of the Income Tax Laws of all states and localities in which it has been
subject to
taxation.
At all
times
from and
after the
effective date
of the
Conversions, Echo
Lake
Foods, Huntington and
Xenitel have each
been treated as
a disregarded entity
of Echo Lake
Foods
Transferor for
federal Income Tax
purposes, and
have been
validly treated
in a
similar manner
for
purposes
of
the
Income Tax
Laws
of
all
states
and
localities
in
which
they
have
been
subject
to
taxation.
Echo
Lake
Foods,
Huntington
and
Xenitel
have
not,
since
the
effective
date
of
the
Conversions, elected to be treated as an association taxable as a corporation for any federal, state or
local
Income Tax
purposes.
Except
as
expressly
contemplated
by
the
Pre-Closing
Restructuring,
from August 3, 2013 until immediately prior to the F Reorganization, no
Person has taken or failed
to take any action that could cause
or otherwise result in the termination of the
status of Echo Lake
Foods as an S corporation
during such period.
Echo Lake Foods is
not and never has
been subject
to
Tax
under
Section 1375
of
the
Code.
No
Governmental
Authority
has
ever
challenged
or
threatened
in
writing
to
challenge
the
status
of
the
Echo
Lake
Foods
as
an
S corporation
for Tax
42
purposes.
All holders of Equity Interests of
Echo Lake Foods Transferor and Echo Lake Foods
are
(and have been) eligible “S corporation” shareholders.
(o)
No
member
of
the
Company
Group
has
ever
been
a
“United
States
real
property
holding company” within the meaning of Section 897(c)(2) of the Code.
(p)
No
member
of
the
Company
Group
has
elected
to
defer
the
payment
of
any
“applicable employment
taxes”
(as defined
in Section
2302(d)(1) of
the CARES
Act) pursuant
to
Section 2302
of
the
CARES and
no
member
of
the
Company
Group
has
claimed
any
“employee
retention credit” pursuant to Section 2301 of the CARES Act.
(q)
Each
member
of
the
Company
Group
(other
than
those
otherwise
described
in
Section
3.15(n))
has been
since its
formation, and
is currently,
properly treated
as having
the U.S.
federal Income Tax status indicated opposite its name on Schedule
3.15.
3.16
Employee Plans
.
(a)
Schedule
3.16(a)
sets
forth
a
list
of
each
material
Employee
Plan
and
separately
identifies whether each material
Employee Plan is a
Company Group Plan and
the sponsor of such
Company Group Plan.
The Sellers have delivered or caused to be delivered to Buyer the following
with respect to each
Employee Plan, as applicable:
(i) all current plan
documents (or, with respect
to
any
unwritten
Employee
Plan,
a
written
summary
thereof),
related
trust
agreements
and
all
amendments
thereto;
(ii) insurance
contracts
and
policies
and
certificates
of
coverage
and
all
amendments
thereto
since
the
last
plan
document
restatement;
(iii) all
current
summary
plan
descriptions and
summaries of
material modifications
thereto; (iv) the Form
5500 annual
reports and
accompanying schedules
and financial
statements, as
filed, for
the three
most
recently completed
plan years;
(v) annual testing
(including nondiscrimination
and coverage
testing) results
for the
three
most
recently
completed
plan
years;
(vi) the
most
recent
determination
letter,
advisory
letter
or
opinion
letter
issued
by
the
IRS;
(vii) material
administrative
or
service
provider
agreements;
(viii) documents
related
to
any
open
disputes
related
to
the
plan;
and
(ix) all
non-routine
correspondence received
from or
provided to
the Department
of Labor,
the Pension
Benefit Guaranty
Corporation, the IRS or any other Governmental Authority during the past six years.
(b)
Except as set forth on
Schedule
3.16(b)
, each Employee Plan has
been administered
and maintained
in all
respects in
accordance with
its terms
and applicable
Law, including
ERISA
and the
Code, and
all filing
and disclosure
requirements imposed
on the
plan sponsor
thereunder.
There is no pending or
threatened action, claim or lawsuit
relating to any Employee Plan
(other than
routine
claims
for
benefits).
There
is
no
audit,
inquiry,
investigation
or
examination
pending
or
threatened by the
IRS, the Department
of Labor, the
Pension Benefit Guaranty
Corporation or any
other Governmental Authority with respect to any Employee Plan.
(c)
Each
Employee
Plan
that
is
intended
to
be
a
qualified
plan
within
the
meaning
of
Section 401(a) of the Code is
so qualified and no circumstances
exist (i) that could result in
loss of
such qualification
under Section 401(a)
of the
Code or
(ii) that could
result in
a penalty
under the
IRS
Closing Agreement
Program
if
discovered
during
an
IRS
audit
or
investigation.
Each
such
Employee Plan either has received a favorable and
currently effective determination letter from the
IRS or
is in
the form
of a
preapproved plan
document that
is the
subject of
a favorable
opinion or
advisory letter from the IRS on which it is entitled to rely.
(d)
No fiduciary (within the meaning of Section 3(21) of ERISA) of any Employee Plan
subject to
Part 4 of
Subtitle B of
Title I
of ERISA
has committed
a breach
of fiduciary
duty with
respect to that Employee
Plan that could subject
a member of the
Company Group or an
employee
43
of
a
member
of
the
Company
Group
to
any
liability
(including
liability
on
account
of
an
indemnification
obligation).
No
member
of
the
Company
Group
has
incurred
any
excise
Taxes
under
Chapter 43
of
the
Code
with
respect
to
any
Employee
Plan
and
nothing
has
occurred
with
respect
to
any
Employee
Plan
that
could
reasonably
be
expected
to
subject
any
member
of
the
Company Group to any such Taxes.
(e)
No Company Group
Plan, and no
member of the
Company Group or
ERISA
Affiliate
sponsors, has sponsored, contributes to, has contributed to or has any liability (including contingent
liability) with respect to:
(i) a plan subject to Title IV of
ERISA, including any defined benefit plan
(as
defined
in
Section 3(35)
of
ERISA);
(ii) a
multiemployer
plan
(as
defined
in
Section 3(37)
or 4001(a)(3) of ERISA); (iii) a
multiple employer plan subject
to Sections 4063 or 4064 of
ERISA;
or
(iv) a
plan subject
to Section
302 of
ERISA or
Section 412
of
the
Code.
No Company
Group
Plan,
and
no
member
of
the
Company
Group,
sponsors,
has
sponsored,
contributes
to,
has
contributed to,
has or
had an
obligation to
contribute to
or has
any liability
(including contingent
liability) with respect to a multiple employer welfare arrangement (as defined in Section 3(4)(A) of
ERISA) or a voluntary employees’
beneficiary association under Section 501(c)(9) of
the Code.
No
member of the
Company Group nor
any ERISA Affiliate has any liability
as a result
of a violation
of COBRA.
No member of the Company Group has any liability under
Sections 502(i) or 502(l) of
ERISA.
(f)
With
respect
to
each
Employee
Plan
for
which
a
separate
fund
of
assets
is
or
is
required to be
maintained, full and
timely payment and
contribution has been
made of all
amounts
due
and
required
under
the
terms
of
such
Employee
Plan
or
applicable
Law
and
all
obligations
accrued on or prior to the Closing Date that relate to directors, officers, employees
or consultants of
any member
of the
Company Group
and that
are not
yet due
have either
been made
or have
been
accrued in the Financial Statements.
All premiums, fees and administrative expenses required to be
paid under or in connection with
the Company Group Plans for the period
on or before the Closing
Date have been paid or have been accrued in full on the Financial Statements.
(g)
No Employee Plan
or member of
the Company Group
provides, or has
any obligation
to provide,
current or
former employees
of the
Company Group
(or any
beneficiaries thereof)
welfare
benefits
(including medical
and life
insurance
benefits) after
such Person
terminates
employment
with
the
Company
Group
or
its
applicable
Affiliate,
except
for
the
coverage
continuation
requirements of COBRA
or continued coverage until
the end of the
month during which termination
occurs.
No Employee
Plan or
member of
the Company
Group provides,
or has
any obligation
to
provide, welfare benefits to any Person who is not a current
or former employee of a member of the
Company Group or its Affiliates, or a beneficiary thereof.
(h)
Except
as set
forth
on
Schedule
3.16(h)
,
each
Employee Plan
that
is
or has
been a
nonqualified deferred compensation plan within the meaning of Section 409A of the Code has been
administered, operated and
maintained in all
respects according to
the requirements of
Section 409A
of the Code, and no member of the Company Group or, with respect to a current or former director,
officer, employee or
consultant of any
member of the
Company Group, or
Affiliate thereof, has
been
required to
withhold or
pay any
Taxes as
a result
of a
failure to
comply with
Section 409A of the
Code.
No
member
of
the
Company
Group
has
any
obligation
to
make
a
“gross-up”
or
similar
payment in respect of any Taxes that may become payable under Section 409A of the Code.
(i)
The
Company
Group
and
its
Affiliates
have
complied
in
all
respects
with
the
applicable provisions of the
Patient Protection and
Affordable Care
Act of 2010 and the
Health Care
and Education
Reconciliation Act of 2010, to
the extent
applicable, including
the employer
shared
responsibility
provisions
relating
to
the
offer
of
“affordable”
health
coverage
that
provides
44
“minimum
essential
coverage”
to
“full-time”
employees
(as
those
terms
are
defined
in
Section 4980H
of
the
Code
and
related
regulations)
and
the
applicable
employer
information
reporting requirements under Sections 6055 and 6056 of the Code.
(j)
Neither the
execution of
this Agreement nor
the consummation
of the
Transactions
(either alone or in combination
with another event) will or
can reasonably be expected to
(i) entitle
any
current
or
former
director,
officer,
employee
or
consultant
of
the
Company
Group
or
any
Affiliate thereof
to any
payment (including
severance pay
or similar
compensation), any
cancellation
of
Indebtedness
or
any
increase
in
compensation,
(ii) accelerate
the
time
of
payment,
funding
or
vesting
under
any
Employee
Plan,
or
(iii) result
in
any
increase
in
benefits
payable
under
any
Employee Plan.
No amount paid or payable
(whether in cash, in
property or in the form
of benefits)
in connection
with the
Transactions (either
alone or
in combination
with another
event) will
be a
“parachute payment”
or an
“excess parachute
payment” with
respect to
any “disqualified
individual”
in respect
of the
Company Group,
in each
case, within
the meaning
of Section 280G
of the
Code.
No entity (including any
entity that is not
a Company or
Transferor) that is a
member of an affiliated
group (within the
meaning of Section 280G
of the Code)
in which any
Company is also
a member
is a
corporation (other
than an S
Corporation or QSub)
for U.S. federal
Income Tax purposes.
No
Employee Plan provides
for, and
no member
of the Company
Group has any
obligation to make
a
“gross-up” or similar payment in
respect of any
Taxes that may become payable
under Section 4999
of the Code.
(k)
No Employee
Plan
is
subject to
any Law
of
any
jurisdiction
outside
of the
United
States of America.
3.17
Labor Matters
.
Except as set forth on Schedule
3.17
, in the last five years:
(a)
No member of the Company Group
is or has been in the
last five years a party to,
is
or has
been in
the last
five years
bound by,
is or
has been
in the
last five
years negotiating,
or has
been in the
last five years
asked to negotiate
a collective bargaining
agreement or other
agreement
or understanding with
any labor organization.
There is not
currently, nor has
there been in
the last
five years, any organized effort by
any labor union to organize
any employees of any member
of the
Company Group into one
or more collective bargaining
units.
No member of the
Company Group
is or has been in the last five
years a party to, and is not affected
by or threatened with, any dispute
or controversy with a labor union or with respect to unionization
or collective bargaining involving
any
of
its
current
or
former
employees
(including
any
actual
or
threatened
labor
strikes,
work
slowdown,
lock-outs,
work
stoppages,
interruptions
of
work,
picketing,
arbitrations,
grievances,
unfair labor practice charges
or proceedings, or other
disputes involving a labor
organization or with
respect to unionization or
collective bargaining), and none are
pending or, to the Knowledge
of the
Company Group, threatened.
(b)
Each
member
of
the
Company
Group
is
in
compliance
and
has
complied
in
all
material
respects
with
all
applicable
Laws
that
relate
to
employment
and
to
the
operation
of
the
Business, including
applicable Laws
that relate
to wages,
hours, wage
payment, employee
record
keeping,
labor,
employment,
fair
employment
practices,
terms
and
conditions
of
employment,
workers’
compensation,
occupational
safety
and
health,
plant
closings,
withholding
of
Taxes,
discrimination
in
employment,
disability
rights
or
benefits,
equal
employment
opportunity,
immigration (including
applicable I-9
applicable Laws),
reasonable accommodations,
labor relations
and collective
bargaining, employee
leave issues
and unemployment
insurance, and
are not
liable
for any arrears of wages or
any Taxes or penalties for
failure to comply with the foregoing.
There is
no pending
or, to
the Knowledge
of the
Company Group,
threatened claim,
investigation or
other
Proceeding in
respect of
any such
applicable Laws
(including any
employment discrimination
charge
45
or employment-related
multi-claimant or
class action
claims), nor,
to the
Knowledge of
the Company
Group, is there any basis therefor.
(c)
No claim with respect to payment
of wages, salary, overtime, commissions, bonuses,
premiums, fees
or other
compensation of
any kind
has been
asserted, or
is now
pending or,
to the
Knowledge
of
the
Company
Group,
threatened
by
or
before
any
Governmental Authority,
with
respect to current or
former employees or independent contractors
of any member of
the Company
Group, and there is no charge or other proceeding with
respect to alleged violation of any collective
bargaining requirements or occupational safety or
health standards that has been
asserted or is now
pending or, to the Knowledge of the
Company Group, threatened with respect to any
member of the
Company Group.
No material charge
or complaint of
discrimination in employment
or employment
practices for
any reason,
including age,
sex, race,
religion, national
origin, veteran
status or
other
legally protected
category, has
been asserted
or is
now pending
or threatened
before the
United States
Equal Employment Opportunity Commission
or other Governmental
Authority by current or
former
employees of any member of
the Company Group.
No member of the Company
Group is subject to
any pending material investigation
by any Governmental
Authority respecting any current
or former
employees of any
member of the
Company Group.
There are no
outstanding, unsatisfied obligations
to reinstate, re-engage, pay compensation
to or comply with any
recommendation or declaration of
any court or any other tribunal in respect of any of the employees, whether past or present.
(d)
Each
member
of
the
Company
Group
is
and
has
been
in
full
compliance
with
the
WARN Act,
and
no
member
of
the
Company
Group
has
taken
any
action
that
could
at
any
time
require notification
of any
of the
current or
former employees
of any
member of
the Company
Group
pursuant to the
provisions of the
WARN Act
or that could cause
any member of the
Company Group
to have liability thereunder.
(e)
Each Company
Group Employee
is employed
at will
and may
terminate his
or her
employment or
be terminated
from such
employment at
any time
for any
or no
reason with
or without
prior notice.
(f)
Each Company Group
Employee is legally
authorized to work
in the United
States.
Each member of
the Company
Group has completed
and maintains in
its files Forms I-9
with respect
to each of its
employees.
The qualifications for employment
of each current
and former employee
of each member of the Company Group have been
reviewed and confirmed by such member of the
Company Group.
(g)
(i) No
officer,
director
or
management
level
employee
of
any
member
of
the
Company Group (A) has been the subject of an allegation of sexual harassment or sexual assault by
any employee
of any
member of
the Company
Group, nor
(B) to the
Knowledge of
the Company
Group, has
engaged in
any such
conduct, and
(ii) no member
of the
Company Group
has entered
into any settlement agreements
related to allegations of
sexual harassment or sexual
assault by any
current or former employee or individual independent contractor.
3.18
Company Group Employee List; Contractor List
.
(a)
Schedule
3.18(a)
contains a
true and
complete list
of the
Company Group
Employees,
in
each
case,
listing,
as
applicable,
each
such
Company
Group
Employee’s:
(i) name;
(ii) job
location
(city
and
state);
(iii) date
of
hire;
(iv) employing
entity;
(v) annual
base
salary
or
hourly
rate, as applicable,
and target bonus
opportunity; (vi) most recent
annual bonus received;
(vii) title
or
functional
position;
(viii) classification
as
exempt
or
non-exempt;
(ix) leave
status
(including
leave
type
and
return
to
work
date);
(x) vacation/paid
time
off
balance
or
annual
vacation
entitlements;
(xi) full-time
or
part-time
status;
and
(xii) visa
status
(including
visa
type
and
46
expiration date) (the “Company
Group Employee List”).
There are a
sufficient number of
Company
Group
Employees
to
operate
the
Business
in
all
material
respects
in
the
manner
in
which
it
is
currently
conducted.
No
Affiliate
of
any
member
of
the
Company
Group
(other
than
another
member
of
the
Company
Group)
employs
any
individuals
who
exclusively
devote
their
working
time to the
Business but who
are not considered
Company Group Employees,
and the members
of
the Company Group
do not employ any
individuals who do not
provide services primarily
in respect
of the Business.
(b)
Schedule
3.18(b)
contains a true and complete
list of each consultant and
individual
independent
contractor
whose
services
have
been
retained
by
a
member
of
the
Company
Group,
identifying in each case:
(i) the applicable Company Group member; (ii) the individual’s employer
(if any); (iii) brief description of
services provided; (iv) engagement start date; (v) the
total amount
paid in calendar year 2024 and year to date in calendar year 2025; and (vi) whether the individual’s
services to the Company Group may
be terminated without cause and without
penalty upon notice,
or details of any required notice period.
3.19
Brokerage Agreements
.
Except as
set forth
on Schedule
3.19
, no
member of
the Company
Group
has
entered
into
any
agreement
with
any
Person,
firm
or
corporation
for
the
payment
of
any
commission, brokerage or “finder’s
fee” in connection
with the Transactions
or for which
it could otherwise
become liable.
3.20
Suppliers
.
Schedule
3.20
sets
forth
the
20 most
significant
third-party
suppliers
(i.e.,
components, parts, packaging)
of the Company
Group, taken as
a whole (based
on aggregate dollar
amounts
paid directly by the Company
Group), during the years ended
December 31, 2023 and December 31, 2024
and during the two months ended on the
Statement Date (collectively, the “Key Suppliers”).
Schedule
3.20
includes
the
total
dollar
volume
for
the
Key
Suppliers
during
such
periods.
Except
as
set
forth
on
Schedule
3.20
, there are
no minimum purchase
contracts or understandings
between the Company
Group,
on the
one hand,
and any
Key Supplier,
on the
other hand.
Since the
Statement Date,
no member
of the
Company
Group
has
received
any
written,
or
to
the
Knowledge
of
the
Company
Group,
oral
notice
or
proposal
from
a
Key
Supplier
(a) requiring
or
proposing
modifications
in
the
terms
on
which
such
Key
Supplier conducts business with the Company Group, (b) terminating
or cancelling its relationship with the
Company Group or (c) informing
or notifying a member
of the Company
Group of any violation
of, or non-
compliance with, any Laws.
3.21
Customers
.
Schedule
3.21
sets forth the 20 largest customers of the Company Group, taken
as
a
whole
(based
on
aggregate
revenues)
during
the
years
ended
December 31, 2023
and
December 31, 2024
and
during
the
two months
ended
on
the
Statement
Date
(the
“Key
Customers”).
Schedule
3.21
includes the
total dollar
revenues from
the Key
Customers during
such periods.
Since the
Statement Date, no member of the Company Group
has received any written notice or proposal from
a Key
Customer
(a) requiring
or
proposing
modifications
in
the
terms
on
which
such
Key
Customer
conducts
business with the Company
Group, (b) terminating or cancelling
its relationship with the
Company Group
or (c) informing or notifying
a member of the
Company Group of any
violation of, or non-compliance
with,
any Laws.
3.22
Product Liability
.
Except as set forth on Schedule
3.22
, in the past five years, the Company
Group
has
not
(a) recalled
any
products
or
received
an
Order
or
request
to
recall
any
products
by
any
Governmental Authority,
customer
or
supplier
or
(b) been
subject
to,
or
received
any
written
or,
to
the
Knowledge of the Company Group, oral notice of any, claim arising from or
caused by any product offered
for sale, sold or distributed by the Company Group.
The Company Group has no Knowledge of any fact or
condition that
could reasonably be
expected to (i) impose
a duty to
recall, withdraw, remove
or undertake
corrective action
in any
material respect
or (ii) result
in any
material product
liability claim,
in each
case,
47
with
respect
to
any
products
offered for
sale,
sold or
distributed by
the Company
Group
in
the past
five
years.
3.23
Food Safety Requirements
.
(a)
All
products
being
distributed,
sold,
manufactured
or
developed
by
the
Company
Group that are subject to the jurisdiction of the FDA, USDA, FTC, any comparable state or foreign
Governmental
Authority
have
been
formulated
and
are
being
processed,
labeled,
stored,
tested,
packed, transported,
distributed, manufactured,
marketed, advertised
and promoted
in compliance
with all
applicable requirements
under the
Federal Food,
Drug, and
Cosmetic Act
(“FDCA”) and
other
Laws,
including
current
Good
Manufacturing
Practices
(“cGMP”)
for
foods,
the
facility
registration, prior import
notice and recordkeeping
requirements of the
Public Health Security
and
Bioterrorism Preparedness
and Response Act
of 2002, the
allergen disclosure
requirements of
the
Food Allergen
Labeling and Consumer
Protection Act
of 2004, the FDA
Food Safety Modernization
Act, as
applicable, the
Egg Products
Inspection Act (“EPIA”),
the Organic
Foods Production Act,
the Sanitary Food
Transportation Act
and all comparable
state and foreign
Laws (collectively, “Food
and Beverage Laws”).
(b)
To the Knowledge of
the Sellers, none of the
Company Group’s products have
been
the
subject
of
any
warning
letter,
notice
of
violation,
notice
of
warning,
seizure,
injunction,
regulatory enforcement action or criminal action issued, initiated or
threatened by the FDA, USDA,
FTC or any comparable
state or foreign Governmental
Authority during the five-year
period prior to
the date hereof.
(c)
No
member
of
the
Company
Group
has
received
any
FDA
Form 483
notice
of
inspectional
observations,
notice
of
adverse
findings,
untitled
letters
or
warning
letters
from
the
FDA, or noncompliance
record from USDA
or Food Safety
and Inspection Service
(“FSIS”) or been
subject to any material
investigation by any Governmental
Authority, or been subject
to any penalty,
fine,
Sanction,
assessment,
audit,
request
for
corrective
or
remedial
action
or
other
material
compliance or enforcement-related action or material communication, in each case in writing, from
any Governmental Authority (including FDA
and USDA).
(d)
For the five-year
period prior to
the date hereof,
each member of
the Company Group
has been in material compliance with the Federal Trade Commission Act (“FTCA”) with respect to
the advertising
and promotion,
product descriptions
and claims
for the
products they
sell.
To the
Knowledge
of
the
Sellers,
all
claims
about
the
Company
Group’s
products
are
appropriately
substantiated and are truthful
and non-misleading under both
the FDCA
and the FTCA.
No member
of the Company
Group has received
written notice of
and, to the
Knowledge of the
Company Group,
there is no written claim filed by the FTC
against any member of the Company Group alleging
any
violation of any of the Laws implemented by it.
(e)
The
Company
Group’s
products
are
neither
adulterated
nor
misbranded
within
the
meaning of
the FDCA or EPIA,
nor do they
contain unapproved
food additives
or ingredients
that
are not
generally recognized
as safe,
nor are
they products
that may
not, under
Sections 404, 505
or 512 of the FDCA,
be introduced into
United States commerce.
For the five-year period
prior to
the date
hereof, no
member of
the Company
Group has,
in connection
with any
Company Group
product,
either
voluntarily
or
as
requested
by
a
Governmental Authority
initiated,
conducted
or
issued, or caused to be initiated, conducted or issued, any recall, or market withdrawal.
(f)
No member of
the Company Group
has or, to
the Knowledge of
the Company Group,
any of its Representatives, been convicted of any crime or engaged
in any conduct that could result
in
debarment
or
exclusion
under
21 U.S.C. Section 335a(a),
21 U.S.C. Section 335a(b)
or
any
48
similar legal requirements.
No claims, actions, proceedings
or investigations that have
resulted, or
could
reasonably
be
expected
to
result,
in
such
a
debarment
or
exclusion
are
pending
or,
to
the
Knowledge of
the Company
Group, threatened
against any
member of
the Company
Group or
the
managers, officers, employees or agents of any member of the Company Group.
3.24
Inventory
.
All of the finished goods inventory of the Business (a) is merchantable, fit for its
intended purpose, of a quality and quantity fully usable and
saleable in the ordinary course of business, and
(b) is
not
obsolete,
defective
or
damaged,
except
for
those
items
that
have
been
reserved
against
in
the
Financial Statements.
Except as set
forth on Schedule
3.24
, no member
of the Company
Group has made
sales on consignment or granted return privileges to buyers of its finished goods
other than spoilage, defect
or damage allowances in the ordinary
course of business.
All finished goods inventories not written-off
in
accordance with GAAP have been reflected on the Company Group’s books at cost or net realizable value,
whichever is lower.
3.25
Certain Business Relationships
with the Company
Group.
Except for the
Affiliate Contracts,
the
Organizational
Documents,
any
Employee
Plan
or
employment
or
consulting
agreements
with
any
employee, officer
or consultant
of any
Company or
any of
their Subsidiaries
or as
set forth
on Schedule
3.25
,
no Related Party is a party
to any agreement, contract, commitment, transaction
or other arrangement with
any Company or any
of their Subsidiaries
or has any interest
in any property or
assets owned or leased
by
any Company or any of their Subsidiaries.
3.26
Insurance
.
Schedule
3.26
contains a
complete list
of all
insurance policies
(specifying the
location,
insured,
insurer,
amount
of
coverage,
type
of
insurance
and
policy
number)
maintained
by
the
Company
Group
other
than insurance
policies maintained
to provide
benefits
under any
Employee Plan.
All such
policies are
in full
force and
effect, all
premiums with
respect thereto
covering all
periods up
to
and including
the Closing
Date have
been paid,
and no
written notice of
cancellation or
termination has
been
received by any member of the Company Group with respect to any such policy.
There is no default under
any such policy and no insurer has advised any member of the Company Group in writing that it intends to
reduce
coverage, increase
premiums or
fail to
renew any
existing
policy or
binder.
There
is no
material
claim
pending
with
respect
to
any
member
of
the
Company
Group
under
any
such
policies
as
to
which
coverage has been questioned, denied or disputed in writing, or,
to the Knowledge of the Company Group,
orally by the underwriters
of such policies
(other than pursuant to
a customary reservation of
rights notice
or in connection with claims for benefits under the Employee Plans).
3.27
Certain
Payments
.
No
member
of
the
Company
Group
or
any
manager,
officer
or
other
employee of any member of the
Company Group, or to the Knowledge
of the Company Group, any agent,
representative or third party acting on behalf of the Company Group has:
(a)
offered or used
any corporate funds
for any unlawful
contribution, gift, entertainment
or other unlawful expense relating to any political campaign or activity;
(b)
offered, authorized, promised, or
used any corporate funds
for any direct or
indirect
unlawful payments to any Person or foreign or domestic “Government Official,” which includes:
(i)
any officer,
employee, or Person acting
in an official
capacity or performing
public
duties
or
functions
on
behalf
of
(A) any
government,
including
all
levels
and
subdivisions of government
from national to
local; (B) any department,
committee, agency
or instrumentality of
government; (C) any business
or commercial entity
owned, managed or
controlled by a government; or (D) any political party or official thereof;
(ii)
any candidate for public office;
49
(iii)
any
officer,
employee
or
agent
of
a
public
international
organization,
including
for
example
the
United
Nations,
the
International
Monetary
Fund
or
the
World
Bank; or
(iv)
any relative of any Government Official;
(c)
violated
any
provision
of
the
U.S.
Foreign
Corrupt
Practices
Act
of
1977
(the
“FCPA”), the U.K. Bribery
Act of 2010,
or any statute,
regulation or any
other applicable laws,
rules
or
regulations
of
relevant
jurisdictions
prohibiting
bribery
and
corruption,
including
local
anti-
corruption laws in the countries in which the Company Group conducts business (“Anti-Corruption
Laws”);
(d)
offered, authorized, promised
or given any
unlawful bribe, rebate,
payoff, influence
payment,
kickback
or
other
unlawful
payment
or
gift
of
money
or
anything
of
value
to
any
Government Official or Person;
(e)
established or
maintained, or
is maintaining,
any fund
of corporate
monies or
other
properties
for
the
purpose
of
supplying
funds
for
any
of
the
purposes
described
in
the
foregoing
subparagraphs
(a)
through
(d);
or
(f)
knowingly received
any unlawful
discounts or
rebates in
violation of
any statute
or
regulation relating to antitrust or competition.
No
member
of
the
Company
Group
or
any
manager,
officer
or
other
employee
of
any
member
of
the
Company Group,
or to
the Knowledge
of the
Company Group,
any agent,
representative or
third party
acting
on behalf of the Company Group has been the subject
of any Proceedings by any Governmental Authority,
any customer, or other business partner
regarding actual or alleged violations of
any Anti-Corruption Laws.
No such Proceeding
is pending or,
to the Knowledge
of the Company
Group, threatened, and
there are no
circumstances that are likely to give rise to any such investigation, inquiry, allegations or proceedings.
3.28
Trade Control Laws; Sanctions
.
(a)
During the past five years, the
Company Group and its directors, officers,
employees
and agents, have (i) conducted the Business in compliance with applicable Trade Control Laws and
Sanctions
in all
material respects,
(ii) not engaged
in a
transaction
or dealing
with or
involving
a
Sanctioned Country or
a Person that
is the subject
or target of
applicable Sanctions and
(iii) not been
the subject of
or otherwise involved
in, enforcement actions
or, to the
Knowledge of the Company
Group, investigations by any Governmental Authority or other actions with respect to any actual or
alleged violations
of Trade
Control Laws
or Sanctions,
and not
been notified
in writing
(or, to
the
Knowledge of the Company Group, orally) of any such pending or threatened actions.
(b)
During the past
five years,
no member of
the Company Group
or any director,
officer,
employee or,
to the
Knowledge of
the Company
Group, agent
of any
member of
the Company
Group
has:
(i) been
the
subject
or
target
of
Sanctions,
(ii) been
subject
to
debarment
or
any
list-based
designations
under
any
Trade
Control
Law,
(iii) maintained
or
maintains
any
offices,
branches,
operations,
assets,
investments,
employees
or
agents
in
a
Sanctioned
Country
or
(iv) engaged
in
transactions, dealings or
activities that could
reasonably be expected
to cause
such Person to
become
a target of Sanctions.
3.29
No
Other
Representations
or
Warranties
.
PRIOR
TO
ITS
EXECUTION
OF
THIS
AGREEMENT,
BUYER
HAS
CONDUCTED
AN
INDEPENDENT
INVESTIGATION
AND
HAS
FORMED
AN
INDEPENDENT
JUDGMENT
CONCERNING
THE
CURRENT
CONDITION
AND
50
AFFAIRS
OF
THE
COMPANY
GROUP.
IN
MAKING
ITS
DECISION
TO
EXECUTE
THIS
AGREEMENT AND
TO
ENTER
INTO
THE
TRANSACTIONS,
BUYER
HAS
RELIED AND
WILL
RELY
SOLELY
UPON
THE
REPRESENTATIONS
AND
WARRANTIES
REGARDING
THE
COMPANY GROUP AND
TRANSFERORS
SET
FORTH
IN
ARTICLE III
AND
THE
SELLERS
SET
FORTH
IN
ARTICLE IV
(IN
EACH
CASE,
AS
QUALIFIED
BY
THE
SCHEDULES)
OR
IN
ANY
CERTIFICATE DELIVERED PURSUANT HERETO AND HAS NOT AND WILL
NOT BE ENTITLED
TO
RELY
ON
ANY
OTHER
STATEMENTS
OR
ADVICE
FROM
THE
COMPANY
GROUP,
ANY
SUBSIDIARY OF
THE COMPANY
GROUP,
ANY SELLER
OR THEIR RESPECTIVE
AFFILIATES OR
REPRESENTATIVES.
BUYER ACKNOWLEDGES
THAT:
(a) IT HAS HAD
THE OPPORTUNITY
TO
VISIT WITH THE COMPANY
GROUP
AND MEET WITH THEIR REPRESENTATIVES TO DISCUSS
THE
COMPANY
GROUP,
THE
BUSINESS
AND
THE
COMPANY
GROUP’S
CONDITION
AND
PROSPECTS, AND (b) EXCEPT
AS EXPRESSLY SET FORTH IN
ARTICLE III
AND
ARTICLE IV
(IN
EACH
CASE,
AS
QUALIFIED
BY
THE
SCHEDULES)
OR
IN
ANY
CERTIFICATE
DELIVERED
PURSUANT HERETO,
NO MEMBER
OF THE
COMPANY GROUP,
NO SELLER
AND
NO OTHER
PERSON
IS
MAKING,
AND
EACH
SUCH
PERSON
HEREBY
EXPRESSLY
DISCLAIMS,
ANY
REPRESENTATION OR
WARRANTY, EXPRESS OR
IMPLIED, AT
LAW OR
IN EQUITY,
AS TO
ANY
MEMBER
OF
THE
COMPANY
GROUP,
THE
BUSINESS,
OR ANY
SELLER
OR ANY
OF
THEIR
RESPECTIVE
ASSETS,
LIABILITIES
OPERATIONS
OR
BUSINESS
(INCLUDING
ANY
WARRANTIES OF
MERCHANTABILITY
OR FITNESS
FOR
A
PARTICULAR PURPOSE).
WITHOUT
LIMITING
THE
GENERALITY
OF
THE
FOREGOING,
NO
SELLER
NOR ANY
OTHER
PERSON
WILL
HAVE
OR
BE
SUBJECT
TO
ANY
LIABILITY
TO
BUYER
OR
ANY
OTHER
PERSON
RESULTING FROM THE DISTRIBUTION TO BUYER, OR
BUYER’S USE OF, ANY PROJECTIONS
OR
FORECASTS
MADE
AVAILABLE
TO
BUYER
OR
ITS
REPRESENTATIVES
IN
ANY
“DATA
ROOMS,”
“VIRTUAL
DATA
ROOMS,”
MANAGEMENT
PRESENTATIONS
OR
IN
ANY
OTHER
FORM IN
EXPECTATION OF,
OR IN
CONNECTION WITH,
THE TRANSACTIONS,
OR IN
RESPECT
OF
ANY
OTHER
MATTER
OR
THING
WHATSOEVER
(ELECTRONIC
OR
OTHERWISE)
OR
OTHERWISE IN EXPECTATION OF THE TRANSACTION.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SECURITYHOLDERS
4.1
Representations of
the Securityholders
.
Each Voting
Securityholder, jointly
and severally,
hereby represents and warrants to Buyer as follows:
(a)
Organization, Existence
and Good
Standing.
If a
Securityholder is
an entity,
such
Securityholder
is
duly
organized
(if
applicable),
validly
existing
and
in
good
standing
under
the
Laws of the jurisdiction of its organization and such
Securityholder is duly qualified to do business
and is in
good standing as
a foreign entity
in each jurisdiction
where the character
of its properties
or
the
nature
of
its
business
makes
such
qualification
necessary,
except
for
failures
to
have
such
power or
authority that,
individually or
in the
aggregate, will
not prevent
or materially
delay, and
could
not
reasonably
be
expected
to
prevent
or
materially
delay,
the
consummation
of
the
Transactions.
(b)
Authorization; Absence of Conflicts
.
(i)
Each
Securityholder
has
all
necessary
power
and
authority
to
execute
and
deliver this
Agreement and the
Ancillary Agreements
to which such
Securityholder is a
party
and
the
capacity
and
authority
to
make
and
perform
the
representations,
warranties,
covenants and agreements
made by such
Securityholder herein and
therein.
The execution
and delivery of
this Agreement
and the
Ancillary
Agreements by each
Securityholder and the
51
consummation of the Transactions have been duly authorized
by all necessary action on the
part
of
such
Securityholder,
and
no
other
actions
or
other
proceedings
are
necessary
to
authorize this Agreement and the
other Ancillary Agreements to which such Securityholder
is a
party or for
such Securityholder to
consummate the Transactions.
This Agreement has
been duly
executed and
delivered by
each Voting
Securityholder and
constitutes, and
as of
the Closing, each Ancillary Agreement to which
a Securityholder is
a party, will
constitute,
when
executed
and
delivered
by
such
Securityholder,
in
each
case
assuming
the
due
authorization,
execution
and
delivery
by
Buyer
and
the
other
parties
to
such
Ancillary
Agreement,
the
legal,
valid
and
binding
obligation
of
such
Securityholder,
enforceable
against such
Securityholder in
accordance with
its terms,
subject to
applicable bankruptcy,
insolvency,
reorganization,
moratorium
and
other
similar
Laws
affecting
creditors’ rights
generally
and
to
general
principles
of
equity
(regardless
of
whether
such
enforceability
is
considered in a proceeding in equity or at Law).
(ii)
Neither
the
execution
or
delivery
of
this
Agreement
or
the
Ancillary
Agreements to which
a Securityholder is
a party nor
the consummation of
the Transactions
will
conflict
with
or
result
in
a
breach
or
violation
of,
or
cause
acceleration,
or
constitute
(with or without due notice or lapse of time or both) a
default under, or give rise to any right
of termination, cancellation or acceleration under, any of the terms, conditions or provisions
of (A) any contract, Law
or Order to which
such Securityholder is a
party or to which
such
Securityholder or
such Securityholder’s
assets are
subject or
(B) the governing
documents
of such Securityholder, if applicable.
(iii)
No consent,
action, approval
or authorization
of, or
registration, declaration
or filing with, any Governmental Authority is required to authorize, or is otherwise required
in connection
with, the
execution and
delivery of
this
Agreement or
any
Ancillary
Agreement
to
which
a
Securityholder
is
a
party
by
such
Securityholder
or
the
performance
by
such
Securityholder
of
the
terms
hereof
or
thereof
or
the
validity
or
enforceability
of
this
Agreement
or
such Ancillary Agreement,
except
for
such
filings
and
approvals,
if
any,
as
may be required under the HSR Act.
(iv)
There are no actions, suits, investigations or other Proceedings pending
or, to
the
Knowledge
of
the
Voting
Securityholders,
threatened
against
a
Securityholder
or
involving
any
of
a
Securityholder’s
properties
or
assets
in
any
court
or
before
any
other
Governmental Authority, or before any arbitrator except as, individually or in
the aggregate,
will not, and not reasonably be expected to have, an adverse effect on such Securityholder’s
ability
to
perform
such
Securityholder’s
obligations
under
this
Agreement
or
otherwise
prevent, hinder or
delay the consummation
of the Transactions.
No Securityholder is
subject
to
any
outstanding
Order
that
prohibits
or
otherwise
restricts
the
ability
of
such
Securityholder to consummate fully the
Transactions or any of
the Ancillary Agreements to
which such Securityholder is a party.
(c)
Ownership
of
Equity
Interests
.
The
Securityholders
are
the
record
and
beneficial
owner of and has good
and valid title to
the number and class of
Equity Interests set forth
opposite
each Securityholder’s name on Schedule
3.4,
and such Equity Interests are
owned free and clear of
all Liens (other than
Permitted Equity Interest Encumbrances).
Other than Equity Interests listed
on
Schedule
3.4
, no Securityholder has
any beneficial ownership of
any Purchased Equity Interests
or
any Equity Interest
in any Company
or any right
of any kind
to have any
such Equity Interest
issued.
Except
as
set
forth
on
Schedule
3.4
,
no
Securityholder
is
a
party
to
any
contract
(other
than
this
Agreement)
that
could
require
such
Securityholder
to
sell
or
otherwise
dispose
of,
or
grant
any
interest in, any of such Securityholder’s Equity Interests.
52
(d)
Brokerage Agreements.
No Person has acted as
a broker, finder or financial
advisor
for in
connection with
the Transactions
based on
any arrangement
or agreement
made by
or on
behalf
of
any
Securityholder
or
any
Securityholder’s Affiliates
for
which
Buyer
or
any
member
of
the
Company Group could be liable following the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
BUYER
Buyer hereby represents and warrants to the Voting Securityholders as follows:
5.1
Organization and Qualification
.
Buyer is a corporation duly organized, validly existing
and
in good standing
under the Laws
of Delaware, with
full power and
authority to own,
operate and lease
its
properties and to carry on its business,
and Buyer is duly qualified to do
business and is in good standing as
a foreign corporation
in each jurisdiction
where the character
of its properties
or the nature
of its business
makes such qualification necessary, except for failures to have
such power or authority that, individually or
in the
aggregate, will
not prevent
or materially
delay, and
could not
reasonably be
expected to
prevent or
materially delay, the consummation of the Transactions.
5.2
Authorization of Agreement; No Violation; No Consents; No Litigation
.
(a)
Buyer has
all necessary
power and
authority to
execute and
deliver this Agreement
and
the Ancillary Agreements
to
which
it
is
a
party
and
the
capacity
and
authority
to
make
and
perform
the
representations,
warranties,
covenants
and
agreements
made
by
Buyer
herein
and
therein.
The execution and delivery of this Agreement and the Ancillary
Agreements by Buyer and
the consummation of the Transactions have been duly authorized by all
necessary action on the part
of Buyer, and
no other actions
or other proceedings
are necessary to
authorize this Agreement and
the
other
Ancillary
Agreements
to
which
Buyer
is
a
party
or
for
Buyer
to
consummate
the
Transactions.
This Agreement has been duly executed and delivered by
Buyer and constitutes, and
as of
the Closing,
each
Ancillary
Agreement to
which Buyer
is a
party, will
constitute, when
executed
and delivered by Buyer, in each case assuming the due authorization, execution and delivery by the
other parties thereto, the
legal, valid and binding
obligation of Buyer, enforceable
against Buyer in
accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium
and
other
similar
Laws
affecting
creditors’
rights
generally
and
to
general
principles
of
equity
(regardless of whether such enforceability is considered in a proceeding in equity or at Law).
(b)
Neither the
execution or
delivery of
this Agreement or the Ancillary Agreements
to
which Buyer is a party nor the consummation of the Transactions (i) will conflict with or result in a
breach or
violation of,
or cause
acceleration, or
constitute (with
or without
due notice
or lapse
of
time or
both) a
default under,
or give
rise to
any right
of termination,
cancellation or
acceleration
under, any
of the
terms, conditions
or provisions
of (A) any
material Contract,
Law or
Order to
which
Buyer is
a party
or to
which Buyer
or its
assets is
subject or
(B) the certificate
of incorporation
or
other
organizational
document
of
Buyer, or
(ii) require
Buyer
to
obtain
the
consent
of
or
provide
notice to any third party (other than a Governmental Authority) not already obtained.
(c)
No consent, action, approval or authorization of, or registration, declaration or filing
with, any
Governmental Authority is
required to
authorize, or
is otherwise
required in
connection
with, the execution and delivery of this Agreement or any Ancillary
Agreement to which Buyer is a
party
by
Buyer
or
the
performance
by
Buyer
of
the
terms
hereof
or
thereof
or
the
validity
or
enforceability of this
Agreement or such
Ancillary
Agreement, except for
such filings and
approvals,
if any, as may be required under the HSR Act.
53
(d)
There
are
no
actions,
suits,
investigations
or
other
Proceedings
pending
or,
to
the
Knowledge of
Buyer, threatened
against Buyer
or any
of its
Subsidiaries or
involving any
of their
respective properties
or assets
in any
court or
before any
other Governmental Authority,
or before
any arbitrator except as
could not, individually or in
the aggregate, have or be
reasonably expected
to
have
an
adverse
effect
on
Buyer’s
ability
to
perform
its
obligations
under
this Agreement
or
otherwise prevent,
hinder or
delay the
consummation of
the Transactions.
Buyer is
not subject
to
any outstanding Order that prohibits or otherwise restricts the ability of Buyer to
consummate fully
the Transactions.
5.3
Financial Ability
.
Buyer has,
and will
have at
the Closing,
on an
unconditional basis,
the
financial capability
and cash
in immediately
available U.S.
funds sufficient
to fund
the consummation
of
the Transactions,
to satisfy
all other
reasonably anticipated
costs and
expenses of
Buyer arising
in connection
therewith and payable
at the Closing
and to permit
Buyer to perform
in a timely
manner all of
its obligations
under this Agreement to be performed at the Closing.
5.4
Brokerage Agreements
.
Buyer
has
not
entered
(directly
or
indirectly)
into
any
agreement
with any Person, firm or corporation providing
for the payment of any commission, brokerage
or “finder’s
fee” in connection
with the Transactions for
which any Securityholder
or any Affiliate thereof (excluding,
if the Closing occurs, any member of the Company Group) will have any responsibility.
5.5
Investment Intention
.
Buyer is acquiring the Purchased Equity Interests
for its own account,
for investment purposes only and not with a view to any public distribution
thereof or with any intention of
selling, distributing or otherwise disposing of
the Purchased Equity Interests in a
manner that would violate
the registration
requirements of
the Securities Act of
1933 (the
“Securities Act”).
Buyer understands
that
the Purchased Equity Interests have
not been registered under the
Securities Act and cannot be sold unless
subsequently registered under the Securities
Act or an exemption
from such registration is available.
Buyer
is able
to bear
the economic
risk of
holding the
Purchased Equity
Interests for
an indefinite
period (including
total loss of
its investment) and
has sufficient knowledge and
experience in financial and
business matters
so as to be capable of evaluating the merits and risk of its investment.
ARTICLE VI
CERTAIN COVENANTS
6.1
Conduct
of
the
Business
Prior
to
the
Closing
Date
.
The
Sellers
agree
that,
except
(w) as
expressly set
forth in
or contemplated,
permitted or
required by
this
Agreement, (x) as
required by
applicable
Law, (y) as set
forth in Schedule
6.1
or (z) as approved
by Buyer in
writing (which Buyer
agrees shall not
be unreasonably
withheld, conditioned
or delayed),
from the
date hereof
through the
Closing Date
or the
termination
of
this Agreement,
each
member
of
the
Company
Group
shall
use
commercially
reasonable
efforts to operate the
Business in all
material respects in the
ordinary course of business
consistent with past
practice
and
use
commercially
reasonable
efforts
to
maintain
intact
their
respective
businesses
and
relationships
and
goodwill
with
employees,
customers,
lenders,
suppliers
and
others
having
material
business relationships with the Company Group in each case, in all material respects.
Without limiting the
generality of the
foregoing, except as
expressly set forth
in or contemplated,
permitted or required
by this
Agreement,
as
Buyer
may
approve
in
writing
(which
Buyer
agrees
shall
not
be
unreasonably
withheld,
conditioned or delayed), or as set forth in Schedule
6.1
, no member of the Company Group or Seller will:
(a)
except
as
expressly
contemplated
by
the
Pre-Closing
Restructuring,
amend
the
Organizational Documents or any
organizational document of any
member of the Company
Group
or any Transferor;
54
(b)
except
for
the
F Reorganization
and
the
ELT
Contribution,
(i) issue,
authorize
for
issuance, sell,
grant, transfer,
dispose of,
subject to
any Lien
(other than
Permitted Equity
Interest
Encumbrances) any Equity Interests of
any member of the Company
Group or Transferor, including
pursuant
to
any
split,
combination,
subdivision
or
reclassification
of
any
such
Equity
Interest;
(ii) issue, authorize
for issuance,
sell, make
or grant
any option,
warrant, call,
right, commitment,
conversion right, right of first refusal, pledge, hypothecation or agreement of any
character relating
to the Equity Interests of any member of the Company Group or Transferor; or (iii) issue, authorize
for issuance, grant, transfer, grant, dispose of or sell any securities or
obligations convertible into or
redeem,
acquire
or
purchase
any
Equity
Interest
of
any
member
of
the
Company
Group
or
Transferor;
(c)
(i) incur
any
Indebtedness
for
borrowed
money
in
addition
to
any
Indebtedness
outstanding on the date
hereof, except for borrowings
made in the ordinary
course of business under
the
Existing
Credit
Facility,
(ii) assume,
guarantee,
endorse
or
otherwise
become
liable
or
responsible
(whether
directly,
contingently
or
otherwise)
for
the
obligations
of
any
other
Person,
except for the endorsement of
checks for collection in the
ordinary course of business or
(iii) make
any
loans,
advances
or
capital
contributions
to,
or
investments
in,
any
other
Person;
provided,
however, that
clause (iii) shall
not prohibit payments
in connection
with normal relocations,
travel
advances or other advances to employees of the Company Group in the ordinary course of business
and not in excess of $5,000 individually or $25,000 in the aggregate;
(d)
(i) increase the base cash compensation payable to any officer, director, employee or
independent contractor, other than any such increases in the ordinary
course of business that do not
on an
annualized basis
exceed 3%
individually or
3% in
the aggregate,
(ii) create, establish,
enter
into, amend
or terminate
any bonus
plan, agreement,
policy or
other employee
benefit plan,
including
any retention or change in control bonus, (iii) materially increase the coverage or benefits available
under
or
otherwise
amend
any
Employee
Plan,
(iv) hire
or
terminate
the
employment
of
any
employee
or
services
of
any
independent
contractor
whose
annual
base
compensation
exceeds
$100,000, other than
termination for
“cause,” (v) transfer or
reassign the duties
of a Company
Group
Employee such that he or she
is no longer a Company Group
Employee, (vi) transfer or reassign the
duties of an employee who is not a Company Group Employee such that he or she
would become a
Company
Group
Employee
other
than
to
the
extent
such
employee
would
not
have
annual
base
compensation in
excess of
$100,000 and
such transfer
or reassignment
is to
fill a
vacant position,
(vii) grant any severance
or termination pay
to any current
or former officer,
director, employee or
independent contractor, other
than pursuant to
agreements and arrangements
already in place
as of
the
date
of
this Agreement,
(viii) grant
any
equity
or
equity-based
awards,
(ix) loan
or
advance
money (other than advances for
business expenses made in the
ordinary course of business) or
other
property to any current or former officer, director, employee or independent contractor, (x) take any
action to
accelerate the
vesting or
payment of
or to
fund any
benefit or
payment to
any current
or
former
officer,
director,
employee
or
independent
contractor
other
than
pursuant
to
existing
agreements or arrangements described
on subsection (d)(x) of
Schedule
6.1,
or (xi) waive, amend
or
terminate the terms of any restrictive covenant obligation of any Company Group Employee;
(e)
(i) except for
sales of
inventory in
the ordinary
course of
business to
the Company
Group’s customers and distributors and non-exclusive licenses in the ordinary course of business to
the
Company
Group’s
customers,
contractors,
distributors,
and
suppliers,
sell,
transfer,
mortgage,
license, lease or
otherwise dispose of,
or encumber, or
agree to sell,
transfer, mortgage, license,
lease
or
otherwise
dispose
of
or
encumber,
any
(A) properties,
real,
personal
or
mixed,
tangible
or
intangible,
that
have
a
value
on
the
books
of
the
Company
Group,
either
individually
or
in
the
aggregate,
in
excess
of
$50,000
or
(B) owned
Company
Group
Intellectual
Property
or
(ii) allow
such properties, rights or assets to become subject to any Liens (other than Permitted Liens);
55
(f)
make
or
commit
to
make
any
capital
expenditure,
capital
addition
or
capital
improvement in an amount exceeding $100,000;
(g)
settle,
cancel,
compromise,
release
or
provide
a
waiver
with
respect
to
any
claim,
action or proceeding (i) if
the amount payable by
the Company Group could
be in excess of
$50,000
individually
or,
with
all
other
settlements
since
the
date
of
this
Agreement,
$150,000
in
the
aggregate, (ii) if
doing so would
require any
payments following
the Closing
or (iii) results
in any
other
liability
or
involving
equitable
remedies
or
an
admission
by
any
member
of
the
Company
Group
of
wrongdoing
or
violation
of
Law
(other
than
the
payment
of
cash
pursuant
to
clause (i)
above);
(h)
(i) declare, set aside or pay any distributions with respect to its equity or redeem any
equity
for
cash
or
otherwise
(other
than
Tax
distributions
to
the
members
of
a
Company
(or
its
applicable Transferor) in accordance with the applicable Organizational Documents and a final Tax
distribution immediately prior
to the
Closing with respect
to estimated
Tax liabilities of
the members
of a
Company through
the Closing)
or (ii) following
the Calculation
Time, use
any Cash
to repay
any Indebtedness or Company Group Expenses;
(i)
acquire any
business (in
any form
of transaction)
or assets
or other
property (other
than
inventory,
goods,
supplies,
raw
materials
and
other
equipment
in
the
ordinary
course
of
business) or lease or sublease any real property;
(j)
recognize any
labor union
or labor
organization as
the representative
of any
of the
employees
of
the
Company
Group,
or
enter
into
any
collective
bargaining
agreement
or
other
contract with a labor union or labor organization;
(k)
other than
in the
ordinary course
of business,
(i) enter into
any contract
that, had
it
been entered into prior to the date
of this Agreement,
would be a Material Contract or (ii) terminate,
cancel, waive
any material
right under
or materially
amend any
Material Contract
or any
contract
that, had it been entered into prior to the date of this Agreement, would be a Material Contract;
(l)
adopt a
plan of
liquidation, dissolution,
merger, consolidation
or other
reorganization,
other than the F Reorganization or ELT Contribution;
(m)
make
any
material
change
with
respect
to
accounting
policies
or
procedures,
including the Accounting Principles, except as required by GAAP
or change in Law;
(n)
cancel, terminate
or allow
to lapse
any insurance
policy, unless
within 15 Business
Days of
such cancellation,
termination or
lapse, replacement
coverage with
a substantially
similar
limit is obtained with no gap in coverage;
(o)
(i) terminate, fail to renew, abandon, cancel, let lapse or fail to continue to prosecute
or
defend
any Registered
Intellectual
Property
or
(ii) fail
to take
reasonable
steps
to maintain
the
confidentiality
of
all
material
Trade
Secrets
included
in
the
owned
Company
Group
Intellectual
Property;
(p)
(i) make,
change
or
revoke
any
material
Tax
election
(except
as
expressly
contemplated by the Pre-Closing
Restructuring), (ii) change any accounting
period or method with
respect to Taxes (except
as expressly contemplated
by the Pre-Closing Restructuring),
(iii) file any
amended Tax
Return,
(iv) enter into
any
“closing agreement”
as
described in
Section 7121 of
the
Code,
(v) settle
or
compromise
any
proceeding
with
respect
to
any
Tax
claim
or
assessment,
(vi) surrender any right
to claim a material
refund of Taxes, (vii) request
any ruling with
respect to
56
any Taxes
or (viii) consent
to any
extension or
waiver of
the limitation
period applicable
to any
Taxes
of any Company, in each case, except as required by applicable Law; or
(q)
agree to do any of the foregoing.
Notwithstanding anything to the contrary
in this
Agreement, nothing contained in this
Agreement shall give
Buyer,
directly
or
indirectly,
the
right
to
control
or
direct
the
Company
Group’s
operations
prior
to
the
Closing.
Prior to the Closing, the Company Group shall exercise, consistent with
the terms and conditions
of this Agreement, complete control and supervision over its business, assets and operations.
6.2
Access by Buyer
.
From the date hereof
until the Closing Date
or the prior termination
of this
Agreement
pursuant
to
Section
10.1,
Buyer,
its Affiliates
and their
respective
employees,
representatives
and agents
will be
given reasonable
access, upon
reasonable notice
and during
normal business
hours, to
the facilities,
properties, management
personnel (including
appropriate access
to outside
accountants and
attorneys),
books
and
records
(including
Tax,
regulatory,
financial,
intellectual
property,
accounting,
commercial, logistical,
R&D and
human resources
records) as
Buyer may
reasonably request
for the
purpose
of conducting an investigation of its financial condition, status, business, properties and
assets or otherwise
with
respect
to
the
Transactions
and
for
transition
planning
purposes;
provided,
however,
that
such
investigation will be conducted in a manner that does not unreasonably interfere with normal operations of
the Company Group;
provided further that
(i) all requests for
access shall be
directed to such
Person(s) as
the
Sellers’
Representative
may
designate
in
writing
from
time
to
time
(the
“Company
Group
Access
Contact”), (ii) such access shall be conducted under
the supervision of the Company Group
Access Contact
or
other
applicable
personnel
specifically
designated
by
a
Company
Group Access
Contact
in
writing,
(iii) no
Personal
Data
shall
be
disclosed
or
used
other
than
in
compliance
with
applicable
Privacy
Law,
(iv) Buyer shall not
(and shall not
permit any of
its representatives or Affiliates
to), contact any
customer,
supplier, distributor or
other material business
relation of the
Company Group (in
each case that
is known
by Buyer to
have such relationship
with the Company
Group) for the
purpose of discussing,
and shall not
discuss,
the
Company
Group,
the
Business
or
the
Transactions
without
the
prior
written
consent
of
the
Sellers’
Representative,
which
consent
shall
not
be
unreasonably
withheld,
conditioned
or
delayed
(provided,
however,
that
nothing
herein
shall
prevent
Buyer
from
having
conversations
with
any
of
the
foregoing in
the ordinary
course of
business of
Buyer and
its Affiliates unrelated
to the
Company Group,
the Business or
the Transactions) and (v) nothing
herein shall require
any member of the
Company Group
or its
representatives to
furnish to
Buyer or
provide Buyer
with information
that (A) is
subject to
an attorney-
client
privilege
or
an
attorney
work-product
privilege
or
confidentiality
obligations,
(B) outside
legal
counsel for the Company Group reasonably concludes may give rise to antitrust or competition Law issues
or
otherwise
violate
applicable
Laws
or
(C) violate
any
Law
or
Contract
disclosed
on
Schedule
3.13
as
containing confidentiality obligations
that would prohibit
disclosures to Buyer
under these circumstances;
provided
further
that
(x) in
the
case
of
clause (v),
the
Parties
shall
use
their
respective
commercially
reasonable
efforts
to
make
appropriate
substitute
arrangements
to
allows
such
disclosure
under
circumstances
in
which
such
restrictions
apply
and
(y) Buyer
will,
and
will
direct
its
employees,
representatives and agents
to, keep all
information furnished to
Buyer in connection with
the Transactions
confidential in accordance with the terms and conditions of the Confidentiality
Agreement.
Any disclosure
during
Buyer’s
investigation
pursuant
to
this
Section
6.2
shall
not
constitute
additions,
modifications,
qualifications, or
limitations to
the representations
or warranties
of any
member
of the
Company Group,
Transferors or Voting Securityholders,
nor shall any such
disclosure in any
way limit Buyer’s
rights under
this Agreement with respect to any such representations or warranties.
Notwithstanding anything herein to
the
contrary,
prior
to
the
Closing,
Buyer
shall
have
no
right
to
perform
any
invasive
or
subsurface
investigations of the properties or facilities
of any member of the Company
Group without the prior written
consent of the Sellers’ Representative.
57
6.3
Satisfaction of Closing Conditions; Competition Filings; Required Consents
.
(a)
From
the
date
hereof
through
the
Closing
Date
or
the
prior
termination
of
this
Agreement pursuant
to Section
10.1
, each
Party agrees
to use
its reasonable
best efforts
to satisfy
the conditions to the Closing set forth in
Article VII
in an expeditious manner.
(b)
Subject to the terms and conditions herein provided, each Party shall make, or cause
to be
made, any
filings required
by such
Party under
any applicable
antitrust or
competition Laws
as soon as
practicable after the
date hereof (but,
with respect to
any HSR
Act submission, in
no event
later
than
15 Business
Days
after
the
date
hereof)
and
request
early
termination
of
any
waiting
periods
in
connection
with
such
competition
filings.
Each
Party
shall
be
responsible
for
its
respective filing fees incurred in connection with all filings contemplated by this Section
6.3(b).
(c)
Notwithstanding anything to the
contrary in this Agreement, each Party
shall use its
reasonable best
efforts to
(i) make, after
the filings
contemplated by
Section
6.3(b)
are made,
any
other
submissions
required
or
reasonably
requested
by
any
Governmental Authority
under
such
Laws, (ii) cooperate with one another in preparing and making all such filings and submissions and
timely
seeking
all
such
consents,
Permits,
authorizations
or
approvals,
(iii) keep
the
Sellers’
Representative
and
the
Company
Group’s
counsel
informed
in
all
material
respects
and
on
a
reasonably
timely
basis
of
any
substantive
or
material
procedural
communication
relating
to
the
Transactions received by such party from,
or given by such party to,
the FTC, the
Antitrust Division
of
the
Department
of
Justice
or
any
other
Governmental
Authority
or
in
connection
with
any
proceeding relating to the
Transactions pending or threatened
by a private party
(iv) permit Buyer or
the
Sellers’ Representative,
as
applicable,
to
review
any
such
substantive
or
material
procedural
communication
and
incorporate
reasonable
comments
thereto,
(v) use
reasonable
best
efforts
to
consult
with
Buyer
or
the
Sellers’
Representative,
as
applicable,
in
advance
of
any
meeting
or
conference with any Governmental Authority relating to the Transactions or in connection with any
proceeding relating
to the
Transactions pending
or threatened
by a
Person other
than a
Governmental
Authority, (vi) give Buyer
or the Sellers’
Representative, as applicable,
the opportunity to
attend and
participate
in
such
meetings
and
conferences
(to
the
extent
permitted
by
such
Governmental
Authority
or
other
Person),
and
(vii) take,
or
cause
to
be
taken,
all
other
actions
necessary
or
advisable
to
consummate
and
make
effective
the
Transactions
on
or
prior
to
the
Outside
Date.
Notwithstanding anything to the contrary
in this Agreement, in no event will Buyer be
obligated to
propose or agree
to accept any
undertaking or condition,
to enter into
any consent decree,
to make
any divestiture, to accept
any operational restriction or take
any other action that, in
the reasonable
judgment of Buyer, could
be expected to limit
the right of Buyer
to own or operate
all or any portion
of its respective businesses or assets.
Neither the Sellers nor any of their respective Affiliates shall,
without
Buyer’s
written
consent,
in
Buyer’s
sole
discretion,
discuss
or
commit
to
any
divestiture
transaction, or
discuss or
commit to
alter their
businesses or
commercial practices
in any
way, or
otherwise take or commit to take
any action that limits Buyer’s freedom
of action with respect to,
or
Buyer’s
ability to
retain any
of the
businesses, product
lines or
assets of,
the
Company Group
or
otherwise receive
the full
benefits of
this Agreement.
Neither Buyer,
on the
one hand,
nor Sellers
nor
the
Company
Group,
on
the
other
hand,
shall
litigate
with
any
Governmental Authorities
to
oppose
any
enforcement action
or
remove any
court
or
regulatory
Orders
impeding
the ability
to
consummate the Transactions without
the written consent of
the other (to be
the written consent of
the Sellers’ Representative in the case of Sellers and the Company Group); provided, however,
that
Buyer shall
direct the
defense of
the Transactions
in any
investigation, litigation,
enforcement action,
court or
regulatory Order,
or negotiations
with any
Governmental Authority; provided
further that
Buyer shall reasonably consult with the Sellers and in good faith consider their views regarding the
strategy and process relating to the defense.
58
(d)
No
Party
shall
consent
to
any
voluntary
delay
of
the
consummation
of
the
Transactions hereby
at the
behest of
any Governmental Authority
without the
consent of
Buyer or
the
Sellers’
Representative,
as
applicable,
which
consent
shall
not
be
unreasonably
withheld,
conditioned or delayed.
(e)
Buyer
shall
not,
and
shall
cause
its Affiliates
not,
acquire
or
agree
to
acquire,
by
merging with or into
or consolidating with, or by
purchasing a portion of
the assets of or
equity in,
any
business
or
corporation,
partnership,
association
or
other
business
organization
or
division
thereof, in each case, if the entering into of a
definitive agreement relating to, or the consummation
of
such
acquisition,
merger
or
consolidation
could
reasonably
be
expected
to
materially
delay
or
prevent the consummation of the Transactions.
6.4
Further
Actions
.
In
addition
to
the
governmental
filing
and
submission
requirements
addressed by
Section
6.3(c)
, each
of the
Parties will
cooperate and
use reasonable
best efforts
to take,
or
cause
to
be
taken,
all
appropriate
actions
and
to
make,
or
cause
to
be
made,
all
filings
and
submissions
necessary or advisable
under all other
applicable Laws, to
consummate and make
effective the
Transactions.
Without
limiting
the
generality
of
the
foregoing,
(i) the
Parties
will
use
reasonable
best
efforts,
as
applicable, to obtain all licenses, Permits,
consents, approvals, authorizations, qualifications and
Orders of
Governmental Authorities and to the extent required by Law to be obtained prior
to the Closing in order to
consummate
the
Transactions,
to
obtain
them
prior
to
the
Closing
and
(ii) the
Sellers
and
the
Company
Group will use reasonable
best efforts to obtain
all consents approvals, authorizations
of parties to contracts
with
the
Company
Group,
in
each
case,
as
are
necessary
in
connection
with
the
consummation
of
the
Transactions and to fulfill the conditions to the Transactions.
6.5
D&O Indemnification; D&O Insurance
.
(a)
For a period
of six years
after the Closing,
Buyer agrees that
all rights provided
in the
Organizational Documents or in any Contract to which
a member of the Company Group is a
party
with
respect
to
exculpation,
indemnification
and
advancement
of
expenses
for
acts
or
omissions
occurring
at
or
prior
to
the
Closing,
whether
asserted
or
claimed
prior
to,
at
or
after
the
Closing
(including in respect of any
matters arising in connection with
this Agreement and
the Transactions)
in favor
of each
individual who
at the
Closing is,
or at
any time
prior to
the Closing
was, (i) a
director,
manager or officer
of any member
of the
Company Group or
(ii) serving as a
director, manager
or
officer
of
any
other
Person
at
the
request
of
any
member
of
the
Company
Group
(each
Person
referred
to
in
clause (i)
or
(ii),
a
“D&O
Indemnified
Party”)
shall
survive
the
Closing
and
shall
continue in
full force
and effect.
For a
period of
six years
after the
Closing, Buyer
shall not,
and
shall not
permit any member
of the Company
Group to,
amend, repeal or
modify any provision
in
the
Organizational
Documents
relating
to
the
exculpation,
indemnification
or
advancement
of
expenses of
any D&O
Indemnified Party
with respect
to acts
or omissions
occurring at
or prior
to
the Closing, whether asserted or claimed prior to,
at or after the Closing (including in
respect of any
matters
arising
in
connection
with
this
Agreement
and
the
Transactions),
and
all
such
D&O
Indemnified
Parties
shall
continue
to
be
entitled
to
such
exculpation,
indemnification
and
advancement
of
expenses
to
the
fullest
extent
permitted
by
applicable
Law
and
that
no
change,
modification or
amendment of
such documents
or arrangements
may be
made that
will adversely
affect
any
such
D&O
Indemnified
Parties’ right
thereto
without
the
prior
written
consent
of
that
D&O Indemnified Party.
(b)
In addition
to the
other rights
provided for
in this
Section
6.5
and not
in limitation
thereof,
from
and
after
the
Closing,
Buyer
shall
cause
the
Company
Group
(each,
a
“D&O
Indemnifying Party”)
to, to
the fullest
extent permitted
by applicable
Law, (i) indemnify
and hold
harmless the D&O Indemnified Parties against
all D&O Expenses (as defined below)
and all losses,
59
claims,
damages,
judgments,
fines,
penalties,
liabilities
and
amounts
paid
in
settlement
(“D&O
Losses”)
in
respect
of
any
threatened,
pending
or
completed
investigation,
claim,
action,
inquiry,
suit, judgment
or other
Proceeding, whether
criminal, civil,
administrative or
investigative, based
on, arising
out of,
relating to
or in
connection with
the fact
that such
Person is
or was
a director
,
officer
or
manager
of
any
member
of
the
Company
Group
arising
out
of
or
relating
to
acts
or
omissions occurring
or existing
(or alleged
to have
occurred or
existed) at
or prior
to the
Closing
(including in respect
of acts or
omissions in connection
with this Agreement and the Transactions)
(a “D&O Indemnifiable Claim”) and (ii) advance, interest-free, to such
D&O Indemnified Party all
D&O
Expenses
incurred
in
connection
with
any
D&O
Indemnifiable
Claim
(including
in
circumstances where
the D&O
Indemnifying Party
is otherwise
entitled to
assume the
defense of
such claim and has assumed
such defense) reasonably promptly after
receipt of statements therefor
(subject
to
reimbursement
if
the
D&O
Indemnified
Party
is
subsequently
determined
by
a
non-
appealable judgment not
to be entitled
to indemnification under
this Section
6.5)
.
Advance payment
of D&O
Expenses in
connection with
any D&O
Indemnifiable Claims
shall continue
until such
D&O
Indemnifiable Claim is disposed
of or all judgments,
orders, decrees or other
rulings in connection
with
such
D&O
Indemnifiable
Claim
become
final
and
nonappealable
and
are
fully
and
finally
satisfied.
None of Buyer or
any member of the
Company Group shall settle,
compromise or consent
to the entry of judgment in any action or investigation or
threatened action or investigation, in each
case, in any manner
that would impose upon
the D&O Indemnified Party
any penalty or limitation
without the prior written consent of such D&O
Indemnified Party (not to be unreasonably withheld,
conditioned
or
delayed).
For
the
purposes
of
this
Section
6.5
,
“D&O
Expenses”
shall
include
reasonable and
documented attorneys’ fees,
expert fees,
arbitrator and
mediator fees
and all
other
out-of-pocket
costs,
charges
and
expenses
reasonably
paid
or
incurred
in
connection
with
investigating, defending, being a witness
in or otherwise participating in
(including on appeal or in
response to a
non-party subpoena), or
preparing to defend,
to be a
witness in or
otherwise participate
in, any D&O Indemnifiable Claim.
(c)
On or
prior to
the Closing
Date, Buyer
will (or
will cause
the Company
Group to)
purchase (the costs,
fees and expenses
of which shall
be borne equally
by Buyer, on
the one hand,
and the
Sellers, on
the other
hand), and
for the
six-year period
commencing on
the Closing
Date,
Buyer shall maintain in
effect directors’ and officers’ liability insurance covering acts or omissions
occurring at
or prior
to the
Closing Date
with respect
to those
Persons who
are currently
(and any
directors
or
officers
of
any
member
of
the
Company
Group
who
prior
to
the
Closing
become)
covered
by
the
existing
director
and
officer
insurance
of
the
Company
Group,
in
an
amount
and
scope,
as
well
as
terms,
conditions
and
retentions,
at
least
as
favorable
as
the
Company
Group’s
existing
directors’
and
officers’
liability
insurance
policies
(the
“D&O
Tail
Policy”);
provided,
however, that in no event will
Buyer or the Company Group be
required to expend for such six-year
period an amount in
excess of 125% of
the annual premium currently
paid by the Company
Group
for such insurance
policy (the “Maximum
Premium”).
Buyer will maintain
such D&O Tail Policy
in full force
and effect, and
continue to honor
the obligations thereunder.
If such insurance
coverage
cannot be obtained at
all, or can be
obtained only at a
premium in excess of
the Maximum Premium,
Buyer
will
cause
to
be
maintained
the
most
advantageous
tail
policies
of
directors’ and
officers’
insurance obtainable for a premium equal to the Maximum Premium.
(d)
The provisions of this Section
6.5
(i) will survive the Closing Date,
(ii) are intended
to be for the
benefit of, and will
be enforceable by, each
D&O Indemnified Party and
his or her heirs
and
representatives,
each
of
whom
is
an
intended
third-party
beneficiary
of
this
Section
6.5
,
and
(iii) are in
addition to,
and not
in substitution
for, any
other rights,
including rights
to indemnification
or contribution that any such Person may have
be Contract or otherwise.
Buyer will pay or cause to
be
paid
(as
incurred)
all
reasonable
and
documented
expenses,
including
reasonable
fees
and
expenses of counsel, that a D&O Indemnified Party may incur in enforcing the indemnity and other
60
obligations provided for
in this Section
6.5
(subject to reimbursement
if the D&O
Indemnified Party
is
subsequently
determined
not
to
be
entitled
to
indemnification
under
this
Section
6.5)
.
Notwithstanding
anything herein
to the
contrary, the
rights and
benefits of
the D&O
Indemnified
Parties under
this Section
6.5
shall not
be terminated
or modified
in any
manner adverse
to any
D&O
Indemnified Party without the prior written consent of such D&O Indemnified Party.
(e)
If (i) Buyer, any
member of the
Company Group or
any of their
respective successors
or
assigns
(A) consolidates
with
or
merges
into
any
other
Person
and
is
not
the
continuing
or
surviving
corporation
or
entity
of
such
consolidation
or
merger
or
(B) transfers
or
conveys
all
or
substantially all
of its
properties and
assets to
any Person
(including by
liquidation, dissolution
or
assignment for the benefit of creditors or similar action), then,
and in each such case and (ii) neither
Buyer
or
a
member
of
the
Company
Group
to
be
controlled
by
Buyer
after
such
transaction
has
assumed
the
obligations
set
forth
in
this
Section
6.5
,
then
Buyer
shall,
or
shall
cause,
proper
provision to be
made so that
the successors and
assigns of the
Company Group member
subject to
such transaction will assume the obligations set forth in this Section
6.5.
(f)
Each of
the Company
Group shall
be a
full indemnitor
of first
resort, shall
be required
to advance the full amount of
all D&O Expenses incurred by
a D&O Indemnified Party and shall
be
liable for the full amount of all D&O
Losses to the extent legally permitted and as
required, without
regard to any rights a D&O Indemnified Party may have against any
direct or indirect holder of the
Company
Group
or
any
of
its
respective Affiliates
(collectively,
the
“Other
Indemnitors”)
or
any
insurer providing insurance coverage
under an insurance policy
issued to any Seller
or any of their
respective Affiliates.
Each of Buyer and the
Company Group further agrees that
no advancement or
payment
by
any
Other
Indemnitor
with
respect
to
any
D&O
Indemnifiable
Claim
or
any
D&O
Expenses shall
alter or
limit the
obligations of
the Company
Group hereunder
and that
any Other
Indemnitor shall have
a right of
contribution and be
subrogated to the
extent of such
advancement
or
payment
to
all
of
the
rights
of
recovery
of
the
D&O
Indemnified
Party
against
the
Company
Group
with
respect
thereto,
and
the
Company
Group
hereby
irrevocably
waive,
relinquish
and
release the Other Indemnitors for indemnification, contribution or subrogation in respect thereof.
6.6
Employee Matters
.
(a)
Continuation
of
Employment
.
The
Parties
intend
that
there
shall
be
continuity
of
employment with respect to
the Company Group Employees
as set forth below.
Prior to the Closing
Date, the Sellers shall transfer
(or cause to be transferred)
the employment of any Company
Group
Employee who is not employed by a
member of the Company Group as of
the date hereof (i.e., the
Company Group
Employees listed
on Schedule
1.1-
1) to
a member
of the
Company Group.
Each
Company Group Employee
who is actively
employed by the
Company Group as
of the Closing
shall
be known as a “Continuing
Employee.”
Following the date hereof,
Sellers shall provide Buyer
with
an updated version
of the Company Group
Employee List (i) upon
Buyer’s reasonable request
and
(ii) to the extent not already updated, no less than 15 days prior to the Closing.
(b)
Inactive
Company
Group
Employees
.
Notwithstanding
the
provisions
of
Section
6.6(a)
, and to the
extent allowable under applicable Law,
the employment of each Company
Group Employee
who is
not actively
at work
and is
on a
leave of
absence as
of the
Closing Date
(each, an
“Inactive Company Group
Employee”) shall,
prior to the
Closing Date, be
transferred to
an Affiliate
of
the
Company
Group
(other
than
a
member
of
the
Company
Group).
An
Inactive
Company
Group
Employee
shall
become
a
Continuing
Employee
only
upon
his
or
her
return
to
active employment with Buyer or
its Affiliates,
but only if such
Inactive Company Group Employee
returns to active
employment within six
months following the
Closing Date (or
such longer period
61
as required by
applicable Law).
The Sellers agree
to promptly notify
Buyer upon receiving
notice
of an Inactive Company Group Employee’s pending return to work.
(c)
Terms
of
Employment
.
During
the
period
from
the
Closing
Date
until
December 31, 2025, Buyer will,
or will cause its
Subsidiaries (including the
Company Group after
the
Closing)
to,
provide
to
each
Continuing
Employee
(except
as
otherwise
agreed
to
in
an
employment agreement
with an
individual listed
in Schedule A)
(i) a base
salary or
wage rate,
as
applicable, and target annual
cash incentive opportunities (determined
as a percentage
of base salary
or wage
rate), if
any, that
are at
least as
favorable on
an aggregate
basis to
such Continuing
Employee
as
those
provided
to
such
Continuing
Employee
immediately
prior
to
the
Closing
(provided,
however, that
the performance
metrics and
structure of
such annual
cash incentive
opportunities shall
be comparable
to Buyer’s
annual cash
incentive plan),
and (ii) other
compensation and
employee
benefits
(excluding
defined
benefit
pension,
nonqualified
deferred
compensation,
phantom
share,
equity
or
equity-based
or
other
long-term
incentive
compensation,
retention,
change
in
control,
transaction bonus
and retiree
or post-employment
welfare or
similar plans
and arrangements)
that
are
substantially
comparable
in
the
aggregate
to
those
provided
to
such
Continuing
Employee
immediately prior to the Closing.
(d)
Closing
Year Bonuses
.
On the
Closing
Date,
the Sellers
shall,
or
shall cause
their
applicable Affiliates
(which,
for
the
avoidance
of
doubt,
includes
any
member
of
the
Company
Group), to
make pro-rated
payments under
each annual
cash bonus
plan maintained
by the
Sellers
or their Affiliates
(including the
Company Group)
to eligible
Continuing Employees
in respect
of
the
performance
period
in
effect
as
of
the
Closing
Date,
with
such
pro-ration
determined
by
multiplying the actual annual cash bonus earned as of the Closing Date by a fraction, the numerator
of which is
the number
of days in
such performance period
that elapsed prior
to the Closing
Date,
and the
denominator
of which
is 365.
Effective
as of
the Closing
Date, Buyer
shall maintain,
or
shall
cause
its
Subsidiaries
(including
the
Company
Group
after
the
Closing)
to
maintain
one
or
more annual cash
bonus plans in
which Continuing Employees
who participated in
an annual cash
bonus
plan
of
a
member
of
the
Company
Group
immediately
prior
to
the
Closing
Date
shall
be
eligible to participate.
(e)
Certain Welfare Plan Matters
.
From and after the
Closing Date, Buyer shall,
or shall
cause its applicable Affiliate to, grant
each Continuing Employee with credit for all service with the
Company Group earned prior to the Closing Date, to the same extent as such Continuing Employee
was or would
have been entitled
to such service
under applicable Employee
Plans before the
Closing
Date,
(i) for
eligibility
and
vesting
purposes
and
(ii) for
purposes
of
vacation
and
paid
time
off
accrual
and
severance
benefit
determinations
under
each
employee
benefit
plan
or
arrangement
maintained by Buyer or its Affiliates (including vacation, paid
time off and severance plans)
that is
made available to
such Continuing Employee
after the Closing
(each, a “Buyer
Plan”) (but not
for
defined benefit pension plan accruals or where such
service would result in duplication of benefits).
Without limiting the
foregoing, Buyer shall,
and shall cause
its Subsidiaries (including
the Company
Group after the Closing) to, provide, honor
and recognize all accrued but unused vacation
as of the
Closing Date.
Buyer shall,
or shall
cause its
applicable Affiliate to,
use commercially
reasonable
efforts
to
(x) waive,
or
cause
to
be
waived,
any
pre-existing
condition
limitation,
exclusions,
actively-at work
requirements, waiting
periods and
any similar
limitations under
Buyer Plans
that
would
prevent
immediate
or
full
participation
under
any
welfare
benefit
plan
providing
medical,
dental,
hospital,
pharmaceutical
or
vision
benefits,
except
to
the
extent
that
such
pre-existing
condition limitation,
exclusions, actively-at
work requirements
and waiting
periods would
have been
applicable under the comparable benefit plan immediately prior
to the Closing and (y) recognize, or
cause to
be recognized,
the dollar
amount of
all deductible
or co-insurance
expenses paid
by each
Continuing
Employee
(and
his
or
her
eligible
dependents)
under
an
Employee
Plan
prior
to
the
62
Closing Date in the same
plan year in which the
Closing Date occurs for purposes
of satisfying such
year’s deductible and
co-payment limitations under
any applicable, comparable
Buyer Plan in
which
the Continuing Employees participate from and after the Closing, as if such amounts
had been paid
in accordance with such Buyer Plan.
(f)
Employee Plans Other than
Company Group Plans; Sponsorship
of Company Group
Plans
.
Buyer and its Affiliates shall not
assume any obligations or
liabilities under or with
respect
to,
or
receive
any
right
or
interest
in
any
trusts
relating
to,
any
assets
of
or
any
insurance,
administration
or
other
contracts
pertaining
to,
any
of
the
Employee
Plans
that
are
not
Company
Group Plans.
Unless Buyer instructs the Sellers otherwise
prior to the Closing, the
Sellers shall, at
least five Business Days prior to the
Closing, transfer (or cause to be transferred)
the sponsorship of
any Company Group
Plan that is
not sponsored by
a member of
the Company Group
to a member
of
the
Company
Group
and
take
action
as
may
be
necessary
to
exclude
any
entity
that
is
not
a
member
of
the
Company
Group
from
participating
in
such
Company
Group
Plans
(including
amending any such Company Group Plan to reflect the transfer of sponsorship, and to exclude such
entities contingent on, and as of the Closing Date).
The Company Group shall provide to Buyer for
its
reasonable
review
and
approval
copies
of
all
documents
effectuating
such
transfer
and
amendments.
Buyer or its Affiliates shall assume, or cause the applicable member of the Company
Group to continue, sponsorship of and all obligations with respect to, the Company Group Plans.
(g)
No
Third-Party
Beneficiaries
.
Nothing
in
this
Agreement
shall
be
construed
to
prevent Buyer or any of its Affiliates
from (i) terminating or modifying the terms of employment of
any Continuing Employee following the Closing
Date or (ii) terminating or modifying to
any extent
any Company
Group Plan.
Nothing in
this Agreement will
be construed
as an
amendment to
any
Employee Plan or any
other compensation or benefit plans
maintained for or provided to
directors,
officers
or
employees
of
Buyer,
its
Affiliates
or
the
Company
Group
prior
to
or
following
the
Closing.
The
Sellers
and
Buyer
acknowledge
and
agree
that
all
provisions
contained
in
this
Section
6.6
are included for the sole benefit of the Sellers, Buyer
and their respective
Affiliates, and
that nothing in this Section
6.6
, whether express or implied, shall create any third-party
beneficiary
or
other
rights
in
any
other
Person,
including
any
Continuing
Employee
or
any
other
current
or
former
employee
or
participant
(or
any
spouse,
dependent
or
other
beneficiary
thereof),
of
the
Sellers,
Buyer
or
their
respective Affiliates,
including
with
respect
to
continued
employment,
the
terms
and
conditions
of
employment,
or
to
any
benefit
or
compensation
plan,
program,
policy,
agreement or arrangement.
6.7
Tax Matters
.
(a)
Tax Certificates
.
At or prior to
the Closing, the Sellers’ Representative shall deliver
or cause to be delivered to Buyer an executed IRS Form W-9 from each Transferor.
(b)
Pre-Closing Tax Returns
.
(i)
The Sellers’ Representative shall have exclusive control over the preparation
and filing
of any
Tax
Return of
any Seller
or Transferor
,
including IRS
Form 1120-S
and
IRS
Form 1065
and
any
similar
state,
local
or
foreign
income
Tax
Returns
filed
by
Echo
Lake Foods Transferor (as
a successor to Echo Lake Foods), Echo
Lake Properties or Elkin
Properties (such Tax Returns, the “Seller Returns”).
(ii)
The
Sellers’
Representative
will
prepare
and
timely
file
any
income
Tax
Return of any
member of the
Company Group for
any Pre-Closing Tax Period
that ends on
or prior to
the Closing Date
that is required to
be filed after
the Closing Date
and that reflects
items that flow through to (or are otherwise reportable by) any Seller or
the Securityholders
63
(such Tax Return, a
“Passthrough Return”).
Each Passthrough Return
shall be prepared
on
a
basis
consistent
with
past
practice
except
to
the extent
otherwise
required
by
applicable
Law.
At least 20 days prior to the due
date (including extensions) for filing any
Passthrough
Return, the Sellers’
Representative shall deliver a copy
of such Passthrough Return, together
with all supporting
documentation and work papers,
to Buyer for
its review and
reasonable
comment,
and
the
Sellers’
Representative
shall
consider
in
good
faith
all
reasonable
comments received from Buyer at least five days prior to the due date
(after giving effect to
any valid extensions thereof) of such Passthrough Return and
shall provide an as-filed copy
of such Passthrough Return to Buyer upon filing.
(iii)
Buyer shall prepare
and file, or
cause to be
prepared and filed,
all Tax Returns
required to
be filed
by any
member of
the Company
Group for
any Straddle
Period that
is
required
to
be
filed
after
the
Closing
Date
and
that
is
not
a
Passthrough
Return
(each,
a
“Buyer
Prepared
Return”).
To
the
extent
such
Buyer
Prepared
Return
(A) reflects
an
Indemnified Tax,
(B) reflects
a Tax
included
as
a
liability
in
the
determination
of
the Tax
Liability
Amount,
Working
Capital,
Company
Group
Expenses
or
Indebtedness,
or
(C) reflects
a
Tax
Refund
Sellers
are
entitled
to
pursuant
to
Section
6.7(h)
,
each
Buyer
Prepared
Return
shall
be
prepared
on
a
basis
consistent
with
past
practice
to
the
extent
permitted by applicable
Law under a
“more likely than
not” (or higher)
level of authority.
At
least
30 days
prior
to
the
due
date
(including
extensions)
for
filing
any
Buyer
Prepared
Return (other than
Buyer Prepared Returns
relating to payroll
Tax, social security
or property
Tax
or
similar
Taxes,
in
each
case
a
copy
of
which
shall
be
provided
to
the
Sellers’
Representative
by
Buyer
upon
the
Sellers’ Representative’s
written
request),
Buyer
shall
deliver a
copy of
such Buyer
Prepared Return,
together with
all supporting
documentation
and work
papers, to
the Sellers’ Representative
for its
review and
reasonable comment.
If
the
Sellers’ Representative
objects
to
any
item
on
any
such
Buyer
Prepared
Return,
the
Sellers’ Representative
shall,
within
15 days
after
receipt
of
such
Buyer
Prepared
Return,
notify
Buyer
in
writing
of
the
Sellers’
Representative’s
objection,
which
the
Sellers’
Representative
and
Buyer
shall
cooperate
in
good
faith
to
resolve.
If
the
Sellers’
Representative and Buyer are unable to resolve such objection within five days after receipt
by
Buyer
of
notice
thereof,
then
the
Sellers’
Representative
and
Buyer
shall
submit
the
objection
to
the
Independent Accountant
for
resolution
using
the
procedures
outlined
in
Section
2.4(d)
, applied
mutatis mutandis
.
If the Independent
Accountant is unable
to resolve
any such objection
before the due
date (with extensions)
for the applicable
Buyer Prepared
Return, the
applicable Buyer
Prepared Return
shall be
filed as
prepared by
Buyer and
then
amended to
reflect the
Independent Accountant’s resolution.
Buyer will
cause each
Buyer
Prepared Return to be timely filed and will provide a copy to the Sellers’ Representative.
(iv)
In
any
case
under
this
Agreement
involving
a
Straddle
Period,
(i) real,
personal
and intangible
property Taxes
(“Property Taxes”)
for
the
Pre-Closing Tax
Period
shall be equal to the amount of such Property
Taxes for the entire Straddle Period multiplied
by a fraction,
the numerator of
which is the
number of days
during the Straddle
Period that
are in the Pre-Closing Tax Period and
the denominator of which is the number of days
in the
Straddle
Period
(provided,
however,
that
for
the
purposes
of
apportioning
such
Straddle
Period Property Taxes, the effective date of any adjustment to the rate,
taxability, exemption
or
other
change
upon
which
such
Property
Taxes
are
computed
shall
be
respected),
and
(ii) Taxes (other than Property Taxes)
for the Pre-Closing Tax Period
shall be computed as if
such Tax period
ended as
of the
close of business
on the
Closing Date;
provided, however,
that, for
the avoidance
of doubt,
all permitted
allowances, credits,
exemptions and
deductions
that are
normally computed
on the
basis of
an entire
year period
(such as
depreciation and
amortization deductions) shall
accrue on a
daily basis and
shall be allocated
between the pre-
64
Closing portion of the Straddle Period
and the post-Closing portion of the Straddle
Period in
proportion to the number of days in each such period.
(v)
Except to the extent attributable, in whole or in part, to
the use of any item of
loss,
deduction,
creditor
or
other
similar
item
arising
in
a
Tax
period
beginning
after
the
Closing
Date,
without
duplication
of
any
Tax
Refunds
payable
to
the
Sellers
under
Section
6.7(h)
, Buyer
shall pay
to the
Sellers an
amount of
cash equal
to the
amount by
which
(A) the Closing
Tax
Liability Amount
exceeds (B) the
Tax
Liability Amount
actually paid
(determined as of the date on which the final Tax
Return for Income Taxes
of the Company
Group for the Pre-Closing Tax
Period is filed) within 30 days after the
filing of the last Tax
Return for Income Taxes of the Company Group for the Pre-Closing Tax
Period.
(c)
Cooperation on Tax
Matters
.
Buyer and the
Sellers will cooperate
fully, as and
to the
extent reasonably requested
by any other
Party, in connection
with the filing
of Tax
Returns pursuant
to
this
Section
6.7
and
any
audit,
litigation
or
other
Proceeding
with
respect
to
Taxes.
Such
cooperation shall include the retention and (upon any other Party’s
request) the provision of records
and information
that are
reasonably relevant
to any
such audit,
litigation or
other Proceeding,
making
employees
available
on
a
mutually
convenient
basis
to
provide
additional
information
and
explanation of any material provided hereunder and signing any Tax Return prepared in accordance
with this
Section
6.7.
Buyer agrees
(i) to retain
all books
and records
with respect
to Tax
matters
pertinent to the Company Group relating to any Tax period beginning before the Closing Date until
the expiration
of the
statute of
limitations (including
any extensions
thereof) of
the Tax periods
to
which
such
books
and
records
relate
(or
such
longer
period
as
may
be
necessary
to
resolve
any
disputes
hereunder),
and
to
abide
by
all
record
retention
agreements
entered
into
with
any
Tax
authority and (ii) to
give the Sellers’ Representative reasonable
written notice prior
to transferring,
destroying or discarding any such books and records and, if
the Sellers’ Representative so requests,
the
Company
Group
or
Buyer,
as
the
case
may
be,
will
allow
the
Sellers’ Representative
to
take
possession of such books and records.
(d)
Tax Contests
.
From and after the
Closing Date, Buyer shall
give prompt notice to
the
Sellers’ Representative if any Governmental Authority provides notice of an
intent to audit, review
or
conduct
any
other
proceeding
with
respect
to
the Taxes
or Tax
Returns
of
any
member
of
the
Company
Group
for
any
Pre-Closing
Tax
Period.
The
Sellers’ Representative,
at
the
cost
and
expense
of
the
Sellers,
shall
have
the
right
to
control
any
audit,
examination,
claim
or
other
proceeding
by
any
Governmental
Authority
with
respect
to
any
Taxes
or
Tax
Returns
of
the
Company
Group
(a
“Tax
Claim”)
for
any Tax
period
ending
on
or
prior
to
the
Closing
Date
that
would
or
could
reasonably
be
expected
to
(i) result
in
an
Indemnified
Tax,
(ii) increase
any
Tax
liability of any
Seller, Securityholder or
any of their Affiliates,
(iii) increase any Tax
reflected as a
liability
in
the
determination
of
the
Tax
Liability
Amount,
Working
Capital,
Company
Group
Expenses
or
Indebtedness,
or
(iv) reduce
a
Tax
Refund
Sellers
are
entitled
to
pursuant
to
Section
6.7(h)
(a
“Seller
Tax
Claim”).
With
respect
to
any
Seller
Tax
Claim,
(i) the
Sellers’
Representative shall
provide Buyer with
a timely and
reasonably detailed account
of each stage
of
such Seller Tax
Claim, (ii) the Sellers’ Representative shall
consult with Buyer
and offer Buyer
an
opportunity to
comment before
taking any
significant action
or submitting
any written
materials with
respect to such Seller
Tax Claim, (iii) the Sellers’
Representative shall defend such Seller
Tax Claim
diligently and in good faith as
if it were the only party in
interest, (iv) Buyer shall be entitled, at
its
own expense, to participate and attend any
meetings or conferences with the relevant
Governmental
Authority with
respect to
such Seller Tax
Claim and
(v) the Sellers’ Representative shall
not settle
or compromise
any material
issue with
respect to
such Seller
Tax Claim
without the
prior written
consent of Buyer, which
consent shall not be
unreasonably withheld, conditioned or
delayed.
Buyer
shall control any Tax
Claim for any
Pre-Closing Tax Period (including
any Straddle Period)
that is
65
not a Seller
Tax Claim (a
“Buyer Tax
Claim”).
With respect to
any Buyer
Tax Claim, (1) Buyer
shall
provide the
Sellers’ Representative with a
timely and
reasonably detailed
account of
each stage
of
such Buyer Tax
Claim, (2) Buyer shall consult
with the Sellers’
Representative and offer the
Sellers’
Representative an
opportunity
to comment
before taking
any significant
action
or submitting
any
written
materials
with
respect
to
such
Buyer
Tax
Claim,
(3) Buyer
shall
defend
such
Buyer
Tax
Claim
diligently
and
in
good
faith
as
if
it
were
the
only
party
in
interest,
(4) the
Sellers’
Representative shall
be entitled,
at the
Sellers’ expense, to
participate and
attend any
meetings or
conferences with
the relevant
Governmental Authority with
respect to
such Buyer
Tax Claim
and
(5) Buyer shall
not settle
or compromise
any material
issue with
respect to
such Buyer Tax
Claim
that would
or could
reasonably be
expected to
(A) result
in an
Indemnified Tax,
(B) increase any
Tax liability of any Seller,
Securityholder or any of their
Affiliates, (C) increase any Tax
reflected as
a
liability
in
the
determination
of
the
Tax
Liability Amount,
Working
Capital,
Company
Group
Expenses
or
Indebtedness,
or
(D) reduce
a
Tax
Refund
Sellers
are
entitled
to
pursuant
to
Section
6.7(h)
, in each
case without the
prior written consent
of the Sellers’ Representative, which
consent shall
not be
unreasonably withheld,
conditioned or
delayed.
Notwithstanding anything
to
the
contrary
contained
in
this
Agreement,
the
procedures
for
all
Tax
Claims
shall
be
governed
exclusively by this Section
6.7(d)
(and not
Article IX)
.
(e)
Transfer Taxes
.
All transfer,
documentary, sales,
use, stamp,
registration and
other
such Taxes (“Transfer Taxes”) incurred by a member of the Company Group in connection with the
Equity Purchase (but excluding any Taxes based
on net income) shall be borne and paid 50%
by the
Sellers, on one hand,
and 50% by Buyer,
on the other hand,
when due.
Buyer and the Sellers
will,
at their joint
expense, file all
necessary Tax
Returns and other
documentation with respect
to all such
Transfer Taxes, and, if required
by applicable Law, Buyer and
the Sellers will join in
the execution
of any
such Tax
Returns and
other documentation.
The costs
associated with
filing these
Tax Returns
and documentation will be borne
and paid 50% by the
Sellers, on one hand, and
50% by Buyer, on
the other hand.
(f)
Allocation of
Purchase Price
.
The Final
Adjusted Equity
Price paid
in connection
with the Equity Purchase (along with any other items that are treated as additional
consideration for
U.S.
federal
and
applicable
state
and
local
Income Tax
purposes
(including,
for
the
avoidance
of
doubt, any liabilities
that, for
U.S. federal and
applicable state and
local Income Tax
purposes, are
treated
as
assumed
by
Buyer))
shall
be
allocated
among
the
assets
of
the
Company
Group
in
accordance with
Section 1060 of
the Code,
the Treasury
Regulations promulgated
thereunder, and
the
methodologies
set
forth
in
Schedule B-2
attached
hereto
(the
“Allocation
Methodology”).
Within 60 days after the
final determination of the
Closing Statement pursuant to
Section
2.4
, Buyer
shall
prepare
and
provide,
or
cause
to
be
provided,
to
the
Sellers’ Representative
an
initial
draft
allocation
prepared
in
accordance
with
the Allocation
Methodology
(the
“Proposed Allocation”).
Within 30 days after its receipt of such Proposed Allocation, the Sellers’
Representative will review
and comment on the allocation, and, absent objection, will sign and
return an executed copy thereof
to Buyer, which allocation will be final.
If the Sellers’ Representative requests any revisions to the
allocation, Buyer
and the
Sellers’ Representative will
discuss such
revisions in
good faith,
and, if
Buyer and the Sellers’
Representative are unable to finalize the allocation
following such good faith
discussions,
the
allocation
will
be
as
finally
determined
by
the
Independent Accountant,
or
if
the
Independent Accountant
is
not
willing
to
be
retained
for
such purpose
or
is
determined
not
to
be
independent
of
either
the
Sellers’
Representative
or
Buyer,
a
reputable,
nationally
recognized
independent accounting
firm
that is
mutually
agreed
on
by Buyer
and
the Sellers’
Representative
(with
such
Parties
sharing
the
costs
of
such
equally);
provided,
however,
that
in
any
event
the
Independent Accountant
or independent accounting firm
retained pursuant to this
Section
6.7(f)
will
be instructed and
bound to make
such determination in
a manner consistent
with this
Agreement and
the Allocation Methodology.
The determination of such allocation shall be final and binding for all
66
applicable Tax
purposes.
The
Parties
(and their
respective Affiliates)
shall
not take
(or
cause
the
Company Group to take) any
position inconsistent with the foregoing
intent on any Tax
Return or in
any Tax
proceeding, except
upon a
final “determination”
by a
Governmental Authority within
the
meaning of Section 1313(a)(1) of the
Code; provided, however, that this
Section
6.7(f)
shall not be
interpreted
to
prohibit
or
hinder
any
Party
from
settling
any
Tax
audit
or
dispute
in
a
manner
inconsistent with the final allocation determined hereunder.
(g)
Intended Tax Treatment
.
For U.S. federal and applicable state and
local Income Tax
purposes, the Parties covenant
and agree to characterize
the F Reorganization as an
Income Tax-free
reorganization of
Echo Lake
Foods (as
it existed
as an
S corporation for
U.S. federal
Income Tax
purposes immediately before the F Reorganization) under Section 368(a)(1)(F) of the Code (and all
comparable state,
local and
non-U.S. Income
Tax Laws)
into Echo
Lake Foods
Transferor (as
the
continuing
S corporation
immediately
after
the
QSub
Election
and
no
separate
election
for
Echo
Lake Foods Transferor to
be treated as
an S corporation for
U.S. federal Income Tax
purposes was
required)
as
contemplated
by
Revenue
Ruling
2008-18,
with
Echo
Lake
Foods
becoming
a
disregarded
entity
of
Echo
Lake
Foods
Transferor
as
a
“qualified
subchapter S
subsidiary”
as
described
in
Sections 1361
and 1362
of
the
Code,
and
then
(after
the
Conversions)
each
of
Echo
Lake Foods, Xenitel and Huntington becoming a disregarded entity of Echo Lake Foods Transferor
pursuant to
Treasury Regulations Section 301.7701-3(b)(1)(ii).
For U.S.
federal and
applicable state
and
local
Income
Tax
purposes,
the
Parties
(and
their
respective
Affiliates)
shall
treat
the
ELT
Contribution
as
an
“assets-over”
partnership
merger
pursuant
to
Treasury
Regulations
Sections
1.708-1(c)(1) and 1.708-1(c)(3)(i),
with the result
that (i) Echo Lake
Properties will be
treated as the
“resulting partnership,” (ii) ELT will be deemed to contribute all of its assets and all of
its liabilities
to Echo Lake Properties in
exchange for interests in Echo
Lake Properties in a transaction
described
in Section 721(a) of the
Code, and immediately thereafter ELT
will be deemed to distribute
interests
in Echo Lake Properties to its members in complete liquidation, and (iii) Echo Lake Properties
will
be treated as a continuation of
the Echo Lake Properties partnership
for purposes of Section 708 of
the Code.
For U.S. federal
and applicable state
and local Income
Tax purposes, the
Parties (and their
respective Affiliates) shall treat the
Equity Purchase as a
taxable sale of
the assets of
each member
of
the
Company
Group
pursuant
to
Section 1001
of
the
Code.
Each
of
the
Parties
(and
their
respective Affiliates) shall file all
Tax Returns consistent
with the Tax treatment
as set forth
in this
Section
6.7(g)
and shall
not voluntarily
take any
position inconsistent
therewith upon
examination
of any relevant Tax
Return in any
Tax proceeding with
respect to such Tax
Returns, except upon
a
final “determination” by a Governmental
Authority within the meaning of Section 1313(a)(1) of
the
Code; provided, however,
that this
Section
6.7(g)
shall not
be interpreted to
prohibit or hinder
any
Party from
settling any
Tax audit
or dispute
in a
manner inconsistent
with the
Tax treatment
described
herein.
(h)
Tax Refunds
.
Except to the
extent (i) reflected as
an asset in
Closing Working
Capital
or (ii) attributable to a carry back or other
use of any item of loss, deduction, credit or other
similar
item arising in a Tax period
beginning after the Closing
Date, any refund of Taxes of
the Company
Group
for
any
Pre-Closing
Tax
Period
(determined
in
accordance
with
the
principles
of
Section
6.7(b)(iv)
for any
Straddle Period),
including interest
paid or
credited with
respect thereto
by
the
applicable
Governmental Authority
(each,
a
“Tax
Refund”),
whether
in
the
form
of
cash
received
or
a
credit
for
overpayment
of
Taxes
that
may
be
used
to
offset
cash
Taxes
otherwise
payable, shall be the property of the Sellers.
For the avoidance of doubt, the Specified
Tax Refunds
are Tax
Refunds that
shall
be
the property
of the
Sellers.
Buyer
shall
pay or
cause
to
be
paid
to
Sellers the amount of any
such Tax Refund no later
than five Business Days after the
receipt of such
Tax Refund from
the applicable
Governmental Authority (or,
if the Tax Refund
is in
the form
of a
credit
for
overpayment
of
Taxes
used
to
offset
cash
Taxes
otherwise
payable,
no
later
than
five Business Days after the earlier of (x) the filing of
the Tax Return claiming such credit or offset
67
and (y) the due date of such Tax Return after taking into account all valid extensions), in each case,
net of any unreimbursed reasonable and documented out-of-pocket costs
(including Taxes) incurred
by Buyer and its Affiliates in respect of
such refund (or credit).
Buyer shall, at the sole
expense of
the Sellers, if the
Sellers’ Representative reasonably requests, cause the Company Group to
file for
and use commercially
reasonable efforts to
obtain the receipt
of any Tax
Refund to which
Sellers are
entitled
under
this
Section
6.7(h).
If
any
Tax
refunds
(including
any
interest
related
thereto) previously paid
to the
Sellers pursuant
to this
Section
6.7(h)
are required
to be repaid
to a
Governmental Authority or
are subsequently
disallowed by
a Governmental Authority,
the Sellers
shall promptly repay to Buyer such previously paid amounts.
(i)
Certain Tax
Matters
.
Without the
prior written
consent of
the Sellers’
Representative,
Buyer shall not, and shall cause each member of the Company Group not to, (i) amend or cause the
amendment of a Tax Return of any of the members of the Company Group with respect
to any Pre-
Closing
Tax
Period,
(ii) change
an
annual
accounting
period
or
adopt
or
change
any
accounting
method with respect to any Pre-Closing Tax
Period, (iii) file or amend any Tax election
concerning
any member
of the
Company Group
with respect
to any
Pre-Closing Tax
Period, (iv) extend
or waive
the applicable statute of limitations with respect to a Tax of any member of the Company Group
for
a Pre-Closing Tax
Period, (v) file
any ruling
request with
any Governmental Authority that
relates
to Taxes
or Tax
Returns
of
any member
of the
Company
Group
for
a
Pre-Closing Tax
Period,
or
(vi) initiate
or
participate
in
any
voluntary
disclosure
program
with
any
Governmental Authority
regarding any Tax (or potential Taxes)
or Tax Returns of any
member of the Company
Group for a
Pre-Closing
Tax
Period,
in
each
case,
if
such
action
would,
or
could
reasonably
be
expected
to,
(A) increase any Tax liability of any Seller, Securityholder or any of their
Affiliates, (B) give rise to
any Indemnified Taxes, (C) increase
any Tax reflected as
a liability in the
determination of the Tax
Liability Amount,
Working Capital, Company
Group Expenses or
Indebtedness, or (D) reduce a
Tax
Refund Sellers are entitled to pursuant to Section
6.7(h).
(j)
Other Tax Matters
.
(i)
The
Parties
agree
that
any
gains,
income,
deductions,
losses
or
other
items
realized by any member of the Company Group for U.S.
federal, state and local Income Tax
purposes with
respect to
any Buyer
Closing Date
Transaction
shall be
treated as
occurring
on the day immediately following the Closing Date.
(ii)
The members
of the
Company Group
shall treat
any deductions
attributable
to (A) any
Transaction
Tax
Deductions and
all related
amounts paid,
accrued or
accruable
on
or
before
the
Closing
Date,
and
(B) any
Company
Group
Expenses
paid,
accrued
or
accruable on
or before
the Closing
Date, as
deductible in
a Pre-Closing
Tax
Period to
the
fullest extent allowed by Law.
(iii)
Buyer shall
not, and
shall not
allow any
member of
the Company
Group to,
engage in
any transaction
after the
Closing, but
on the
Closing Date,
that is
outside of
the
ordinary
course
of
business
and
is
not
contemplated
by
this
Agreement
for
the
intended
purpose
of (A) increasing
any Tax
liability
of any
Seller
or Securityholder
or any
of their
Affiliates,
(B) giving rise
to any
Indemnified Taxes,
(C) increasing any
Tax
reflected as
a
liability in
the determination
of the
Tax Liability Amount,
Working Capital, Company Group
Expenses or
Indebtedness, or
(D) reducing a
Tax
Refund Sellers
are entitled
to pursuant
to
Section
6.7(h).
6.8
Confidentiality.
For a period
of five years
after the Closing,
each Seller shall,
and shall cause
its
post-Closing Affiliates
(excluding,
for
the
avoidance
of
doubt,
Buyer
and
the
Company
Group)
and
68
representatives
to,
treat
as
confidential
and
safeguard
any
and
all
information,
knowledge,
data,
ideas,
concepts, plans and strategies whether now or hereafter existing relating to or arising from the past, current
or planned business,
activities, finances and/or
operations of the
Company Group and
the Business that
is
known to the Sellers or
such Affiliates
(the “Confidential Information”) except (a) as
otherwise agreed to in
writing by
Buyer, (b) for
disclosures to
any Governmental
Authority having
jurisdiction to
require disclosure
or to any arbitral body to the extent required by same, (c) as otherwise may be required by applicable Law,
(d) in
connection
with
enforcing
any
rights
under
this
Agreement
or
any
Ancillary
Agreement,
(e) as
required
for
internal
audit,
financial
and Tax
purposes,
or
(f) for
disclosures
to
its
representatives
in
the
ordinary course of business, but only if such representatives are
made aware of and directed to abide by the
provisions
of
this
Section
6.8,
and
such
Seller
shall
be
responsible
for
any
breach
hereof
by
such
representatives.
Notwithstanding the
foregoing, if
any Seller
or any
of its Affiliates
or representatives
is
requested
or
required
disclose
any
Confidential
Information
in
response
to
a
court
order
or
as
otherwise
requested or required by any Law, or to comply with Tax reporting requirements (including the preparation
of Tax Returns), regulatory
reporting, audit or other
compliance obligations, to the
extent permitted by such
Law
or
other
compliance
obligation,
such
Seller, Affiliate
or
representative
thereof
will
notify
Buyer
in
writing
of
such
request
or
obligation
as
soon
as
practicable
after
such
Seller, Affiliate
or
representative
thereof becomes aware of it
and, if possible, before any information
is disclosed, so that a protective
order
or other appropriate remedy may
be obtained by Buyer at Buyer’s
sole expense.
The Parties acknowledge
that the confidentiality
obligations set forth
in this Section
6.8
shall not extend
to information, knowledge
and data that (i) is or becomes
generally available to the public other
than as a result of a
disclosure by such
Seller or any of
its Affiliates or representatives, (ii) is available
or becomes available to
such Seller or any
of its Affiliates or their respective representatives on
a non-confidential basis from a
source other than any
member of
the Company
Group that
is not
bound by
a confidentiality
or fiduciary
obligation to
the Company
Group, (iii) is
requested or
required by
applicable Law
to be
disclosed, (iv) was
independently developed
by such
Seller, its Affiliates
or their
respective representatives
without reference
to or
otherwise utilizing
the Company Group’s information, (v) to the extent it is owned by an Excluded Company but
is not related
to or owned by a
member of the Company
Group.
The Confidentiality
Agreement shall terminate and
be of
no further
force and
effect on
the Closing
Date.
For the
avoidance of
doubt, the
provisions of
this Section
6.8
will
not
apply
to
any
information
regarding
the
negotiation
or
execution
of
this
Agreement
or
the
consummation of the Transactions
or the public announcement
thereof, which shall be
governed solely by
Section
11.8.
6.9
Access to Books and
Records.
From and after the
Closing Date and for
a period of five
years
thereafter, the Sellers’ Representative and its representatives shall have reasonable access, upon reasonable
notice and during normal business
hours to all of the
books and records of the
Company Group (including
the ability
to make
copies of
any such
information) to
the extent
that such
access may
be reasonably
required
to permit the
Sellers to perform
or satisfy any
accounting or regulatory
obligation, in connection
with any
legal
proceeding
by
or
before
a
Governmental Authority
or
the
preparation
and
filing
of Tax
filings
and
other Tax compliance
obligations, in each
case, relating to
any period on
or prior to
the Closing Date,
but
only to the
extent that Buyer
may do so
without violating any
obligations to any
Person or waiving
any legal
privilege and
to the
extent that
Buyer has
the authority
to grant
such access
without breaching
applicable
Law or any contract or
other restriction binding on Buyer
or the Company Group; provided,
however, that
in any such
case, Buyer shall,
and shall cause
the Company Group
to, reasonably cooperate
with the Sellers’
Representative to
seek an
appropriate remedy
to permit
the access
contemplated hereby;
provided further
that (i) such investigation
will be conducted
in a manner
that does not
unreasonably interfere with
normal
operations
of
Buyer
or
the
Company
Group,
(ii) such
access
(including
the
making
of
copies)
shall
be
conducted
at
the
Sellers’ Representative’s
sole
expense,
(iii) no
Personal
Data
shall
be
disclosed
or
used
other than in compliance with applicable Privacy
Law, (iv) neither Buyer nor the Company Group
shall be
required
to incur
any third-party
costs or
expenses in
connection with
the rights
granted pursuant
to this
Section
6.9
, (v) nothing
herein shall
require any
member of
the Company
Group or
its representatives
to
furnish to
the Sellers’ Representative
or provide
the Sellers’ Representative
with information
or access
to
69
any Trade Secrets related to
any Company Group Intellectual
Property and (vi) the Sellers’ Representative
and the
Sellers will,
and will
direct their
respective Affiliates and
representatives to,
keep all
information
furnished in
accordance with
Section
6.9
confidential in
accordance with
the terms
of Section
6.8.
For a
period of
six years following
the Closing,
or such
longer period
as may be
required by
applicable Law
or
necessitated
by
applicable
statutes
of
limitations,
Buyer
shall,
and
shall
cause
the
Company
Group
to,
maintain all such books and records and shall not destroy, alter or otherwise dispose of any such books and
records, in each case, relating to the purposes
described in the foregoing sentence.
On and after the end of
such period, Buyer
shall, and shall
cause the Company
Group to, provide
the Sellers’ Representative with
at least ten Business Days’ notice before destroying, altering or otherwise disposing of any such books and
records, during which
period the
Sellers’ Representative may elect
to take possession,
at its
own expense,
of such books and records relating to the purposes described in the first sentence of this Section
6.9.
6.10
R&W Insurance Policy
.
(a)
If Buyer
obtains an
R&W Insurance
Policy, (i) the
costs, fees
and expenses
of any
such R&W Insurance
Policy shall be
borne equally by
Buyer, on the
one hand, and
the Sellers, on
the other hand
and (ii) then such
R&W Insurance
Policy shall provide
that the insurer
for such R&W
Insurance Policy shall not receive, irrevocably and unconditionally waives and releases,
and agrees
not
to
exercise,
directly
or
indirectly,
any
rights
and
claims
of
subrogation,
contribution,
indemnification or recourse or other rights of recovery, or rights and claims acquired by assignment
against
the
Sellers,
except
in
the
case
that
a
Seller
commits
Fraud.
Prior
to
binding
any
R&W
Insurance Policy, Buyer
shall provide notice
to the Sellers’ Representative and
provide the Sellers’
Representative a reasonable
opportunity to comment
on such policy
with respect to
the matters set
forth in the preceding sentence, which comments shall be considered in good faith and presented to
the
insurer of
the
R&W Insurance
Policy for
inclusion
into
the R&W
Insurance
Policy by
Buyer
prior to the binding thereof.
In addition, the R&W Insurance Policy shall not be amended, restated,
supplemented, modified or altered, nor shall any terms thereof be waived, in any manner adverse to
the Sellers without the prior written consent of the Sellers’ Representative.
(b)
Except for those matters set forth in
Article IX
, Buyer acknowledges and agrees that
if it obtains
an R&W Insurance
Policy, then such
R&W Insurance Policy
(whether or not
such R&W
Insurance Policy is sufficient to cover
the applicable losses) shall be the sole
and exclusive remedy
of
Buyer
and
its Affiliates
(including,
from
and
after
the
Closing,
the
Company
Group),
in
Law,
equity or
otherwise, arising
out of,
or related
to any
inaccuracy or
breach of
any representation
or
warranty regarding the
Company Group contained
in this Agreement, the Ancillary Agreements or
in any certificates delivered with respect thereto, and Buyer, its Affiliates
(including, from and after
the
Closing,
the
Company
Group),
and
the
insurers
under
any
such
R&W Insurance
Policy
shall
have no recourse against any
Seller with respect thereto, except
with respect to claims for
Fraud and
claims related to pre-Closing Taxes.
6.11
Notices of Certain Events
.
From the date hereof until the Closing Date or
the termination of
this Agreement in accordance with
the terms of
Article X
, whichever is
earlier, the Sellers’ Representative
shall promptly notify Buyer of:
(a)
any notice or other
written communication received by
any Seller or member
of the
Company Group from any Person alleging
that the consent of such Person
is or may be required
in
connection with the Transactions or any Ancillary
Agreement;
(b)
any notice or other
written communication received by
any Seller or member
of the
Company
Group
from
any
Governmental Authority
in
connection
with
the
Transactions
or
any
Ancillary Agreement;
70
(c)
any
Proceedings
(i) commenced
or
(ii) to
the
Knowledge
of
the
Company
Group,
threatened against any Seller
or member of the
Company Group that, if
pending on the date
of this
Agreement, would have been required to have been disclosed pursuant to Section
3.10.
(d)
any breach of
any (i) representation or
warranty set
forth in
Article III
or
Article IV
or (ii) Pre-Closing Covenant; or
(e)
any
change,
event,
circumstance,
occurrence,
state
of
facts,
development
or
effect
that has had
or could reasonably
be expected to
have a Material
Adverse Effect, or
would reasonably
be expected to
make the satisfaction
of any of
the conditions in
Section
7.1
impossible or reasonably
unlikely;
provided, however, that
no such
notification required
by this
Section
6.11
(and no
other notification
required
to be
given under
any other
Section of
this Agreement)
shall affect
the representations,
warranties, covenants
or agreements of the Parties or the conditions to the obligations of the Parties under this Agreement.
6.12
Director,
Manager
and
Officer
Resignations
.
At
least
five
Business
Days
prior
to
the
Closing, the Sellers
shall deliver to
Buyer a true
and complete list
of the directors,
managers and officers,
as applicable, of
each member of
the Company Group.
At the request
of Buyer at
least one Business
Day
prior
to
the
Closing,
the
Sellers
and
the
Company
Group
shall
cause
the
resignation
of
any
directors,
managers or officers identified by Buyer in writing, with effect as of the Closing.
6.13
Termination of Affiliate Contracts
.
Except as set forth on Schedule
6.13
, the Sellers and the
Company Group shall, prior to the Closing, terminate or settle in full (without any payments by Buyer, any
Affiliate
of
Buyer
or
any
member
of
the
Company
Group
following
the
Calculation
Time)
all Affiliate
Contracts, pursuant to documentation that is reasonably acceptable to Buyer such that as of the Closing, all
such
Contracts,
transactions
or
other
obligations
or
liabilities
shall
be
of
no
further
force
or
effect
and
without any liability
to Buyer or
any of its
Affiliates or any
member of the
Company Group notwithstanding
any terms thereof to the contrary.
6.14
Exclusivity
.
Each
of
the
Sellers
and
the
Company
Group
agree
that
from
the
date
of
this
Agreement until the Closing Date or the
prior termination of this
Agreement pursuant to Section
10.1
, none
of the
Sellers or
any member
of the
Company Group
shall, and
the Sellers
and the
Company Group
shall
instruct
their
respective Affiliates
and
representatives
not
to,
directly
or
indirectly,
(a) provide
any
non-
public information
to any
third party
(including via
access to
any data
room or
other records)
other than
Buyer and its
representatives with respect
to any Conflicting Transaction,
(b) solicit, initiate or
knowingly
encourage
proposals,
offers
or
inquiries
from
a
third
party
other
than
Buyer
and
its
representatives
with
respect to any
Conflicting Transaction,
(c) participate in any
negotiations or discussions
with any third
party
other than Buyer and its representatives with
respect to any Conflicting Transaction
or (d) enter into a letter
of intent or other agreement
with a third party
other than Buyer with
respect to any Conflicting
Transaction.
In furtherance
of the
foregoing, promptly
after the
execution of
this
Agreement, the
Sellers and
the Company
Group shall, and
shall cause their Affiliates and
representatives to, (x) within
two Business Days
from the
date of this
Agreement, terminate access of
any Person (other
than Buyer, any
of its
Affiliates or any
of their
respective agents or representatives) to any
physical or electronic data rooms hosted by
or on behalf of the
Company Group and (y) deliver written notice to each
such Person requesting that such Person (other than
Buyer,
any
of
its
Affiliates
or
any
of
their
respective
representatives)
promptly
return
or
destroy
all
confidential
information
regarding
the
Company
Group
in
accordance
with
applicable
confidentiality
agreements.
71
6.15
Non-Compete and Non-Solicit
.
In order to induce Buyer to enter into this Agreement
and to
induce Buyer to consummate the Transactions, the Sellers agree as follows:
(a)
Each
Transferor
and
each
Person
listed
on
Schedule
6.15(a)
(each,
Transferor
and
each
such
Person,
a
“Restricted
Party”)
hereby
agrees
that,
without
the
prior
written
consent
of
Buyer, during the
period beginning immediately
following the Closing
and ending on
the date that
is five years after the Closing Date, such Restricted Party shall not, and shall cause its Affiliates not
to, directly or indirectly:
(i)
(A) enter
into
or
engage
in
(or
prepare
to
enter
into
or
engage
in)
any
Competitive
Activity,
(B) manage,
operate
or
control
any
business
or
Person
that
is
or
proposes to be engaged in any business that is competitive with the Business (a “Competing
Business”),
or
(C) permit
Restricted
Party’s
name
to
be
used
in
connection
with
any
Competing Business, in the
case of each of
clauses (A) through (C) above, anywhere
in the
United States of America (the “Restricted Territory”); or
(ii)
(A) solicit
or
contact
any
customer
or
supplier
or
prospective
customer
or
supplier to induce or attempt to induce such Person to
cease doing business with, or reduce,
divert or transfer the amount of business conducted with, the Company Group, (B) solicit or
contact any customer or supplier or prospective customer or supplier to induce or attempt to
induce such
Person to
conduct business
with any
Person that
is a
Competing Business;
or
(C) solicit
or
contact
any
customer
or
supplier
or
prospective
customer
or
supplier
to
adversely impact such Person’s business relationship with the Company Group.
(b)
Without the prior written consent of
Buyer, during the period beginning immediately
following the Closing
and ending on the
date that is
three years after
the Closing Date,
each Seller
agrees that
such Seller
shall not,
and shall
cause its Affiliates (and
its or
their respective
directors,
officers, executors, trustees or fiduciaries (or
their equivalents)), (i) solicit, induce, entice or
recruit
or
attempt
to
solicit,
induce,
entice
or
recruit,
directly
or
indirectly,
any
employee,
independent
contractor
or
consultant
of
the
Company
Group
to
terminate
such
Person’s
employment
or
engagement with the
Company Group, or
(ii) solicit, recruit or
hire, or attempt
to solicit, recruit
or
hire,
directly
or
indirectly,
any
employee,
independent
contractor
or
consultant
of
the
Company
Group
who
was
employed
or
engaged
by
the
Company
Group
at
any
time
during
the
12-month
period immediately prior to the Closing Date;
provided, however, that nothing herein shall prohibit
any Seller from
(i) conducting a general
solicitation of prospective
employees in the
ordinary course
of business consistent with past practice or hiring any Person as a result of such general solicitation
or (ii) soliciting or hiring any individual whose employment with a member of the Company Group
is involuntarily terminated by the Company Group.
(c)
The
Sellers
acknowledge
that
the
covenants
set
forth
in
this
Section
6.15
are
an
essential element
of this Agreement
and that,
but for
the agreement
of the
Sellers to
comply with
these covenants, Buyer would not have entered into this Agreement.
(d)
If
any
provision
contained
in
this
Section
6.15
is
held
by
any
court
of
competent
jurisdiction
to
be
unenforceable
because
of
the
duration
of
such
provision,
the
geographic
area
covered thereby or
otherwise, the court
making such determination
shall have the
power to, and
is
hereby
directed
by
the
Parties
to,
reduce
the
duration
or
geographic
area
of
such
provision
or
otherwise
modify
such
provision,
and,
in
its
reduced
or
modified
form,
such
provision
shall
be
enforceable.
In addition, upon a determination that any
such term or other provision, or
any portion
thereof, is invalid, illegal or incapable of being enforced, the Parties
shall negotiate in good faith to
72
modify this Agreement so
as to
effect the
original intent
of the
Parties as
closely as
possible in
an
acceptable manner to the end that the Transactions are consummated to the fullest extent possible.
ARTICLE VII
CONDITIONS TO CLOSING
7.1
Conditions of
Buyer to
Closing
.
The obligations
of Buyer
to effect
the Transactions
at the
Closing are subject
to the satisfaction
(or, to the
extent permitted by
Law, waiver by
Buyer) of the
following
conditions:
(a)
Representations, Warranties and Covenants of the Sellers.
(i)
(A) The representations and warranties of the Sellers regarding the Company
Group and Transferors
set forth in
Sections
3.1(a)
(first sentence
only),
3.1(c)
,
3.2
,
3.4
,
3.6
(first sentence only) and
3.19
shall be true and correct in all
respects at and as of the Closing
as
if
made
at
and
as
of
the
Closing,
(B) the
representations
and
warranties
of
the
Sellers
regarding the Company Group and Transferors set forth in
Sections
3.1(a)
(second sentence
only),
3.1(b)
and
3.25
shall be true
and correct
in all
respects at and
as of
the Closing as
if
made
at
and
as
of
the
Closing
(except
for
de
minimis
inaccuracies),
and
(C) the
representations and warranties of the Sellers regarding the Company Group and Transferors
set forth
in
Article III
(other than those
that are the
subject of clauses
(A) and (B))
shall be
true
and
correct
in
all
respects
(ignoring
and
disregarding
all
materiality
and
Material
Adverse Effect qualifications set
forth therein) at and as
of the Closing as
if made at and as
of the Closing, except for inaccuracies of a representation or
warranty (individually or when
aggregated with other
such inaccuracies of
representations or warranties)
that have not
had
and could not reasonably be expected
to have a Material
Adverse Effect; provided, however,
that,
in
each
case,
representations
and
warranties
that
are
made
as
of
a
particular
date
or
period
shall
be
so
true
and
correct
(in
the
manner
set
forth
in
clause (A),
(B)
or
(C),
as
applicable) only as of such date or period;
(ii)
The
representations
and
warranties
of
the
Securityholders
set
forth
in
Section
4.1
shall
be
true
and
correct
in
all
respects
(except
for
de
minimis
inaccuracies);
provided, however,
that, in
each case,
representations and
warranties that
are made
as of
a
particular date or period shall be so true and correct only as of such date or period;
(iii)
The Sellers and the Company Group shall each have performed (or caused to
have been performed) in all
material respects all covenants required
to be performed by the
Sellers or the
Company Group (as
applicable) at or
prior to the
Closing under this
Agreement
(except for such covenants that by their nature may be performed only at the Closing);
(iv)
The Sellers’ Representative
and each
Transferor shall
have furnished
Buyer
at the
Closing with
a certificate
certifying the
matters set
forth in
Sections
7.1(a)(i)
,
7.1(a)(iii)
and
7.1(f)
, as applicable; and
(v)
The Sellers’ Representative shall have furnished Buyer
at the Closing with
a
certificate certifying the matters set forth in Sections
7.1(a)(ii).
73
(b)
Statutory Requirements; No Governmental Restraints.
(i)
Any applicable waiting period under the HSR Act and any timing agreement
with any
Governmental Authority to
delay or
not consummate
the Transactions
shall have
expired or been terminated; and
(ii)
There
shall
not
be
any
pending
action,
suit
or
proceeding
initiated
by
any
Governmental Authority seeking to restrain or invalidate the Transactions; and
(iii)
There shall
not be
in effect
any Law
or Order
enacted, issued,
promulgated,
enforced or entered by any court or other Governmental Authority of competent jurisdiction
that
enjoins,
restrains,
makes
illegal
or
otherwise
prohibits
the
consummation
of
the
Transactions.
(c)
Completion of Pre-Closing Restructuring
.
The Sellers shall have completed the Pre-
Closing Restructuring
pursuant to
documentation that
complies with
the requirements
set forth
in
Section
2.1(a)(vii).
(d)
Payment
of
Company
Group
Indebtedness;
Release
of
Liens
.
At
or
prior
to
the
Closing, the Sellers have repaid, or caused to be repaid, in full all outstanding secured Indebtedness
of the Company Group
identified in clauses (a), (b),
(d) and (e) of
the definition of Indebtedness
and
terminated
the
Existing
Credit
Facility,
and,
as
applicable,
have
obtained
payoff
letters
and
lien
releases with respect
to any
Liens relating
to any
of the
foregoing Indebtedness,
which payoff
letters,
termination documents
and release
instruments shall
be delivered
to Buyer
at least
three Business
Days prior to the Closing Date.
(e)
Ancillary
Agreements
.
Each
of
the
Ancillary
Agreements
contemplated
by
this
Agreement to
be executed
at Closing,
and to
which any
member of
the Company
Group or
any Seller
is a party, shall have been executed and delivered by such Party and shall
be in full force and effect.
(f)
No Material
Adverse Effect
.
No Material Adverse
Effect shall
have occurred
since
the date hereof.
(g)
Instruments
of
Transfer
.
Each
Transferor
shall
have
delivered
to
Buyer
a
duly
executed unit power
or similar
instrument of assignment
and conveyance,
transferring the Purchased
Equity Interests from such Seller to Buyer.
7.2
Conditions of the Sellers to Closing
.
The obligation of the Sellers to effect the Transactions
at
the
Closing
are
subject
to
the
satisfaction
(or,
to
the
extent
permitted
by
Law,
waiver
by
the
Sellers’
Representative) of the following conditions:
(a)
Representations, Warranties and Covenants of Buyer.
(i)
(A) The
representations
and
warranties
of
Buyer
set
forth
in
Sections
5.1
,
5.2
(a)
and
5.4
shall be true
and correct in
all respects at
and as of
the Closing as
if made at
and as
of the
Closing (except
for
de minimis
inaccuracies), and
(B) the representations
and
warranties of Buyer set forth in
Article V
(other than those that are the
subject of clause (A))
shall be true and correct in all material respects at and as of the Closing as if made
at and as
of the Closing; provided, however, that
representations and warranties that are made as
of a
particular date or period shall be so true and correct (in the manner set forth in clause (A) or
(B), as applicable) only as of such date or period;
74
(ii)
Buyer
shall
have
performed
(or
caused
to
be
performed)
in
all
material
respects all covenants
required to be
performed by Buyer
at or prior
to the Closing
under this
Agreement
(except
for
such
covenants
that
by
their
nature
may
be
performed
only
at
the
Closing); and
(iii)
Buyer shall
have furnished
the Sellers’ Representative
at the
Closing with
a
certificate certifying the matters set forth in Sections
7.2(a)(i)
and
(ii).
(b)
Statutory Requirements; No Governmental Restraints.
(i)
Any applicable waiting period under the HSR Act and any timing agreement
with any
Governmental
Authority to
delay or
not consummate
the contemplated
Transactions
shall have expired or been terminated;
(ii)
There
shall
not
be
any
pending
action,
suit
or
proceeding
initiated
by
any
Governmental Authority seeking to restrain or invalidate the Transactions; and
(iii)
There shall
not be
in effect
any Law
or Order
enacted, issued,
promulgated,
enforced or entered by any court or other Governmental Authority of competent jurisdiction
that
enjoins,
restrains,
makes
illegal
or
otherwise
prohibits
the
consummation
of
the
Transactions.
(c)
Ancillary
Agreements
.
Each
of
the
Ancillary
Agreements
contemplated
by
this
Agreement to be
executed at Closing,
and to which
Buyer is a
party, shall have
been executed and
delivered by Buyer and shall be in full force and effect.
ARTICLE VIII
NON-SURVIVAL OF
REPRESENTATIONS
8.1
Survival of Representations and Warranties
.
Without limiting any claims against
any Party
for
Fraud
or
any
rights
to
indemnification
set
forth
in
Article IX
,
the
representations
and
warranties
contained
in
Article III,
Article IV
,
and
Article V
and
in
the
certificates
delivered
pursuant
to
Section
7.1(a)(iv)
,
Section
7.1(a)(v)
and
Section
7.2(a)(iii)
will
immediately
terminate
as
of
the
Closing,
and thereafter there shall be no liability on the part of, nor shall any claim be made by, any Party in
respect
thereof.
8.2
Survival
of
Covenants
and
Agreements
.
The
covenants
in
this
Agreement
requiring
performance solely prior
to or at
the Closing (each,
a “Pre-Closing Covenant”)
shall, in each
case, terminate
effective as of
the Closing and
shall not
survive the
Closing for any
purpose, and thereafter
there shall be
no liability on the part of, nor
shall any claim be made by, any
party in respect thereof, and the covenants
in
this Agreement
that contemplate performance on or
after the Closing or
expressly by their terms
survive the
Closing shall survive the Closing in accordance with their respective terms.
8.3
Statute of Limitations
.
Each of the Parties acknowledges and agrees that
this
Article VIII
is
expressly intended to limit an otherwise applicable statute of
limitations under applicable Law, and waives
the statute of limitations under such Law
to the extent such statute of limitations period
exceeds the periods
described in this
Article VIII.
8.4
No
Post-Closing
Liability
for
Representations
or
Pre-Closing
Covenants
.
Buyer
acknowledges
and
agrees
that,
regardless
of
whether
Buyer
obtains
an
R&W
Insurance
Policy
(and
regardless of
whether any
R&W Insurance
Policy it
obtains is
sufficient to
cover the
applicable Losses),
75
except
as
set
forth
in
Article IX
,
neither
Buyer
nor
any Affiliate
thereof
(including,
from
and
after
the
Closing, the
Company Group),
shall have
any remedy
at law,
in equity
or otherwise,
arising out
of, or
related
to, any inaccuracy
or breach of
any representation, warranty
or Pre-Closing
Covenant by or
regarding the
Company Group or the Sellers contained in this
Agreement, the Ancillary
Agreements or in any certificates
delivered with respect hereto or thereto.
Buyer and its Affiliates
(including, from and after the Closing, the
Company Group),
and the
insurers under
any such
R&W Insurance
Policy shall
have no
recourse against
any Seller or any Affiliate thereof with respect thereto.
Buyer expressly waives any other rights, remedies,
claims or
causes of
action Buyer
may have
against any
Person, by
contract, statute
or otherwise,
with respect
to the foregoing, whether in contract, tort or otherwise, or whether at law or in equity, and regardless of the
legal
theory
under
which
such
entitlement,
remedy
or
recourse
may
be
sought
or
imposed
(including
all
rights
afforded by
any
statute
that
limits the
effects
of
a
release
with
respect
to
unknown claims).
Each
Seller acknowledges and agrees that, at
and as of the Closing, neither such
Seller nor any Affiliate thereof,
shall have any remedy at law, in
equity or otherwise, arising out of, or
related to, any inaccuracy or breach
of any
representation, warranty
or Pre-Closing
Covenant by
or regarding
Buyer contained
in this
Agreement,
the
Ancillary
Agreements
or
in
any
certificates
delivered
with
respect
hereto
or
thereto.
Each
Seller
expressly waives any other rights or
remedies such Seller may have with
respect to the foregoing, whether
in contract, tort or otherwise, or whether at law or in equity, and regardless of the
legal theory under which
such entitlement, remedy or
recourse may be sought
or imposed (including all
rights afforded by any
statute
that limits
the effects
of a
release with
respect to
unknown claims).
Notwithstanding anything
to the
contrary
in this
Agreement, nothing in
this
Agreement shall limit,
impair or release
any claims for
Fraud or any
rights
to indemnification set forth in
Article IX.
ARTICLE IX
SPECIAL INDEMNIFICATION
9.1
Indemnification Provision
.
From and after the Closing, subject to the terms,
and conditions
provided
in
this
Article IX,
the
Sellers
shall,
jointly
and
severally,
indemnify,
defend
and
hold
harmless
Buyer
and
its
Affiliates
and
each
of
their
respective
members,
partners,
directors,
managers,
officers,
employees, stockholders, agents and other Representatives (in each case,
the “Buyer Indemnified Parties”),
from and against (a) any and all
Losses incurred by the Buyer Indemnified
Parties to the extent arising
out
of or resulting from any of the items
listed on Schedule
9.1
(the “Specified Liabilities”), and (b) any and all
Indemnified Taxes.
Payment in
full of
any amount
due from
the Sellers
to Buyer
under clause (b)
of this
Section
9.1
shall be
made to the
affected party
in immediately available
funds at
least five Business
Days
before
the
date
the payment
of the
Taxes
to
which such
payment relates
is
due,
or, if
no Tax
is payable,
within 15 days after written demand is made for such payment.
9.2
Indemnification Procedure
.
(a)
A
written
notice
of
all
Specified
Liabilities
shall
be
deemed
to
have
been
given
pursuant to this Section
9.2(a)
on the Closing Date.
If any claim or action at law or suit in equity is
instituted
by
a
third
party
against
a
Buyer
Indemnified
Party
(each,
a
“Third
Party
Claim”)
with
respect
to
any
Specified
Liability,
which
such
Buyer
Indemnified
Party
intends
to
claim
indemnification
for
any
Losses
under
Section
9.1
,
the
Buyer
Indemnified
Party
shall
supply
the
Sellers’ Representative with
such information
and documents
as it
has in
its possession
regarding
such
claim,
and
will
allow
reasonable
access
to
relevant
personnel,
auditors
and
other
Representatives of the
Buyer Indemnified Party
(subject to customary
exceptions for legal
privilege)
together
with
all
pertinent
information
in
its
possession
regarding
the
amount
of
the
Loss
that
it
asserts it
has sustained
or incurred,
and will
permit the
Sellers (as
well as
the Sellers’
Representatives,
agents or
assigns) to
inspect such
other records
and books
in the
possession of
the Buyer
Indemnified
Party and relating to the
Third Party Claim and asserted
Loss as the Sellers shall
reasonably request,
76
and the
Buyer Indemnified Party
shall cooperate with
the Seller
with respect to
matters relating to
any Third Party Claims.
(b)
The Sellers,
acting through
the Sellers’
Representative, shall
have the
right to
conduct
and control,
at their
own expense,
through counsel
of their
choosing, the
defense of
a Third
Party
Claim so
long as
the Sellers’ Representative
notifies the
Buyer Indemnified
Party that
the Sellers
have
agreed
to
indemnify
the
Buyer
Indemnified
Party
for
any
and
all
Losses
arising
out
of
or
resulting from the
Third Party Claim
of which they
are assuming the
right to conduct and
control the
defense within 30 days of their receipt of the initial notice of the Third Party Claim, and shall do so
in
good
faith;
provided,
however,
that
the
Buyer
Indemnified
Party
may
participate
at
its
own
expense, with counsel of its choosing, in
the defense of such Third Party
Claim although such Third
Party Claim shall be
controlled by the Sellers; provided
further that if the Buyer
Indemnified Party
requests,
and
the
Sellers
fail
to
provide
to
the
Buyer
Indemnified
Party,
evidence
reasonably
acceptable to the
Buyer Indemnified Party that
the Sellers have
sufficient resources to defend
such
third-party action or
suit and fulfill
its indemnity obligations
hereunder, the Sellers
shall no longer
be entitled to conduct and control
the defense of said third-party action
or suit.
The Party defending
such action or suit shall in any event defend any such matters vigorously and in good faith.
(c)
The Buyer Indemnified
Party and the
Sellers shall in
each case cooperate
with each
other to the
fullest extent possible
in regard to
all matters relating
to the
Third Party Claim,
including
corrective actions required
by applicable Law, assertion
of defenses, the
determination, mitigation,
negotiation
and
settlement
of
all
amounts,
costs,
actions,
penalties,
damages
and
the
like
related
thereto, access to the books
and records of the
Buyer Indemnified Party and its
Subsidiaries and, if
necessary, providing the Party controlling the defense of the Third Party Claim and its counsel with
any powers
of attorney
or other
documents required
to permit
the Party
controlling the
defense of
the Third Party Claim and its counsel to act on behalf of the other Party.
(d)
Neither the
Buyer Indemnified
Party nor
the Sellers
shall settle
any Third
Party Claim
without
the
consent
of
the
other
Party,
which
consent
shall
not
be
unreasonably
withheld,
conditioned
or
delayed;
provided,
however,
that
if
such
settlement
involves
only
the
payment
of
money
and
the
release
of
the
Third
Party
Claim
and
the
Buyer
Indemnified
Party
is
completely
indemnified therefor
and nonetheless
refuses to
consent to
such settlement,
then the
Seller shall
cease
to
be
obligated
for
such Third
Party
Claim
or
any
Losses
thereunder
in
excess
of
the
amount
of
Losses that
would have
been paid
in such
settlement.
Any compromise
or settlement
of the Third
Party Claim under
this Section
9.2
shall include as
an unconditional and
irrevocable term thereof
the
giving
by
the
claimant
in
question
to
the
Seller
and
the
Buyer
Indemnified
Party
a
full
and
final
release of all liabilities in respect of such claims.
9.3
Determination of Losses
.
(a)
In calculating the amounts payable to
a Buyer Indemnified Party, the
amount of any
indemnified
Losses
shall
be
computed
net
of
(i) payments
already
recovered
by
the
Buyer
Indemnified
Party
under
any
insurance
policy,
with
respect
to
such
Losses
or
pursuant
to
any
contribution rights; and
(ii) any prior recovery
by the Buyer
Indemnified Party from
any Person with
respect to
such Losses
(including pursuant
to any
indemnification agreement
or arrangement
with
any third party).
(b)
In
respect
of
any
Loss
for
which
indemnification
may
be
sought
pursuant
to
this
Article IX
, the Buyer
Indemnified Party shall
(i) use reasonable best
efforts to mitigate
any Losses
upon becoming aware
of any event
that could reasonably
be expected to,
or does, give
rise thereto
to
the
extent that
such
Losses can
be mitigated;
and
(ii) use
reasonable
efforts to
pursue
all
legal
77
rights
and
remedies
available
(including
insurance
recoveries
and
third-party
indemnification)
in
order to minimize
the Losses to
which it may
be entitled to
indemnification under this Agreement.
Notwithstanding anything
to the
contrary in
this
Agreement, the
Sellers shall
not be
required to
make
any
payment
to
a
Buyer
Indemnified
Party
in
respect
of
such
Loss
to
the
extent
the
Buyer
Indemnified Party has failed to comply with its obligations under this Section
9.3(b).
(c)
Notwithstanding anything to the contrary
in this Agreement, no Party shall be liable
for any (i) punitive damages,
except to the extent
such damages are finally
determined to be payable
and actually paid
to a third
party in respect
of a Third Party
Claim in accordance
with the terms of
this
Article IX
, or (ii) consequential, special
or other indirect damages, including
any loss of future
business, distributions,
revenue, profits
or income,
or loss
of reputation
(whether calculated
based
on a
multiple of
lost profit
or cash
flow (or
similar metric)
or otherwise),
in each
case in
the foregoing
clause (ii),
except
to
the
extent
such
damages
or
Losses
arise
from
(A) a
breach
of
a
Party’s
confidentiality obligations expressly set
forth in this
Agreement or the Confidentiality
Agreement or
(B) such Party’s Fraud.
9.4
Payments
.
Subject
to
the
other
provisions
of
this
Agreement,
any
Losses
payable
by
the
Sellers
to
a
Buyer
Indemnified
Party
pursuant
to
Section
9.1
shall
be
satisfied
(a) first, from
the
Indemnification
Escrow
Account
and
(b) then,
to
the
extent
the
amount
of
Losses
exceeds
the
amounts
available to
the Buyer
Indemnified Party
in the
Indemnification Escrow
Account, from
the Sellers;
provided,
however, that with respect to the Sellers’ indemnification for Indemnified Taxes set forth in Section
9.1
(b),
with
the
exception
of
the
Sellers’
indemnification
for
any
Losses
attributable
to any
Indemnified
Taxes
relating to (i) Echo Lake
Foods not qualifying as
an S corporation for purposes
of Subchapter S of the
Code
and
(ii) Huntington
and
Xenitel
each
not
qualifying
as
a
“qualified
subchapter S
subsidiary”
as
defined
under Section 1361(b)(3)(B) of the Code (in each case, as
of the respective Qualification Dates set forth in
Section
3.15(n))
, which, in each case,
Buyer shall be entitled
to receive payment from
the Indemnification
Escrow Account
and from
the Sellers,
Buyer shall
be required
to satisfy
any Losses
first from
the R&W
Insurance Policy until
the applicable caps
or other limits
under the R&W
Insurance Policy have
been met
(or recovery
under the
R&W Insurance
Policy is
not reasonably
expected to
be available)
before seeking
recovery from the
Indemnification Escrow Account
or from the
Sellers.
If Buyer becomes
entitled to any
distribution of all or any portion of the Indemnification Escrow Account
pursuant to this
Article IX
, Buyer
and the Sellers’ Representative will
provide a joint written instruction to
the Escrow Agent to pay
to Buyer,
on behalf of
the Sellers, by
wire transfer of
immediately available funds
from the Indemnification
Escrow
Account
to
the
account
designated
by
Buyer,
the
amounts
to
be
paid
from
the
Indemnification
Escrow
Account to Buyer in accordance with this Agreement.
9.5
Tax
Treatment
of
Indemnification
Payments
.
For
all Tax
purposes,
Buyer
and
the
Sellers
agree to treat any indemnity
payment made by an indemnitor
pursuant to this
Article IX
as an adjustment to
the Adjusted Equity Price, unless otherwise required by Law.
9.6
Potential
Partial
Release
from
the
Indemnification
Escrow
Account
.
If
(x) the
Company
Group has
received or entered
into a Qualifying
Order (as
defined below) with
respect to both
Item 2 and
Item 3
on
Schedule
9.1
with
the
applicable
Governmental
Authority,
(y) all
indemnification
payments
required to
be made
by the
Sellers to
Buyer under
this
Article IX
with respect
to both
such matters
have
been paid in
full, including any
applicable documentation, remediation
and corrective costs
required to be
taken by the
Company Group with
respect to each
such matter addressed
in the applicable
Qualifying Order,
and
(z) after
all
such
indemnification
payments
have
been
made,
the
then-remaining
balance
in
the
Indemnification Escrow
Account is greater
than $2,500,000, then
Buyer and the
Sellers’
Representative will
provide
a
joint
written
instruction
to
the
Escrow
Agent
to
pay
such
excess
amount
to
the
Sellers’
Representative,
for
the
benefit
of
the
Sellers,
by
wire
transfer
of
immediately
available
funds
from
the
Indemnification
Escrow
Account
to
the
account
designated
by
the
Sellers’
Representative.
The
term
78
“Qualifying Order” means
a final Order
issued by
the applicable Governmental
Authority that includes
such
Governmental
Authority’s
unconditional
confirmation
to
the
Company
Group
that
no
further
documentation, remediation or corrective
action is required to
be taken by the
Company Group with
respect
to the
matter addressed in
such Order.
Any amount
remaining in the
Indemnification Escrow Account
as
of expiration of the
latest-expiring statute of limitations
applicable to Item 4 on
Schedule
9.1
shall be paid
to the Sellers’ Representative, for the benefit of the
Sellers, by wire transfer of immediately available funds
from
the
Indemnification
Escrow
Account
to
the
account
designated
by
the
Sellers’
Representative;
provided,
however,
that
if
one
or
more
Proceedings
with
respect
to
any
of
the
Specified
Liabilities
are
pending at such time, then
any amount remaining in the
Indemnification Escrow Account shall remain
until
such
Proceedings
are
no
longer
pending
or
subject
to
appeal.
Notwithstanding
any
provision
in
this
Section
9.6
, the release of
amounts from the Indemnification
Escrow Account shall not
modify or terminate
the indemnification obligations of the Sellers expressly provided in this
Article IX.
ARTICLE X
TERMINATION, AMENDMENT
AND WAIVER
10.1
Termination
.
This Agreement may be terminated,
and the Transactions may
be abandoned,
at any time prior to the Closing Date, as follows:
(a)
by mutual written agreement of the Sellers’ Representative and Buyer;
(b)
by
Buyer,
if
there
has
been
a
breach
by
the
Company
Group
or
the
Sellers,
as
applicable,
of
any
covenant,
representation
or
warranty
of
the
Company
Group
or
the
Sellers
contained in this Agreement, or if any such representation or warranty shall have become untrue, in
either case
that would prevent
or has prevented
the satisfaction of
any condition
to the obligations
of Buyer
at the
Closing contained
in Section
7.1(a)(i)
, Section
7.1(a)(ii)
or Section
7.1(a)(iii)
, and
such breach has not been waived by Buyer
or cured, or cannot be cured, by the
Company Group or
the Sellers, as applicable, on or prior to the date that is 30 days after written notice thereof has been
provided by Buyer
(or by the
second Business Day
prior to the
Outside Date, if
earlier); provided,
however, that Buyer
may not terminate
this Agreement pursuant to this
Section
10.1(b)
if Buyer is
in breach of this Agreement that would prevent
or has prevented the satisfaction of any condition to
the obligations of the Sellers at the Closing contained in Section
7.2(a)(i)
or Section
7.2(a)(ii);
(c)
by the Sellers’ Representative, if there has
been a breach by
Buyer of any covenant,
representation or warranty contained in this
Agreement, or if any such representation or warranty
of
Buyer shall have become untrue, in either
case that would prevent or has
prevented the satisfaction
of
any
condition
to
the
obligations
of
the
Sellers
at
the
Closing
contained
in
Section
7.2(a)(i)
or
Section
7.2(a)(ii)
, and such
breach has not
been waived by
the Sellers’ Representative or
cured, or
cannot be cured, by Buyer
on or prior to the
date that is 30 days after
written notice thereof has been
provided by the Sellers’
Representative (or by the second Business Day prior to the Outside
Date, if
earlier);
provided,
however,
that
the
Sellers’
Representative
may
not
terminate
this
Agreement
pursuant to this Section
10.1(c)
if the Company Group
or the Sellers are
in breach of this
Agreement
that would prevent or
has prevented the satisfaction
of any condition to
the obligations of Buyer
at
the Closing contained in Section
7.1(a)(i)
, Section
7.1(a)(ii)
or Section
7.1(a)(iii);
(d)
by either the Sellers’ Representative or Buyer,
upon written notice to the other, if the
Closing shall not have
occurred on or
prior to July 7, 2025
(the “Outside Date”); provided,
however,
if the conditions set
forth in Section
7.1(b)(i)
and Section
7.2(b)(i)
are not satisfied as
of the Outside
Date, but all of the
other conditions set forth in
Article VII
have been satisfied or waived
(other than
(a) those that by their
terms are to be
satisfied at the Closing,
but subject to the
satisfaction thereof
79
at the
Closing and
(b) the completion
of the
Pre-Closing
Restructuring, subject
to the
completion
thereof
in
accordance
with
Section
2.1(a))
,
either
Buyer
(upon
written
notice
from
Buyer
to
the
Sellers’
Representative)
or
the
Sellers’
Representative
(upon
written
notice
from
the
Sellers’
Representative to
Buyer) may
elect to
extend the
Outside Date
by up
to 30 days;
provided further
that (i) the
Sellers’
Representative may
not terminate
this
Agreement pursuant
to this
Section
10.1(d)
if such non-occurrence of the Closing prior to the Outside Date is primarily due to the failure of the
Company
Group
or
any
Seller,
as
applicable,
to
perform
or
observe
in
all
material
respects
the
covenants and agreements
hereof to be
performed or observed
by it and
(ii) Buyer may not
terminate
this Agreement pursuant
to this
Section
10.1(d)
if such
non-occurrence of
the Closing
prior to
the
Outside Date is
primarily due to
the failure of
Buyer to perform
or observe in
all material respects
the covenants and agreements hereof to be performed or observed by it; or
(e)
by
either
Buyer
or
the
Sellers’ Representative
if
there
shall
be
any
Law
or
Order
enacted, issued, promulgated, enforced or entered by any court or other Governmental Authority of
competent
jurisdiction
that
is
final
and
non-appealable
permanently
enjoining,
restraining
or
otherwise prohibiting
the consummation
of the
Equity Purchase, but
only if, prior
to invoking this
condition, Buyer or the Sellers’
Representative (or with respect to the
Sellers’
Representative’s right
to invoke
this condition,
the Sellers
and the
Company Group)
shall have
complied in
all material
respects with its obligations under Section
6.3
and Section
6.4.
10.2
Effect of
Termination
.
In the
event of
termination of
this
Agreement pursuant
to Section
10.1
,
(a) this Agreement shall forthwith become void and have no further effect, except for the provisions of this
Section
10.2
,
Section
11.1
,
Section
11.2
,
Section
11.3
,
Section
11.5
,
Section
11.11,
Section
11.12
and
Section
11.16
; and (b) there shall be no liability under this
Agreement on the part of Buyer or the Company
Group, the Sellers or
any of their respective
officers or directors, and
all rights and obligations
of each Party
shall
cease;
provided,
however,
that
nothing
herein
shall
relieve
any
Party
from
liability
for
any
willful
breach
hereof
occurring
prior
to
such
termination;
provided
further
that
any
failure
of
any
Party
to
consummate the
Transactions in
breach of
this
Agreement shall
be deemed
to be
a willful
breach (regardless,
in
the
case
of
Buyer,
of
whether
Buyer
had
sufficient
funds
available
to
consummate
the Transactions);
provided further
that following
the termination
of this Agreement, the
obligations of
the parties
under the
Confidentiality Agreement shall continue in full force
and effect in accordance
with its terms.
The Parties
agree
not
to
bring
any
lawsuit,
action
or
claim
against
any
other
Party
inconsistent
with
the
foregoing
provisions
of
this
Section
10.2
.
For
purposes
hereof,
“willful
breach”
means,
with
respect
to
any
representation, warranty or
covenant in this Agreement,
acting or failing
to act with
the actual
knowledge
that such action or failure to
act could reasonably be expected to
cause a material breach of this
Agreement.
ARTICLE XI
MISCELLANEOUS
11.1
No Third-Party
Beneficiaries
.
Except as
expressly provided
in this
Article XI,
Section
6.5
or
Article IX
,
after
the
Closing,
nothing
in
this Agreement
will
provide
any
benefit
to
any
third
party
or
entitle any third
party to any
claim, cause of
action, remedy or
right of any
kind, it being
the intent of
the
Parties that this Agreement will not be construed as a third-party beneficiary contract.
11.2
Expenses
.
Except as otherwise set forth herein (including the definition of Company Group
Expenses),
and
notwithstanding
anything
to
the
contrary
in
the
Organizational
Documents,
all
costs
and
expenses
incurred
in
connection
with
this
Agreement,
the
Ancillary
Agreements
and
the
Transactions
(including the
fees and
expenses of
financial advisors,
accountants and
legal counsel):
(a) if incurred
by
Buyer, will
be paid
by Buyer,
and (b) if
incurred by
the Sellers
or the
Company Group
(but solely
to the
extent incurred at or prior to Closing), will be paid by the Sellers prior to the Closing Date.
80
11.3
Notices
.
All notices,
requests, demands
or other
communications that
are required
or may
be given pursuant to the terms
of this Agreement must be in writing and will
be deemed to have been duly
given:
(a) on the date of delivery, if personally delivered
by hand; (b) upon the date scheduled for delivery,
if such notice is sent by a nationally recognized overnight-express courier or (c) upon written confirmation
of
receipt
by
the
recipient
of
such
notice
(including
any
automatic
confirmation
that
is
received),
if
transmitted by electronic mail:
If to the Company Group (prior to the Closing) or any Seller, to the Sellers’ Representative:
c/o Echo Lake Foods, Inc.
316 W Grove St.
Burlington, WI 53105
Attention:
Scott Meinerz, President
Email:
with a
copy, in
connection with
any notice
to the
Company Group
(prior to
the Closing)
or to
any
Seller or to the Sellers’ Representative, which will not constitute notice, to:
Reinhart Boerner Van Deuren s.c.
N16 W23250 Stone Ridge Dr., Suite One
Waukesha, WI 53188
Attention:
Vincent J. Beres; Blake Knickelbein
Email:
and in the case of Buyer (or following the Closing, the Company Group) to:
Cal-Maine Foods, Inc.
1052 Highland Colony Pkwy
Suite 200
Ridgeland, MS 39157
Attention:
Sherman L. Miller, President and CEO
Robert L. Holladay, Jr., Vice President and General Counsel
Email:
with a copy, which will not constitute notice, to:
Sidley Austin LLP
1000 Louisiana, Suite 5900
Houston, Texas 77002
Attention:
J. Mark Metts
Email:
or at such other address
or electronic mail address, as
applicable, as may have been
specified by like notice.
11.4
Headings
.
The descriptive headings
of the several Articles and
Sections of this Agreement
are inserted for convenience only and do not constitute a part of the Agreement.
11.5
Entire Agreement
.
This Agreement, the Ancillary Agreements, the
Exhibits, the
Schedules
and the Confidentiality Agreement
constitute the entire agreement between the Parties (to the extent
parties
thereto) pertaining
to the
subject matter
hereof and
supersede all
prior and
contemporaneous agreements,
understandings, negotiations and
discussions, whether oral
or written, of
the Parties pertaining
to the subject
matter hereof.
81
11.6
Waiver
.
At any
time prior
to the
Closing, any
Party hereto
may (a) extend
the time
for the
performance of any of the obligations or
other acts of any other Party or
(b) waive compliance with any of
the agreements of any other Party or with any
conditions to its own obligations.
Any agreement on the part
of a Party hereto
to any such extension
or waiver will be
valid only if
set forth in an
instrument in writing
signed on
behalf of
such Party.
Notwithstanding the
foregoing provisions
of this
Section
11.6
, any
extension
or waiver
executed by
the Sellers’ Representative
on behalf
of the
Sellers in
accordance with
Section
2.7
shall be valid and binding with respect to each Seller.
11.7
Amendment
.
This Agreement
may not be
amended except by
an instrument in
writing signed
by each of the Parties.
No supplement, alteration or modification of this Agreement will be binding unless
executed
in
writing
by
the
Parties.
Notwithstanding
the
foregoing
provisions
of
this
Section
11.7
,
any
supplement, alteration
or modification
executed by
the Sellers’ Representative
on behalf
of the
Sellers in
accordance with Section
2.7
shall be valid and binding with respect to each Seller.
11.8
Public
Statements
.
Following
the
date
hereof,
no
Party
(or Affiliate
thereof)
will
issue
a
press release
or announcement
concerning this Agreement
and the
Transactions without
the prior
written
consent
of
the
Sellers’ Representative
and
Buyer;
provided,
however,
that
Buyer
may
issue
any
public
announcement or other public disclosures (a) required
by applicable Law or (b) required
by the rules of any
stock exchange upon
which any class
of Buyer’s capital
stock is traded,
but only if,
in each case,
Buyer uses
commercially
reasonable
efforts
to
afford
the
Sellers’ Representative
an
opportunity
to
first
review
the
content of the proposed disclosure and provide reasonable comments thereon.
Buyer agrees to provide the
Sellers’ Representative a
copy of any proposed press release or announcement permitted hereunder as soon
as practicable
prior to
the proposed
date of
dissemination thereof.
Buyer shall
give reasonable
consideration
to any suggested changes to such proposed press release or
announcement that are requested by the Sellers’
Representative.
Notwithstanding the
foregoing, no
additional consent
from the
Sellers’ Representative is
required for
any subsequent
statements by
or on
behalf of
Buyer that
are consistent
with any
such public
announcements
or
other
public
disclosures
that
have
already
been
made
in
compliance
with
this
Section
11.8.
11.9
Assignment
.
The provisions of this Agreement will be binding
upon and inure to the benefit
of the
Parties to
this Agreement
and their
respective successors
and permitted
assigns, but
no Party
may
assign,
delegate
or
otherwise
transfer
any
of
its
rights
or
obligations
under
this Agreement
without
the
consent
of Buyer
or
the
Sellers’ Representative,
as
the case
may
be;
provided,
however, that
Buyer
may
assign
its
rights
and
obligations
hereunder
without
the
prior
written
consent
of
the
other
Parties
to
any
Affiliates;
provided
further
that
no
such
assignment
shall
relieve
Buyer
of
its
obligations
under
this
Agreement.
11.10
Independent Covenants
.
The covenants contained herein are independent and
separate, and
in the
event that
any provision
contained herein
is declared
invalid or
illegal, the
other provisions
hereof
will not be affected or impaired thereby and will remain valid and enforceable.
11.11
Governing Law
.
This Agreement
and the other documents
delivered pursuant hereto and
the
legal relations between the Parties will be governed
and construed in accordance with the Laws of
the State
of Delaware, without giving effect to principles of conflict of laws.
11.12
Jurisdiction; Venue
.
(a)
Except
as
specifically
provided
in
Section
2.4
(which
shall
govern
any
dispute
thereunder), each of the
Parties (i) irrevocably submits itself
to exclusive jurisdiction of
the Court of
Chancery of the State of Delaware (provided, however, that, in the event subject matter jurisdiction
is declined by or
unavailable in the Court
of Chancery, then such
action, suit or proceeding
will be
heard and determined exclusively in any other state court sitting
in the State of Delaware; provided
82
further that,
in the
event subject
matter jurisdiction
is declined
by or
unavailable in
any such
state
court,
then such
action, suit
or proceeding
will be
heard
and determined
exclusively in
any other
federal court sitting
in the State
of Delaware) with
respect to any
action, suit or
proceeding arising
out of or relating to this Agreement, any of the Transactions or any facts and circumstances leading
to its execution or performance,
(ii) agrees that it will not
attempt to deny or defeat
such jurisdiction
by motion
or other
request for
leave from
such courts,
(iii) agrees not
to bring
any action,
suit or
proceeding
against
any
other
Party
arising
out
of
or
relating
to
this
Agreement,
any
of
the
Transactions
or
any
facts and
circumstances
leading to
its
execution
or performance
in
any
other
court and
(iv) waives any
defense of
inconvenient forum
to the
maintenance of
any action,
suit or
proceeding so
brought.
The Parties
agree
that
a final
judgment in
any such
action
or proceeding
shall be conclusive
and may
be enforced
in other
jurisdictions by
suit on
the judgment
or in
any other
manner provided by applicable Law.
Each of the Parties
agrees to waive any bond,
surety or other
security
that
might
be
required
of
any
other
Party
with
respect
to
any
action,
suit
or
proceeding,
including any appeal thereof.
(b)
Each of the Parties agrees that service of any process, summons, notice or document
in accordance
with Section
11.3
will be
effective service
of process
for any
action, suit
or proceeding
brought against
it by
any other
Party in
connection with
Section
11.12(a)
; provided,
however, that
nothing contained herein will affect
the right of any
Party to serve legal process
in any other manner
permitted by applicable
Law.
Notwithstanding the
foregoing, the consents
to jurisdiction set
forth
in Section
11.12(a)
will not constitute
general consents to
service of process
in the State
of Delaware
and shall
have no
effect for
any purpose
except as
provided in
this
Section
11.12
and will
not be
deemed to confer rights on any Person other than the Parties.
(c)
EACH OF THE
PARTIES HERETO HEREBY
ACKNOWLEDGES AND
AGREES
THAT
ANY
CONTROVERSY
THAT
MAY
ARISE
UNDER
OR
RELATING
TO
THIS
AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS IS
LIKELY TO
INVOLVE
COMPLICATED
AND
DIFFICULT
ISSUES,
AND
THEREFORE
IT
HEREBY
IRREVOCABLY AND
UNCONDITIONALLY
WAIVES
ALL
RIGHTS
IT
MAY
HAVE
TO
A
TRIAL BY JURY IN
RESPECT OF ANY LITIGATION (WHETHER
BASED ON
CONTRACT,
TORT OR OTHERWISE) DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO
THIS
AGREEMENT,
THE
ANCILLARY
AGREEMENTS,
THE
TRANSACTIONS
OR
THE
FACTS OR CIRCUMSTANCES LEADING
TO ITS EXECUTION OR PERFORMANCE.
EACH
PARTY CERTIFIES
AND ACKNOWLEDGES
THAT (i) NO
PARTY OR
REPRESENTATIVE OR
AFFILIATE
THEREOF
HAS
REPRESENTED,
EXPRESSLY
OR
OTHERWISE,
THAT
SUCH
OTHER PARTY WOULD
NOT, IN
THE EVENT
OF LITIGATION,
SEEK TO
ENFORCE THE
FOREGOING
WAIVER,
(ii) IT
UNDERSTANDS
AND
HAS
CONSIDERED
THE
IMPLICATIONS
OF
SUCH
WAIVER,
(iii) IT
MAKES
SUCH
WAIVER
KNOWINGLY AND
VOLUNTARILY
AND (iv) IT
HAS BEEN
INDUCED TO
ENTER INTO
THIS
AGREEMENT BY,
AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS
CONTAINED
IN THIS PARAGRAPH.
11.13
Counterparts
.
This Agreement
may
be
executed
in
any
number
of
counterparts,
each
of
which when
so executed
will be
deemed an
original but
all of
which together
will constitute
one and
the
same instrument.
Delivery of
an executed counterpart
of a signature
page to this Agreement
by facsimile
transmission or by electronic
transmission of a .pdf or
other electronic file shall be
as effective as delivery
of a manually signed counterpart of this Agreement.
11.14
Withholding
or
Granting
of
Consent
.
Except
as
otherwise
provided
in
this
Agreement
(including
any
provision
that
requires
that
consent
is
not
to
be
unreasonably
withheld,
conditioned
or
delayed), each Party hereto may, with respect to any consent or approval that such Party is entitled to grant
83
pursuant
to
this Agreement
or
any
other
document
or
instrument
or
agreement
delivered
or
entered
into
pursuant hereto, grant or withhold such
consent or approval in its sole
and uncontrolled discretion, with or
without cause, and subject to such conditions as it will deem appropriate.
11.15
Specific
Enforcement
.
The
Parties
acknowledge
that,
in
view
of
the
uniqueness
of
the
business of the
Company Group and
the Transactions, neither Buyer
nor the Sellers
will have an
adequate
remedy
at
law
for
money
damages,
and
that
irreparable
damage
would
occur,
in
the
event
that
this
Agreement
has
not
been
performed
in
accordance
with
its
terms
by
the
other
Parties,
and
therefore,
the
Parties
agree
that
Buyer
or
the
Sellers’ Representative,
as
the
case
may
be,
will
be
entitled
to
seek
an
injunction or
injunctions and
specific enforcement
of the
terms hereof
with respect
to the
Transactions in
the event
of breach
or expressly
threatened
breach by
the other
Party in
addition to
any other
remedy
to
which the
Parties may
be entitled,
at Law
or in
equity, for
such breach
without the
requirement of
the posting
of any bond therefor.
The rights in this Section
11.15
are in addition to any other
remedy to which a Party
may be entitled at
law or in equity,
and the exercise by
a Party of one
remedy shall not preclude
the exercise
of any other remedy, and except as
otherwise provided in this
Agreement, nothing herein shall be construed
as a
waiver by
Buyer or
the Sellers
of any
right they
may now
have or
hereafter acquire
to monetary
damages
from the other Parties by reason
of any injury to its property, or
otherwise arising out of any breach
or any
otherwise wrongful act
or omission by
such Parties; provided,
however, that, notwithstanding
the foregoing,
under
no
circumstances
shall
any
Person
be
permitted
or
entitled
to
receive
in
connection
with
this
Agreement both (a) a grant
of specific performance to
require Buyer to consummate
the Closing and (b) the
payment of monetary damages of any kind.
11.16
Non-Recourse
.
All claims, obligations, liabilities or causes of action (whether in contract or
in tort, at law or in
equity or granted by statute) that
may be based upon, in respect
of, arise under, out or by
reason
of, be
connected with,
or relate
in any
manner
to this
Agreement or
the negotiation,
execution or
performance of this
Agreement (including any representation
or warranty made in,
in connection with, or
as
an inducement to, this
Agreement), may be made
against (and such representations and
warranties are those
solely of) only
the Parties.
Notwithstanding anything that
may be expressed
or implied in
this Agreement
to the contrary, the Parties agree and
acknowledge that no recourse under this
Agreement or any documents
or instruments delivered hereunder or
the Transactions shall be
had against any Person who
is not a Party to
this
Agreement,
including
any
director,
officer,
employee,
incorporator,
member,
partner,
manager,
stockholder, Affiliate, agent, attorney or
representative of, and any financial advisor or lender to, any of the
foregoing
(together,
the
“Nonparty Affiliates,”
it
being
acknowledged
and
agreed,
for
the
avoidance
of
doubt,
that
none
of
Buyer,
the
Company
Group
or
the
Sellers
shall
be
Nonparty Affiliates
hereunder),
whether by
the enforcement
of any
assessment or
by any
legal or
equitable litigation,
or by
virtue of
any
Law,
or
by
virtue
of
any
breach
or
alleged
breach
hereof
or
thereof,
the
negotiation,
execution
or
performance hereof or
thereof or the
Transactions or in
respect of any
other document or
theory of law
or
equity or in
respect of any
oral or written
representations made or
alleged to be
made in connection
herewith
or therewith
(whether by
or through
attempted piercing
of the
corporate veil,
whether at
law or
in equity,
and whether
in contract
or in
tort or
otherwise), it
being expressly
agreed and
acknowledged that
no personal
liability whatsoever
shall attach
to, be
imposed on
or otherwise
be incurred
by any
Nonparty Affiliate for
any obligation of
any Party under
this Agreement,
any or any
documents or instruments
delivered hereunder
or the Transactions for any
claim based on, in
respect of or by reason
of such obligations or their
creation.
Without
limiting
the
foregoing,
no
claim
will
be
brought
or
maintained
by
any
Party
or
any
Nonparty
Affiliate
or
any
of
their
respective
successors
or
permitted
assigns
against,
and
no
Person
shall
seek
to
recover monetary damages from,
any Nonparty
Affiliate, and no recourse
will be brought or
granted against
any
of
them,
by
virtue
of
or
based
upon
any
alleged
misrepresentation
or
inaccuracy
in
or
breach
or
nonperformance of any of the
representations, warranties, covenants or agreements
of any Party set forth
or
contained in
this
Agreement or
any documents
or instruments
delivered hereunder
or the
Transactions.
Each
Nonparty Affiliate shall be an
express third-party beneficiary of, and entitled to enforce, this Section
11.16.
84
11.17
Waiver
of
Conflicts
.
Reinhart
Boerner
Van
Deuren
s.c
.
(“Reinhart”)
has
acted
as
legal
counsel to
the Company
Group, its
Affiliates and
the Sellers
’
Representative prior
to the
Closing with
respect
to
various
matters,
including
the
Transactions
and
by
acting
as
legal
counsel
to
certain Affiliates
of
the
Company
Group
and
the
Sellers
’
Representative,
and
may
continue
following
the
Closing
to
represent
certain Affiliates
of the
Company
Group
and the
Sellers
’
Representative with
respect to
various matters,
including the
Transactions and
by acting
as legal
counsel to
certain Affiliates of
the Company
Group and
the
Sellers
’
Representative.
Each
of
the
Parties,
on
behalf
of
themselves
and
each
of
their
respective
Affiliates, hereby
waives any
conflicts of
interest that
may arise
in connection
with the
representation by
Reinhart of
the Company
Group, its Affiliates and
the Sellers
’
Representative with
respect to
any matters
that have already occurred or that may arise in the future,
including the Transactions and by acting as legal
counsel to
certain Affiliates of
the Company
Group and
the Sellers
’
Representative.
All communications
that involve
attorney-client confidences
and that
have arisen
or may
arise in
the future
between the
Company
Group, on the one
hand, and Reinhart, on
the other hand, to
the extent related to
negotiation, documentation
and consummation of the Transactions, shall be deemed to be confidences that belong solely to the Sellers
’
Representative, and
no other
Person shall
have any
access thereto.
Furthermore, all
communications that
involve
attorney-client
confidences
and
that
have
arisen
or
may
arise
in
the
future
with
respect
to
any
representation by Reinhart of any Affiliate
of the Company Group or the Sellers
’
Representative (including
any that may
have arisen or
that may in
the future arise
in connection with
the Transactions)
shall be deemed
to
be
attorney-client
confidences
that
belong
solely
to
such
Person,
and
no
other
Person
shall
have
any
access
thereto.
Without
limitation
of
the
foregoing,
no
Person
may
use
or
rely
on
any
communications
described in the immediately preceding sentence in any claim, dispute, action,
suit or proceeding against or
involving any
of the
Sellers.
Notwithstanding the foregoing,
if after
the Closing
a dispute
arises between
Buyer or one or more
of its Affiliates (including, after the Closing, the Company Group),
on the one hand,
and a third party other than (and unaffiliated with) any of the Sellers, on the other hand,
then Buyer or such
Affiliate (to the
extent applicable) may
assert the attorney-client
privilege to prevent
disclosure to such
third
party
of
confidential
communications
by
Reinhart;
provided,
however,
that
neither
Buyer
nor
any
of
its
Affiliates may
waive such
privilege without
the prior
written consent
of the
Sellers
’
Representative.
No
term
of
this
Section
11.17
may
be
amended,
waived
or
modified
without
the
prior
written
consent
of
Reinhart.
[Signature Pages Follow; Remainder of Page Intentionally Left Blank]
1
IN WITNESS
WHEREOF, each of
the Parties has
executed this
Agreement as of
the date first
above
written.
BUYER:
CAL-MAINE FOODS, INC.
By: /s/ Sherman L. Miller
Sherman L. Miller
President and CEO
[Signature Pages Continue on Next Page]
1
TRANSFERORS:
ECHO LAKE PROPERTIES, LLC
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
Manager and President
ELKIN PROPERTIES, LLC
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
Manager and President
COMPANY GROUP:
ECHO LAKE FOODS, INC.
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title: President
ELT, LLC
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
Manager and President
ECHO LAKE HUNTINGTON, INC.
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
President
2
XENITEL, INC.
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
President
ECHO LAKE HUNTINGTON 435, LLC
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
Manager
BLUE GRASS REAL ESTATE CO, LLC
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
Manager
ECHO YORKVILLE, LLC
By: /s/ Scott Meinerz
Name:
Scott Meinerz
Title:
Manager
[Signature Pages Continue on Next Page]
1
VOTING SECURITYHOLDERS:
THORNHILL FAMILY
TRUST
By: /s/ Lynn Thornhill
Lynn Thornhill
Trustee
/s/ Leigh Peterson
Leigh Peterson
/s/ Sandra Townsend
Sandra Townsend
/s/ Timothy Meinerz
Timothy Meinerz
/s/ Gregory Meinerz
Gregory Meinerz
/s/ Scott Meinerz
Scott Meinerz
/s/ Luann Meinerz Namowicz
Luann Meinerz Namowicz
2
EXHIBIT A
ACCOUNTING PRINCIPLES
ARTICLE XIICAPITALIZED
TERMS USED BUT NOT DEFINED IN THIS EXHIBIT A (THESE
“ACCOUNTING PRINCIPLES”) SHALL HAVE
THE RESPECTIVE MEANINGS ASCRIBED
TO SUCH TERMS IN THE AGREEMENT.
ARTICLE XIIITHE CLOSING CERTIFICATE
AND CLOSING STATEMENT
(TOGETHER,
THE “STATEMENTS
”) SHALL BE PREPARED ON A COMBINED BASIS FOR THE
COMPANY GROUP IN ACCORDANCE WITH THE FOLLOWING POLICIES AND
PROCEDURES IN THE FOLLOWING ORDER OF PRIORITY:
13.1
the accounting principles, policies, practices, methodologies
and procedures set out in these
Accounting Principles (“Specific Accounting Policies”);
13.2
to
the
extent
not
covered
by
clause
13.1
above,
consistent
with
accounting
principles,
policies, treatments, categorizations,
practices, methods, and
bases as were
used in the
preparation of the
unaudited combined interim
balance sheets as
of February 28, 2025, included
in the Unaudited
Financial
Statements; and
13.3
to the extent not
covered by clauses
13.1
and
13.2
above, in accordance with
GAAP as of
the
Calculation Time.
In the event of a conflict,
clause
13.1
will have priority over clauses
13.2
and
13.3
, and clause
13.2
will have priority over clause
13.3.
Specific Accounting Policies
As required
by clause
13.1
above, the
Statements shall
be prepared
in accordance
with the
following specific
principles:
ARTICLE XIVTHE SOLE REFERENCE FOR THE PREPARATION
OF THE STATEMENTS
SHALL BE THE ASSOCIATED DEFINITIONS SET OUT IN THE AGREEMENT AND THESE
ACCOUNTING PRINCIPLES, AND IN THE EVENT OF A CONFLICT BETWEEN THE
DEFINITIONS SET OUT IN THE AGREEMENT AND THESE ACCOUNTING PRINCIPLES
THE DEFINITIONS SET OUT IN THE AGREEMENT SHALL PREVAIL.
ARTICLE XVTHE STATEMENTS
SHALL:
15.1
be prepared on the basis the
Company Group is a going concern
and shall exclude the effect
of any change of Law or GAAP after the Calculation Time.
15.2
be
interpreted
to
avoid
double
counting
(whether
positive
or
negative)
of
any
item
to
be
included in the Statements.
15.3
be prepared in accordance with the specific procedures that would be
adopted at a financial
year-end, including detailed analyses of prepayments and accruals and performance of cut-off procedures.
15.4
be prepared
in a
format set
out in
Schedule B-1 to
the Agreement (the
“Reference Balance
Sheet”) by reference to the trial balance account codes of the Company Group.
The underlying assets and
liabilities
shall
be
classified
between
the
columns
labeled
“Cash,”
“Working
Capital,”
“Indebtedness,”
“Company
Group
Expenses,”
“Tax
Liability
Amount”
and
“Other”
on
a
basis
consistent
with
the
3
classification
of
the
equivalent
line
item
set
forth
in
the
Reference
Balance
Sheet.
To
the
extent
the
methodologies
utilized
in
calculating
the
underlying
amounts
set
forth
in
the
Reference
Balance
Sheet
conflict
with
the
Accounting
Principles,
the
Accounting
Principles
shall
prevail.
To
the
extent
any
new
account codes are
created between the
date of the
Reference Balance Sheet
and the Calculation
Time, the
amounts included therein
will be (i) classified and
allocated to an
existing trial balance
account code based
on the nature
of the
new account
code and (ii)
included in
or excluded from
“Cash,” “Working
Capital,”
“Indebtedness,” “Company Group Expenses,” “Tax Liability Amount”
and “Other” on a basis consistent
with the existing account code.
15.5
exclude
any
right-of-use
assets
or
liabilities
required
to
be
recorded
as
such
by
FASB
Accounting
Standards
Codification
Topic
842, Accounting
for
Leases,
in
respect
of
any
operating
leases
(except for any past due related liabilities, which shall be included as a liability in Working Capital).
15.6
not exclude any item or amount solely on the grounds of materiality.
ARTICLE XVIANY INTERCOMPANY BALANCES BETWEEN OR AMONG THE COMPANY
GROUP SHALL BE RECONCILED AND ELIMINATED PRIOR TO
THE CALCULATION
TIME.
ANY BALANCES THAT ARE NOT RECONCILED AS OF THE CALCULATION
TIME
SHALL BE EXCLUDED FROM WORKING CAPITAL.
ARTICLE XVIIFOR PURPOSE OF CALCULATING
WORKING CAPITAL:
17.1
there shall
be no
change in
the classification
(i) to a
current asset
or a
current liability
of
any asset or liability that has not previously been characterized as a
current asset or current liability in the
Reference Balance Sheet or
(ii) to a long-term asset
or long-term liability of
any asset or liability
that has
not previously
been characterized
as a
long-term asset
or long-term
liability in
the Reference
Balance Sheet,
in each
case, other
than such
a change
resulting solely
from the
passage of
time between
the date
of the
Reference Balance Sheet and the Calculation Time.
17.2
prepayments made as
of the Calculation
Time shall be
included in Working
Capital only to
the extent they give rise to an economic benefit to Buyer after the Closing.
ARTICLE XVIIITHE OBLIGATION
FOR FISCAL YEAR 2025 ANNUAL BONUS EARNED AND
UNPAID AS OF IMMEDIATELY
PRIOR TO CLOSING SHALL BE INCLUDED IN
INDEBTEDNESS, CALCULATED ON A PRO RATA
BASIS, BASED ON (A) THE NUMBER OF
DAYS
BETWEEN JANUARY 1, 2025 AND THE CLOSING DATE
AND (B) THE EMPLOYEE
BONUS BUDGET FOR FISCAL YEAR 2025.
FOR AVOIDANCE
OF DOUBT, THE
EMPLOYER PORTION OF ANY TAXES
DUE ON SUCH AMOUNTS SHALL BE
CALCULATED AND INCLUDED IN INDEBTEDNESS IN ADDITION TO
THE PRO RATA
PORTION OF THE UNPAID
BONUSES EARNED AS OF IMMEDIATELY
PRIOR TO
CLOSING.
TO THE EXTENT THE BONUS IS EXPECTED TO EXCEED THE EMPLOYEE
BONUS BUDGET FOR FISCAL YEAR 2025, THE BONUS LIABILITY SHALL BE EQUAL TO
THE PRO-RATA
AMOUNT BASED ON THE REVISED EMPLOYEE BONUS BUDGET FOR
FISCAL YEAR 2025.
ARTICLE XIXTHE REFUND FROM KENTUCKY RELATED
TO SALES AND USE TAX
RECORDED IN
ACCOUNT #1212-00 (TAX RECEIVABLES)
, SHALL BE INCLUDED IN THE
CALCULATION OF CASH.
4
EXHIBIT B
FORM OF
CLOSING CERTIFICATE
1
Reference is
made to
that certain
Securities Purchase Agreement,
dated as
of April [●], 2025
(the
“Agreement”),
by
and
among
Cal-Maine
Foods,
Inc.,
a
Delaware
corporation
(“Buyer”);
the
following
companies to be
acquired, directly or
indirectly, by Buyer
on the terms
and subject to
the conditions set
forth
in the
Agreement (each,
a “Company”
and, collectively,
the “Companies”
or the
“Company Group”):
(i)
Echo Lake Foods, Inc., a Wisconsin corporation
(“Echo Lake Foods”), (ii) ELT,
LLC, a Wisconsin limited
liability company (“ELT”), (iii)
Echo Lake Huntington, Inc.,
a Wisconsin corporation (“Huntington”), (iv)
Xenitel, Inc.,
a Wisconsin
corporation (“Xenitel”),
(v) Echo
Lake Huntington
435, LLC,
a Wisconsin
limited
liability company
(“Huntington 435”),
(vi) Blue
Grass Real
Estate Co,
LLC, a Wisconsin
limited liability
company
(“Blue
Grass”),
and
(vii)
Echo
Yorkville,
LLC,
a
Wisconsin
limited
liability
company
(“Yorkville”); the following transferring entities and securityholders (each,
a “Seller” and, collectively, the
“Sellers”): (i) Echo Lake
Properties, LLC, a
Wisconsin limited liability company
(“Echo Lake Properties”),
(ii)
Elkin
Properties,
LLC,
a
Wisconsin
limited
liability
company
(“Elkin
Properties”),
(iii)
the
holders,
collectively, of 100% of
the Class A voting shares of Echo Lake
Foods, as set forth
on the signature pages
to
the Agreement
(each,
a
“Voting
Securityholder”
and,
collectively,
the
“Voting
Securityholders”);
and
Scott
Meinerz,
in
his
capacity
as
Sellers’ Representative.
All
capitalized
terms
used
but
not
otherwise
defined herein shall have the respective meanings ascribed to them in the Agreement.
This
Closing
Certificate
is
delivered
to
Buyer
pursuant
to
Section 2.3
of
the
Agreement.
In
accordance with Section 2.3 of the Agreement, the Sellers’ Representative, on behalf of the Sellers, hereby
certifies that the items
below set forth, in
reasonable detail, the Sellers’
Representative’s good faith estimate
of:
(a) the Estimated Adjustment
Amount (and each component thereof and including the subtotal for each
Transferor
Group);
(b) the
Estimated Adjusted
Equity
Price
(including
the
subtotal
for
each
Transferor
Group); and
(c) the Closing
Date Payment,
in each
case, as
calculated in
accordance with
the Accounting
Principles.
1
Note to Draft
:
The amounts shown below are illustrative and are consistent with the amounts shown in Exhibit C.
5
ARTICLE XXESTIMATED
ADJUSTMENT AMOUNT:
20.1
Estimated Cash
$[●]
(a)
Echo Lake Foods Group
$[●]
(b)
Echo Lake Properties Group
$[●]
(c)
Elkin Properties Group
$[●]
20.2
Estimated Company Group Expenses
$[●]
(a)
Echo Lake Foods Group
$[●]
(b)
Echo Lake Properties Group
$[●]
(c)
Elkin Properties Group
$[●]
20.3
Estimated Indebtedness
$[●]
(a)
Echo Lake Foods Group
$[●]
(b)
Echo Lake Properties Group
$[●]
(c)
Elkin Properties Group
$[●]
20.4
Estimated
Working
Capital
over
Target
Working
Capital
$[●]
(a)
Echo Lake Foods Group
$[●]
(b)
Echo Lake Properties Group
$[●]
(c)
Elkin Properties Group
$[●]
20.5
Target
Working
Capital
over
Estimated
Working
Capital
$[●]
(a)
Echo Lake Foods Group
$[●]
(b)
Echo Lake Properties Group
$[●]
(c)
Elkin Properties Group
$[●]
20.6
Estimated Tax Liability Amount
$[●]
(a)
Echo Lake Foods Group
$[●]
(b)
Echo Lake Properties Group
$[●]
(c)
Elkin Properties Group
$[●]
20.7
Estimated
Adjustment
Amount
(I.A
minus
I.B
minus I.C plus
the excess,
if any,
of I.D minus
the excess,
if any,
of I.E minus I.F)
($[●])
(a)
Echo Lake Foods Group
($[●])
(b)
Echo Lake Properties Group
($[●])
(c)
Elkin Properties Group
($[●])
ARTICLE XXIESTIMATED
ADJUSTED EQUITY PRICE:
6
21.1
Purchase Price
$[250,000,000]
21.2
Estimated Adjustment Amount
$[●]
1.
Echo Lake Foods Group
$[●]
2.
Echo Lake Properties Group
$[●]
3.
Elkin Properties Group
$[●]
21.3
Adjustment Escrow Amount
$[●]
21.4
Indemnification Escrow Amount
$[●]
21.5
Estimated Adjusted
Equity Price
(II.A minus
II.B,
if II.B is negative
or plus II.B, if II.B
is positive minus II.C
minus
II.D)
$[●]
1.
Echo Lake Foods Group
$[●]
2.
Echo Lake Properties Group
$[●]
3.
Elkin Properties Group
$[●]
ARTICLE XXIICLOSING DATE
PAYMENT:
$[●]
[Signature Page Follows; Remainder of Page Intentionally Left Blank]
7
IN WITNESS WHEREOF, the undersigned has executed this Closing Certificate as of the date first
written above.
SCOTT MEINERZ,
solely in his capacity as Sellers’ Representative
8
EXHIBIT C
CONSIDERATION ALLOCATION
SCHEDULE
Reference is
made to
that certain
Securities Purchase Agreement,
dated as
of April [●], 2025
(the
“Agreement”),
by
and
among
Cal-Maine
Foods,
Inc.,
a
Delaware
corporation
(“Buyer”);
the
following
companies to be
acquired, directly or
indirectly, by Buyer
on the terms
and subject to
the conditions set
forth
in the
Agreement (each,
a “Company”
and, collectively,
the “Companies”
or the
“Company Group”):
(i)
Echo Lake Foods, Inc., a Wisconsin corporation
(“Echo Lake Foods”), (ii) ELT,
LLC, a Wisconsin limited
liability company (“ELT”), (iii)
Echo Lake Huntington, Inc.,
a Wisconsin corporation (“Huntington”), (iv)
Xenitel, Inc.,
a Wisconsin
corporation (“Xenitel”),
(v) Echo
Lake Huntington
435, LLC,
a Wisconsin
limited
liability company
(“Huntington 435”),
(vi) Blue
Grass Real
Estate Co,
LLC, a Wisconsin
limited liability
company
(“Blue
Grass”),
and
(vii)
Echo
Yorkville,
LLC,
a
Wisconsin
limited
liability
company
(“Yorkville”); the following transferring entities and securityholders (each,
a “Seller” and, collectively, the
“Sellers”): (i) Echo Lake
Properties, LLC, a
Wisconsin limited liability company
(“Echo Lake Properties”),
(ii)
Elkin
Properties,
LLC,
a
Wisconsin
limited
liability
company
(“Elkin
Properties”),
(iii)
the
holders,
collectively, of 100% of
the Class A voting shares of Echo Lake
Foods, as set forth
on the signature pages
to
the Agreement
(each,
a
“Voting
Securityholder”
and,
collectively,
the
“Voting
Securityholders”);
and
Scott
Meinerz,
in
his
capacity
as
Sellers’ Representative.
All
capitalized
terms
used
but
not
otherwise
defined herein shall have the respective meanings ascribed to them in the Agreement.
9
2
ARTICLE XXIIIALLOCATION
OF PURCHASE PRICE:
THE PURCHASE PRICE SHALL BE ALLOCATED AMONG THE TRANSFEROR
GROUPS AS FOLLOWS:
23.1
Echo Lake Foods Group
$[248,540,813]
23.2
Echo Lake Properties Group
$[1,762,300]
23.3
Elkin Properties Group
$[7,777,550]
ARTICLE XXIVESTIMATED
ADJUSTMENT AMOUNT / FINAL ADJUSTMENT AMOUNT (
AS
APPLICABLE
):
24.1
Estimated Cash / Closing Cash (as applicable)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
24.2
Estimated
Company
Group
Expenses
/
Company
Group Expenses (as applicable)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
24.3
Estimated Indebtedness / Closing Indebtedness (as
applicable)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
24.4
Estimated
Working
Capital
over
Target
Working
Capital /
Closing Working
Capital over
Target Working
Capital
(as applicable)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
24.5
Target
Working
Capital
over
Estimated
Working
Capital /
Target Working
Capital over
Closing Working
Capital
(as applicable)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
24.6
Estimated
Tax
Liability
Amount
/
Closing
Tax
Liability Amount (as applicable)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
24.7
Estimated Adjustment
Amount /
Final
Adjustment
Amount
(as
applicable)
(II.A
minus
II.B
minus
II.C
plus
the
excess, if any, of II.D minus the excess, if any, of II.E minus II.F)
$__________
(a)
Echo Lake Foods Group
$__________
(b)
Echo Lake Properties Group
$__________
(c)
Elkin Properties Group
$__________
10
ARTICLE XXVESTIMATED
ADJUSTED EQUITY PRICE / FINAL ADJUSTED EQUITY PRICE
(
AS APPLICABLE
):
25.1
Purchase Price
$[258,080,663]
1.
Echo Lake Foods Group
$[248,540,813]
2.
Echo Lake Properties Group
$[1,762,300]
3.
Elkin Properties Group
$[7,777,550]
25.2
Estimated
Adjustment
Amount
/
Final
Adjustment
Amount (as applicable)
$__________
1.
Echo Lake Foods Group
$__________
2.
Echo Lake Properties Group
$__________
3.
Elkin Properties Group
$__________
25.3
Adjustment Escrow
Amount (allocated
in the
same
proportions as the Purchase Price)
$__________
1.
Echo Lake Foods Group
$__________
2.
Echo Lake Properties Group
$__________
3.
Elkin Properties Group
$__________
25.4
Indemnification
Escrow
Amount
(allocated
in
the
same proportions as the Purchase Price)
$__________
1.
Echo Lake Foods Group
$__________
2.
Echo Lake Properties Group
$__________
3.
Elkin Properties Group
$__________
25.5
Estimated Adjusted Equity
Price /
Final Adjusted
Equity Price (as applicable)
(III.A minus III.B, if III.B is
negative
or plus III.B, if III.B is positive minus III.C minus III.D)
$__________
1.
Echo Lake Foods Group
$__________
2.
Echo Lake Properties Group
$__________
3.
Elkin Properties Group
$__________
2
Note to Draft:
Allocations to Echo Lake Properties Group and Elkin Properties Group tie to tax gross-up calculation, with the
remainder allocated to Echo Lake Foods Group.
11
EXHIBIT D
FORM OF
EXCLUDED ASSET ASSIGNMENT AGREEMENT
THIS EXCLUDED
ASSET
ASSIGNMENT
AGREEMENT (this
“Agreement”) is
made and
entered
into
as
of
April [__], 2025
by
and
between
ECHO
LAKE
FOODS, LLC,
a
Delaware
limited
liability
company,
as
successor
by
conversion
to
ECHO
LAKE
FOODS,
INC.,
a
Wisconsin
corporation
(“Assignor”), and
MEINERZ HOLDINGS,
INC., a
Wisconsin corporation
(“Assignee”).
Reference is
made
to that certain
Securities Purchase Agreement, dated April [__], 2025 (the
“Purchase Agreement”), by and
among
Assignor,
ELT, LLC,
a
Wisconsin
limited
liability
company,
Echo
Lake
Properties, LLC,
a
Wisconsin limited
liability company,
Elkin Properties, LLC,
a Wisconsin
limited liability
company, Echo
Lake
Huntington, Inc.,
a
Wisconsin
corporation,
Xenitel, Inc.,
a
Wisconsin
corporation,
Echo
Lake
Huntington 435, LLC, a
Wisconsin limited liability
company, Blue Grass
Real Estate Co, LLC,
a Wisconsin
limited
liability
company,
Echo
Yorkville, LLC,
a
Wisconsin
limited
liability
company,
Cal-Maine
Foods, Inc., a
Delaware corporation,
the holders
of 100%
of the
issued and
outstanding shares
of Class A
voting common stock of Assignor and certain other parties.
RECITALS
A.
Assignee is the
sole member of Assignor,
and Assignor is classified
as a disregarded
entity
(within
the
meaning
of Treasury
Regulations
Section 301.7701-3(b)(1)(ii)
and
analogous
state
and
local
provisions) of Assignee for U.S. federal and applicable state and local income tax purposes.
B.
Assignor
desires
to
distribute
and
assign
the
Excluded Assets
to Assignee,
and Assignee
desires to accept such assignment.
C.
Capitalized
terms
not
otherwise
defined
herein
have
the
meaning
given
to
them
in
the
Purchase Agreement.
AGREEMENTS
In
consideration
of
the
recitals
and
the
mutual
agreements
contained
herein,
the
parties
agree
as
follows:
12
ARTICLE XXVIEFFECTIVE AS OF IMMEDIATELY
AFTER THE CONVERSIONS, ASSIGNOR
HEREBY DISTRIBUTES, TRANSFERS AND ASSIGNS TO ASSIGNEE ALL RIGHT,
TITLE
AND INTEREST IN AND TO THE EXCLUDED ASSETS, AND ASSIGNEE HEREBY ACCEPTS
SUCH ASSIGNMENT.
ARTICLE XXVIITHE PARTIES AGREE THAT
THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT ARE INTENDED TO BE TREATED
AS DISREGARDED FOR FEDERAL
AND APPLICABLE STATE
AND LOCAL INCOME TAX PURPOSES, AND SHALL FILE ALL
TAX RETURNS IN A MANNER CONSISTENT WITH SUCH INTENT.
ARTICLE XXVIIIIN THOSE CASES WHERE (A) ANY EXCLUDED ASSET IS NOT BY ITS
TERMS ASSIGNABLE OR (B) THE ASSIGNMENT OF SUCH EXCLUDED ASSETS
REQUIRES THE CONSENT OF A THIRD PARTY
IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
ASSIGNOR AND ASSIGNEE
WILL, PRIOR TO AND AFTER THE CLOSING, COOPERATE
AND USE THEIR
RESPECTIVE REASONABLE BEST EFFORTS TO OBTAIN
ALL CONSENTS AND WAIVERS
AND TO RESOLVE
ALL IMPRACTICALITIES OF ASSIGNMENTS AND TRANSFERS
NECESSARY TO CONVEY OR GIVE ASSIGNEE THE RIGHT TO ANY SUCH EXCLUDED
ASSETS.
IF ASSIGNOR COLLECTS ANY PAYMENTS
WITH RESPECT TO THE
EXCLUDED ASSETS, ASSIGNOR WILL REMIT SUCH AMOUNTS, WITHOUT OFFSET OR
HOLDBACK, TO ASSIGNEE NO LATER
THAN FIVE BUSINESS D
AY
S AFTER THE DATE
ON WHICH SUCH COLLECTION OCCURS.
ARTICLE XXIXTHE TERMS AND CONDITIONS OF THIS AGREEMENT SHALL BE BINDING
UPON AND SHALL INURE TO THE BENEFIT OF THE PARTIES
AND THEIR RESPECTIVE
SUCCESSORS, ASSIGNS AND HEIRS.
THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE
OF
DELAWARE,
REGARDLESS OF CONFLICT OF LAW
PRINCIPLES.
THIS AGREEMENT
MAY
BE EXECUTED IN ONE OR MORE COUNTERPARTS,
EACH OF WHICH SHALL BE
DEEMED AN ORIGINAL AND ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE
DOCUMENT.
THIS AGREEMENT MAY
BE SIGNED AND DELIVERED BY FACSIMILE OR
ELECTRONICALLY
IN PORTABLE
DOCUMENT FORMAT (“.PDF”) OR ANY SIMILAR
ELECTRONIC FORMAT,
AND FACSIMILE OR .PDF SIGNATURES
SHALL BE BINDING
FOR ALL PURPOSES HEREOF.
[
Signature Page Follows; Remainder of Page Left Intentionally Blank
]
13
IN WITNESS WHEREOF, the parties have executed
this Assignment Agreement as
of the date first
written above.
ASSIGNOR:
ECHO LAKE FOODS, LLC
By:
Scott Meinerz, President
ASSIGNEE:
MEINERZ HOLDINGS, INC.
By:
Scott Meinerz, President
14
EXHIBIT E
FORM OF
OPERATING AGREEMENT
OF
ECHO LAKE FOODS, LLC
The
undersigned,
Meinerz
Holdings, Inc.,
a
Wisconsin
corporation
(the
“Member”),
is
entering
into
this
Operating
Agreement
(this
“Operating
Agreement”)
for
the
purpose
of
establishing
the
governance,
management
and
capitalization
of
Echo
Lake
Foods,
LLC,
a
Delaware
limited
liability
company
(the
“Company”).
The undersigned acknowledges and agrees as follows:
15
1.
THE CERTIFICATE
OF
FORMATION
OF
THE COMPANY,
FILED
WITH
THE
DELAWARE
SECRETARY
OF
STATE
,
EFFECTIVE
AS
OF
[__], 2025,
PURSUANT
TO
THE
CONVERSION
OF
ECHO
LAKE
FOODS,
INC.,
A
WISCONSIN
CORPORATION,
INTO
A
DELAWARE
LIMITED
LIABILITY
COMPANY,
IS
HEREBY
ADOPTED,
RATIFIED
AND
CONFIRMED.
2.
THIS
OPERATING
AGREEMENT,
TOGETHER
WITH
THE
APPLICABLE
PROVISIONS OF THE DELAWARE
LIMITED LIABILITY COMPANY
ACT (THE “ACT”), AS
SUPPLEMENTED BY THIS
OPERATING AGREEMENT,
SHALL GOVERN ALL RIGHTS
AND
OBLIGATIONS OF THE MEMBER.
3.
THE
SOLE
MEMBER
AND
EQUITY
OWNER
OF
THE
COMPANY
SHALL
BE
THE
MEMBER,
WHO
SHALL
OWN
100%
OF
THE
ISSUED
AND
OUTSTANDING
EQUITY
INTERESTS
IN
THE
COMPANY,
CONSISTING
OF
ONE
CLASS
CALLED
LIMITED
LIABILITY COMPANY MEMBERSHIP INTERESTS.
4.
THE
MEMBER
SHALL
BE
ENTITLED
TO
A
100%
INTEREST
IN
THE
CONTRIBUTIONS,
PROFITS,
LOSSES
AND
DISTRIBUTIONS
OF
THE
COMPANY.
ANY
DISTRIBUTION
OR
RETENTION
OF
THE
PROFITS
AND
ASSETS
OF
THE
COMPANY
SHALL BE MADE IN THE DISCRETION OF THE MEMBER.
5.
THE
COMPANY
SHALL
BE
MEMBER-MANAGED
AND
SHALL
CONDUCT
SUCH OPERATIONS
AND BUSINESS
AS THE
MEMBER SHALL
DETERMINE ARE
IN THE
COMPANY’S BEST INTERESTS.
6.
UNLESS OTHERWISE SET FORTH IN A WRITTEN AGREEMENT, ALL DEBTS,
OBLIGATIONS AND LIABILITIES OF THE
COMPANY,
WHETHER ARISING IN
CONTRACT
OR
OTHERWISE,
SHALL
BE
THE
DEBTS,
OBLIGATIONS
AND
LIABILITIES
OF
THE
COMPANY AND NOT OF ANY MEMBER.
7.
THE
MEMBER
IS
HEREBY
AUTHORIZED
AND
DIRECTED,
FOR
AND
ON
BEHALF
OF
THE
COMPANY,
TO
TAKE
ANY
ACTIONS
AND
EXECUTE,
DELIVER
AND
PERFORM
ANY
DOCUMENTS,
AGREEMENTS
AND
OTHER
INSTRUMENTS
AS
THE
MEMBER
DEEMS
NECESSARY
OR
APPROPRIATE
TO
ORGANIZE
THE
COMPANY
AND
CONDUCT
ITS
BUSINESS.
ALL
OF
SUCH
DOCUMENTS,
AGREEMENTS
AND
OTHER
INSTRUMENTS
ARE
TO
BE
IN
SUCH
FORM
AND
CONTAIN
SUCH
PROVISIONS
AS
THE
MEMBER
EXECUTING
THE
SAME
SHALL
APPROVE,
AND
THE
SIGNATURE
OF
THE
MEMBER APPEARING THEREON
SHALL BE CONCLUSIVE
EVIDENCE OF ITS
APPROVAL
THEREO
F.
8.
THE MEMBER
MAY BESTOW UPON EMPLOYEES
OR REPRESENTATIVES OF
THE COMPANY SUCH TITLES AS THE MEMBER DEEMS NECESSARY OR EXPEDIENT TO
ENABLE IT TO
CARRY OUT
ITS DUTIES
ON BEHALF OF
THE COMPANY
.
SUCH TITLES
MAY
INCLUDE
“CHAIR,”
“PRESIDENT,”
“CHIEF
EXECUTIVE
OFFICER,”
“CHIEF
FINANCIAL
OFFICER,”
ONE
OR
MORE
“VICE
PRESIDENTS,”
“TREASURER”
OR
“SECRETARY
,”
OR
SUCH
OTHER
POSITIONS
OR
TITLES
AS
THE
MEMBER
DEEMS
ADVISABLE.
SUCH
PERSONS,
IN
THEIR
RESPECTIVE
ROLES
AS
OFFICERS
OF
THE
COMPANY,
MUST DISCHARGE
THEIR DUTIES
IN GOOD
FAITH
WITH THE
CARE THAT
AN
ORDINARY,
PRUDENT
PERSON
IN
A
LIKE
POSITION
WOULD
EXERCISE
UNDER
SIMILAR CIRCUMSTANCES, AND IN A MANNER THE MEMBER REASONABLY BELIEVES
TO BE IN THE BEST INTERESTS OF THE COMPANY.
16
9.
NO OFFICER
OR AGENT
APPOINTED BY
THE MEMBER SHALL
BE LIABLE,
RESPONSIBLE OR ACCOUNTABLE IN DAMAGES OR
OTHERWISE TO THE COMPANY OR
THE MEMBER
FOR ANY
ACTS PERFORMED
OR OMITTED
BY SUCH
PERSON IN
GOOD
FAITH, EXCEPT FOR ACTS OR OMISSIONS THAT CONSTITUTE GROSS NEGLIGENCE OR
WILLFUL
MISCONDUCT.
THE
OFFICERS
SHALL
BE
INDEMNIFIED
AND
HELD
HARMLESS BY THE
COMPANY,
TO THE EXTENT
OF THE COMPANY’S ASSETS, AGAINST
OBLIGATIONS
AND
LIABILITIES
ARISING
OR
RESULTING
FROM
OR
INCIDENTAL
TO
THE MANAGEMENT
OF THE
COMPANY’S AFFAIRS AND, IN ALL
CASES, TO THE
EXTENT
THAT
THE
ACT
PROVIDES
FOR
INDEMNIFICATION
OF
SUCH
PERSONS;
PROVIDED,
HOWEVER, THAT NO PARTY
SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER
FOR
ACTS
OR
OMISSIONS
CONSTITUTING
GROSS
NEGLIGENCE
OR
WILLFUL
MISCONDUCT.
10.
AT ANY TIME
WHEN THERE
IS ONLY ONE MEMBER
OF THE
COMPANY AND
THERE
IS
AN
EVENT
OF
DISSOCIATION,
INCLUDING
A
MEMBER
CEASING
TO
BE
A
MEMBER OF THE COMPANY
BY REASON OF DEATH,
A SALE OR OTHER TRANSFER OF
INTEREST
OR
BANKRUPTCY,
ANY
PERSON
OR
ENTITY
SUCCEEDING
TO
THE
MEMBER’S
INTEREST
AS
A
RESULT
OF
SUCH
EVENT
OF
DISSOCIATION
SHALL
BE
A
MEMBER
WITHOUT
FURTHER
ACTION
ON
THE
PART
OF
THE
TRANSFEREE,
THE
COMPANY
OR
THE
DISSOCIATED
MEMBER,
AND
SUCH
EVENT
OF
DISSOCIATION
SHALL NOT CAUSE OR RESULT
IN THE DISSOLUTION OF THE COMPANY.
[
Signature Page Follows; Remainder of Page Intentionally Left Blank
]
17
Dated as of the ____ day of __________________, 2025.
MEMBER
:
MEINERZ HOLDINGS, INC.
By:
Scott Meinerz, President
exhibit106
1
[Form of]
Severance and Change in Control Agreement
This Severance and Change in Control Agreement (the “Agreement”) between Cal-Maine Foods,
Inc., a Delaware corporation, and [●] (the “Executive”) is dated effective as of April 8, 2025 (the
“Agreement Date”).
ARTICLE I
Definitions
Capitalized
terms
used
in
this
Agreement
but
not
otherwise
defined
shall
have
the
meanings
set
forth in this Article I.
1.1
Affiliate
.
“Affiliate” means a Person that directly,
or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with, another specified Person.
1.2
Board
.
“Board” shall mean the Board of Directors of the Company.
1.3
Cause
.
“Cause” shall mean:
(a)
An unauthorized use or disclosure by the Executive of the Company’s confidential
information or trade secrets;
(b)
A material breach by the Executive of any agreement between Executive and
Company;
(c)
A material failure by the Executive to comply with the Company’s written policies
or rules;
(d)
The Executive’s conviction of, or plea of “guilty” or “no contest” to, a felony under
the laws of the United States or any State thereof;
(e)
The Executive’s gross negligence or willful misconduct in connection with
Executive’s performance of services for the Company or an Affiliate;
(f)
A continuing failure by the Executive to perform assigned duties after receiving
written notification of such failure from the Board; or
(g)
A failure by Executive to cooperate in good faith with a governmental or internal
investigation of the Company or its directors, officers, or employees, if the Company has requested the
Executive’s cooperation.
For purposes of this provision, no act or failure to act, on the part of the Executive, will be considered
“willful” unless it is done, or omitted to be done, by the Executive in bad faith or without a reasonable
belief that the act or omission was in the best interest of the Company or its Affiliates.
Any act, or failure
to act, based on authority given pursuant to a resolution duly adopted by the Board or the advice of
counsel to the Company or its Affiliates will be conclusively presumed to be done, or omitted to be done,
by the Executive in good faith and in the best interests of the Company or its Affiliates.
The termination
of employment of the Executive will not be deemed to be for Cause unless and until there has been
delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of a majority of the
entire membership of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an opportunity, together with
counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive
has engaged in the conduct described in subparagraphs (a) through (g) above, and specifying the
particulars of such conduct.
1.4
Change in Control
. “Change in Control” means:
2
(a)
the acquisition by any individual, entity or group (a “Person”), including any
“person” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 25% or more of either (A) the then outstanding shares of Common Stock of
the Company (the “Outstanding Common Stock”) or (B) the combined voting power of the then
outstanding securities of the Company entitled to vote generally in the election of directors (the
“Outstanding Voting
Securities”); provided, however, the following shall not be a “Change in Control”:
(1) any acquisition directly from the Company (excluding any acquisition resulting from the exercise of an
exercise, conversion or exchange privilege unless the security being so exercised, converted or exchanged
was acquired directly from the Company), (2) any acquisition by the Company, (3) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (4) any acquisition by any corporation pursuant to a transaction that complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section or (5) any transaction contemplated by that
certain Agreement Regarding Conversion by and among the Company and the other parties thereto dated
as of February 25, 2025; provided further that, for purposes of clause (2), if any Person (other than the
Company or any employee benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial owner of 25% or more of the
Outstanding Common Stock or 25% or more of the Outstanding Voting
Securities by reason of an
acquisition by the Company, and such Person shall, after such acquisition by the Company,
become the
beneficial owner of any additional shares of the Outstanding Common Stock or any additional
Outstanding Voting
Securities and such beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control; or
(b)
the cessation of individuals who, as of the date hereof, constitute the Board (the
“Incumbent Board”) to constitute at least a majority of such Board; provided, however, that any individual
who becomes a director of the Company subsequent to the date hereof whose election, or nomination for
election by the Company’s stockholders, was approved by the vote of at least a majority of the directors
then constituting the Incumbent Board shall be deemed a
member
of the Incumbent Board; and provided
further, that any individual who was initially elected as a director of the Company as a result of an actual
or threatened solicitation by a Person other than the Board for the purpose of opposing a solicitation by
any other Person with respect to the election or removal of directors, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other than the Board shall not be deemed
a member of the Incumbent Board; or
(c)
the consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a “Corporate Transaction”); provided,
however, “Change in Control” shall not include a Corporate Transaction pursuant to which:
(i)
all or substantially all of the individuals or entities who are the beneficial
owners, respectively, of the Outstanding Common Stock and the Outstanding Voting
Securities
immediately prior to such Corporate Transaction will beneficially own, directly or indirectly,
more than
50% of, respectively, the outstanding shares of common stock, and the combined voting power of the
outstanding securities entitled to vote generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including, without limitation, a corporation that
as a result of such transaction owns, directly or indirectly, the Company or all or substantially all of the
Company’s assets) in substantially the same proportions relative to each other as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Common Stock and the Outstanding
Voting
Securities, as the case may be,
(ii)
no Person (other than the Company; any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by the Company; the
corporation resulting from such Corporate Transaction; and any Person that beneficially owned,
immediately prior to such Corporate Transaction, directly or indirectly,
25% or more of the Outstanding
Common Stock or the Outstanding Voting
Securities, as the case may be) will beneficially own, directly
or indirectly, 25% or more of, respectively,
the outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of directors, and
3
(iii)
individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors of the corporation resulting from such Corporate
Transaction; or
(d)
the consummation of a plan of complete liquidation or dissolution of the Company.
1.5
Code
.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
1.6
Common Stock
.
“Common Stock” shall mean the common stock, $0.01 par value per share, of
the Company.
1.7
Company
.
As used in this Agreement, “Company” shall mean Cal-Maine Foods, Inc. and any
successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all
or substantially all of the assets of the Company.
Following a Change in Control, “Company” shall refer
to the Post-Transaction Corporation.
1.8
Disability
.
“Disability” shall mean:
(a)
A disability entitling the Executive to receive benefits under a long-term disability
insurance policy maintained by the Company or an Affiliate in effect at the time either because he is
totally disabled or partially disabled, as such terms are defined in such policy in effect as of the Agreement
Date or as similar terms are defined in any successor policy.
(b)
If there is no long-term disability plan in effect covering the Executive, and if (i) a
physical or mental illness renders the Executive incapable of satisfactorily discharging his duties and
responsibilities to the Company or an Affiliate for a period of 90 consecutive days, and (ii) such
incapacity is certified in writing by a duly qualified physician chosen by the Company or an Affiliate and
reasonably acceptable to the Executive or his legal representatives, then the Board will have the power to
determine that the Executive has become disabled.
If the Board makes such a determination, the
Company or its Affiliate will have the continuing right and option, during the period that such disability
continues, and by notice given in the manner provided in this Agreement, to terminate the status of the
Executive as an officer and employee.
Any such termination will become effective 60 days after such
notice of termination is given, unless within such 60-day period, the Executive becomes capable of
rendering services of the character contemplated hereby (and a physician chosen by the Company or an
Affiliate and reasonably acceptable to the Executive or his legal representatives so certifies in writing) and
the Executive in fact resumes such services.
(c)
The “Disability Effective Date” will mean the date on which termination of the
Executive’s status as an officer and employee becomes effective
due to Disability.
1.9
Good Reason.
“Good Reason” shall mean:
(a)
Any material breach by the Company of any material provision of this Agreement;
or
(b)
The assignment to the Executive of any duties inconsistent in any material adverse
respect with Executive’s position (including status, offices, titles and reporting requirements), authority,
duties or responsibilities as of the Agreement Date, or any other action that results in a material
diminution in such position, authority, duties or responsibilities; provided that prior to a Change in Control
the Company ceasing to have a class of common equity securities registered pursuant to the Securities
Exchange Act of 1934, as amended, shall not constitute “Good Reason.”
(c)
Following a Change in Control, as defined in Section 1.3 hereof, “Good Reason”
will also include:
(i)
Any failure of the Company to provide the Executive with the position,
authority, duties and responsibilities at least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during the 120-day period immediately
4
preceding the Change in Control.
For the avoidance of doubt, Executive’s position, authority,
duties and
responsibilities after a Change in Control shall not be considered commensurate in all material respects
with Executive’s position, authority,
duties and responsibilities prior to a Change in Control unless after
the Change in Control the Executive holds an equivalent position in the Company and the Company has a
class of common equity securities registered pursuant to the Securities Exchange Act of 1934, as
amended, if such was the case prior to the Change in Control;
(ii)
Any failure of the Company to provide the Executive with the total pay
opportunity (including, in the aggregate, base salary, target
bonus opportunity and long-term incentive
opportunity and insurance and other employee benefits) at least commensurate with the highest total pay
opportunity available to the Executive within the one-year period preceding the Change in Control,
unless such failure is the result of an across-the-board reduction applicable to all Company executives
(which includes, for the avoidance of doubt, similarly situated executives of the acquiring company) of
less than 10%;
(iii)
The Company requiring the Executive to be based at any office or location
more than 35 miles from the office or location where Executive was employed immediately preceding the
Change in Control, or requiring the Executive to travel on business to a substantially greater extent than
required immediately prior to a Change in Control; or
(iv)
Any failure by the Company to comply with and satisfy Sections 4.1(c) and
(d) of this Agreement.
Notwithstanding the foregoing, the Executive shall not have the right to terminate the Executive’s
employment hereunder for Good Reason unless (1) within 30 days of the initial existence of the condition
or conditions giving rise to such right the Executive provides written notice to the Company of the
existence of such condition or conditions, and (2) the Company fails to remedy such condition or
conditions within 30 days following the receipt of such written notice (the “Cure Period”). If any such
condition is not remedied within the Cure Period, the Executive must terminate the Executive’s
employment with the Company within a reasonable period of time, not to exceed 30 days, following the
end of the Cure Period.
1.10
Post-Transaction Corporation
.
Unless a Change in Control includes a Corporate Transaction,
“Post-Transaction Corporation” means the Company after the Change in Control.
If a Change in Control
includes a Corporate Transaction, “Post-Transaction Corporation” will mean the corporation or other
entity resulting from the Corporate Transaction unless, as a result of such Corporate Transaction, an
ultimate parent entity controls the Company or all or substantially all of the Company’s assets either
directly or indirectly, in which case, “Post-Transaction
Corporation” will mean such ultimate parent
entity.
1.11
Protected Period
. “Protected Period” shall mean the period beginning on the date of a Change in
Control and ending on the second anniversary of the Change in Control.
1.12
Retire
.
“Retire” shall mean the Executive’s voluntary termination of employment from the
Company that satisfies the criteria for retirement under any tax qualified retirement plan of the Company.
1.13
Section 409A
.
“Section 409A” shall mean Section 409A of the Code and the regulations and
guidance issued thereunder.
1.14
Termination
Date
.
“Termination Date” shall mean, if the Executive’s
status as an officer and
employee is terminated (i) by reason of the Executive’s death, the date of the Executive’s
death, (ii) by
reason of Disability, the Disability Effective
Date, (iii) by the Company other than by reason of death or
Disability, the date of delivery of the notice of termination or any later date specified in the notice of
termination, which date will not be more than 30 days after the giving of the notice, or (iv) by the
Executive other than by reason of death, the date of delivery of the notice of termination or any later date
specified in the notice of termination, which date will not be more than 30 days after the giving of the
notice.
5
ARTICLE II
Severance and Change in Control Benefits
2.1
Term
.
This Agreement shall commence on the Agreement Date and continue in effect through
May 31, 2030 (the “Employment Term”).
Commencing on each June 1
st
thereafter, the Employment
Term will be automatically extended for one additional year,
unless not later than 90 days prior to the end
of the current Employment Term the Board has given written notice to the Executive that it does not wish
to extend the Agreement. Notwithstanding the above, if the Executive continues to serve as an officer of
the Company and a Change in Control occurs during the Employment Term, then the Executive’s
employment under this Agreement shall continue through the end of the Protected Period, subject to any
earlier termination of the Executive’s employment pursuant to this Agreement.
2.2
Compensation and Benefits
.
During the Protected Period, the Executive shall be entitled to the
following compensation and benefits:
(a)
Salary.
An annual salary (“Base Salary”) at the highest rate in effect for the
Executive at any time during the 120-day period immediately preceding the Change in Control, payable to
the Executive at such intervals no less frequent than the most frequent intervals in effect at any time
during the 120-day period immediately preceding the Change in Control or, if more favorable to the
Executive, the intervals in effect at any time after the Change in Control for other most senior executives
of the Company and its Affiliates.
(b)
Bonus.
The Executive shall be entitled to participate in an annual incentive bonus
program applicable to other most senior executives of the Company and its Affiliates but in no event shall
such program provide the Executive with incentive opportunities less favorable than the most favorable of
those provided by the Company and its Affiliates for the Executive under the Company’s annual cash plan
as in effect for the Executive at any time during the 120-day period immediately preceding the Change in
Control or, if more favorable to the Executive, those provided generally at any time after the Change in
Control to other most senior executives of the Company and its Affiliates.
Any such bonus shall be paid
in cash no later than two and a half months following the close of the fiscal year for which it is earned.
(c)
Fringe Benefits.
The Executive shall be entitled to fringe benefits (including, but
not limited to, automobile allowance, air travel, and reimbursement for club membership dues) in
accordance with the most favorable agreements, plans, practices, programs and policies of the Company
and its Affiliates in effect for the Executive at any time during the 120-day period immediately preceding
the Change in Control or, if more favorable to the Executive, as in effect generally at any time thereafter
with respect to other most senior executives of the Company and its Affiliates.
(d)
Expenses.
The Executive shall be entitled to receive prompt reimbursement for all
reasonable business expenses (including food and lodging) incurred by the Executive in accordance with
the most favorable agreements, policies, practices and procedures of the Company and its Affiliates in
effect for the Executive at any time during the 120-day period immediately preceding the Change in
Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to
other most senior executives of the Company and its Affiliates.
(e)
Incentive, Savings and Retirement Plans.
The Executive shall be entitled to
participate in all incentive (both cash and equity), savings and retirement plans, practices, policies and
programs applicable generally to other most senior executives of the Company and its Affiliates, but in no
event shall such plans, practices, policies and programs provide the Executive with incentive opportunities
(measured with respect to both regular and special incentive opportunities, to the extent, if any, that such
distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less
favorable than the most favorable of those provided by the Company and its Affiliates for the Executive
under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Change in Control.
(f)
Welfare
Benefit Plans.
The Executive and the Executive’s family shall be eligible
for participation in and shall receive all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its Affiliates (including, without limitation, medical, prescription,
6
1
dental, disability, employee life, group life, accidental death and travel accident insurance plans and
programs) to the extent applicable generally to other most senior executives of the Company and its
Affiliates, but in no event shall such plans, practices, policies and programs provide the Executive with
benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies
and programs of the Company and its Affiliates in effect for the Executive at any time during the 120-day
period immediately preceding the Change in Control.
(g)
Indemnification and Insurance.
The Company shall indemnify the Executive, to the
fullest extent permitted by applicable law, for any and all claims brought against him arising out his
services during or prior to the Employment Term.
In addition, the Company shall maintain a directors’
and officers’ insurance policy covering the Executive substantially in the form of the policy maintained by
the Company and its Affiliates at any time during the 120-day period immediately preceding the Change
in Control or, if more favorable to the Executive, as provided generally at any time thereafter with respect
to other most senior executives of the Company and its Affiliates.
(h)
Office and Support Staff.
The Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal secretarial and other
assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company
and its Affiliates at any time during the 120-day period immediately preceding the Change in Control or,
if more favorable to the Executive, as provided generally at any time thereafter with respect to other most
senior executives of the Company and its Affiliates.
(i)
Vacation.
The Executive shall be entitled to paid vacation in accordance with the
most favorable agreements, plans, policies, programs and practices of the Company and its Affiliates as in
effect for the Executive at any time during the 120-day period immediately preceding the Change in
Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to
other most senior executives of the Company and its Affiliates.
2.3
Obligations upon Termination
prior to a Change in Control
.
(a)
Termination by the Company without Cause or by the Executive for Good Reason.
If during the Employment Term, and prior to a Change in Control, the Company terminates the
Executive’s employment without Cause, or the Executive terminates his employment for Good Reason,
then, subject to Sections 2.6 and 2.8 (as applicable) and, if applicable, the six-month delay set forth in
Section 2.12:
(i)
The Company will pay to the Executive the Executive’s Base Salary earned
through the Termination Date to the extent not previously paid (the “Accrued Salary”).
(ii)
The Company will pay to the Executive an amount in lieu of the annual
bonus for the fiscal year in which the Termination Date occurs (the “Termination
Bonus”), which shall
equal the average of the annual cash bonuses paid to the Executive for the three full fiscal years
immediately preceding the Termination Date.
(iii)
The Company will pay to the Executive in a lump sum in cash an amount
equal to [●] times
the sum of (i) the Executive’s base salary in effect at the Termination
Date and (ii) the
average of the annual bonuses paid to the Executive for the immediately preceding three fiscal years (the
“Severance Payment”).
(iv)
For a period commencing on the Termination Date and ending on the
earlier of
(i) the third anniversary of the Termination Date, or (ii) the date that the Executive accepts new
employment (the “Continuation Period”), the Company will at its expense maintain and administer for
the continued benefit of Executive all insurance and welfare benefit plans in which Executive was
entitled to participate as an employee of the Company as of the Termination Date, except medical
reimbursement benefits under the Company’s flex plans, provided that Executive’s
continued
participation is possible under the general terms and provisions of such plans and all applicable laws.
If
the Executive is a “specified employee” governed by Section 2.12, to the extent that any benefits
1
NTD
:
2x for Mr. Miller and 1.5x for Messrs. Bowman, Holladay and Walters.
7
provided to the Executive under this Section 2.3(iv) are taxable to the Executive, then, with the exception
of nontaxable medical insurance benefits, the value of the aggregate amount of such taxable benefits
provided to the Executive pursuant to this Section 2.3(iv) during the six-month period following the
Termination Date shall be limited to the amount specified by Section 402(g)(1)(B) of Code for the year in
which the Termination Date occurred.
The Executive shall pay the cost of any benefits that exceed the
amount specified in the previous sentence during the six-month period following the Termination Date,
and shall be reimbursed in full by the Company during the seventh month after the Termination Date.
The coverage and benefits (including deductibles and costs) provided under any such benefit plan in
accordance with this paragraph during the Continuation Period will be no less favorable to Executive
than the most favorable of such coverages and benefits as of the Termination Date.
If Executive’s
participation in any such benefit plan is barred or any such benefit plan is terminated, the Company will
use commercially reasonable efforts to provide Executive with compensation or benefits substantially
similar or comparable in value to those Executive would otherwise have been entitled to receive under
such plans.
At the end of the Continuation Period, the Executive will have the option to have assigned to
him or her, at no cost and with no apportionment of prepaid premiums, any assignable insurance owned
by the Company that relates specifically to the Executive.
Subject to the general terms and provisions of
the plans and all applicable laws, the Executive will be eligible for coverage under the Company’s retiree
medical plan or the Consolidated Omnibus Budget Reconciliation Act at the end of the Continuation
Period or earlier cessation of the Company’s obligation under the foregoing provisions of this paragraph.
To the extent that the amounts payable under this Section 2.3(iv) are reimbursements and other
separation payments described under Treasury Regulations Section 1.409A-1(b)(9)(v), such payments do
not provide for the deferral of compensation.
If they do constitute deferral of compensation governed by
Section 409A, they shall be deemed to be reimbursements or in-kind benefits governed by Treasury
Regulations Section 1.409A-3(i)(1)(iv).
If the previous sentence applies, (i) the amount of expenses
eligible for reimbursement or in-kind benefits provided during the Executive’s taxable year shall not
affect the expenses eligible for reimbursement or in-kind benefits in any other taxable year, (ii) the
reimbursement of an eligible expense must be made on or before the last day of the Executive’s taxable
year following the taxable year in which the expense was incurred and (iii) the right to reimbursement or
in-kind benefits shall not be subject to liquidation or exchange for another benefit.
(v)
The Company will pay or deliver, as appropriate, all other benefits earned
by the Executive or accrued for his benefit pursuant to any employee benefit plans maintained by the
Company with respect to services rendered by the Executive prior to the Termination Date.
(b)
Termination as a Result of Death, Disability or Retirement.
If, prior to a Change in
Control, (1) the Executive’s employment is terminated by reason of the Executive’s
death, (2) the
Company terminates the Executive’s employment by reason of the Executive’s
Disability, or (3) the
Executive Retires and terminates his employment, then, subject to Sections 2.6 and 2.8 (if applicable) and,
if applicable, the six-month delay set forth in Section 2.12:
(i)
The Company or an Affiliate will pay to the Executive or his legal
representatives the Executive’s Accrued Salary.
(ii)
The Company or an Affiliate will pay to the Executive or his legal
representatives the Termination Bonus.
(iii)
The Company or an Affiliate will pay or deliver, as appropriate, all other
benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans
maintained by the Company or its Affiliates with respect to services rendered by the Executive prior to
the Termination Date.
(c)
Termination for Other Reasons.
If during the Employment Term and prior to a
Change in Control, the Executive’s employment is terminated by the Company for Cause, by the
Executive without Good Reason, or for any other reason (other than as set forth in Sections 2.3(a) and
(b)), the Company will pay to the Executive the Accrued Salary without further obligation to the
Executive other than for obligations by law and obligations for any benefits earned by the Executive or
8
2
accrued for his benefit pursuant to any employee benefit plans maintained by the Company with respect to
services rendered by the Executive prior to the Termination Date.
2.4
Obligations upon Termination
after a Change in Control
.
(a)
Termination as a Result of Death, Disability or Retirement.
If, after a Change in
Control and during the Protected Period, (1) the Executive’s employment is terminated by reason of the
Executive’s death, (2) the Company terminates the Executive’s
employment by reason of the Executive’s
Disability, or (3) the Executive Retires and terminates his employment, then, subject to Sections 2.6 and
2.8 (if applicable) and, if applicable, the six-month delay set forth in Section 2.12:
(i)
The Company or an Affiliate will pay to the Executive or his legal
representatives the Executive’s Accrued Salary.
(ii)
The Company or an Affiliate will pay to the Executive or his legal
representatives the Termination Bonus.
(iii)
The Company or an Affiliate will pay or deliver, as appropriate, all other
benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans
maintained by the Company or its Affiliates with respect to services rendered by the Executive prior to
the Termination Date.
(b)
Termination by the Company for Cause; by the Executive for other than Good
Reason.
If, after a Change in Control and during the Protected Period, the Executive’s employment is
terminated by the Company or an Affiliate for Cause, or by the Executive for other than Good Reason, the
Company or Affiliate will pay to the Executive the Accrued Salary without further obligation to the
Executive other than for obligations by law and obligations for any benefits earned by the Executive or
accrued for his benefit pursuant to any employee benefit plans maintained by the Company or Affiliate
with respect to services rendered by the Executive prior to the Termination Date.
(c)
Termination by the Company for Reasons other than Death, Disability or Cause; by
the Executive for Good Reason.
If, after a Change in Control and during the Protected Period, (1) the
Company or an Affiliate terminates the Executive’s employment other than for Cause, death or Disability,
or (2) the Executive terminates his employment for Good Reason, then, subject to Sections 2.6 and 2.8 (if
applicable), and, if applicable, the six-month delay set forth in Section 2.12:
(i)
The Company or an Affiliate will pay to the Executive the Accrued Salary.
(ii)
The Company or an Affiliate shall pay to the Executive the Termination
Bonus.
(iii)
The Company or an Affiliate shall pay to the Executive in a lump sum in
cash an amount equal to [●] times
the sum of (A) the Executive’s base salary in effect at the Termination
Date, or if higher, immediately preceding the Change in Control (with such base salary being determined
without regard to any reduction that would provide the Executive a basis to terminate employment for
Good Reason), and (B) the average of the annual cash bonuses paid to the Executive for the three full
fiscal years immediately preceding the date of the Change in Control, or, if a higher amount results, the
Termination Date (the “CIC Severance Payment”).
(4)
For the Continuation Period, the Company or its Affiliate will at its
expense maintain and administer for the continued benefit of Executive the benefits provided as under
Section 2.3(iv).
(iv)
The Company or an Affiliate will pay or deliver, as appropriate, all other
benefits earned by the Executive or accrued for his benefit pursuant to any employee benefit plans
2
NTD
:
3x for Mr. Miller and 2x for Messrs. Bowman, Holladay and Walters.
9
maintained by the Company or Affiliate with respect to services rendered by the Executive prior to the
Termination Date.
2.5
Nondisclosure and Proprietary Rights
.
The rights and obligations of the Company and the
Executive contained in Article III hereof will continue to apply notwithstanding a termination triggering
obligations of the Company pursuant to Section 2.3 or 2.4.
2.6
Most Favorable Benefits
.
It is the intention of the parties that the terms of this Agreement
provide payments and benefits to the Executive that are equivalent or more beneficial to the Executive than are
otherwise available to the Executive under the terms of any applicable benefit plan or related compensation
agreement.
To that end, the terms of the Agreement shall govern the payments and benefits to which the
Executive shall be entitled upon the termination of the Executive’s employment as provided herein, except that if
the terms of any applicable benefit plan or related compensation agreement provide more favorable benefits to the
Executive than are provided hereunder, the terms of such plan or agreement shall control.
2.7
Excise Tax
Provision
.
(a)
Notwithstanding any other provisions of this Agreement, if a Change in Control
occurs during the original or extended term of this Agreement, in the event that any payment or benefit
received or to be received by the Executive in connection with the Change in Control of the Company or
the termination of the Executive’s employment under this Agreement or any other agreement between the
Company and the Executive (all such payments and benefits, including the payments and benefits under
Section 2.4(c) hereof, being hereinafter called “Total Payments”) would be subject (in whole or in part), to
an excise tax imposed by section 4999 of the Code (the “Excise Tax”), then the cash payments under
Section 2.4(c) hereof shall first be reduced, and the noncash payments and benefits under the other
sections hereof shall thereafter be reduced, to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax but only if (A) the net amount of such Total
Payments, as so
reduced (and after subtracting the net amount of federal, state and local income and employment taxes on
such reduced Total Payments) is greater than or equal to (B) the net amount of such Total
Payments
without such reduction (but after subtracting the net amount of federal, state and local income and
employment taxes on such Total Payments and the amount of Excise Tax
to which the Executive would be
subject in respect of such unreduced Total Payments); provided, however,
that the Executive may elect to
have the noncash payments and benefits hereof reduced (or eliminated) prior to any reduction of the cash
payments under Section 2.4(c) hereof.
(b)
For purposes of determining whether and the extent to which the Total Payments
will be subject to the Excise Tax, (i) no portion of the Total
Payments the receipt or enjoyment of which
the Executive shall have waived at such time and in such manner as not to constitute a “payment” within
the meaning of section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which, in the opinion of tax counsel (“Tax Counsel”) reasonably
acceptable to the Executive and selected by the accounting firm (the “Auditor”) which was, immediately
prior to a Change in Control or other event giving rise to a potential Excise Tax, the Company’s
independent auditor, does not constitute a “parachute payment” within the meaning of section 280G(b)(2)
of the Code (including by reason of section 280G(b)(4)(A) of the Code) and, in calculating the Excise
Tax, no portion of such Total
Payments shall be taken into account which, in the opinion of Tax Counsel,
constitutes reasonable compensation for services actually rendered, within the meaning of section
280G(b)(4)(B) of the Code, in excess of the “base amount” (within the meaning set forth in section
280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash
benefit or any deferred payment or benefit included in the Total Payments shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
(c)
At the time that payments are made under this Agreement, the Company shall
provide the Executive with a written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation, any opinions or other advice
the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such
opinions or advice which are in writing shall be attached to the statement).
10
2.8
Release Condition
.
The Executive agrees that Executive’s receipt of the compensation and
benefits set forth in Sections 2.3 and 2.4, other than the Accrued Salary (the “Severance Benefits”) shall
be in lieu of all other claims that the Executive may make by reason of termination of Executive’s
employment and that, as a condition to receiving the Severance Benefits, Executive, or his estate or heirs
if applicable, will execute a general release of claims in substantially the form attached hereto as Exhibit
A
(the “Release”).
The Executive and the Company agree that the intent of such release is to ensure a
final, complete, and enforceable release of all claims that the Executive has or may have against the
Company relating to or arising in any way from the Executive’s employment with the Company and/or the
termination thereof.
Within five business days of the Termination
Date, the Company shall deliver to the
Executive the form of release for the Executive to execute.
The Executive will not be eligible for nor
entitled to the Severance Benefits unless the Executive executes and delivers to the Company the release
within 21 days of delivery of the release by the Company to the Executive and such release subsequently
becomes irrevocable by virtue of the expiration of any revocation period (such time being the “Release
Effective Date”).
The Company shall have no obligation to provide Severance Benefits prior to the
Release Effective Date (and if the maximum period for execution and revocation of the Release spans two
calendar years, payments of the Severance Benefits shall be made or begin in the later taxable year).
2.9
Incentive Awards
.
The foregoing benefits are intended to be in addition to the value of any other
equity or incentive awards that may be due or that will remain outstanding pursuant to the their terms in
connection with a termination of employment, including but not limited to, equity-based incentive awards
such as options to acquire Common Stock, restricted stock or restricted stock units granted under the
Company’s stock incentive plans and any other incentive or similar plan heretofore or hereafter adopted
by the Company or an Affiliate.
2.10
Resignation from Board of Directors.
If the Executive is a director of the Company and his
employment is terminated for any reason other than death, the Executive will, if requested by the
Company, immediately resign as a director of the Company and its Affiliates.
If such resignation is not
received within 20 business days after the Executive actually receives written notice from the Company
requesting the resignation, the Executive will forfeit any right to receive any payments pursuant to this
Agreement.
2.11
Legal Fees
.
The Company agrees to pay as incurred all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement
(including as a result of any contest by the Executive about the amount or timing of any payment pursuant
to this Agreement).
2.12
Section 409A of the Internal Revenue Code
.
(a)
This Agreement is intended to comply with Section 409A or an exemption
thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding
any other provision of this Agreement, payments provided under this Agreement may only be made upon
an event and in a manner that complies with Section 409A or an applicable exemption. Any payments
under this Agreement that may be excluded from Section 409A as separation pay due to an involuntary
separation from service, as a short-term deferral, or under any other provision of Section 409A, shall be
excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each
installment payment provided under this Agreement shall be treated as a separate payment. Any payments
to be made under this Agreement upon a termination of employment shall only be made upon a
“separation from service” under Section 409A. Notwithstanding the foregoing, the Company makes no
representations that the payments and benefits provided under this Agreement comply with Section 409A
and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other
expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
(b)
Notwithstanding any other provision of this Agreement, if any payment or benefit
provided to the Executive in connection with his termination of employment is determined to constitute
"nonqualified deferred compensation” within the meaning of Section 409A and the Executive is
determined to be a “specified employee” as defined in Section 409A(a)(2)(b)(i), then such payment or
benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the
11
Termination Date or,
if earlier, on the Executive’s
death (the “Specified Employee Payment Date”) . The
aggregate of any payments that would otherwise have been paid before the Specified Employee Payment
Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and
thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
(c)
No acceleration of payments and benefits provided for in this Agreement shall be
permitted, except that the Company may accelerate payment, if permitted by Section 409A, as necessary
to allow the Executive to pay FICA taxes on amounts payable hereunder and additional taxes resulting
from the payment of such FICA amount, or as necessary to pay taxes and penalties arising as a result of
the payments provided for in this Agreement failing to meet the requirements of Section 409A.
In no
event shall the Executive, directly or indirectly, designate the calendar year of payment.
(d)
To the extent required by Section 409A, each reimbursement or in-kind benefit
provided under this Agreement shall be provided in accordance with the following:
(i)
the amount of expenses eligible for reimbursement, or in-kind benefits
provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other calendar year;
(ii)
any reimbursement of an eligible expense shall be paid to the Executive on
or before the last day of the calendar year following the calendar year in which the expense was incurred;
and
(iii)
any right to reimbursements or in-kind benefits under this Agreement shall
not be subject to liquidation or exchange for another benefit.
ARTICLE III
Nondisclosure and Proprietary Rights
3.1
Confidential Information
.
For purposes of this Agreement, the term “Confidential Information”
means any information, knowledge or data of any nature and in any form (including information that is
electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the
past, current or prospective business or operations of the Company and its Affiliates, that at the time or
times concerned is not generally known to persons engaged in businesses similar to those conducted or
contemplated by the Company and its Affiliates (other than information known by such persons through a
violation of an obligation of confidentiality to the Company), whether produced by the Company and its
Affiliates or any of their consultants, agents or independent contractors or by the Executive, and whether
or not marked confidential, including without limitation information relating to the Company’s or its
Affiliates’ products and services, business plans, business acquisitions, processes, product or service
research and development ideas, methods or techniques, training methods and materials, and other
operational methods or techniques, quality assurance procedures or standards, operating procedures, files,
plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists,
supplier information, purchasing methods or practices, distribution and selling activities, consultants’
reports, marketing and engineering or other technical studies, maintenance records, employment or
personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost
analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer
source lists, proprietary computer software, and internal notes and memoranda relating to any of the
foregoing.
3.2
Nondisclosure of Confidential Information
.
(a)
The Executive will hold in a fiduciary capacity for the benefit of the Company all
Confidential Information obtained by the Executive during the Executive’s employment (whether prior to
or after the Agreement Date) and will use such Confidential Information solely within the scope of his
employment with and for the exclusive benefit of the Company.
For a period of five years after the
Termination Date, the Executive agrees (a) not to communicate, divulge or make available to any person
or entity (other than the Company) any such Confidential Information, except upon the prior written
authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to
12
the Company any Confidential Information in his possession, including any duplicates thereof and any
notes or other records the Executive has prepared with respect thereto.
In the event that the provisions of
any applicable law or the order of any court would require the Executive to disclose or otherwise make
available any Confidential Information, the Executive will give the Company prompt prior written notice
of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a
protective order with respect to such Confidential Information by appropriate proceedings.
Notwithstanding the above, Executive understands that nothing contained in this Agreement limits
Executive’s ability to file a charge or complaint with the Equal Employment Opportunity Commission, the
National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and
Exchange Commission or any other federal, state or local governmental agency or commission
(“Government Agencies”).
Executive further understands that this Agreement does not limit Executive’s
ability to communicate with any Government Agencies or otherwise participate in any investigation or
proceeding that may be conducted by any Government Agency, including providing documents or other
information, without notice to the Company.
This Agreement does not limit Executive’s right to receive
an award for information provided to any Government Agencies.
(b)
Executive may have certain rights under the Defend Trade Secrets Act of 2016,
Pub. L. 114-153. An individual shall not be held criminally or civilly liable under any Federal or State
trade secret law for the disclosure of a trade secret that: (i) is made: (A) in confidence to a federal, state, or
local government official, either directly or indirectly,
or to an attorney; and (B) solely for the purpose of
reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document
filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit
for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to
the attorney of the individual and use the trade secret information in the court proceeding, if the
individual: (X) files any document containing the trade secret under seal; and (Y) does not disclose the
trade secret, except pursuant to court order.
3.3
Injunctive Relief; Other Remedies
.
The Executive acknowledges that a breach by the Executive
of Section 3.2 would cause immediate and irreparable harm to the Company for which an adequate
monetary remedy does not exist; hence, the Executive agrees that, in the event of a breach or threatened
breach by the Executive of the provisions of Section 3.2, the Company will be entitled to injunctive relief
restraining the Executive from such violation without the necessity of proof of actual damage or the
posting of any bond, except as required by non waivable, applicable law.
Nothing herein, however, will
be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the
Company may be entitled under applicable law in the event of a breach or threatened breach of this
Agreement by the Executive, including without limitation the recovery of damages and/or costs and
expenses, such as reasonable attorneys’ fees, incurred by the Company as a result of any such breach or
threatened breach.
In addition to the exercise of the foregoing remedies, the Company will have the right
upon the occurrence of any such breach to offset the damages of such breach as determined by the
Company, against any unpaid salary,
bonus, commissions or reimbursements otherwise owed to the
Executive.
In particular, the Executive acknowledges that the payments provided under Article II are
conditioned upon the Executive fulfilling the nondisclosure agreements contained in this Article III.
If the
Executive at any time materially breaches nondisclosure agreements contained in this Article III, then the
Company may offset the damages of such breach, as determined solely by the Company, against payments
otherwise due to the Executive under Article II or, at the Company’s
option, suspend payments otherwise
due to the Executive under Article II during the period of such breach.
The Executive acknowledges that
any such offset or suspension of payments would be an exercise of the Company’s right to offset
or
suspend its performance hereunder upon the Executive’s breach of this Agreement; such offset or
suspension of payments would not constitute, and shall not be characterized as, the imposition of
liquidated damages.
3.4
Governing Law of this Article III; Consent to Jurisdiction
.
Any dispute regarding the
reasonableness of the covenants and agreements set forth in this Article III or duration thereof, or the
remedies available to the Company upon any breach of such covenants and agreements, will be governed
by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in
which the alleged prohibited disclosure occurs, and, with respect to each such dispute, the Company and
the Executive each hereby consent to the jurisdiction of the state and federal courts sitting in the relevant
State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction)
13
for resolution of such dispute, and agree that service of process may be made upon him or it in any legal
proceeding relating to this Article III by any means allowed under the laws of such jurisdiction.
3.5
Executive’s Understanding of this Article
.
The Executive hereby represents to the Company
that he has read and understands, and agrees to be bound by, the terms of this Article III.
The Executive
acknowledges that the duration of the covenants contained in Article III are the result of arm’s length
bargaining and are fair and reasonable in light of (a) the importance of the functions performed by the
Executive and the length of time it would take the Company to find and train a suitable replacement, and
(b) the Executive’s level of control over and contact with the business and operations of the Company and
its Affiliates in various jurisdictions where same are conducted.
It is the desire and intent of the parties
that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law,
whether now or hereafter in effect and, therefore, to the extent permitted by applicable law,
the parties
hereto waive any provision of applicable law that would render any provision of this Article III invalid or
unenforceable.
ARTICLE IV
Miscellaneous
4.1
Binding Effect; Successors
.
(a)
This Agreement shall be binding upon and inure to the benefit of the Company and
any of its successors or assigns.
(b)
This Agreement is personal to the Executive and shall not be assignable by the
Executive without the consent of the Company (there being no obligation to give such consent) other than
such rights or benefits as are transferred by will or the laws of descent and distribution.
(c)
The Company shall require any successor to or assignee of (whether direct or
indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses
of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or
to cause to be performed all of the obligations under this Agreement in the same manner and to the same
extent as would have been required of the Company had no assignment or succession occurred, such
assumption to be set forth in a writing reasonably satisfactory to the Executive.
(d)
The Company shall also require all entities that control or that after the transaction
will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be
performed all of the obligations under this Agreement, such agreement to be set forth in a writing
reasonably satisfactory to the Executive.
4.2
Notices
.
All notices hereunder must be in writing and, unless otherwise specifically provided
herein, will be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt
therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally
recognized overnight courier service (against a receipt therefor) or (d) email (read receipt requested).
All
such notices must be addressed as follows:
If to the Company, to:
Cal-Maine Foods, Inc.
_______________
_______________
_______________
Attention:
_________________
14
If to the Executive, to:
______________
______________
or such other address as to which any party hereto may have notified the other in writing.
4.3
Governing Law
.
Except as provided in Article III hereof, this Agreement shall be construed and
enforced in accordance with and governed by the internal laws of the State of Delaware without regard to
principles of conflict of laws.
4.4
Withholding
.
The Executive agrees that the Company has the right to withhold, from the amounts
payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or
employment tax laws, or as otherwise stated in documents granting rights that are affected by this
Agreement.
4.5
Amendment, Waiver
.
No provision of this Agreement may be modified, amended or waived
except by an instrument in writing signed by both parties.
4.6
Severability
.
If any term or provision of this Agreement, or the application thereof to any person
or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as
written, the Executive and the Company intend for any court construing this Agreement to modify or limit
such provision so as to render it valid and enforceable to the fullest extent allowed by law.
Any such
provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or
provision hereof, and the remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not
be affected thereby and each term and provision of this Agreement shall be valid and enforced to the
fullest extent permitted by law.
4.7
Waiver of Breach
.
The waiver by either party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach thereof.
4.8
Remedies Not Exclusive
.
No remedy specified herein shall be deemed to be such party’s
exclusive remedy, and accordingly,
in addition to all of the rights and remedies provided for in this
Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or
regulation.
4.9
Company’s Reservation of Rights
.
The Executive acknowledges and understands that the
Executive serves at the pleasure of the Board and that the Company has the right at any time to terminate
the Executive’s status as an employee of the Company or any of its Affiliates, or to change or diminish
Executive’s status during the Employment Term
or Protected Period, subject to the rights of the Executive
to claim the benefits conferred by this Agreement.
4.10
Counterparts
.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together shall constitute one and the same instrument.
15
IN WITNESS WHEREOF, the Company and the Executive
have caused this Agreement to be
executed as of the Agreement Date.
Cal-Maine Foods, Inc.
[●]
Executive
[●]
Signature Page of Severance and Change in Control Agreement
between Cal-Maine Foods, Inc. and [●]
16
EXHIBIT A: FORM OF SEPARATION
AGREEMENT AND RELEASE
SEPARATION
AGREEMENT AND RELEASE
This Separation Agreement and Release (this “Release”) is granted effective as of the date signed below
by ________ (“Executive”) in favor of [Cal-Maine Foods, Inc. /__________] (the “Company”),
[successor in interest to Cal-Maine Foods, Inc. pursuant to __________] [
INSERT DESCRIPTION OF
TRANSACTION IF APPLICABLE
].
Capitalized terms not defined in this Release are as defined in the
Severance and Change in Control Agreement between Cal-Maine Foods, Inc. and [●], dated effective [●]
(the “Agreement”). Executive gives this Release in consideration of the Company’s promises and
covenants as recited in the Agreement, with respect to which this Release is an integral part.
Executive
agrees as follows:
1.
General Release.
Executive, individually and on behalf of Executive’s successors,
assigns, attorneys, and all those entitled to assert Executive’s rights, now and forever hereby
releases and discharges the Company and its respective officers, directors, stockholders, trustees,
employees, agents, fiduciaries, parent corporations, subsidiaries, Affiliates, estates, successors,
assigns and attorneys (the “Released Parties”), from any and all claims, actions, causes of action,
sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages,
judgments, agreements, promises, demands, claims for attorney’s fees and costs, or liabilities
whatsoever (collectively, “Claims”), in law or in equity,
which Executive ever had or now has
against the Released Parties, including, without limitation, any Claims arising by reason of or in
any way connected with any employment relationship which existed between the Company and its
Affiliates and Executive and/or the termination of such relationship.
It is understood and agreed
that this Release is intended to cover all Claims, whether known or unknown, of any nature
whatsoever, including those which may be traced either directly or indirectly to the aforesaid
employment relationship, and/or the termination of that relationship, that Executive has, had or
purports to have, from the beginning of time to the date of this Release, and including but not
limited to Claims arising or alleged to arise under any federal, state or municipal statute, law or
regulation, including, but not limited to, Title VII of the Civil Rights Act of 1964, the Americans
with Disabilities Act of 1990, the Family and Medical Leave Act, or the Fair Labor Standards Act;
Claims for statutory or common law wrongful discharge or termination in violation of public
policy; Claims for breach of contract, express or implied, promissory estoppel, fraud,
misrepresentation, interference with contract or prospective economic advantage, or unfair
business practices; Claims for defamation, libel or slander; Claims for intentional or negligent
infliction of emotional distress; Claims for wages or vacation pay; Claims for benefits or that in
any way relate to the design or administration of any employee benefit program, including any
Claims arising under the Employee Retirement Income Security Act; Claims for attorney’s fees,
expenses and costs; or Claims under any other applicable federal, state or local law or legal
concept.
2.
Release of Claims Under Age Discrimination in Employment Act.
Without
limiting the generality of the foregoing General Release, Executive agrees that by executing this
Release, Executive has released and waived any and all Claims Executive has or may have as of
the date of this Release under the Age Discrimination in Employment Act, 29 U.S.C. §621, et seq.
Executive acknowledges and agrees that Executive has been, and hereby is, advised by Company
to consult with an attorney prior to executing this Release; that the consideration Executive
receives for this Release is in addition to anything of value to which Executive is already entitled
in the absence of accepting this Release; and that Company has offered Executive the opportunity,
before executing this Release, to consider this Release for a period of up to twenty-one (21)
calendar days.
It is further understood that Executive may revoke Executive’s acceptance of this
Release at any time within seven (7) calendar days following the date of Executive’s execution of
this Release and, therefore, that this Release is not effective and none of the consideration for this
Release shall be provided to Executive until after the seven (7) calendar day revocation period has
expired without Executive having exercised Executive’s right to revoke, subject to any further
delay imposed by the Agreement.
17
3.
Release of Unknown Claims.
Executive understands and agrees that this Release is
a full and final release covering all known and unknown, suspected or unsuspected injuries, debts,
Claims or damages which have arisen or may have arisen from any matters, acts, omissions or
dealings released in this Release.
Executive fully understand that if any fact with respect to any
matter covered in this Release is found hereinafter to be other than or different from the facts
believed by Executive to be true at the time of the execution of this Release, Executive expressly
accepts and assumes that this Release shall be and remain effective, notwithstanding such
difference in facts.
4.
Limited Exceptions to Release.
The
only
exceptions
to this Release of Claims are
with respect to (1) such Claims as may arise after the date this Release is executed; (2) any
indemnification and expense advancement obligations to Executive under Company’s bylaws,
certificate of incorporation, law or otherwise, and the Company’s obligations to Executive and
Executive’s rights pursuant to an indemnification agreement between the Company and Executive
entered into prior to the termination of Executive’s employment; (3) Executive’s
vested rights
under the terms of employee benefit plans sponsored by the Company or pursuant to outstanding
incentive awards as described in Section 2.9 of the Agreement; (4) applicable Workers’
Compensation benefits for occupational injuries or illnesses; (5) the right to file a claim for
unemployment benefits under state law; and (6) any rights which by law may not be released by
private agreement, including Executive’s right to file, participate in or cooperate with an
administrative proceeding with or by the United States Equal Employment Opportunity
Commission or any other government agency, provided, however,
that Executive expressly waives
Executive’s right to claim, receive, or accept any monies, damages or other individual relief
awarded as a result of any charge of discrimination or lawsuit which may be filed by Executive or
anyone acting on Executive’s behalf.
5.
Knowing and Voluntary
Nature of Release.
Executive expressly acknowledges that
Executive has read and understands each and every provision of this Release and the Agreement,
which is incorporated herein by reference; that Executive has executed this Release voluntarily,
without any duress or undue influence on the part or on behalf of Company or any third party, with
the full intent of releasing all Claims against Company and all other Released Parties.
Executive is
fully aware of the legal and binding effect of this Release.
6.
Post-Termination Obligations and Covenants
(a)
Confidential Information.
Executive acknowledges that the provisions in Article III
of the Agreement will survive Executive’s termination of employment.
(b)
Non-disparagement.
Executive agrees and covenants that the Executive shall not at
any time make, publish, or communicate to any person or entity or in any public forum any
defamatory or disparaging remarks, comments, or statements concerning the Company or its
businesses, or any of its employees, officers, or directors now or in the future.
This Section does
not in any way restrict or impede Executive from exercising legally protected rights, including
rights under the National Labor Relations Act (NLRA) or the federal securities laws, including the
Dodd-Frank Act, to the extent that such rights cannot be waived by agreement or from complying
with any applicable law or regulation or a valid order of a court of competent jurisdiction or an
authorized government agency, provided that such compliance does not exceed that required by
the law, regulation, or order.
Executive shall promptly provide written notice of any such order to
[INSERT NAME, TITLE, PHYSICAL ADDRESS, AND EMAIL ADDRESS OF
COMPANY PERSON DESIGNATED]
.
(c)
Cooperation.
The parties agree that certain matters in which Executive has been
involved during Executive’s employment may need Executive’s
cooperation with the Company in
the future. Accordingly, for a period of two years after the Termination
Date, or if longer, through
the conclusion of any litigation that is pending as of the Termination Date and in which
Executive’s assistance is needed, to the extent reasonably requested by the Company,
Executive
shall cooperate with the Company regarding matters arising out of or related to Executive’s service
to the Company, provided that the Company shall make reasonable efforts
to minimize disruption
18
of Executive’s other activities. The Company shall reimburse Executive for reasonable expenses
incurred in connection with this cooperation and, to the extent that Executive is required to spend
substantial time on such matters, the Company shall compensate Executive at an hourly rate based
on Executive’s base salary on the Termination
Date.
(d)
Covenant Not to Sue. Executive agrees and covenants not to sue Company or any
other of the Released Parties in any local, state or federal court or any other court or tribunal for
any Claims released by this Release.
7.
Non-Admission.
The benefits provided under the Agreement are not to be
construed as an admission of any liability whatsoever on the part of the Company or any of the
other Released Parties, by whom liability is expressly denied.
8.
Acceptance and Revocation Period.
As provided in the Agreement, to receive the
Severance Benefits under the Agreement, Executive must sign and return this Release to
[INSERT
NAME, TITLE, PHYSICAL ADDRESS, AND EMAIL ADDRESS OF COMPANY
PERSON DESIGNATED TO
RECEIVE EXECUTIVE’S RELEASE]
by no later than 5:30
p.m. Central Standard Time on the 21
st
calendar day following the date Executive received this
Release.
In the event Executive signs and returns this Release prior to the expiration of such 21-
day period, Executive waives Executive’s right to review and consider the Release for the
remainder of such 21-day period.
In the event Executive fails to sign and return this Release
within such 21-day period, the Severance Benefits provided under the Agreement no longer will be
available to Executive.
In the event Executive elects to exercise Executive’s right to revoke
Executive’s acceptance of this Release, Executive’s
written revocation must be delivered in person
or by email to
[INSERT NAME, TITLE, PHYSICAL ADDRESS, AND EMAIL ADDRESS
OF COMPANY PERSON DESIGNATED
TO RECEIVE EXECUTIVE’S NOTICE OF
REVOCATION]
by no later than 5:30 p.m. Central Standard Time on the 7
th
calendar day
following the date of Executive’s acceptance of this Release, and in such event, none of the
Severance Benefits described in the Agreement will be provided to Executive.
In the event
Executive does not exercise Executive’s right to revoke Executive’s
acceptance of this Release
within the seven (7) day revocation period, this Release shall be final and binding on Executive
and the Company and fully enforceable by either of them.
9.
Governing Law and Severability.
This Release and the rights and obligations of the
parties hereto shall be governed and construed in accordance with the laws of the State of
Delaware, except as otherwise provided in Article III of the Agreement.
If any term or provision
of this Agreement, or the application thereof to any person or circumstance, shall at any time or to
any extent be invalid, illegal or unenforceable in any respect as written, the Executive and the
Company intend for any court construing this Agreement to modify or limit such provision so as to
render it valid and enforceable to the fullest extent allowed by law.
Any such provision that is not
susceptible of such reformation shall be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid, illegal or unenforceable,
shall not be affected thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
10.
Complete Agreement.
This Release and the Agreement set forth the entire
understanding and agreement between Executive and Company concerning the subject matter of
this Release and supersede and invalidate any previous agreements or contracts.
No
representations, inducements, promises or agreements, oral or otherwise, which are not embodied
herein shall be of any force or effect.
I have read and understood this Release (including the Agreement, which is incorporated by
reference), and I hereby AGREE TO and ACCEPT its terms and conditions.
[Executive’s Name]
19
Executive’s Signature Date
exhibit107
1
FORM OF
AMENDED AND RESTATED
CAL-MAINE FOODS, INC. 2012 OMNIBUS LONG-TERM INCENTIVE PLAN
PERFORMANCE SHARE UNIT AGREEMENT
Unless otherwise defined herein, capitalized terms used in this Performance Stock Unit Agreement (this
“Agreement”)
shall have
the meanings
ascribed in
the Amended
and Restated
Cal-Maine Foods,
Inc. 2012
Long-Term
Incentive Plan,
as it
may be further amended from time to time (the “Plan”).
I
.
NOTICE OF PSU GRANT
A.
PSU Grant.
Cal-Maine Foods, Inc. (the “Company”
or “CALM”) is pleased to inform you
that, subject to the terms and conditions
of the Plan and this Agreement,
you have been granted performance stock units
(“PSUs”), each of which represents the
right to
receive one Common Share, subject to the terms and conditions set forth in this Agreement and the Plan,
as follows:
Participant Name:
________________________________________________
Grant Approval Date:
________________________________________________
Number of Target PSUs:
________________________________________________
Performance Period:
[Start of first Fiscal Year 1 through end of Fiscal Year
3]
Vesting
Date:
[Last
day
of
the
Performance
Period,
subject
to
the
Participant’s
continuous
employment
through such date, except as otherwise provided in Part II of this Agreement]
Performance Measures:
See the Performance Measures set forth on Exhibit A to this Agreement
Withholding Taxes:
[Use of Common Shares to cover withholding taxes approved]
B.
Target Award
.
The number of PSUs granted represents
the target award (the “Target
PSUs”). The actual number of PSUs
earned will
range from
0% to
150% of
the Target
PSUs and
will depend
on the
Company’s
level of
achievement and
certification of
the
Performance Measures during the Performance Period.
C.
Settlement of PSU Grant.
Following the end of the Performance Period, the Committee shall, within a reasonably practicable time, determine the
level of achievement of the Performance Conditions set forth in
Exhibit A and the number of PSUs, if any,
earned (the “Earned
PSUs”). Such determination shall be final, conclusive
and binding on the Participant, and on
all other persons, to the maximum
extent
permitted
by
law.
Payment
in
respect
of
the
Earned
PSUs
and
all
Related
Credits
(as
defined
below)
shall
be
made
following
the
Committee’s
determination
of
the
attainment of
the
Performance Measures;
but
in
any
event,
no
later
than
75
days following the end of the Performance Period (the “Settlement Date”).
II.
OTHER TERMS AND CONDITIONS OF THE PSU GRANT
A.
Dividend Equivalents.
The
PSUs
do
not
entitle
the
Participant
to
any
incidents
of
ownership
(including,
without
limitation,
dividend
and
voting rights) in any Common
Shares until the PSUs vest and
the Participant is issued the Common
Shares underlying
any Earned
PSUs.
Any Earned
PSUs shall
convey the
right to
receive (i)
the amount
of any
cash dividends
and (ii)
any Common Shares, securities, or other property distributed or distributable to which the Participant would have been
entitled had the Participant been a record
holder of one Common Share for each
Earned PSU at all times from the
first
day of the Performance Period until the Settlement Date (collectively, the “Related Credits”).
All such Related Credits
shall be
made notionally
to a
dividend equivalent
account (an
“Account”) established for
the Participant
with respect
to all
PSUs granted on
the same date.
All such
Related Credits shall
vest or be
forfeited at the
same time and
on the
same terms as the PSUs to which they relate.
B.
Impact of a Change in Control or Termination of Employment.
(i)
Change in
Control.
Without
limiting the
Committee’s
authority under
Section 12.3
of the
Plan, in
the event that a
Change in Control occurs
prior to the end
of the Performance Period,
then (a) the Performance
Period
shall
end
on
the
last
day
of
the
most
recently
completed
fiscal
quarter
that
ended
on
or
immediately
prior
to
the
consummation of the
Change in Control;
(b) the
number of
Common Shares that
may be
earned under this
Award,
if
any,
shall
be
calculated,
adjusted,
and
fixed
on
the
basis
of
actual
performance
through
such
date,
with
such
adjustment effective
upon the
consummation of
the Change
in Control;
and (c)
such number
of Common
Shares that
may be
earned under
this Award,
as adjusted
for performance,
and all
Related Credits
shall continue
to be
subject to
all other
terms and
conditions of this
PSU Agreement, and
shall payout no
later than 30
days following
the earlier of
(i)
the
last
day
of
the
original
three-year
Performance
Period
as
set
forth
in
Section
I(A),
or
(ii)
the
date
of
the
Participant’s
termination
of
continuous
Service
by
reason
of
the
Participant’s
termination
by
the
Company
without
Cause or Participant’s termination with Good Reason.
2
(ii)
Forfeiture
of
Unvested
Shares
Upon
Early
Termination
of
Service.
Except
as
provided
in
subparagraphs (i) and (iii)
through (v) below,
if the Participant ceases
to remain in
continuous Service for any
reason,
(i) all unvested PSUs provided for in this Agreement and
all Related Credits credited to the Participant’s
Account with
respect to such PSUs shall immediately be forfeited.
(iii)
Death
or
Disability.
In
the
event
of
the
Participant’s
Disability
or
death
during
the
Performance
Period,
then the number
of Target
PSUs and all
Related Credits with
respect to such
PSUs shall vest
as of the
date of
the termination
of Participant’s
continuous Service,
and shall
be delivered
within 30
days following
the Participant’s
termination of continuous Service, subject to any requirements under this Agreement, to the Participant, in the event of
his
or
her
Disability,
or
in
the
event of
the
Participant’s
death,
to
the beneficiary
or
beneficiaries designated
by
the
Participant, or if the Participant has not
so designated any beneficiary(ies), or if no
designated beneficiary survives the
Participant, such
shares shall
be delivered
to the
personal representative
of the
Participant’s
estate.
For purposes
of
this
Agreement,
“Disability”
means
that
the
Participant,
as
determined
by
the
Committee
in
its
sole
discretion,
is
unable
to
engage
in
any
substantial
gainful
activity
by
reason
of
any
medically
determinable
physical
or
mental
impairment which can be expected to
result in death or can
be expected to last for
a continuous period of not
less than
twelve (12) months.
(iv)
Retirement.
If the Participant’s
termination of continuous Service
is by reason of
Retirement, at the
time of
such termination,
the Committee
in its
sole discretion
may provide
that some
or all
of the
Target
PSUs shall
not
be
forfeited,
but
shall
remain
outstanding
and
vest
as
of
the
end
of
the
Performance
Period
based
on
the
Company’s
level
of
achievement
of
the
Performance
Measures
set
forth
on
Exhibit
A.
For
purposes
of
this
Agreement, “Retirement”
means a
termination of
continuous Service
after attainment
of the
requirements set
forth in
the retirement policy of the Company.
(v)
Without Cause
or For Good
Reason. Unless Section
II(B)(i) applies, if
the Participant’s
termination
of
continuous
Service
is
by
reason
of
the
Participant’s
termination
by
the
Company
without
Cause
or
Participant’s
termination
with
Good
Reason
the
PSUs
provided
for
in
this
Agreement
and
all
Related
Credits
credited
to
the
Participant’s Account
with respect to
such PSUs shall not
be forfeited, but
shall remain outstanding and
vest as of
the
end of
the Performance
Period based
on the
Company’s
level of
achievement of
the Performance
Measures set
forth
on Exhibit A.
C.
No Transfer Permitted.
The Participant
shall not,
and shall
not purport
to, sell,
assign, pledge
or otherwise
transfer any
PSUs or
the
Related Credits, or any interest therein, either voluntarily or by operation of law,
except by will, by the laws of descent
and distribution, or pursuant to a qualified domestic relations order.
D.
Tax Matters.
(i)
The
Participant
agrees
to
make
appropriate
arrangements
with
the
Company
(or
the
Parent,
Subsidiary or Affiliate employing or retaining the Participant) for the satisfaction of all Federal, state, local and foreign
income
and
employment
tax
withholding
requirements
applicable upon
the
vesting
or
settlement
of
the
PSUs.
The
Participant
acknowledges
and
agrees
that
the
Company
may
refuse
to
issue
the
Common
Shares
underlying
any
Earned PSUs
if such
withholding amounts
are not
delivered.
These arrangements
include payment
in cash,
but may
also include the
following with the
Company’s consent
(a) payment from
the proceeds of
the sale of
shares through a
Company-approved broker,
(b) withholding
Common Shares
that otherwise
would be
issued to
the Participant
upon
settlement of the Earned PSUs, (c) surrendering shares that the Participant
previously acquired or (d) withholding cash
from other
compensation.
The Fair Market
Value
of withheld or
surrendered Shares, determined
as of the
date when
taxes otherwise would have been withheld in cash, will be applied to the withholding taxes.
(ii)
This
Award
is
intended
to
satisfy
the
short-term
deferral
exception
to
the
requirements of
Section
409A
of
the
Code,
and
shall
be
interpreted,
construed
and
administered
in
accordance
with
such
exception.
Notwithstanding
anything
in
this
Agreement
to
the
contrary,
if
the
PSUs
constitute
“deferred
compensation”
under
Section
409A
of
the
Code
and
the
vesting
and
payout
of
any
PSUs
is
accelerated
pursuant
to
Section
II(B),
a
distribution
of
Shares
issuable
to
the
Participant
and
all
Related
Credits
due
the
Participant
shall
be
delayed
for
a
period of six months after the Participant’s
termination of continuous Service, if the Participant
is a Key Employee (as
defined in Section 409A of the Code) and if so
required pursuant to Section 409A of the Code, unless the
Participant’s
termination is due
to death.
If settlement of
the PSUs is
delayed, the PSUs
shall be settled
within 30 days
of the date
that is the six-month anniversary of the Participant’s termination of continuous Service. Notwithstanding any provision
to the contrary herein, distributions to be
made upon a termination of continuous Service hereunder
may only be made
upon a “separation
from service” as defined
under Section 409A
of the Code.
In no event
shall a Participant, directly
or indirectly, designate the calendar year of payment.
E.
Entire Agreement; Governing Law.
The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and
supersede in
their entirety
all prior
undertakings and
agreements of
the Company
and the
Participant with
respect to
the subject matter hereof, and may not
be modified adversely to the Participant’s
interest except by means of a writing
signed
by
the Company
and the
Participant. Subject
to
Article 9
of
the
Plan,
in
the
event of
a
conflict between
the
terms and conditions of
the Plan and the
terms and conditions of
this Agreement, the terms
and conditions of the
Plan
3
shall
prevail.
This
Agreement
is
governed
by
the
laws
of
the
state
of
Mississippi.
In
addition,
PSUs
(and
any
compensation paid
or Shares
issued hereunder)
are subject
to recoupment
in accordance
with The
Dodd–Frank Wall
Street
Reform
and
Consumer
Protection
Act
and
any
implementing
regulations
thereunder,
any
clawback
policy
adopted by the Company and any compensation recovery policy otherwise required by applicable law.
F.
No Rights to Assets.
The Participant
shall not
have any
interest in
any particular
assets of
the Company
by reason
of the
right to
earn an
Award
under
the
Plan
and
this
Agreement,
and
the
Participant
or
any
other
person
shall
have
only
the
rights
of
a
general unsecured creditor of the Company with respect to any rights under the Plan or this Agreement.
G.
No Right to Continued Employment.
Nothing in
this Agreement
shall confer
upon the
Participant any
right to
continue in
the employ
of the
Company or
any of its Subsidiaries, or
to interfere in any way
with the right of
the Company or any of
its Subsidiaries to terminate
the Participant’s Service with the Company or any of its Subsidiaries at any time.
H.
Other Documents.
The
Participant
acknowledges
receipt
of
and
the
right
to
receive
a
document
providing
the
information
required
by
Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.
I.
Electronic Delivery of Documents.
The
Participant
agrees
to
accept
by
email, electronic
submission
or
any
other
means
requested
by
the
Company
all
documents relating to the Company, the Plan or this Agreement and all other documents that the Company is required
to deliver to its security holders (including, without limitation, disclosures that may be required by the U.S. Securities
and Exchange
Commission). The
Participant also
agrees that
the Company
may deliver
these documents
by posting
them on a website maintained by
the Company or by a third party
hired by the Company.
If the Company posts these
documents
on a
website, it
will notify
the Participant
by
email.
The
Participant acknowledges
that
he
or
she
may
incur costs
in connection
with electronic
delivery,
including the
cost of
accessing the
internet and
printing fees,
and
that
an
interruption
of
internet
access
may
interfere
with
the
Participant’s
ability
to
access
the
documents.
This
consent
will
remain
in
effect
until
the
Participant
gives
the
Company
written
notice
that
it
should
deliver
paper
documents.
J.
Insider Trading Policy
The
Participant
acknowledges
that
Participant
is
required
to
comply
with
the
Company’s
Amended
and
Restated
Trading
Policy as
a condition
of
employment and
as a
condition to
receiving the
Award.
Participant acknowledges
that Participant may not sell the Common Shares during certain periods as set forth in such policy.
* * * * *
By your signature and the signature of the Company’s representative below,
you and the Company agree that the PSUs
are granted
under and
governed by
the terms
and conditions
of the
Plan and
this Agreement.
By your
signature below,
you
accept this award and acknowledge and agree that you have reviewed the Plan and this Agreement in their entirety,
have had an
opportunity to
obtain the
advice of
counsel prior
to executing
this Agreement
and fully
understand all
provisions of
the Plan
and
this
Agreement.
You
hereby
agree
to
accept
as
binding,
conclusive
and
final
all
decisions
or
interpretations
of
the
Committee upon
any questions
relating to
the Plan
and this
Agreement.
You
further agree
to notify
the Company
upon any
change in the residence address indicated below.
This Agreement may
be executed in
counterparts, each of
which shall be
deemed an original,
but both of
which shall
constitute one and
the same instrument.
The parties acknowledge
and agree that
this Agreement may
be executed or
accepted
using
electronic,
stamped
or
facsimile
signatures,
and
that
such
a
signature
shall
be
legally
binding
to
the
same
extent
as
a
written signature by a party or party’s authorized representative.
PARTICIPANT:
CAL-MAINE FOODS, INC.
__________________________________________
By: ____________________________________
Signature
Name:__________________________________
Title:
__________________________________
__________________________________________
Print Name
Residence Address:
__________________________________________
4
__________________________________________
5
EXHIBIT A
[To be determined by the Committee in connection with each grant.]
exhibit311
Exhibit 31.1
1
Certification
Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, Sherman L. Miller, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Cal-Maine Foods, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Sherman L. Miller
Sherman L. Miller
President and Chief Executive Officer
Date:
April 8, 2025
exhibit312
Exhibit 31.2
1
Certification
Pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
Act of 1934,
As Adopted Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
I, Max P. Bowman, certify that
1.
I have reviewed this Quarterly Report on Form 10-Q of Cal-Maine Foods, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
/s/ Max P. Bowman
Max P. Bowman
Vice President and Chief Financial Officer
Date:
April 8, 2025
exhibit32
Exhibit 32
1
Certifications Pursuant to 18 U.S.C. §1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Solely for
the purposes of
complying with 18
U.S.C. §1350, as
adopted pursuant to
Section 906 of
the Sarbanes-Oxley Act of
2002,
we,
the
undersigned
Chief
Executive
Officer
and
Chief
Financial
Officer
of
Cal-Maine
Foods,
Inc.
(the
“Company”),
hereby certify, based
on our knowledge,
that the Quarterly
Report on Form
10-Q of the
Company for the
quarter ended March
1, 2025 (the
“Report”) fully
complies with
the requirements
of Section
13(a) or
15(d) of
the Securities
Exchange Act of
1934
and that
the information
contained in
the Report
fairly presents,
in all
material respects,
the financial
condition and
results of
operations of the Company.
/s/ Sherman L. Miller
Sherman L. Miller
President and Chief Executive Officer
/s/ Max P. Bowman
Max P. Bowman
Vice President and Chief Financial Officer
Date:
April 8, 2025