Exhibit 10.23

 

Execution Copy

 

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STOCK PURCHASE AGREEMENT

 

BY AND BETWEEN

 

RENTECH DEVELOPMENT CORPORATION

 

AND

 

ROYSTER-CLARK, INC.

 

DATED AS OF DECEMBER 10, 2004

 

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TABLE OF CONTENTS

 

          Page

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ARTICLE I

   DEFINITIONS    1

Section 1.1.

  

Definitions

   1

ARTICLE II

   PURCHASE AND SALE OF SHARES; CLOSING; RELATED MATTERS    11

Section 2.1.

  

Purchase and Sale of the Shares

   11

Section 2.2.

  

Closing; Delivery of the Shares

   11

Section 2.3.

  

Payment

   11

Section 2.4.

  

Purchase Consideration

   11

Section 2.5.

  

Adjustment of Aggregate Cash Consideration

   11

ARTICLE III

   REPRESENTATIONS AND WARRANTIES OF SELLER    13

Section 3.1.

  

Organization

   13

Section 3.2.

  

Authority

   13

Section 3.3.

  

Organization and Related Matters

   14

Section 3.4.

  

Authority; No Violation; Consents

   14

Section 3.5.

  

Financial Statements

   15

Section 3.6.

  

Absence of Undisclosed Liabilities

   15

Section 3.7.

  

Compliance with Applicable Laws

   15

Section 3.8.

  

Real Property and Tangible Personal Property

   16

Section 3.9.

  

Inventory

   18

Section 3.10.

  

Condition of Assets

   18

Section 3.11.

  

Contracts

   18

Section 3.12.

  

Accounts Receivable

   19

Section 3.13.

  

Intellectual Property

   20

Section 3.14.

  

Legal Proceedings

   20

Section 3.15.

  

Tax Matters

   20

Section 3.16.

  

Insurance

   21

Section 3.17.

  

Benefit Plans

   22

Section 3.18.

  

Environmental Matters

   23

Section 3.19.

  

Employee Relations

   24

Section 3.20.

  

Bank Accounts; Powers of Attorney

   24

Section 3.21.

  

Absence of Changes

   25

 

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TABLE OF CONTENTS

(continued)

 

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Section 3.22.

  

No Brokers

   26

Section 3.23.

  

Related Party Transactions

   26

ARTICLE IV

   REPRESENTATIONS AND WARRANTIES OF BUYER    26

Section 4.1.

  

Organization

   26

Section 4.2.

  

Authority; No Violation; Consents

   27

Section 4.3.

  

Legal Proceedings

   27

Section 4.4.

  

No Brokers

   28

Section 4.5.

  

Investment Intent

   28

Section 4.6.

  

Investigation

   28

Section 4.7.

  

Disclaimer of Other Representations and Warranties

   28

ARTICLE V

   COVENANTS    28

Section 5.1.

  

Conduct of Business

   28

Section 5.2.

  

Governmental Consents and Filings

   30

Section 5.3.

  

Additional Agreements

   30

Section 5.4.

  

Expenses

   31

Section 5.5.

  

Access; Certain Communications

   31

Section 5.6.

  

Confidentiality; Public Announcements

   31

Section 5.7.

  

Tax Matters

   32

Section 5.8.

  

Employee Matters

   34

Section 5.9.

  

Termination of Affiliate Relations; Indebtedness; Release of Liens

   36

Section 5.10.

  

Directors and Officers; Other Relationships

   37

Section 5.11.

  

Intercompany Liabilities

   37

Section 5.12.

  

Covenant Not to Compete

   37

Section 5.13.

  

Preservation of Records

   37

Section 5.14.

  

Notification of Certain Matters

   38

Section 5.15.

  

Use of Certain Names

   38

Section 5.16.

  

Financing

   38

Section 5.17.

  

Patent Assignments

   39

ARTICLE VI

   CONDITIONS TO CLOSING/POST-CLOSING DELIVERIES    39

Section 6.1.

  

Conditions to Buyer’s Obligations

   39

 

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TABLE OF CONTENTS

(continued)

 

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Section 6.2.

  

Conditions to Seller’s Obligations

   41

Section 6.3.

  

Mutual Conditions

   42

ARTICLE VII

   SURVIVAL AND INDEMNIFICATION    42

Section 7.1.

  

Survival

   42

Section 7.2.

  

Indemnification

   42

Section 7.3.

  

Method of Asserting Claims, Etc

   43

Section 7.4.

  

Environmental Procedures

   45

Section 7.5.

  

Indemnification Amounts/Seller

   45

Section 7.6.

  

Indemnification Amounts/Buyer

   46

Section 7.7.

  

Losses Net of Insurance, Etc

   46

Section 7.8.

  

Sole Remedy/Waiver

   46

Section 7.9.

  

No Consequential Damages

   47

ARTICLE VIII

   TERMINATION    47

Section 8.1.

  

Termination

   47

Section 8.2.

  

Effect of Termination

   48

ARTICLE IX

   MISCELLANEOUS    48

Section 9.1.

  

Amendments; Extension; Waiver

   48

Section 9.2.

  

Entire Agreement

   48

Section 9.3.

  

Interpretation

   48

Section 9.4.

  

Severability

   49

Section 9.5.

  

Notices

   49

Section 9.6.

  

Binding Effect; Persons Benefiting; No Assignment

   49

Section 9.7.

  

Disclosure Schedules

   50

Section 9.8.

  

Counterparts

   50

Section 9.9.

  

Governing Law

   50

Section 9.10.

  

Mutual Drafting

   51

Section 9.11.

  

Certain Understandings

   51

Section 9.12.

  

Specific Performance

   51

 

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STOCK PURCHASE AGREEMENT

 

STOCK PURCHASE AGREEMENT, dated as of December 10, 2004 (this “Agreement”), by
and between RENTECH DEVELOPMENT CORPORATION, a Colorado corporation (“Buyer”),
and ROYSTER-CLARK, INC., a Delaware corporation (“Seller”).

 

RECITALS:

 

WHEREAS, Seller is the record and beneficial owner of all of the issued and
outstanding shares of capital stock (the “Shares”), of Royster-Clark Nitrogen,
Inc., a Delaware corporation (the “Company”);

 

WHEREAS, Seller desires to sell the Shares to Buyer, and Buyer desires to
purchase the Shares from Seller, upon the terms and subject to the conditions
set forth in this Agreement;

 

WHEREAS, Buyer and Seller desire to make certain representations, covenants and
agreements in connection with the transactions contemplated by this Agreement.

 

NOW, THEREFORE, in consideration of and premised upon the various
representations, warranties, covenants and other agreements and undertakings of
the parties contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1. Definitions.

 

(a) For all purposes in this Agreement, the following terms shall have the
respective meanings set forth in this Section 1.1:

 

“Acquisition” means the purchase and sale of the Shares referred to in this
Agreement.

 

“Affiliate” means, with respect to any Person, any other Person that, directly
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person. For the purposes of this
definition, “control,” when used with respect to any specified Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Equity Interests, by Contract or otherwise; and the terms
“controlling” and “controlled” have correlative meanings to the foregoing. For
purposes of the definition of “control,” a general partner or managing member of
a Person shall always be considered to control such Person.

 

“Applicable Accounting Principles” means (A) the same accounting methods,
policies, practices and procedures, with consistent classification, judgments
and estimation methodology, as were used by the Company in preparing the
Financial Information but (B) not taking into account any changes in
circumstances or events occurring after the closing of business on the Closing
Date, except to the extent such changes provide indications of conditions on the
Closing Date; provided, however, that inventory shall include, without
limitation, supplies, parts, unamortized catalyst expenditures and recovered
precious metals.

 

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“Applicable Law” means any statute, law (including common law), ordinance, rule,
code, public administrative interpretation, published policy statement,
regulation, judgment, order, writ, injunction, directive, judgment, decree or
other requirement of any Governmental Authority applicable to the Person or
Persons referenced.

 

“Business Day” means any day of the year on which national banking institutions
in New York, New York are open to the public for conducting business and are not
required or authorized to close.

 

“Buyer Material Adverse Effect” means any change, effect, event, occurrence,
state of facts or development that would reasonably be expected to cause Buyer
to be unable to consummate the transactions contemplated hereby on or before the
Drop Dead Date.

 

“CERCLA” shall mean the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. § 9601, et seq.), as amended, and rules and regulations
thereunder.

 

“Charter Documents” means, with respect to any entity, the certificate of
incorporation, the articles of incorporation, by-laws, articles of organization,
limited liability company agreement, partnership agreement, formation agreement,
joint venture agreement or other similar organizational documents of such entity
(in each case, as amended).

 

“Closing” means the completion of the transactions contemplated by this
Agreement.

 

“Closing Date” means the date of the Closing.

 

“COBRA” means Part 6 of Subtitle B of Title I of ERISA, Section 4980B of the
Code and any similar state law.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company Disclosure Schedule” means the disclosure schedule being delivered by
Seller to Buyer on the date hereof.

 

“Company Material Adverse Effect” means any change, effect, event, occurrence,
state of facts or development that is materially adverse to the business,
financial condition, results of operations of the Company, or on the ability of
Seller to consummate the transactions contemplated hereby on or before the Drop
Dead Date, provided, however, that none of the following shall be deemed in
themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Company Material Adverse Effect: any adverse change, effect, event,
occurrence, state of facts or development to the extent attributable to,
resulting from or relating to (a) the announcement or pendency of the
transactions contemplated by this Agreement; (b) any adverse conditions
affecting the industry generally, declines in any securities market or segment
thereof, general national, international or regional economic or financial
conditions, or any outbreaks of hostilities or terrorism or escalation thereof
or other calamity or crisis; (c) compliance with the

 

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terms of, or the taking of any action required by or consented to by Buyer
pursuant to, this Agreement; or (d) actions required to be taken under
applicable laws, rules, regulations, contracts or agreements.

 

“Contract” means with respect to any Person, any agreement, indenture, debt
instrument, contract, guarantee, loan, note, mortgage, license, lease, purchase
order, delivery order or commitment, whether written or oral, including all
amendments, modifications and options thereunder or relating thereto, to which
such Person is a party, by which it is bound, to which any of its assets or
properties is subject.

 

“Credit Agreement” means the Amended and Restated Credit Agreement, dated as of
December 22, 2003, by and among Seller, the Company and certain other
Subsidiaries of the Seller as the co-borrowers, various financial institutions
as lenders, U.S. Bank National Association, as the administrative agent,
collateral agent and lead arranger and the CIT Group/Business Credit, Inc., as a
collateral agent and lead arranger and Bank of America, N.A. as a lead arranger,
providing for up to $225.0 million of revolving credit borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection with the agreement, and in each case as amended,
modified, renewed, refunded, replaced or refinanced from time to time.

 

“Debt Commitment Letter“ means a commitment letter to provide financing for the
transactions contemplated herein, which, together with the proceeds to be
received by Buyer upon completion of its anticipated sale of equity, will
provide sufficient financing for the consummation of the transactions
contemplated herein and for working capital purposes thereafter.

 

“Distribution Agreement” means the Distribution Agreement by and among Buyer and
Seller, substantially in the form attached to this Agreement as Exhibit A.

 

“Dollar” or “Dollars” or “$” means United States dollar currency in all cases,
unless otherwise specified.

 

“East Dubuque Facility” means the Owned Property in East Dubuque, Jo Daviess
County, Illinois described in the Title Insurance Policy and the Survey.

 

“Employee Benefit Plan” means each “employee benefit plan” (as such term is
defined in Section 3(3) of ERISA) and each other employee benefit plan, program,
agreement, arrangement or payroll practice, including, without limitation,
employment, consulting or other compensation agreements, equity or equity-based
compensation, bonus or other incentive compensation or deferred compensation
arrangements, retention, change in control, termination or severance plans or
arrangements, employee loans, executive perquisites, vacation pay and
educational assistance plans and programs for which the Company has or could
reasonably expect to have any Liability (other than any liability arising solely
as a result of the Company and any of the Subsidiaries being treated as a single
employer with, or under common control with, Seller or any trade or business
controlled by or under common control with Seller under Section 414 of the Code
and the regulations thereunder).

 

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“Encumbrance” means any lien, pledge, security interest, charge, encumbrance,
mortgage or adverse claims of any kind, except for restrictions imposed by
applicable Securities Laws.

 

“Environmental Laws” means federal, state and local Applicable Laws imposing
standards of conduct or otherwise relating to pollution or protection of the
environment and the Management of Hazardous Substances including, without
limitation, CERCLA; RCRA; the Clean Water Act; the Clean Air Act; the Toxic
Substances Control Act; the Safe Drinking Water Act; the Pollution Control Act
of 1990; and comparable state and local Applicable Laws, each as in effect on
the date hereof.

 

“Environmental Liabilities” has the meaning set forth in Section 3.17(b).

 

“Equity Interests” means: (a) capital stock, partnership interests, membership
interests, beneficial interests or any other equity or ownership interests in
the Person referenced; (b) any instruments or securities convertible into or
exchangeable for, or whose value is determined by reference to, any such
interests; or (c) any other rights (including Contracts), warrants or options to
acquire or dispose of any of the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ERISA Affiliate” means any entity that is considered a single employer with, or
under common control with, the Company under Section 414 of the Code.

 

“Financial Releases” means the releases necessary to release the Company and its
Subsidiaries from the liens and guarantees created as a result of the Credit
Agreement and the Indenture.

 

“GAAP” means generally accepted accounting principles as used in the United
States of America.

 

“Governmental Authority” means any domestic or foreign nation, union of nations,
state, territory, province, county, city or other local government or other unit
or subdivision thereof or any entity, commission, authority, tribunal, official,
agency, department, board, commission, instrumentality, court, arbitrator, any
other body legally authorized to exercise legislative, executive, judicial,
regulatory, taxing, or administrative functions of or pertaining to government,
and any governmental or non-governmental self-regulatory organization.

 

“Hazardous Substances” shall include any substance defined as a “hazardous
substance,” “hazardous material,” “hazardous waste,” “toxic substance,” or any
similar term under any Environmental Law including without limitation any
petroleum product or a fraction thereof or byproduct, radioactive material,
asbestos and polychlorinated biphenyls (“PCBs”).

 

“Indebtedness” of any Person means, without duplication, (i) the principal of
and premium (if any) in respect of (A) indebtedness of such Person for money
borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other
similar instruments for the payment of which such Person is responsible or
liable; (ii) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations of such Person and
all obligations of such Person under any title retention agreement (but
excluding

 

4

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trade accounts payable and other accrued current liabilities arising in the
Ordinary Course of Business); (iii) all obligations of such Person under leases
required to be capitalized in accordance with GAAP; (iv) all obligations of such
Person for the reimbursement of any obligor on any banker’s acceptance or
similar credit transaction; (v) the liquidation value of all redeemable
preferred stock of such Person; (vi) the face amount of all accounts receivable
sold to third parties under any factoring or similar arrangement; (vii) all
obligations of the type referred to in clauses (i) through (vi) of any other
Persons for the payment of which such Person is responsible or liable, directly
or indirectly, as obligor, guarantor, surety or otherwise, including guarantees
of such obligations; and (viii) all obligations of the type referred to in
clauses (i) through (vii) of other Persons secured by any Lien on any property
or asset of such Person (whether or not such obligation is assumed by such
Person).

 

“Indemnified Party” shall mean the party entitled to indemnification pursuant to
Article VII.

 

“Indemnifying Party” shall mean the party required to indemnify the other party
pursuant to Article VII.

 

“Indenture” shall mean the Indenture dated as of April 22, 1999 by and among
Seller, Company and the other guarantors set forth therein, and the United
States Trust Company of New York, as Trustee.

 

“Intellectual Property” means: (a) inventions, trade secrets, designs,
technology, know how and other confidential or proprietary information and
materials; (b) trade marks and service marks (whether or not registered),
applications for trade marks and service marks, trade names, logos, trade dress
and all goodwill associated therewith; (c) mask works and all works of
authorship, whether or not protected by copyright; (d) internet domain names;
and (e) all letters patent, patent applications, provisional patents, design
patents, and all applications, registrations, issuances, divisions,
continuations, renewals, reissuances and extensions of the foregoing.

 

“IRS” means the Internal Revenue Service of the United States.

 

“Knowledge of Buyer” means the actual knowledge of each of the individuals set
forth on Section 1.1 of the Company Disclosure Schedule after due inquiry.

 

“Knowledge of Seller” means the actual knowledge of each of the individuals set
forth on Section 1.1 of the Company Disclosure Schedule after due inquiry.

 

“Legal Proceeding” means any judicial, administrative or arbitral action, suit,
proceeding (public, private or self-regulatory), investigation, claim or
assertion of liability or responsibility by or before any Governmental
Authority.

 

“Liability” means any Indebtedness, loss, damage, adverse claim, liability or
obligation (whether direct or indirect, known or unknown, asserted or
unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, or due or to become due, and whether in contract, tort, strict
liability or otherwise), and including all costs and expenses relating thereto.

 

5

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“Lien” means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement, servitude,
proxy, voting trust or agreement, transfer restriction under any shareholder or
similar agreement, encumbrance or any other restriction or limitation
whatsoever.

 

“Manage” and “Management” shall mean generation, production, handling,
distribution, processing, use, storage, treatment, operation, transportation,
recycling, reuse and/or disposal of Hazardous Substances.

 

“Multiemployer Plan” has the meaning set forth in Section 3(37) of ERISA.

 

“Newt Contract” means the Agreement to Exchange Like Kind Property between the
Company and Gary Newt and Dubuque Barge and Fleeting Service Company dated
November 24, 1999 and recorded February 6, 2003 as Document No. 298324 in the
Recorder’s Office of Jo Daviess County Illinois, with respect to the East
Dubuque Facility and certain adjacent land, together with all amendments and
modifications thereof as reflected in correspondence relating to said agreement.

 

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment
or arbitration award of a Governmental Authority.

 

“Ordinary Course of Business” means the ordinary and usual course of day-to-day
operations of the business of the Company through the date hereof consistent
with past practice.

 

“Permits” means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, franchises and similar consents in
each case granted or issued by any Governmental Authority or pursuant to any
Applicable Law.

 

“Permitted Exceptions” means (i) statutory liens for current Taxes, assessments
or other governmental charges not yet delinquent or the amount or validity of
which is being contested in good faith by appropriate proceedings, provided an
appropriate reserve is established therefor; (ii) mechanics’, carriers’,
workers’, repairers’ and similar Liens arising or incurred in the Ordinary
Course of Business that are not material to the business, operations and
financial condition of the Company Property so encumbered and that are not
resulting from a breach, default or violation by the Company of any Contract or
Applicable Law; (iii) zoning, entitlement and other land use requirements and
Environmental Laws, provided that such requirements and Environmental Laws have
not been violated so as to materially detract from the value of or materially
interfere with the present use of any Company Property; (iv) with respect to the
East Dubuque Facility, all matters shown in Schedule B to Chicago Title
Insurance Company Commitment for Title Insurance No. 11065 dated May 10, 2004
(excluding Nos. 28-30 of said Schedule B) (the “Title Commitment”), (v) all
matters shown on a survey of the East Dubuque Facility, dated August 10, 1989,
prepared by Paul C. Bradshaw (the “Survey”) and (vi) such other imperfections in
title, charges, easements, restrictions and encumbrances of record which,
individually or in the aggregate, do not materially detract from the value of or
materially interfere with the present use of any Company Property subject
thereto or affected thereby.

 

6

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“Person” means any natural person, corporation, company, limited liability
company, partnership (limited or general), joint venture, association, trust,
unincorporated organization, Governmental Authority or other entity.

 

“RCRA” shall mean the Resource Conservation and Recovery Act (42 U.S.C. § 6901
et seq.), as amended as of the date hereof, and all rules, regulations,
standards, guidelines, and publications issued thereunder.

 

“Release” means any releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, depositing, or
disposing into the environment of any Hazardous Substance.

 

“Remediation” means investigations, monitoring, clean-up and other response
actions required under Environmental Laws.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Securities Laws” means the United States Securities Act of 1933; the United
States Securities Exchange Act of 1934; the published rules and regulations of
the SEC promulgated thereunder; the securities or “blue sky” laws of any state
or territory of the United States and the comparable laws, rules and regulations
in effect in any other country.

 

“Seller Material Adverse Effect” means any change, effect, event, occurrence,
state of facts or development that would reasonably be expected to cause Buyer
to be unable to consummate the transactions contemplated hereby on or before the
Drop Dead Date.

 

“Subsidiary” means any entity of which more than 50% of the effective voting
power or Equity Interests or such entity are directly or indirectly owned or
controlled by the Company.

 

“Target Working Capital” means $13,000,000.

 

“Tax” or “Taxes” means (i) any and all taxes, assessments, fees, levies,
imposts, duties and other governmental assessments or charges imposed by any
Governmental Authority (including without limitation income, profits, gross
receipts, net proceeds, alternative or add-on minimum, ad valorem, value added,
turnover, sales, use, property, personal property (tangible and intangible),
environmental, stamp, leasing, lease, user, excise, duty, franchise, capital,
capital stock, transfer, registration, license, withholding, social security (or
similar), unemployment, disability, payroll, employment, fuel, excess profits,
occupational, premium, windfall profit, severance, estimated, or other charge of
any kind whatsoever) and (ii) any interest and any penalties, additions to tax
or additional amounts imposed by any Governmental Authority in connection with
(A) any item described in clause (i) or (B) any Liability for failure to comply
with any requirement imposed with respect to any Tax Return.

 

“Tax Returns” means returns, reports, declarations and forms required to be
filed with any Governmental Authority, including any schedules thereto and any
amendments thereof, by the Code or by applicable state, local or foreign Tax
laws (including any consolidated, combined or unitary Tax Return in which the
Company or any of its Subsidiaries is or was required to have been included).

 

7

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“Title Commitment” means Chicago Title Insurance Company Commitment for Title
Insurance No. 11065 dated May 10, 2004.

 

“Title Insurance Policy” means Chicago Title Insurance Company Title Insurance
Policy No. 14-0213-106-00000573 dated December 1, 1999.

 

“UST” shall mean an underground storage tank, including as that term is defined,
construed and otherwise used in RCRA and in rules, regulations, standards,
guidelines and publications issued pursuant to RCRA and comparable state and
local laws.

 

(b) The following terms shall have the meaning specified on the indicated page
of this Agreement:

 

Term

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   Page

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338 Taxes

   33

Accounting Referee

   12

Acquisition

   1

Affiliate

   1

Aggregate Cash Consideration

   11

Agreement

   1

Applicable Accounting Principles

   1

Applicable Law

   2

Appurtenant Easements

   16

Asserted Liability

   43

Basket Amount

   45

Business Day

   2

Buyer

   1

Buyer Benefit Plans

   35

Buyer Material Adverse Effect

   2

Buyer’s Savings Plan

   35

CERCLA

   2

Charter Documents

   2

Claims Notice

   43

Closing

   2

Closing Date

   2

Closing Statement

   12

Closing Working Capital

   12

COBRA

   2

Code

   2

Collateral Source

   46

Company

   1

Company Disclosure Schedule

   2

Company Intellectual Property

   20

Company Material Adverse Effect

   2

 

8

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Company Properties

   16

Competing Business

   37

Confidentiality Agreement

   32

Contract

   3

Credit Agreement

   3

Current Balance Sheet

   15

Current Financial Statements

   15

Debt Commitment Letter

   3

Distribution Agreement

   3

Dollar(s) or $

   3

Drop Dead Date

   47

East Dubuque Facility

   3

Election

   32

Employee Benefit Plan

   3

Employees

   35

Encumbrance

   4

Environmental Laws

   4

Environmental Liabilities

   4

Environmental Liability

   23

Environmental Permits

   23

Equity Interests

   4

ERISA

   4

ERISA Affiliate

   4

Estimated Working Capital

   11

Final Working Capital

   13

Financial Information

   15

Financial Releases

   4

GAAP

   4

Governmental Authority

   4

Governmental Consents

   15

Group

   33

Hazardous Substances

   4

HSR Act

   15

HSR Filing

   30

Indebtedness

   4

Indemnified Party

   5

Indemnifying Party

   5

Indenture

   5

Intellectual Property

   5

Intercompany Liabilities

   37

Interim Covenants

   42

IRS

   5

Knowledge of Buyer

   5

Knowledge of Seller

   5

Legal Proceeding

   5

Liability

   5

 

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Lien

   6

Losses

   42

Manage

   6

Management

   6

Material Contracts

   19

Multiemployer Plan

   6

Net Working Capital

   12

Newt Contract

   6

Non-Imputation Coverage

   40

Non-Union Employees

   35

Order

   6

Ordinary Course of Business

   6

Owned Properties

   16

Owned Property

   16

Permits

   6

Permitted Exceptions

   6

Person

   7

Personal Property Leases

   17

Potential Acquirer

   37

Pre-Closing Consolidated Returns

   33

Pre-Closing Period Returns

   33

Pre-Closing Taxes

   33

Products

   18

Purchase Consideration

   11

RCRA

   7

Release

   7

Remediation

   7

Remediation Standard

   45

SEC

   7

Securities Laws

   7

Seller

   1

Seller Material Adverse Effect

   7

Seller’s 401(k) Plan

   35

Shares

   1

Statement

   33

Straddle Period

   33

Straddle Period Return

   33

Subsidiary

   7

Survey

   6

Survival Period

   42

Target Working Capital

   7

Tax

   7

Tax Returns

   7

Taxes

   7

Third Party Consents

   14

Title Commitment

   6, 8

 

10

--------------------------------------------------------------------------------

Title Company

   40

Title Insurance Policy

   8

Union Employees

   35

UST

   8

WARN

   24

WARN Act

   36

 

ARTICLE II

 

PURCHASE AND SALE OF SHARES; CLOSING; RELATED MATTERS

 

Section 2.1. Purchase and Sale of the Shares. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
convey, transfer and deliver to Buyer, and Buyer shall purchase, acquire and
accept from Seller, all right, title and interest in and to the Shares, free and
clear of any Encumbrances. The consideration to be paid by Buyer for the Shares
is set forth in Section 2.4 hereof.

 

Section 2.2. Closing; Delivery of the Shares. The Closing shall take place (a)
at the offices of Dechert LLP, 4000 Bell Atlantic Tower, 1717 Arch Street,
Philadelphia, PA, at 10:00 a.m. on the third Business Day following the date on
which the last of the conditions set forth in Article VI that are capable of
being satisfied before Closing are fulfilled or waived in accordance with this
Agreement or (b) at such other place, time or date as Buyer and Seller may
agree. At the Closing, Seller will deliver to Buyer one or more certificates
representing all of the Shares, duly endorsed in blank or accompanied by stock
powers or other instruments of transfer duly executed in blank.

 

Section 2.3. Payment. In consideration of the sale of the Shares to Buyer in
accordance with this Agreement, Buyer shall pay to Seller at the Closing, by
wire transfer of immediately available funds to an account designated in writing
by Seller to Buyer prior to the Closing, Aggregate Cash Consideration.

 

Section 2.4. Purchase Consideration. The aggregate amount payable by Buyer to
Seller in respect of the Shares (the “Purchase Consideration”) shall consist of
cash (the “Aggregate Cash Consideration”) in an aggregate amount equal to
$63,136,000, subject to adjustment as provided in Section 2.5.

 

Section 2.5. Adjustment of Aggregate Cash Consideration.

 

(a) Not later than 10 Business Days before the Closing Date, Seller will provide
Buyer with Seller’s good faith estimate of the Company’s Closing Working
Capital, based upon the accounting books and records of the Company (the
“Estimated Working Capital”), and all underlying documentation supporting the
Estimated Working Capital. The determination of the Estimated Working Capital
will be binding on Seller and Buyer for purposes of this Section 2.5(a) and will
be used to determine the amount of the Aggregate Cash Consideration payable to
Seller at the Closing. If the Estimated Working Capital is greater than

 

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Target Working Capital, then the amount of the Aggregate Cash Consideration paid
by Buyer to Seller at the Closing will be increased by the amount of such
excess. If the Estimated Working Capital is less than Target Working Capital,
then the amount of the Aggregate Cash Consideration paid by Buyer to Seller at
the Closing will be decreased by the amount of such deficit.

 

(b) As promptly as practicable, but no later than 45 days after the Closing
Date, Seller shall cause to be prepared and delivered to Buyer the Closing
Statement (as defined below) and a certificate based on such Closing Statement
setting forth Seller’s calculation of Closing Working Capital. The closing
statement (the “Closing Statement”) shall present the Net Working Capital as of
the end of business on the Closing Date (“Closing Working Capital”). “Net
Working Capital” means the amount equal to the Company’s cash, plus inventory
(including, without limitation, supplies, parts, unamortized catalyst
expenditures and recovered precious metals), plus trade receivables (other than
trade receivables owing from Seller or its Affiliates), minus the accounts
payable minus accrued liabilities (excluding all current and deferred Taxes
based on the Company’s income) of the Company, in each case as determined in
accordance with the Applicable Accounting Principles. A sample calculation of
Net Working Capital is attached hereto as Annex A.

 

(c) If Buyer disagrees with Seller’s calculation of Closing Working Capital
delivered pursuant to Section 2.5(b), Buyer may, within 30 days after delivery
of the Closing Statement, deliver a notice to Seller disagreeing with such
calculation and setting forth Buyer’s calculation of such amount. Any such
notice of disagreement shall (i) specify those items or amounts as to which
Buyer disagrees, and Buyer shall be deemed to have agreed with all other items
and amounts contained in the Closing Statement and the calculation of Closing
Working Capital delivered pursuant to Section 2.5(b) and (ii) only include
disagreements based on mathematical errors or Seller’s failure to follow
Applicable Accounting Principles in its calculation of Closing Working Capital.

 

(d) If a notice of disagreement shall be duly delivered pursuant to Section
2.5(c), Buyer and Seller shall, during the 15 days following such delivery, use
their commercially reasonable efforts to reach agreement on the disputed items
or amounts in order to determine the amount of Closing Working Capital, which
amount shall not be less than the amount thereof shown in Seller’s calculation
delivered pursuant to Section 2.5(b) nor more than the amount thereof shown in
Buyer’s calculation delivered pursuant to Section 2.5(c). If during such period,
Buyer and Seller are unable to reach such agreement, they shall promptly
thereafter cause PricewaterhouseCoopers (the “Accounting Referee”) to review
this Agreement and the disputed items or amounts for the purpose of calculating
Closing Working Capital. In making such calculation, the Accounting Referee
shall consider only (i) those items or amounts in the Closing Statement and
Buyer’s calculation of Closing Working Capital as to which Buyer has disagreed
and (ii) disagreements based on mathematical errors or Seller’s failure to
follow Applicable Accounting Principles in its calculation of Closing Working
Capital. The Accounting Referee shall deliver to Buyer and Seller, as promptly
as practicable (but in any case no later than 30 days from the date of
engagement of the Accounting Referee), a report setting forth such calculation.
Such report shall be final and binding upon Buyer and Seller. The cost of such
review and report shall be borne equally by Buyer and Seller.

 

12

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(e) Buyer and Seller shall, and shall cause their respective representatives,
and Buyer shall cause the Company, to cooperate and assist in the preparation of
the Closing Statement and the calculation of Closing Working Capital and in the
conduct of the review referred to in this Section 2.5, including, without
limitation, the making available to the extent necessary of books, records, work
papers and personnel.

 

(f) If Final Working Capital exceeds Estimated Working Capital, Buyer shall pay
to Seller, in the manner as provided in Section 2.5(g), the amount by which
Final Working Capital so exceeds Estimated Working Capital as an adjustment to
the Purchase Consideration and, if Estimated Working Capital exceeds Final
Working Capital, Seller shall pay to Buyer the amount by which Estimated Working
Capital so exceeds Final Working Capital as an adjustment to the Purchase
Consideration. “Final Working Capital” means Closing Working Capital (i) as
shown in Buyer’s calculation delivered pursuant to Section 2.5(b) if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
2.5(c); or (ii) if such a notice of disagreement is delivered, (A) as agreed by
Buyer and Seller pursuant to Section 2.5(d) or (B) in the absence of such
agreement, as shown in the Accounting Referee’s calculation delivered pursuant
to Section 2.5(d).

 

(g) Any payment pursuant to Section 2.5(f) shall be made at a mutually
convenient time and place within 3 Business Days after Final Working Capital has
been determined by wire transfer by Buyer or Seller, as the case may be, of
immediately available funds to the account of such other party as may be
designated in writing by such other party.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller represents and warrants to Buyer as follows:

 

Section 1.1. Organization. (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of Delaware. The Company
has all requisite power and authority to carry on its business as it is now
conducted and to own, lease and operate all of its properties and assets, and is
duly licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased or operated by
it makes such qualification or licensing necessary, except where the failure to
be so licensed or qualified would not have a Company Material Adverse Effect.
Section 3.1 of the Company Disclosure Schedule contains a complete and accurate
list of each jurisdiction in which the Company is qualified to do business.

 

(b) Neither Seller nor the Company is in default under its Charter Documents.
The Charter Documents of the Company in the forms attached to the Company
Disclosure Schedule are the Charter Documents of the Company as in effect on the
date of this Agreement.

 

Section 3.2. Authority. Seller is a corporation duly organized, validly existing
and in good standing under the laws of Delaware. Seller has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly

 

13

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executed and delivered by Seller. Assuming the due authorization, execution and
delivery of this Agreement by the Buyer, this Agreement constitutes the legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).

 

Section 3.3. Organization and Related Matters.

 

(a) The Company does not have any Subsidiaries and does not directly or
indirectly own any Equity Interests.

 

(b) The authorized capital stock of the Company consists of 1,000 shares of
Common Stock, no par value per share and 150,000 shares of Preferred Stock, par
value $100 per share. All of the Shares are duly authorized, validly issued,
fully paid and nonassessable and are owned of record and beneficially by Seller
free and clear of all Encumbrances, except as set forth on Schedule 3.3(b) of
the Company Disclosure Schedule. Upon transfer of the Shares to Buyer in
accordance with the terms of Article II, Buyer will receive valid title to the
Shares, free and clear of all Encumbrances. All of the Shares were issued in
compliance with Applicable Laws. None of the Shares was issued in violation of
any Contract to which Seller or the Company is a party or is subject. Other than
the Shares, the Company does not have outstanding any Equity Interests or any
other securities. The Company is not a party or subject to any Contract
obligating the Company to issue any Equity Interests or any other securities.
The Company does not have outstanding or authorized any stock appreciation,
phantom stock, profit participation, or similar rights involving any Equity
Interests of the Company. Neither Seller nor the Company is a party or subject
to any stockholder agreement, voting agreement, voting trust or any other
similar arrangement which has the effect of restricting or limiting the
transfer, voting or other rights associated with the Shares, except as set forth
on Schedule 3.3(b) of the Company Disclosure Schedule. There are no obligations,
contingent or otherwise, of the Company to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
Person.

 

Section 3.4. Authority; No Violation; Consents.

 

(a) Neither the execution and delivery of this Agreement by Seller, nor the
consummation of the transactions contemplated hereby and the performance of this
Agreement by Seller, assuming that the Governmental Consents have been obtained
prior to the Closing, will (i) violate, conflict with, or result in a breach of
any provision of the charter, by-laws or other organizational documents of
Seller or the Company, (ii) require consent under, violate, conflict with, or
result in a breach, in any material respect, of any provision of, or constitute
a default (or an event that, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance or payment required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the
properties or assets of the Company under any of the terms, conditions or
provisions of any Contract to which the Company is a party or to which its
properties or assets may be subject, except as set forth on Section 3.4(a) of
the Company Disclosure Schedule (the “Third Party Consents”), or (iii) violate
any Applicable Law applicable to Seller or the Company or any

 

14

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of their respective properties or assets, except, with respect to clauses (ii)
and (iii), for such violations which would not have a Seller Material Adverse
Effect or a Company Material Adverse Effect.

 

(b) Except as set forth on Section 3.4(b) of the Company Disclosure Schedule
(the “Governmental Consents”), and for such filings as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and
regulations thereunder (the “HSR Act”) and applicable federal and state
securities laws, no notice to, filing with, authorization of, exemption by, or
consent or approval of, any Governmental Authority is necessary or required to
be obtained by Seller or the Company for the sale of the Shares and the
consummation of the other transitions contemplated hereby.

 

Section 3.5. Financial Statements. Section 3.5(a) of the Company Disclosure
Schedule sets forth the following financial statements of the Company’s (i)
audited financial statements consisting of the balance sheet of the Company as
at December 31 in each of the years 2001 through 2003 and the related statements
of income and retained earnings, stockholders’ equity and cash flow, for the
years then ended and (ii) the unaudited financial statements consisting of the
balance sheet of the Company as at September 30, 2004 (the “Current Balance
Sheet”) and the related statements of income and retained earnings,
stockholders’ equity and cash flow for the nine month period then ended (the
“Current Financial Statements”, together with the information described at
clauses (i) and (ii), the “Financial Information”). Except as set forth in
Section 3.5(a) of the Company Disclosure Schedule, the Financial Information was
derived from the internal books and records of the Company, has been prepared in
accordance with GAAP consistently applied by Seller and the Company through the
periods presented and fairly presents in all material respect the consolidated
financial position, results of operations and cash flows of the Company as of
the dates and the periods indicated therein, subject to the absence of footnotes
and normal recurring year-end adjustments.

 

Section 3.6. Absence of Undisclosed Liabilities. There exists no Indebtedness or
Liabilities of the Company, whether accrued, absolute, contingent or threatened
of the nature that would be required to be reflected on the Company’s balance
sheet under GAAP except (i) as disclosed, reflected or reserved against in the
Current Financial Statements, (ii) for items disclosed as Liabilities in Section
3.6 of the Company Disclosure Schedule, (iii) for Liabilities incurred in the
Ordinary Course of Business since the date of the Current Balance Sheet, (iv)
Liabilities under Contracts and Permits of the Company and (v) for Liabilities
that would not have a Company Material Adverse Effect. Section 3.6 of the
Company Disclosure Schedule set forth all outstanding Indebtedness of the
Company as of the date hereof.

 

Section 3.7. Compliance with Applicable Laws. Except as set forth in Section 3.7
of the Company Disclosure Schedule, the business of the Company is being
conducted in compliance with all Applicable Laws applicable to Seller or the
Company, except for possible violations which would not have a Company Material
Adverse Effect. Except as set forth in Section 3.7 of the Company Disclosure
Schedule, all Permits required to conduct the business of the Company have been
obtained and are in full force and effect and are being complied with in all
respects, except for such failures to obtain, maintain or comply with Permits
which would not have a Company Material Adverse Effect. Except as set forth in
Section 3.7 of the Company Disclosure Schedule, the individuals set forth in
Section 1.1 of the Company Disclosure Schedule have not received written notice
regarding violation of, conflict with, or failure to comply with any Applicable
Law or Permit.

 

15

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Section 3.8. Real Property and Tangible Personal Property.

 

(a) Section 3.8(a) of the Company Disclosure Schedule sets forth a complete list
of all real property and interests in real property owned in fee by the Company
(individually, an “Owned Property” and collectively, the “Owned Properties”).
The Company has good and marketable fee title to all Owned Properties, free and
clear of all Liens of any nature whatsoever except (A) Liens set forth in
Section 3.8(a) of the Company Disclosure Schedule and (B) Permitted Exceptions.
Section 3.8(a) of the Company Disclosure Schedule also sets forth a complete
list of all appurtenant easements as described in the Title Insurance Policy
(the “Appurtenant Easements”). The Company has valid and enforceable rights in
and to the Appurtenant Easements, free and clear of all Liens of any nature
whatsoever except (A) Liens set forth in Section 3.8(a) of the Company
Disclosure Schedule and (B) Permitted Exceptions. The Owned Properties and the
Appurtenant Easements are referred to collectively herein as the “Company
Properties.”

 

(b) The Company has no leasehold interests in real property.

 

(c) There does not exist, to the Knowledge of Seller, threatened or contemplated
condemnation or eminent domain proceedings that materially adversely affect any
Company Property or any part thereof, and Seller has no Knowledge of the
intention of any Governmental Authority to take or use all or any part thereof.
To the Knowledge of Seller, it has not received any written notice of pending,
and there are no threatened, condemnation, fire, health, safety, building,
zoning, land use or other regulatory proceedings, lawsuits or administrative
actions relating to any portion of the Company Property which do or may
adversely affect the current use, occupancy or value thereof. To the Knowledge
of Seller, it has not received written notice of any pending or threatened
special assessment proceedings affecting any portion of the Company Property.

 

(d) Except as set forth in Section 3.8(d) of the Company Disclosure Schedule,
with respect to the Newt Contract, the Company does not own or hold, and is not
obligated under or a party to, any option, right of first refusal or other
Contractual right to purchase, acquire, sell, assign or dispose of any material
real estate or any material portion thereof or interest therein. No Person other
than the Company is in possession of any of the Company Property or any portion
thereof except, with respect to the Appurtenant Easements, in accordance with
the terms of said Appurtenant Easements, and except for Permitted Exceptions
there are no leases, subleases, licenses, concessions or other agreements,
written or oral, under which the Company has granted to any Person other than
the Company the right of use or occupancy of the Company Property or any portion
thereof.

 

(e) To the Knowledge of Seller, it has not received any written notice from any
Governmental Authority or other Person that the Company Property and its current
use do not comply in any material respect with all applicable building and
zoning codes, deed restrictions, ordinances and rules.

 

16

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(f) To the Knowledge of Seller, it has not received written notice that any of
the Company Property or the present uses and operations of the Company Property
do not comply in all material respects with all Laws, covenants, conditions,
restrictions, easements, disposition agreements and similar matters affecting
the Company Property.

 

(g) The Company Property is in suitable condition for the Company’s business as
currently conducted. The portion of the Company Property identified as Parcel 3
in the Title Insurance Policy is contiguous to the public street systems.

 

(h) The Company has good and marketable title to all of the items of tangible
personal property reflected as owned on the Current Balance Sheet (except as
sold or disposed of subsequent to the date thereof in the Ordinary Course of
Business), free and clear of any and all Liens, other than the Permitted
Exceptions.

 

(i) Except as set forth in Section 3.8(i) of the Company Disclosure Schedule,
the Company Properties and the tangible personal property owned or leased by the
Company constitute all the real and personal property necessary for the
continued operation of their businesses as currently conducted.

 

(j) Section 3.8(j) of the Company Disclosure Schedule sets forth all leases of
personal property (“Personal Property Leases”) involving annual payments in
excess of $100,000 relating to personal property used in the business of the
Company or to which the Company is a party or by which the properties or assets
of the Company is bound. The Company has delivered or otherwise made available
to Buyer true, correct and complete copies of the Personal Property Leases,
together with all amendments, modifications or supplements thereto.

 

(k) The Company has a valid leasehold interest under each of the Personal
Property Leases under which it is a lessee, enforceable against the Company that
is a party thereto and, to the Knowledge of Seller, against the other party
thereto, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors’ rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity). Each of
the Personal Property Leases is in full force and effect. No party to any of the
Personal Property Leases has exercised any termination rights with respect
thereto.

 

(l) Water, sewer, gas, electric, telephone and drainage facilities existing at
the Company Property are adequate to service the Company Property in the
operation of the business and to permit compliance in all material respects with
the requirements of all Laws in the operation thereof. To the Knowledge of
Seller, it has not received written notice of any existing fact or condition
likely to result in the termination or material reduction of the current access
from the Company Property to existing roads or to sewer or other utility
services presently serving the Company Property.

 

(m) To the Knowledge of Seller, it has not received written notice from either
(i) any party to the Newt Contract or (ii) the owner of the Burlington Northern
RR line relating to an attempt to stop the Company from using the rail spur
track described in the Newt Contract or the main line tracks to which such rail
spur track connects.

 

17

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Section 3.9. Inventory. As of the Closing Date, and as except as would not
reasonably be expected to have a Company Material Adverse Effect, (a) all of the
Company’s inventory of anhydrous ammonia, granular urea, UAN solutions and
nitric acid (the “Products”) is of a quality, quantity and condition useable or
saleable in the ordinary course of business, (b) none of the Products are
obsolete and no write-down of the Products has been made or should have been
made in the period since September 30, 2004, (c) the quantities of each item of
Product are not excessive and are reasonable in the present circumstances of the
Company and (d) all of the Products are located at the facilities of the
Acquired Company and no Products are held on a consignment basis.

 

Section 3.10. Condition of Assets. Except as set forth in Section 3.10 of the
Company Disclosure Schedule, the buildings, machinery, equipment, tools,
furniture, improvements and other tangible assets which are owned, leased or
used by the Company are in good operating condition and fit for the purposes for
which they are used, subject to normal maintenance requirements and normal wear
and tear reasonably expected in the ordinary course of business. Except for the
representations, warranties and covenants set forth in this Agreement, all of
such assets will be conveyed by Seller to Buyer at the Closing Date “As Is,
Where Is.”

 

Section 3.11. Contracts. Section 3.11 of the Company Disclosure Schedule sets
forth a complete and correct list as of the date of this Agreement of all of the
following Contracts to which the Company is a party:

 

(a) any Contract with any current or former director, officer or employee of the
Company;

 

(b) each real estate lease or sublease with respect to each Company Property;

 

(c) any Contract with a labor union or association (including any collective
bargaining agreement);

 

(d) any Contract (other than Employee Benefit Plans) not otherwise disclosed
pursuant to this Section 3.11 calling for annual payments aggregating more than
$100,000, whether payable by or to the Company;

 

(e) any partnership, joint venture or other similar contract;

 

(f) any Contract relating to the incurrence, assumption or guarantee of any
Indebtedness in an amount in excess of $100,000 or imposing a Lien in an amount
in excess of $100,000 on any of its assets (other than Permitted Exceptions);

 

(g) any Contract involving the Company pursuant to which any party is required
to purchase or sell a stated portion of its requirements or output from or to
another party and requiring annual payments aggregating more than $100,000;

 

(h) any Contract for the sale of assets of the Company requiring payments in
excess of $100,000 other than in the Ordinary Course of Business or for the
grant to any person of any preferential rights to purchase any of such assets;

 

18

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(i) any Contract containing covenants of the Company not to compete in any
business or solicit with any person in any geographical area or covenants of any
other person not to compete with the Company in any line of business or in any
geographical area;

 

(j) any Contract relating to the acquisition or disposition of any material
business (whether by merger, sale of stock, sale of assets or otherwise);

 

(k) any Contract under which the Company has made advances or loans to any other
Person (other than to employees in the Ordinary Course of Business); or

 

(l) any Contract providing for severance, retention, change in control or other
similar payments in excess of $100,000;

 

(m) any Contract for consulting services providing annual compensation in excess
of $100,000;

 

(n) any outstanding Contacts of guaranty or surety, direct or indirect, by the
Company;

 

(o) any outstanding Contracts of indemnification, other than in the Ordinary
Course of Business;

 

(p) any Contract (or group of related Contracts) which involve the expenditure
of more than $100,000 annually or $100,000 in the aggregate or require
performance by the Company more than six months from the date hereof;

 

(q) any distribution, dealer, representative or sales agency Contract;

 

(r) with any Governmental Authority; and

 

(s) any Contract that is otherwise material to the Company and not in the
Ordinary Course of Business, including the Newt Contract.

 

All of the foregoing are collectively referred to in this Agreement as the
“Material Contracts.” Except as set forth in Section 3.11 of the Company
Disclosure Schedule, each Material Contract is in full force and effect and
enforceable against the Company, and, to the Knowledge of Seller, each other
party thereto, in accordance with its terms. Except as set forth in Section 3.11
of the Company Disclosure Schedule, there does not exist under any Material
Contract any default or condition or event that, after notice or lapse of time
or both, would constitute a default on the part of the Company or, to the
Knowledge of Seller, on the part of any other parties to such Material
Contracts, except for such defaults, conditions or events that would not have a
Company Material Adverse Effect. No party to any of the Material Contracts has
exercised any termination rights with respect thereto. The Company has delivered
or otherwise made available to Buyer, true, correct and complete copies of all
the Material Contracts, together with all amendments, modifications or
supplements thereto.

 

Section 3.12. Accounts Receivable. All of the accounts and notes receivable of
the Company represent amounts receivable for products actually delivered or
services actually

 

19

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provided (or, in the case of non-trade accounts or notes represent amounts
receivable in respect of other bona-fide business transactions), have arisen
from bona-fide transactions in the ordinary course of business, are not subject
to any defenses, counterclaims or offsets, have been billed and are due within
30 days after such billing, subject to reserves which are adequate under GAAP.

 

Section 3.13. Intellectual Property. Except as set forth in Schedule 3.13 of the
Company Disclosure Schedule, the Company owns all right, title and interest in
and to, or has a valid and enforceable license or other right to use, all of the
Intellectual Property used by it in connection with its business, which
constitutes all intellectual property rights (the “Company Intellectual
Property”) necessary for it to conduct its business as presently conducted, and
no Person is challenging or, to Seller’s Knowledge, infringing or otherwise
violating any Company Intellectual Property owned by the Company. To the
Seller’s Knowledge, the conduct of the businesses of the Company does not
infringe upon or violate the Intellectual Property of any other Person, and
neither Seller nor the Company has received any notice of any claim of any such
infringement or violation within the three (3) years preceding the date hereof.

 

Section 3.14. Legal Proceedings. Except as set forth in Section 3.14 of the
Company Disclosure Schedule, there is no Legal Proceeding pending or, to the
Knowledge of Seller, threatened against the Company, at law, in equity or
otherwise, in, before, or by, any court or Governmental Authority other than
that which would not, individually or in the aggregate, have a Company Material
Adverse Effect. There is no Legal Proceeding pending or, to the Knowledge of the
Seller, threatened against any former director or employee of the Company with
respect to which the Company has or is reasonably likely to have an
indemnification obligation. Except as set forth in Section 3.14 of the Company
Disclosure Schedule, there are no unsatisfied judgments or outstanding orders,
injunctions, decrees, stipulations or awards (whether rendered by a court, an
administrative agency or by an arbitrator) against the Company other than that
which would not have a Company Material Adverse Effect.

 

Section 3.15. Tax Matters.

 

(a) Except as disclosed in Section 3.15 of the Company Disclosure Schedule,
Seller has filed or caused to be filed in a timely manner (within any applicable
extension periods) all material Tax Returns required to be filed with respect to
the Company and has paid or caused to be paid all Taxes shown to be due on such
Tax Returns. Such Tax Returns are accurate and complete in all material
respects. Except as set forth in Schedule 3.15, the Company does not have any
agreement with any Person regarding the filing of Tax Returns or relating to the
sharing of Tax benefits or liabilities with such Persons. The Group has filed or
caused to be filed within any applicable extension periods all material Tax
Returns required to be filed with respect to the Group and paid all material
Taxes shown to be due on such Tax Returns. Such Tax Returns are accurate and
complete in all material respects.

 

(b) There is no action or audit now proposed, in writing or pending against, or
with respect to, the Company in respect of any Taxes. The Company is not
currently the beneficiary of any extension of time within which to file any Tax
Return, nor has the Company made (or had made on their behalf) any requests for
such extensions that are currently outstanding. No claim has ever been made in
writing by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction or that it
must file Tax Returns. There are no Encumbrances on any of the stock or assets
of the Company with respect to Taxes other than with respect to Taxes not yet
due or payable.

 

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(c) The Company has withheld and timely paid all Taxes required to have been
withheld and paid and has complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto.

 

(d) The Company Disclosure Schedule (i) lists all federal, state, local, and
foreign income Tax Returns filed with respect to Company for taxable periods
ended on or after December 31, 2000, (ii) indicates those Tax Returns that have
been audited, and (iii) indicates those Tax Returns that currently are the
subject of audit. The Company has not waived (nor is subject to a waiver of) any
statute of limitations in respect of Taxes that is currently pending or has
agreed to (nor is subject to) any extension of time with respect to a Tax
assessment or deficiency that is currently pending.

 

(e) Seller is not a “foreign person” within the meaning of Section 1445 of the
Code. The Company has not participated in or cooperated with an international
boycott as defined in Section 999 of the Code.

 

(f) The Company has not received (nor is subject to) any ruling from any Taxing
Authority which would have continuing effect or has entered into (nor is subject
to) any agreement with a Taxing Authority which would have continuing effect.

 

(g) The Company is not a party to any Tax allocation or sharing agreement. The
Company does not have any liability for the Taxes of any Person, other than
under Section 1.1502-6 of the Treasury regulations (or any similar provision of
state, local, or foreign law) with respect to any Group of which the Company
currently is a member, (i) as a transferee or successor, (ii) by contract, (iii)
under Section 1.1502-6 of the Treasury regulations (or any similar provision of
state, local or foreign law), or (iv) otherwise. The Company is not a party to
any joint venture, partnership or other arrangement that is treated as a
partnership for federal income tax purposes.

 

(h) Seller is eligible to join with Buyer in making the Section 338(h)(10)
Election with respect to the acquisition by Buyer of the Company.

 

Section 3.16. Insurance. The Company is covered by policies of insurance
obtained by Seller with reputable insurance companies or associations in amounts
and with retentions and deductibles and covering such risks as are in accordance
with reasonable business practices and requirements of Applicable Law in all
material respects and will continue in force to the Closing Date policies of
insurance of substantially the same character and coverage. All premiums due
under such policies have been accrued or paid in full. As of the date of this
Agreement, the Company has not received any written notice of cancellation of
any insurance policy maintained in favor of the Company or been denied insurance
coverage, which, in either case, would have a Company Material Adverse Effect.
Excluding insurance policies that have expired and been replaced in the Ordinary
Course of Business, no insurance policy has been cancelled within the last 2
years and, to the Knowledge of Seller, no written threat has been made to cancel
any insurance policy of the Company during such period.

 

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Section 3.17. Benefit Plans.

 

(a) Section 3.17(a) of the Company Disclosure Schedule lists all Employee
Benefit Plans.

 

(b) Except as set forth in Section 3.17(b) of the Company Disclosure Schedule no
Employee Benefit Plan is a Multiemployer Plan or a plan that is subject to Title
IV of ERISA, and no Employee Benefit Plan provides health or other welfare
benefits to former employees of the Company or any of the Subsidiaries other
than as required by COBRA. The Company has not withdrawn in a complete or
partial withdrawal from any Multiemployer Plan prior to the Closing Date, nor
has incurred any liability due to the termination or reorganization of a
Multiemployer Plan.

 

(c) Except as set forth in Section 3.17(c) of the Company Disclosure Schedule,
each Employee Benefit Plan is maintained and administered in compliance in all
material respects with the applicable requirements of ERISA, the Code and any
other applicable laws. Each Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code has received a determination from the
Internal Revenue Service that it is so qualified and, to Seller’s Knowledge,
there are no facts or circumstances that would be reasonably likely to adversely
affect the qualified status of any such Employee Benefit Plan.

 

(d) No liability under Title IV of ERISA has been, or to Seller’s Knowledge is
expected to be incurred by any ERISA Affiliate that could reasonably be expected
to become a liability of the Company.

 

(e) The Company and the ERISA Affiliates have complied, in all material
respects, with the requirements of COBRA.

 

(f) None of the Company or, to Seller’s Knowledge, any other Person has engaged
in any transaction with respect to any Employee Benefit Plan that would be
reasonably likely to subject the Company to any material tax or penalty (civil
or otherwise) imposed by ERISA, the Code or other applicable law.

 

(g) With respect to each Employee Benefit Plan, Seller has delivered to Buyer
true, complete and correct copies, to the extent applicable, of (i) the plan and
trust documents and any amendments thereto and the most recent summary plan
description and any summary of material modifications thereto, (ii) the annual
reports (Form 5500 series) and all attachments thereto filed during the prior
three years, (iv) the financial statements and actuarial reports prepared during
the prior three years, and, (v) all current Internal Revenue Service
determination letters.

 

(h) Except as set forth in Section 3.17(h) of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee (current, former or retired) of the Company, (ii) increase any
benefits otherwise payable under any Employee Benefit Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits under
any such plan.

 

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(i) All contributions required to have been made under any of the Employee
Benefit Plans or by law (without regard to any waivers granted under Section 412
of the Code) have been timely made, and all contributions for any period ending
on or before the Closing Date which are not yet due will have been paid or
accrued as current liabilities on the Closing Statement on or prior to the
Closing Date.

 

(j) No Employee Benefit Plan is maintained outside of the jurisdiction of the
United States.

 

(k) The representations and warranties in this Section 3.17 and Sections 3.14,
3.19 and 3.21 are the sole and exclusive representations and warranties of
Seller concerning employee benefit plan matters in this Agreement.

 

Section 3.18. Environmental Matters. Except as set forth in Section 3.18 of the
Company Disclosure Schedule:

 

(a) The Company has all Permits and other authorizations required for the
operations of their business under applicable Environmental Laws (the
“Environmental Permits”) and are in compliance with all terms and conditions of
the Environmental Permits, and with all applicable Environmental Laws, except
for where the failure to have any such Permit or any such noncompliance would
not have a Company Material Adverse Effect.

 

(b) The Company has not received any written notice of any citation, summons,
Order, complaint, penalty, investigation, or review by any Governmental
Authority with respect to any liability under Environmental Laws (including,
without limitation for violations of Environmental Laws or for conditions
requiring Remediation under Environmental Laws) (an “Environmental Liability”)
since April 22, 1999, except for such Environmental Liabilities which would not
have a Company Material Adverse Effect.

 

(c) The Company has not received any written requests for information, notice of
claim, demand, or notification that it is, or may be, responsible with respect
to any Remediation of any threatened or actual Release of any Hazardous
Substance since April 22, 1999, except for such requests, notices, demands, or
notifications which would not have a Company Material Adverse Effect.

 

(d) There is no action, suit, proceeding or investigation pending or, to the
Knowledge of Seller, threatened against or involving the Company asserting an
Environmental Liability which would have a Company Material Adverse Effect.

 

(e) To the knowledge of Seller, there are no USTs located in, at, on, or under
any of the Company Properties, other than the USTs identified in Section 3.18(e)
of the Company Disclosure Schedule as USTs

 

(f) The representations and warranties in this Section 3.18 are the sole and
exclusive representations and warranties of Seller concerning environmental
matters, Environmental Laws and Hazardous Substances in this Agreement.

 

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Section 3.19. Employee Relations.

 

(a) Except as disclosed in Section 3.19(a) of the Company Disclosure Schedule,
the Company is not: (i) a party to or otherwise bound by any collective
bargaining or other type of union agreement, (ii) a party to, involved in or, to
the Knowledge of Seller, threatened by, any labor dispute or unfair labor
practice charge, or (iii) has experienced any work stoppage during the last 3
years.

 

(b) Except as disclosed in Section 3.19(b) of the Company Disclosure Schedule,
there are no outstanding claims against the Company (whether under Applicable
Law relating to the Company, Contract, policy or otherwise), that could
reasonably be expected to have a Company Material Adverse Effect, asserted by or
on behalf of any present or former employee or job applicant of the Company on
account of or for (i) overtime pay, other than overtime pay for work done in the
current payroll period, (ii) wages or salary for a period other than the current
payroll period, (iii) any amount of vacation pay or pay in lieu of vacation time
off, other than vacation time off or pay in lieu thereof earned in or in respect
of the current fiscal year, (iv) any amount of severance pay or similar
benefits, (v) unemployment insurance benefits, (vi) workers’ compensation or
disability benefits, (vii) any violation of any Applicable Law relating to the
Company relating to plant closings, employment terminations or layoffs,
including but not limited to The Workers Adjustment and Retraining Act, (viii)
any violation of Applicable Law relating to the Company relating to employee
“whistleblower” or “right-to-know” rights and protections, (ix) any violation of
any Applicable Law relating to the Company relating to the employment
obligations of federal contractors or subcontractors or (x) any violation of any
Applicable Law relating to the Company relating to minimum wages or maximum
hours of work. The Company is in compliance in all material respects with all
laws, regulations and orders relating to the employment of labor, including all
such laws, regulations and orders relating to items (i) through (x) above,
wages, hours, the Worker Adjustment and Retraining Notification Act and any
similar state or local “mass layoff” or “plant closing” law (“WARN”), collective
bargaining, discrimination, civil rights, safety and health, workers’
compensation, except where the failure to be in compliance would not have a
Company Material Adverse Effect.

 

(c) The Company has properly accrued in the ordinary course of business all
wages and compensation due to employees, including all vacations or vacation
pay, holidays or holiday pay, sick days or sick pay, and bonuses.

 

(d) The Company has materially complied and is in compliance in all material
respects with the requirements of the Immigration Reform and Control Act of
1986. The Company Disclosure Schedule sets forth a true and complete list of all
employees of the Company working in the United States who are not U.S. citizens
and a description of the legal status under which each such employee is
permitted to work in the United States.

 

(e) Section 5.8(h) of the Company Disclosure Schedule sets forth all Union
Employees receiving COBRA continuation coverage under section 4980B of the Code
as of the date hereof.

 

Section 3.20. Bank Accounts; Powers of Attorney. Section 3.20 of the Company
Disclosure Schedule sets forth the name of each bank, safe deposit company or
other financial institution in which the Company has an account, lock box or
safe deposit box and the names of

 

24

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all persons authorized to draw thereon or have access thereto. Except as set
forth in Section 3.20 of the Company Disclosure Schedule, there are no
outstanding powers of attorney executed by or on behalf of the Company in favor
of any Person.

 

Section 3.21. Absence of Changes. Except as set forth in Section 3.21 of the
Company Disclosure Schedule, since the date of the Current Balance Sheet, (a)
the Company has conducted its business only in the Ordinary Course of Business
and (b) there has not been any event, change, occurrence or circumstance that
has had or could reasonably be expected to have a Company Material Adverse
Effect. Without limiting the foregoing, except as set forth in Section 3.21 of
the Company Disclosure Schedule since the date of the Current Balance Sheet:

 

(i) there has not been any damage, destruction or loss, whether or not covered
by insurance, with respect to the property and assets of the Company having a
replacement cost of more than $250,000 for any single loss or $500,000 for all
such losses;

 

(ii) except as permitted by Section 5.1(d), there has not been any declaration,
setting aside or payment of any dividend or other distribution in respect of any
shares of capital stock of the Company or any repurchase, redemption or other
acquisition by the Company of any Equity Securities in, the Company;

 

(iii) other than in the Ordinary Course of Business, the Company has not been
awarded or paid any bonuses to employees of the Company, except to the extent
accrued on the Current Balance Sheet or agreed to increase the compensation
payable or to become payable by it to any of the Company’s directors, officers
or employees (with respect to non-officer employees, that average more than 10%)
or agreed to increase the coverage or benefits available under any severance
pay, termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with such directors, officers or employees;

 

(iv) there has not been any material change by the Company in accounting or Tax
reporting principles, methods or policies;

 

(v) the Company has not made or rescinded any material election relating to
Taxes (other than any such election made in the Ordinary Course of Business) or
settled or compromised any material claim relating to Taxes;

 

(vi) the Company has not made any loans, advances or capital contributions to,
or investments in, any Person (other than with or among the Seller and other
than in the Ordinary Course of Business) and has not incurred, assumed, or
guaranteed any Indebtedness;

 

(vii) the Company has not acquired any assets or sold, assigned, transferred,
conveyed, leased or otherwise disposed of any assets of the Company, except for
assets acquired or sold, assigned, transferred, conveyed, leased or otherwise
disposed of in the Ordinary Course of Business;

 

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(viii) the Company has not canceled or compromised any debt or claim or amended,
canceled, terminated, relinquished, waived or released any Contract or right
except in the Ordinary Course of Business and which, in the aggregate, would not
be material to the Company;

 

(ix) the Company has not made or committed to make any capital expenditures or
capital additions or betterments in excess of $150,000 individually or $300,000
in the aggregate (other than as contemplated by the Company’s capital budget);

 

(x) the Company has not settled any material Legal Proceeding;

 

(xi) the Company has not amended or changed its Charter Documents;

 

(xii) the Company has not altered any term of any outstanding Equity Security or
other security;

 

(xiii) the Company has not created or assumed any Encumbrance on any asset
(other than Permitted Exceptions); and

 

(xiv) neither Seller nor the Company has agreed, whether in writing or
otherwise, to do any of the foregoing.

 

Section 3.22. No Brokers. Seller represents, as to itself and its Affiliates,
including the Company, that no agent, broker, investment banker or other firm or
person is or will be entitled to any broker’s or finder’s fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.

 

Section 3.23. Related Party Transactions. Except as described in Section 3.23 of
the Company Disclosure Schedule, since January 1, 2003, none of the Seller, any
Subsidiary of the Seller (other than the Company) has or has had: (a) any
Contract with the Company or (b) engaged in any transaction with the Company.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Buyer represents and warrants to Seller as follows:

 

Section 4.1. Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of Colorado. Buyer has the power
and authority to carry on its business as it is now being or is currently
proposed to be conducted and to own, lease and operate all of its properties and
assets, and is duly licensed or qualified to do business in each jurisdiction in
which the nature of the business conducted by it or the character or location of
the properties and assets owned, leased or operated by it makes such
qualification or licensing necessary, except where the failure to be so licensed
or qualified would not, individually or in the aggregate, have a Buyer Material
Adverse Effect.

 

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Section 4.2. Authority; No Violation; Consents.

 

(a) Buyer has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly approved by all requisite action on the part of Buyer and
no other proceedings on the part of Buyer are necessary to approve this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Buyer. Assuming the due
authorization, execution and delivery of this Agreement by Seller, this
Agreement constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.

 

(b) Neither the execution, delivery and performance of this Agreement by Buyer,
nor the consummation by Buyer of the transactions contemplated hereby and the
performance of this Agreement by Buyer, assuming that the Governmental Consents
have been obtained prior to the Closing, will (i) (x) violate, conflict with, or
result in a breach of any provision of the charter or by-laws or other
organizational documents of Buyer, or (y) require consent under, violate,
conflict with, or result in a breach, in any material respect, of any provision
of, or constitute a default (or an event that, with notice or lapse of time or
both, would constitute a default) under, or result in the termination of, or
accelerate the performance or payment required by, or result in a right of
termination or acceleration under, or result in the creation of any material
Encumbrance upon any of the properties or assets of Buyer, under any of the
terms, conditions or provisions of any material Contract to which Buyer is a
party or to which Buyer or any of its properties or assets may be subject, or
(ii) violate any Applicable Law applicable to it or any properties or assets of
Buyer, except, with respect to clause (ii), for such violations which would not
have a Buyer Material Adverse Effect.

 

(c) No material notice to, filing with, authorization of, exemption by, or
consent or approval of, any Governmental Authority is necessary for the
consummation by Buyer of the transactions contemplated by this Agreement, other
than the Governmental Consents and such filings as may be required under the HSR
Act and applicable federal and state securities laws.

 

Section 4.3. Legal Proceedings. Buyer is not a party to any, and there are no
material Legal Proceedings pending or, to the Knowledge of Buyer, threatened
against Buyer or any of its properties, assets or Subsidiaries that challenges
the validity or legality of this Agreement or of the transactions contemplated
hereby or which seeks to prevent the consummation of such transactions and there
is no injunction, decree, or regulatory restriction imposed specifically upon
Buyer or any of its respective properties, assets, partners, directors, members,
officers, or employees that challenges the validity or legality of this
Agreement or of the transactions contemplated hereby, except in each case as
would not have a Buyer Material Adverse Effect.

 

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Section 4.4. No Brokers. No broker, finder or similar intermediary has acted for
or on behalf of, or is entitled to any broker’s, finder’s or similar fee or
other commission from, Buyer or its Affiliates in connection with this Agreement
or the transactions contemplated hereby.

 

Section 4.5. Investment Intent. The Shares are being acquired by Buyer solely
for its own account, for investment and not with a view to any distribution
thereof that would violate Securities Laws.

 

Section 4.6. Investigation. Buyer acknowledges that, except for the matters that
are expressly covered by the provisions of this Agreement, Buyer is relying on
its own investigation and analysis in entering into the transactions
contemplated hereby and Buyer has not relied and is not relying on any other
materials, documents or information provided by Seller and the Company other
than the information specifically covered by the representations and warranties
herein. Buyer is knowledgeable about the industries in which the Company
operates and is capable of evaluating the merits and risks of the transactions
contemplated by this Agreement and is able to bear the substantial economic risk
of such investment for an indefinite period of time. Buyer has been afforded
full access to the books and records, facilities and personnel of the Company
for purposes of conducting a due diligence investigation and has conducted a
full due diligence investigation of the Company.

 

Section 4.7. Disclaimer of Other Representations and Warranties. Buyer
acknowledges and agrees that (i) Seller does not make, and has not made, any
representations or warranties relating to the Company, the business of the
Company or otherwise in connection with the transactions contemplated hereby
other than those expressly set forth in Article III and (ii) no Person has been
authorized by Seller or the Company to make any representation or warranty
relating to the Company, the business of the Company or otherwise in connection
with the transactions contemplated hereby except as set forth in Article III
and, if made, such representation or warranty must not be relied upon as having
been authorized by Seller.

 

ARTICLE V

 

COVENANTS

 

Section 5.1. Conduct of Business.

 

(a) Prior to the Closing, and except as otherwise contemplated by this Agreement
or consented to or approved by Buyer, Seller shall cause the Company to operate
the business only in the Ordinary Course of Business and use commercially
reasonable efforts to preserve the properties, business and relationships with
suppliers and customers of the Company and shall cause the Company not to
undertake any of the following:

 

(i) sell, lease, transfer or assign any material assets (other than inventory)
other than in the Ordinary Course of Business;

 

(ii) declare, set aside, make or pay any dividend or other distribution in
respect of the capital stock of the Company or repurchase, redeem or otherwise
acquire any outstanding shares of the capital stock or other securities of, or
other ownership interests in, the Company;

 

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(iii) transfer, issue, sell or dispose of any Equity Interests or other
securities of the Company or grant options, warrants, calls or other rights to
purchase or otherwise acquire shares of the capital stock or other securities of
the Company;

 

(iv) create an Encumbrance, other than Permitted Exceptions, on any material
assets, or incur any Indebtedness in each case except in the Ordinary Course of
Business;

 

(v) permit the Company to enter into any transaction or to enter into, modify or
renew any Contract which is not in the Ordinary Course of Business;

 

(vi) enter into any Contract, understanding or commitment that restrains,
restricts, limits or impedes the ability of the Company to compete with or
conduct any business or line of business in any geographic area except in the
Ordinary Course of Business;

 

(vii) enter into, terminate, materially amend, restate, materially supplement or
waive any material rights under any (A) Material Contract, Personal Property
Lease or Intellectual Property License (or any Contract that would be
categorized as any of the foregoing if in existence on the date hereof) or (B)
Permit, in each case other than in the Ordinary Course of Business;

 

(viii) except for increases consistent with past practices or as may be required
by any Contracts existing as of the date hereof, increase the rate of
compensation or the benefits payable to any employee at an average of more than
10%;

 

(ix) other than in the Ordinary Course of Business or as required by law
including, with respect to any Benefit Plan, as a condition of continued
qualification, adopt, amend, modify or terminate any bonus, profit-sharing,
incentive, stock option, severance, or other plan, contract or commitment for
the benefit of any of its directors, officers or employees (or taken any such
action with respect to any Employee Benefit Plan), or enter into any employment
agreement or make any material change in employment terms for any of employees
of the Company increasing such benefits at an average of more than 10%;

 

(x) make any new commitment or increase any previous commitment for capital
expenditures in an amount exceeding $150,000 per any such capital expenditure,
and $300,000 in the aggregate; provided that any commitment identified in
Section 5.1(a) of the Company Disclosure Schedule shall not require the consent
or approval of Buyer;

 

(xi) take any action which would adversely affect the ability of the parties to
consummate the transactions contemplated by this Agreement;

 

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(xii) adopt or propose any amendment to the Charter Documents of the Company;

 

(xiii) acquire any assets other than in the Ordinary Course of Business or as
provided in Section 5.1(a)(x) hereof;

 

(xiv) make any changes in its accounting methods, principles or practices other
than as required by GAAP;

 

(xv) make any Tax election, change its method of Tax accounting or settle any
claim relating to Taxes other than as required by Tax laws;

 

(xvi) agree to do anything prohibited by this Section 5.1 or anything which
would make any of the representations and warranties of Seller in this Agreement
untrue or incorrect in any material respect; or

 

(xvii) enter into any Contract, commitment or arrangement with respect to any of
the foregoing.

 

(b) Nothing in this Agreement shall be construed to limit Seller and the
Company’s discretion to operate the business of the Company in the Ordinary
Course of Business, or shall give Buyer any ownership rights to Shares, before
the Closing Date.

 

(c) As of the Closing, the Company shall secure the Financial Releases.

 

(d) Buyer acknowledges that notwithstanding anything to the contrary, the
Company may transfer, by way of a dividend or otherwise, cash, cash equivalents,
marketable securities and other financial instruments to Seller or its
Affiliates prior to Closing.

 

Section 5.2. Governmental Consents and Filings. Seller and Buyer have filed the
notification and report form (the “HSR Filing”), required under the HSR Act with
respect to the transactions contemplated hereby, on November 19, 2004. Each
party shall cooperate with the other party to the extent necessary to assist the
other party in the preparation of its HSR Filing, to request early termination
of the waiting period required by the HSR Act and, if requested, to promptly
amend or furnish additional information thereunder. Each party shall use its
reasonable best efforts to secure the termination of any waiting periods under
the HSR Act. Each of Buyer and Seller shall as promptly as practicable comply
with the laws and regulations of any other Governmental Authority that are
applicable to any of the transactions contemplated by this Agreement and
pursuant to which any Governmental Consent is necessary. Buyer and Seller shall
furnish to each other all such information as is necessary to prepare any such
registration, declaration or filing. Buyer and Seller shall keep each other
apprised of the status of any communications with, and any inquiries or requests
for additional information from, any Governmental Authority with respect to the
transactions contemplated by this Agreement.

 

Section 5.3. Additional Agreements. Subject to the terms and conditions provided
in this Agreement, each of Seller and Buyer agree to use their respective
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable, and not in
violation of any Applicable Law, to consummate and make effective as

 

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promptly as practicable the transactions contemplated by this Agreement, and to
cooperate with the other party hereto in connection with the foregoing,
including (i) to obtain, in addition to the approvals discussed in Section 5.2,
any other consents or approvals as are necessary in connection with the
consummation of the transactions contemplated hereby, (ii) to effect, in
addition to filings discussed in Section 5.2, all registrations and filings as
are necessary or desirable in connection with the consummation of the
transactions contemplated hereby, (iii) to defend Legal Proceedings challenging
this Agreement or the consummation of the transactions contemplated hereby, and
(iv) to furnish to each other such information and assistance and to consult
with respect to the terms of any registration, filing, application or
undertaking as may be reasonably requested in connection with the foregoing.

 

Section 5.4. Expenses. Except as provided elsewhere herein, each party hereto
shall bear the expenses incurred by it in connection with the negotiation and
preparation of this Agreement and the consummation of the transactions
contemplated hereby provided, however, that Seller shall pay all expenses of the
Company incurred prior to Closing in connection with the negotiation, execution
and delivery of this Agreement or the transactions contemplated hereby;
provided, further that Buyer shall pay all expenses in connection with the
transactions between Buyer, its Affiliates and management of the Company, fees
associated with registrations, filings, applications, notices, transfers
(including transfer taxes if any), approvals, orders, qualifications, consents
(including any consents with respect to any assets, rights or Contracts of the
Company) and waivers pursuant to this Agreement, including all fees payable
under the HSR Act and all expenses.

 

Section 5.5. Access; Certain Communications. Between the date of this Agreement
and the Closing Date, subject to Applicable Laws relating to the exchange of
information, Seller shall and shall cause the Company to afford to Buyer and its
authorized agents and representatives (including, without limitation, its legal
advisors, accountants, and prospective lenders and their authorized agents and
representatives), reasonable access, upon reasonable prior notice and during
normal business hours, to contracts, documents and information relating to the
business of the Company as Buyer shall reasonably request and to make extracts
and copies of such documents. Buyer, its prospective lenders and their agents
shall not contact or have access to customers, suppliers or employees of the
Company without the prior consent of Seller (which consent shall not be
unreasonably withheld). It is expressly understood by the parties hereto that,
notwithstanding the provisions of this Section 5.5, Seller, in its sole
discretion, may deny or restrict any access (i) involving possible breaches of
applicable confidentiality agreements with third parties or possible waivers of
any applicable attorney-client privileges; or (ii) in the event Buyer is in
breach of this Agreement. It is further understood that Seller shall be under no
obligation to grant Buyer or its representatives any access if such access
would, under the circumstances, interfere with the operations, activities or
employees of the Company, or if such access would, in the judgment of Seller,
violate applicable antitrust or similar laws.

 

Section 5.6. Confidentiality; Public Announcements.

 

(a) Prior to the Closing, this Agreement, the transactions contemplated hereby
and all information disclosed pursuant to Section 5.5 hereof shall be subject to
the confidentiality agreement dated January 20, 2004 between the Buyer and
Seller (the “Confidentiality Agreement”), the terms of which are incorporated
herein.

 

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(b) The parties hereto shall coordinate all publicity relating to the
transactions contemplated by this Agreement and no party shall issue any press
release, publicity statement or other public notice relating to this Agreement,
or the transactions contemplated by this Agreement, without obtaining the prior
consent of Seller or Buyer, as the case may be, which consent shall not be
unreasonably withheld or delayed, except to the extent required by Applicable
Law or applicable rules of any national securities exchange in which case each
party shall grant the other as much prior notice and consultation as possible
prior to issuing any press release or public notice.

 

Section 5.7. Tax Matters.

 

(a) 338(h)(10) Election. Seller and Buyer shall jointly make (or cause to be
made), and will take any and all action necessary to effect, a timely election
under section 338(h)(10) of the Code (and any comparable elections under state
and local income Tax law) with respect to the Company (the “Election”). Buyer
and Seller shall execute and submit Internal Revenue Service Form 8023 at
Closing pursuant to Section 6.2 of this Agreement.

 

(i) Within 120 days following the Closing Date, the Seller shall prepare and
deliver to the Buyer Internal Revenue Service Form 8883, and any similar forms
required by state or local law (together with Internal Revenue Service Form 8023
and any equivalent state or local law forms, the “Forms”), together with a
proposed allocation of the consideration deemed paid for the assets of the
Company. The Forms shall be prepared in accordance with Section 338 of the Code
and any applicable Treasury Regulations (or, if applicable, comparable
provisions of state and local income tax law). The Buyer shall have 30 days
following the receipt of the Forms from the Seller to notify the Seller in
writing whether or not the Buyer accepts the Forms as prepared by the Seller. If
the Buyer notifies the Seller that it does not accept any of the Forms, it shall
set out in reasonable detail in the written notice its reasons for
non-acceptance and specify the adjustments, which, in its opinion, should be
made. The Seller and the Buyer shall use all reasonable efforts to reach
agreement on the adjustments, if any, to be made to the Forms. If the Seller and
the Buyer do not reach agreement within 25 days after the Seller receives the
Buyer’s notice of non-acceptance, the matter shall be referred to and determined
by the Accounting Referee as promptly as feasible and the determination shall be
binding on both the Buyer and the Seller.

 

(ii) The Forms, as prepared and agreed to pursuant to this Section 5.7, shall be
final, conclusive and binding on the Buyer and the Seller. Neither the Seller
nor the Buyer shall, or shall permit any of their Affiliates to, take any action
to modify any of the Forms or reports (including any corrections, amendments, or
supplements thereto) that are required for the making of the Election after its
execution or to modify or revoke the Election following the filing of the Forms
without the prior written consent of the other party. Each of

 

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the Seller and the Buyer will be responsible for timely filing Form 8883 in a
manner consistent with the Forms. Each of the Buyer and Seller shall be
responsible for filing all Forms required by any state or local jurisdiction.

 

(iii) In the event that any of the Forms is disputed by any Governmental
Authority, the party receiving notice of such dispute shall promptly notify and
consult with the other party hereto concerning resolution of such dispute.

 

(b) Pre-Closing Taxes; Straddle Periods. Seller shall be responsible for paying
“Pre-Closing Taxes,” which shall be defined as all Taxes due with respect to any
Tax period that ends on or before the Closing Date and Taxes attributable to the
Pre-Closing Tax Period of a Straddle Period, as determined in accordance with
this Section 5.7(b), except to the extent that such Taxes are reflected in Net
Working Capital. Unless prohibited by applicable law, Buyer, Seller and the
Company shall cause the taxable year of the Company to close on the Closing
Date. In the case of any taxable period that includes (but does not end on) the
Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured
by income, receipts or expenditures of the Company for the Pre-Closing Tax
Period shall be determined based on an interim closing of the books as of the
close of business on the Closing Date and the amount of other Taxes of the
Company for a Straddle Period which relate to the Pre-Closing Tax Period shall
be deemed to be the amount of such Tax for the entire taxable period in which
the Straddle Period occurs multiplied by a fraction the numerator of which is
the number of days in the Taxable period ending on the Closing Date and the
denominator of which is the total number of days in the Straddle Period. For
avoidance of doubt, any Taxes realized on or before the Closing as a result of
the Election (the “338 Taxes”) or other Taxes on income or gain realized on or
before the Closing as a result of the Company’s departure from the Group shall
be Pre-Closing Taxes.

 

(c) Preparation of Pre-Closing Period Returns. The Company shall continue to be
included for all taxable periods ending on or before the Closing in the
consolidated federal income Tax Return for the affiliated group of which Seller
is the common parent (the “Group”) and any required state or local consolidated,
combined or unitary income or franchise Tax Returns that include the Company
(all such Tax Returns including taxable periods of the Company ending on or
before the Closing Date are hereinafter referred to as “Pre-Closing Consolidated
Returns”). Seller shall prepare and file all Pre-Closing Consolidated Returns
and all other Tax Returns for a period that ends on or before the Closing Date
(collectively, “Pre-Closing Period Returns”). Seller shall pay all Taxes and be
entitled to all refunds and credits attributable to all Pre-Closing Period
Returns.

 

(d) Preparation of Straddle Period Returns. Buyer shall prepare or cause to be
prepared and file or cause to be filed all Returns of the Company for any
Straddle Period (each a “Straddle Period Return”). Buyer shall provide a copy of
each such Straddle Period Return to Seller for its approval not later than 90
days prior to the deadline for filing each such Tax Return. Concurrently with
the provision to the Seller of any Straddle Period Return (including any draft
Straddle Period Return), Buyer shall provide a computation of the Pre-Closing
Taxes reflected in any such Straddle Period Return (such computation, the
“Statement”). If Seller disagrees with the allocation in the Statement or with
such Straddle Period Return, Seller shall notify Buyer in writing of such
disagreement within 30 days of receipt of the Statement, and Seller and Buyer

 

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shall consult and attempt to resolve in good faith the disagreement. In the
event that Seller and Buyer are unable to resolve the disagreement within 15
days, Seller and Buyer shall submit the matter to the Accounting Referee to
resolve the dispute as promptly as possible.

 

(e) Tax Cooperation. After the Closing Date, Seller shall submit to Buyer blank
tax return workpaper packages reasonably necessary for Seller to prepare any
Pre-Closing Consolidated Returns. Buyer shall prepare or cause to be prepared
completely and accurately all information that Seller shall reasonably request
in such workpaper packages and shall submit to Seller such packages within the
later of 60 days after Buyer’s receipt thereof or 45 days after the close of the
taxable period to which a workpaper package relates. Each party shall cooperate
with the other in connection with any Tax filing, investigation, audit or other
proceeding. Buyer and Seller shall (i) preserve and cause to be preserved all
information, returns, books, records and documents relating to any liabilities
for Taxes of the Company with respect to a taxable period until the later of
sixty 60 days after the expiration of all applicable statutes of limitation and
extensions thereof, or the conclusion of all litigation with respect to Taxes
for such period and (ii) give reasonable written notice to the other party prior
to transferring, destroying or discarding any such information, returns, books,
records or documents and, if the other party so requests, allow party to take
possession of such information, returns, books, records or documents. Buyer
shall make available to Seller (and to Seller’s accountants and attorneys) any
and all books and records and other documents and information in its possession
or control related to the Company reasonably requested by Seller to prepare
Pre-Closing Consolidated Returns or to deal with audits related to pre-Closing
periods.

 

(f) Carrybacks. To the extent permitted by law, Buyer shall not, and shall cause
the Company or any of its Subsidiaries not to, carry back any tax attribute to a
period ending on or before the Closing Date.

 

(g) Buyer shall not cause or permit Company to take any extraordinary action on
the Closing Date (other than the Election), and if it does, Buyer shall be
responsible for any Tax costs resulting from such action.

 

Section 5.8. Employee Matters.

 

(a) At the Closing, Buyer shall cause the Company to offer continued employment
to all employees employed by the Company immediately prior to the Closing Date,
provided that subject to the terms of any applicable collective bargaining
agreement the Company shall have the same right to terminate the employment of
any employee following the Closing and to adopt such compensation, incentive and
benefit programs as it shall determine in its sole judgment as it has on the
date hereof.

 

(b) From and after the Closing Date, Buyer shall maintain for all employees of
the Company credit for any service with the Company earned prior to the Closing
Date:

 

(i) for eligibility, vesting (but not benefit accrual) purposes and

 

(ii) for purposes of vacation accrual and severance benefits

 

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under any employee benefit plan, program or arrangement established or
maintained by the Company on or after the Closing Date (the “Buyer Benefit
Plans”). In addition, Buyer shall (i) waive all pre-existing condition exclusion
and actively-at-work requirements and similar limitations, eligibility waiting
periods and evidence of insurability requirements under any Buyer Benefit Plans
to the extent required by the Health Insurance Portability and Accountability
Act of 1996 (HIPAA), and (ii) take into account any covered expenses incurred on
or before the Closing Date by any employee (or covered dependent thereof) of the
Company for purposes of satisfying applicable deductible provisions after the
Closing Date under any applicable Buyer Benefit Plan. Buyer will, and will cause
the Company to, maintain Buyer Benefit Plans for the benefit of non-union
employees and their dependents that are, in the aggregate, substantially similar
to the employee benefit plans, programs or arrangements that the Buyer provides
to its similarly situated employees. Buyer’s health benefit plan shall be
responsible for all benefits for health care services rendered on and after the
Closing Date to Employees and their covered dependents (including those in the
hospital or undergoing a plan of treatment as of the Closing Date).

 

(c) Notwithstanding any limitation in Sections 5.8(a) or 5.8(b) above, Buyer
shall, and shall cause the Company to, honor any collective bargaining
agreements, including without limitation any amendments, addenda or memoranda of
understanding relating or entered into in connection therewith, by which the
Company is bound on the date hereof, with such changes therein as may be agreed
to in the Ordinary Course of Business, or with Buyer’s consent (which shall not
be unreasonably withheld), between the date hereof and Closing. Employees whose
terms and conditions of employment are subject to any such collective bargaining
agreements are hereinafter referred to as “Union Employees.” All other Employees
are referred to as “Non-Union Employees.”

 

(d) 401(k)/Savings Plans.

 

Non-Union Employees

 

(i) As soon as practicable, but in any event within 90 days, following Closing,
Buyer will establish, or designate, a savings plan qualified under Code Section
401(a) and including a cash or deferred feature under Code Section 401(k) and a
related trust thereunder which shall be exempt under Code Section 501(a)
(collectively “Buyer’s Savings Plan”) for the benefit of the employees of the
Company (collectively “Employees”). Buyer’s Savings Plan may be sponsored by
Buyer or any other entity controlled, within the meaning of Code section 414, by
Buyer.

 

(ii) Buyer shall allow Employees to participate in the Buyer’s Savings Plan on
terms and conditions substantially similar to those applicable to the Employees
under the “Seller’s 401(k) Plan”, with service credit as provided under Section
5.8(b) above.

 

(iii) Buyer will cause the Buyer’s Savings Plan to accept the rollover, by
direct or indirect rollover, as selected by each Employee, of that portion of
the Employee’s accounts in the Seller’s 401(k) Plan that constitutes an
“eligible

 

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rollover distribution” as that term is defined by section 402(c)(4) of the Code,
provided that at the time an Employee elects such a rollover that Employee is
employed by the Buyer or an employer under Buyer’s control within the meaning of
section 414 of the Code. Any such rollover will be effected in cash and, as
applicable, any notes evidencing loans from the Seller’s 401(k) to the Employee
electing such rollover. Buyer and Seller will, and will cause the trustees of
their respective 401(k) plans to, cooperate with each other with respect to the
rollover of the eligible rollover distribution portions of the Employees’
account balances in the Seller’s 401(k) Plan to the Buyer’s Savings Plan.

 

(iv) Buyer will, and will cause the Company, to assume and continue in effect
the 401(k) plan maintained for the benefit of Union Employees on the date
hereof, in accordance with the terms of the applicable plan documents and
collective bargaining agreement.

 

(e) Vacation and Sick Leave. Buyer will, and will cause the Company to honor all
vacation pay and sick leave accrued by any Employee of the Company as of the
Closing Date to the extent reflected in the Closing Working Capital.

 

(f) Severance Benefits. Buyer will, and will cause the Company to pay severance
benefits to any Employee terminated with the one year period following closing,
that are at least equal to the severance benefits to which such Employee would
be entitled under the terms of the applicable severance plan on the date hereof.

 

(g) WARN Act. The Buyer shall be solely responsible for any Claim arising under
the Worker Adjustment Retraining Notification Act, or any equivalent state or
local statute or ordinance requiring the provision of notices to Employees
affected by a plant closing, mass layoff, or the like (collectively, the “WARN
Act”), relating to or arising from the failure to retain in employment, or the
termination or layoff of any Employees or any other employment decision made by
Buyer on or after the Closing Date.

 

(h) Union COBRA. With respect to Union Employees, other than those Union
Employees set forth on Section 5.8(h) of the Company Disclosure Schedule and
their dependents for which the Company shall remain liable for COBRA
continuation coverage under section 4980B of the Code, effective as of the
Closing Date, Buyer shall assume liabilities with respect to the obligation to
provide COBRA continuation coverage under section 4980B of the Code.

 

Section 5.9. Termination of Affiliate Relations; Indebtedness; Release of Liens.

 

(a) All agreements between the Company, on the one hand, and Seller and its
Affiliates, on the other hand, shall be terminated as of the Closing, and all
obligations and liabilities thereunder shall have been satisfied.

 

(b) Prior to the Closing Date, Seller and the Company shall secure all Financial
Releases.

 

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Section 5.10. Directors and Officers; Other Relationships. On the Closing Date,
Seller shall cause to be delivered to Buyer duly signed resignations, effective
immediately after the Closing, of all directors or members of other similar
governing body of their position as a directors (and, if requested by Buyer
prior to Closing, of officers of their position as an officer) of the Company.
At the Closing, Buyer, effective immediately after the Closing, shall appoint
new directors, officers, general partners and other replacements for Affiliates
of Seller who resign in accordance with Section 5.10. Seller and its Affiliates
shall have no liability for the activities or services terminated in accordance
with this Section 5.10 for any period after the Closing.

 

Section 5.11. Intercompany Liabilities. Prior to the Closing, Seller shall, and
shall cause each of its Subsidiaries to, settle all intercompany accounts that
are unpaid as of the Closing Date between the Company, on the one hand, and
Seller and its Affiliates (other than the Company), on the other hand (the
“Intercompany Liabilities”).

 

Section 5.12. Covenant Not to Compete. Seller agrees that, during the 3-year
period immediately following the Closing, Seller shall not and shall cause its
Subsidiaries, not to, within those countries set forth in Section 5.12 of the
Company Disclosure Schedule, engage, directly or indirectly, in or directly or
indirectly acquire, any ownership interest in any firm, corporation,
partnership, proprietorship, limited liability company or other business entity
that engages in the manufacturing of nitrogen (a “Competing Business”);
provided, however, (i) that the restrictions contained in this Section 5.12
shall not restrict the ownership by Seller, its Subsidiaries, directly or
indirectly, of less than 2% of the outstanding capital stock of any publicly
traded company engaged in a Competing Business, (ii) it shall not be a violation
of this Section 5.12 to operate a Competing Business that has been acquired by
such Person, provided that such Competing Business accounted for less than 10%
of the net revenues of the total business acquired and such Competing Business
is sold within 12 months of such acquisition, (iii) nothing herein contained
shall be construed to prevent Seller or its Affiliates from acquiring or merging
with any business, Person or entity fifty percent (50%) or more of whose
consolidated revenues for the most recently completed fiscal year prior to such
acquisition were derived from businesses other than a Competing Business and, in
such case, continuing to operate such Competing Business, (iv) nothing herein
contained shall be construed to prevent Seller or its Affiliates from being
acquired (through a merger or otherwise) by any business, Person or entity (a
“Potential Acquirer”) who operates a Competing Business and who after such
acquisition continues to operate a Competing Business so long as Seller and its
direct subsidiaries do not operate a Competing Business and (v) that this
Section 5.12 shall not apply to, prohibit or in anyway inhibit the Seller or its
Subsidiaries from owning or operating its facility in North Bend, Ohio;
provided, further that nothing in Section 5.12 shall prohibit the Seller or its
Subsidiaries from buying, selling, trading or hedging natural gas, nitrogen or
fertilizer in the Ordinary Course of Business.

 

Section 5.13. Preservation of Records. Subject to Section 5.7 hereof (relating
to the preservation of Tax records), Seller and Buyer agree that each of them
shall (and shall cause the Company to) preserve and keep the records held by
them relating to the respective businesses of the Company for a period of 5
years from the Closing Date and shall make such records and appropriate
personnel available to the other as may be reasonably required by such party in
connection with, among other things, any insurance claims by, Legal Proceedings
against or governmental investigations of Seller, the Company, Buyer or any of
their Affiliates or in order

 

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to enable the Company, Seller or Buyer to comply with their respective
obligations under this Agreement and each other agreement, document or
instrument contemplated hereby or thereby and as required by Seller to comply
with its financial reporting and other obligations under applicable debt
agreements, and securities, tax and other laws and regulations. In the event
Seller or Buyer wish to destroy (or permit to be destroyed) such records after
that time, such party shall first give 90 days prior written notice to the other
and such other party shall have the right at its option and expense, upon prior
written notice given to such party within that 90 day period, to take possession
of the records within 180 days after the date of such notice. Buyer will cause
the Company to provide to Seller, within 60 days of Closing, the monthly
reporting information (in form and substance) customarily provided to Seller by
the Company and such other financial information as reasonably requested with
respect to the Company’s consolidated operations for the period and/or periods
up to Closing. In addition, Buyer shall cause the Company’s employees, agents
and representatives to cooperate and assist Seller in the preparation of the
Seller’s financial statements for each period prior to Closing, including in
connection with the audit of the Seller’s financial statements for any such
period.

 

Section 5.14. Notification of Certain Matters. Seller shall give prompt notice
to Buyer of (a) any fact, event or circumstance known to it that individually or
taken together with all other facts, events and circumstances known to it, has
had or is reasonably likely to have a material adverse effect on the Company, or
that would cause or constitute a breach of any of its representations,
warranties, covenants or agreements contained herein, (b) the failure of any
condition precedent to Buyer’s obligations set forth in Sections 6.1(a) through
6.1(j), (c) any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
Acquisition, (d) any notice or other communication from any Governmental
Authority in connection with the Acquisition, or (e) any action, suit or
proceeding, claim, arbitration, litigation or investigation commenced relating
to Seller or the Company that, if pending on the date of this Agreement, would
have been required to have been disclosed pursuant to Section 3.14; provided
that (i) the delivery of any notice pursuant to this Section 5.14 shall not
limit or otherwise affect any remedies available to Buyer, and (ii) disclosure
by Seller shall not be deemed to amend or supplement the Company Disclosure
Schedule or prevent or cure any misrepresentations, breach of warranty or breach
of covenant or agreement.

 

Section 5.15. Use of Certain Names. Seller agrees that, for a period of 30 days
after the Closing Date, the Company may continue to distribute product
literature that uses any Names and distribute products with labeling that uses
any Names to the extent that such product literature and labeling exists on the
Closing Date and Buyer has marked, or has caused the Company to mark, such
product literature and such labeling to obliterate the Names, or, has otherwise
provided notice, or has caused the Company to otherwise provide notice, that the
Company has been sold to Buyer and is independent of Seller. In no event shall
Buyer, the Company or their respective Subsidiaries use any Names after the
Closing in any manner or for any purpose different from the use of such Names by
the Company during the 180-day period preceding the Closing Date. “Names” means
“Royster-Clark Nitrogen, Inc.” or any name, logo or trademark that includes
“Royster-Clark Nitrogen, Inc.”

 

Section 5.16. Financing. Buyer shall use commercially reasonable efforts to
obtain the Debt Commitment Letter and shall deliver a copy of the executed Debt
Commitment Letter to

 

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Seller promptly following the execution thereof. Following execution thereof,
Buyer shall use its commercially reasonable efforts to satisfy the requirements
of the Debt Commitment Letter and to obtain the funding contemplated by and on
the terms contained in the Debt Commitment Letter, or if the Debt Commitment
Letter is terminated or such funds shall not otherwise be available, shall use
best efforts to obtain an alternative source of debt financing in order to
consummate the transactions contemplated hereby. Following the date hereof, any
amendment, termination or cancellation of the Debt Commitment Letter or any
information known to Buyer which makes it unlikely to obtain the financing set
forth in the Debt Commitment Letter shall be promptly disclosed to Seller.
Neither Buyer nor its respective Affiliates shall attempt, directly or
indirectly, to intentionally induce or encourage the exercise by the other party
or parties to a Debt Commitment Letter (the “Lender”) of any right not to fund
any of the financing provided for by the Debt Commitment Letter. If the Lender
fails to fund any such financing, Buyer shall request the Lender to communicate
in writing directly to Seller the circumstances and bases therefor.

 

Section 5.17. Patent Assignments. Seller shall cause Royster-Clark Agribusiness,
Inc. to deliver at Closing, executed patent assignments for the assignment of
the patents set forth in Section 5.17 of the Company Disclosure Schedule to the
Company in a form reasonably satisfactory to Buyer.

 

ARTICLE VI

 

CONDITIONS TO CLOSING/POST-CLOSING DELIVERIES

 

Section 6.1. Conditions to Buyer’s Obligations. The obligations of Buyer to
effect the transactions contemplated hereby shall be subject to the fulfillment,
on or prior to the Closing Date, of each of the following conditions, any one or
more of which may be waived in writing by Buyer in whole or in part:

 

(a) each of the representations and warranties of Seller contained in this
Agreement, (i) to the extent qualified by materiality, shall be true and correct
and (ii) to the extent not qualified by materiality, shall be true and correct
in all material respects, when made and as of the Closing Date, with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except (x) that representations and warranties that are made
as of a specific date need be true and correct only as of such date; and (y) as
contemplated or permitted by this Agreement to change between the date of this
Agreement and the Closing Date;

 

(b) Seller shall have performed and complied in all material respects with all
agreements, covenants, obligations and conditions required by this Agreement to
be performed or complied with by Seller at or prior to the Closing Date;

 

(c) Seller shall have delivered to Buyer a certificate dated as of the Closing
Date signed by Seller in form reasonably satisfactory to Buyer, confirming the
satisfaction in all respects of the conditions contained in paragraphs (a)
through (b) of this Section 6.1;

 

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(d) the parties hereto shall have made and obtained all Governmental Consents
set forth in Section 6.1(d) of the Company Disclosure Schedule;

 

(e) Seller shall have delivered to Buyer evidence that upon payment of the
Aggregate Cash Consideration, Seller shall provide Buyer with the Financial
Releases;

 

(f) Seller shall have delivered to Buyer a duly completed and executed
certification of non-foreign status pursuant to Section 1.1445-2(b)(2) of the
Treasury regulations in a form reasonably satisfactory to Buyer;

 

(g) Seller shall have duly executed and delivered to Buyer the Distribution
Agreement, substantially in the form of Exhibit A attached hereto;

 

(h) Buyer shall have received an opinion of Dechert LLP, counsel to Seller, in
substantially the form of Exhibit B attached hereto;

 

(i) Seller shall have obtained the consent of each Person whose consent is
required under Section 6.1(i) of the Company Disclosure Schedule;

 

(j) Good Standing and Other Certificates. Seller shall have delivered to Buyer
(A) a copy of the Company’s Certificate of Incorporation as in effect on the
Closing Date, including all amendments thereto, certified by the Secretary of
State or other appropriate official of its jurisdiction of incorporation, (B) a
certificate from the Secretary of State or other appropriate official of its
jurisdiction of incorporation to the effect that the Company is in good standing
or subsisting in such jurisdiction and listing all charter documents of the
Company on file, (C) a certificate from the Secretary of State or other
appropriate official in each State in which the Company is qualified to do
business to the effect that the Company is in good standing in such State, (D) a
certificate as to the tax status of the Company from the appropriate official in
its jurisdiction of incorporation and each State in which the Company is
qualified to do business and (E) a copy of the By-Laws of the Company, certified
by the Secretary of the Company as being true and correct and in effect on the
Closing Date;

 

(k) Financing. Buyer shall have received the proceeds of the financing described
in the Debt Commitment Letter or otherwise obtained debt and/or equity financing
sufficient to consummate the transactions contemplated herein; and

 

(l) Title Insurance. Buyer shall have received, at Buyer’s expense, the
commitment of Chicago Title Company (“Title Company”) to issue, with respect to
the Owned Properties and Appurtenant Easements, an endorsement to the existing
Title Insurance Policy insuring the Company and delivered to Buyer which shall
include (A) subject to the following proviso, an endorsement deleting the
standard exclusion from coverage for loss or damage sustained by reason of the
Title Company’s denial of liability under the Title Insurance Policy by reason
of knowledge of officers of the Company on or prior to the Closing Date imputed
to the Company after the Closing Date (“Non-Imputation Coverage”), (B) updating
the date of the existing Title Insurance Policy to the Closing Date, and (C)
insuring over any matter which is not a Permitted Exception or other matter
reasonably acceptable to Buyer, provided that such Non-Imputation Coverage shall
be a condition to Buyer’s obligations only if the Title Company will provide it
without any representation, indemnity or other undertaking or agreement by
Seller

 

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other than Seller’s delivery of (i) executed affidavits of the appropriate
officers of the Company substantially in the form attached hereto as Exhibit D,
disclosing no items other than the matters disclosed pursuant to this Agreement,
and (ii) an executed indemnity of Seller substantially in the form attached
hereto as Exhibit E. If the Title Company imposes any other conditions to the
issuance of the Non-Imputation Coverage (other than payment of any premium by
Buyer), then clause (A) above shall be deemed deleted from this Section, unless
Title Company agrees to waive such other conditions. It is further agreed by
Buyer and Seller that the Title Insurance Policy will also be endorsed, on or
prior to the Closing Date, to reflect (a) the acquisition by the Company prior
to the Effective Date of the fee simple title to the three (3) parcels
identified in the Title Insurance Policy as Tract 1, Tract 2 and Tract 3 (as
exceptions from the description of Parcel 1 in Exhibit A), and (b) the
identification of the zoning classification and permitted uses of the land as of
the date of the Title Insurance Policy in the ALTA Endorsement Form 3.1
currently made part of the Title Insurance Policy.

 

Section 6.2. Conditions to Seller’s Obligations. The obligations of Seller to
effect the transactions contemplated hereby shall be subject to fulfillment on
or prior to the Closing Date of each of the following conditions, any one or
more of which may be waived in whole or in part by Seller in writing:

 

(a) each of the representations and warranties of Buyer contained in this
Agreement, (i) to the extent qualified by materiality, shall be true and correct
and (ii) to the extent not qualified by materiality, shall be true and correct
in all material respects, when made and as of the Closing Date, with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except (x) that representations and warranties that are made
as of a specific date need be true and correct only as of such date and (y) as
contemplated or permitted by this Agreement to change between the date of this
Agreement and the Closing Date);

 

(b) Buyer shall have performed and complied with all agreements, covenants,
obligations and conditions required by this Agreement to be performed or
complied with by it at or prior to the Closing Date;

 

(c) Buyer shall have delivered to Seller a certificate, dated as of the Closing
Date, from a senior executive officer of Buyer confirming the satisfaction of
the conditions contained in paragraphs (a) and (b) of this Section 6.2;

 

(d) the parties hereto shall have made or obtained all Governmental Consents set
forth on Section 6.2(d) of the Company Disclosure Schedule;

 

(e) Seller shall have received an opinion of Morgan, Lewis & Bockius LLP,
counsel to Buyer in substantially the form of Exhibit C attached hereto;

 

(f) the Seller’s 10 1/4% First Mortgage Notes due 2009 shall have been paid in
full and retired;

 

(g) Seller shall have received the Aggregate Cash Consideration;

 

(h) the parties shall have executed the Distribution Agreement;

 

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(i) Seller shall have obtained the necessary consents under the Credit
Agreement; and

 

(j) 338(h)(10) Election Forms. The Buyer shall have provided to Seller an
Internal Revenue Service Form 8023 executed and filled out by the Buyer and in a
form reasonably satisfactory to Seller, along with any equivalent forms required
under state, local or foreign Tax law requested by Seller and in a form
reasonably satisfactory to Seller. Seller shall execute Form 8023 and it shall
be sent to the appropriate Internal Revenue Service Center at Closing.

 

Section 6.3. Mutual Conditions. The obligations of Seller, on the one hand, and
Buyer, on the other hand, to effect the Closing shall be subject to the
condition that no Order of any Governmental Authority or other legal restraint
or prohibition preventing the consummation of the transactions contemplated by
this Agreement shall be in effect, that no proceeding initiated by any
Governmental Authority seeking an injunction shall be pending and that no
Applicable Law shall have been enacted, entered, promulgated or enforced by any
Governmental Authority which prohibits, restricts or makes illegal consummation
of the transactions contemplated hereby.

 

ARTICLE VII

 

SURVIVAL AND INDEMNIFICATION

 

Section 7.1. Survival. The representations and warranties contained in this
Agreement and any covenants required to be performed at or prior to Closing
(together, the “Interim Covenants”) shall survive the Closing until the date
that is 18 months after the Closing Date; provided that the representations and
warranties contained in Sections 3.2 and 3.3 and all of the covenants and
agreements contained herein (other than the Interim Covenants) shall survive
indefinitely and the representations, warranties and covenants contained in
Section 3.15 and Section 5.7 shall not expire until 90 days following the
expiration of the applicable statute of limitations with respect to the
particular matter that is the subject matter thereof (in each case, the
“Survival Period”); provided, however, that any obligation to indemnify and hold
harmless shall not terminate with respect to claims for misrepresentations or
breach of warranties or covenants which have been the subject of a Claims Notice
to the Indemnifying Party before the termination of the applicable Survival
Period.

 

Section 7.2. Indemnification.

 

(a) From and after the Closing Date and subject to Article VII, Seller agrees to
indemnify and hold harmless Buyer and its Affiliates (including the Company)
against and in respect of any and all losses, claims, damages, liabilities,
reasonable costs and expenses, including reasonable legal fees and expenses
(“Losses”), resulting or arising from or otherwise relating to (i) any breaches
of Seller’s representations and warranties set forth in Article III of this
Agreement, (ii) any nonfulfillment of or failure to comply with any covenant or
agreement of Seller set forth in this Agreement or (iii) any Pre-Closing Taxes
as set forth in Section 5.7 and Taxes resulting from the Company being severally
liable for any Taxes of the Group or any other consolidated group of which the
Company was a member prior to the Closing Date pursuant to

 

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Treasury Regulations §1.1502-6 or any analogous state, local or foreign Tax
provision, any Tax imposed upon or relating to the Company as a transferee or
successor, by contract, or otherwise as a result of a pre-Closing action of the
Company, any Tax arising directly or indirectly from a breach or inaccuracy of a
representation or warranty set forth in Section 3.15, any Section 338 Tax, or
(iv) any Losses incurred by the Company solely by reason of the joint and
several liability provisions of ERISA and the Code with respect to (1) any
employee pension benefit plan subject to Title IV of ERISA, or section 412 of
the Code, including any Multiemployer Plan maintained or contributed to by any
ERISA Affiliate (other than the Company and its Subsidiaries) or (2)
non-compliance by any ERISA Affiliate (other than the Company and its
Subsidiaries) with the notice and benefit continuation requirements of COBRA.

 

(b) From and after the Closing Date and subject to Article VII, Buyer shall
indemnify and hold harmless Seller and its Affiliates against and in respect of
any and all Losses resulting or arising from or otherwise relating to (i) any
breaches of Buyer’s representations and warranties set forth in this Agreement
or (ii) any nonfulfillment of or failure to comply with any covenant or
agreement of Buyer set forth in this Agreement.

 

(c) Any payments pursuant to this Article VII shall be treated as an adjustment
to the Purchase Consideration.

 

(d) Payment in full of any amount due under Section 7.2(a)(iii) shall be made to
the Buyer in immediately available funds at least five Business Days before the
date for payment of the Taxes to which such payment relates is due. The Tax
indemnities contained in Section 7.2(a)(iii) shall not be subject to any
threshold or other limitations contained in this Agreement.

 

Section 7.3. Method of Asserting Claims, Etc. The obligations and Liabilities of
any party hereto against which indemnification is sought hereunder with respect
to claims resulting from the assertion of liability by third parties shall be
subject to this Section 7.3.

 

(a) Promptly after receipt by any Indemnified Party of notice of any demand or
claim or the commencement of any action, proceeding or investigation (an
“Asserted Liability”) that could reasonably be expected to result in Losses, the
Indemnified Party shall promptly give written notice thereof (a “Claims Notice”)
to the party obligated to provide indemnification pursuant to Section 7.2(a) or
Section 7.2(b). Each Claims Notice shall describe the Asserted Liability in
reasonable detail and shall, to the extent reasonably possible, indicate the
amount (estimated, if necessary) of the Losses that have been or may be suffered
by the Indemnified Party. The rights of any Indemnified Party to be indemnified
hereunder shall not be adversely affected by its failure to give, or its failure
to timely give, a Claims Notice with respect thereto unless, and if so, only to
the extent that, the Indemnifying Party is prejudiced thereby.

 

(b) The Indemnifying Party shall have the right, exercisable by written notice
to the Indemnified Party within 30 days of receipt of a Claims Notice from the
Indemnified Party to assume the defense of such Asserted Liability, using
counsel selected by the Indemnifying Party and reasonably acceptable to the
Indemnified Party. If the Indemnifying Party elects not to defend against,
negotiate or settle with any Asserted Liability which relates to any Losses
indemnified against hereunder, fails to notify the Indemnified Party of its
election as herein

 

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provided or contests its obligation to indemnify the Indemnified Party for such
Losses under this Agreement, the Indemnified Party may defend against,
negotiate, settle or otherwise deal with such Asserted Liability. If the
Indemnified Party defends any Asserted Liability, then the Indemnifying Party
shall reimburse the Indemnified Party for the Losses of defending such Asserted
Liability upon submission of periodic bills. If the Indemnifying Party shall
assume the defense of any Asserted Liability, the Indemnified Party may
participate, at his or its own expense, in the defense of such Asserted
Liability; provided, however, that such Indemnified Party shall be entitled to
participate in any such defense with separate counsel at the expense of the
Indemnifying Party if (i) so requested by the Indemnifying Party to participate
or (ii) in the written opinion of counsel to the Indemnified Party, a conflict
or potential conflict exists between the Indemnified Party and the Indemnifying
Party that would make such separate representation required under applicable
standards of professional responsibility; and provided, further, that the
Indemnifying Party shall not be required to pay for more than one such counsel
for all indemnified parties in connection therewith. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such Asserted Liability. Subject to the foregoing, if the
Indemnifying Party elects to compromise or defend such Asserted Liability, the
Indemnified Party shall, subject to clause (c) below, cooperate, at the expense
of the Indemnifying Party, in the compromise of, or defense against, such
Asserted Liability. If the Indemnifying Party elects not to compromise or defend
the Asserted Liability or fails to notify the Indemnified Party of its election
as herein provided, the Indemnified Party may pay, compromise or defend such
Asserted Liability with the consent of the Indemnifying Party, such consent not
to be unreasonably held or delayed. The Indemnified Party and the Indemnifying
Party may participate, at their own expense, in the defense of such Asserted
Liability. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall, make available to the Indemnifying Party any books,
records or other documents within its control, and the reasonable assistance of
its employees, for which the Indemnifying Party shall be obliged to reimburse
the Indemnified Party the reasonable out-of-pocket expenses of making them
available.

 

(c) If any Indemnifying Party has assumed the defense of an Asserted Liability
in accordance with the terms hereof, he, she or it shall have the right to
consent to the entry of judgment with respect to, or otherwise settle such
Asserted Liability without the consent of the Indemnified Party if (i) the
settlement involves solely monetary damages, (ii) the Indemnifying Party
expressly agrees in writing to the Indemnified Party that, as between the two,
the Indemnifying Party is solely obligated to satisfy and discharge the claim
and (iii) the Indemnified Party receives an unconditional release of liability.
If the foregoing conditions are not satisfied, the Indemnifying Party shall have
the right to consent to the entry of judgment with respect to, or otherwise
settle such Asserted Liability only upon receipt of the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. If the
Indemnified Party does not give such consent, the Indemnifying Party shall
resume the diligent defense of the Asserted Liability. Regardless of whether the
Indemnifying Party elects to assume the defense of the Asserted Liability in
accordance with the terms hereof, the Indemnified Party shall not admit any
liability with respect to, consent to the entry of judgment with respect to, or
otherwise settle such Asserted Liability without the prior written consent of
the Indemnifying Party, which consent shall not be unreasonably withheld or
delayed.

 

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(d) After any final decision, judgment or award shall have been rendered by a
Governmental Authority of competent jurisdiction and the expiration of the time
in which to appeal therefrom, or a settlement shall have been consummated, or
the Indemnified Party and the Indemnifying Party shall have arrived at a
mutually binding agreement with respect to an Asserted Liability hereunder, the
Indemnified Party shall forward to the Indemnifying Party notice of any sums due
and owing by the Indemnifying Party pursuant to this Agreement with respect to
such matter and the Indemnifying Party shall be required to pay all of the sums
so due and owing to the Indemnified Party by wire transfer of immediately
available funds within 10 Business Days after the date of such notice.

 

Section 7.4. Environmental Procedures. Notwithstanding any other provisions
contained in this Agreement, Seller shall have the right to direct, manage and
control, and take such actions as are reasonably necessary in connection with,
any Remediation or defense or other resolution of any claim, event or condition
subject to indemnification for arising from the breaches of Seller’s
representations and warranties set forth in under Section 3.18, and Buyer shall
provide Seller with access to the Company property reasonably necessary for
Seller to exercise their rights under this Section 7.4. Seller’s obligations to
indemnify for any Environmental Liability pursuant to this Article VII or to
conduct any Remediation shall be deemed satisfied so long as the remedy (i)
complies with the minimum and least stringent standards enforceable under
applicable Environmental Laws, and (ii) is approved or authorized by
Governmental Authorities with jurisdiction over such matters, where such
approval or authorization is required by applicable Environmental Laws (the
“Remediation Standard“). Seller may use the most commercially reasonable and
cost-effective method of achieving the Remediation Standard, including the use
of commercial, industrial and/or other forms of non-residential cleanup criteria
and the use of environmental land use restrictions or similar institutional
controls. Buyer agrees that, if such environmental land use restrictions or
similar institutional controls are approved or authorized by Governmental
Authorities or Environmental Laws, as applicable, Buyer will execute any
required documents and will cooperate with Seller in the recording, on the
applicable land records, of such environmental land use restrictions or similar
controls; provided, however, such land use restrictions or similar institutional
controls do not render the Company Properties unsuitable for use as such Company
Properties were used immediately prior to and up to the Closing.

 

Section 7.5. Indemnification Amounts/Seller. Except for Losses arising from
breach of Sections 3.2, 3.3, 3.15 and 3.22, Seller shall not have liability for
Seller’s breach of representations and warranties under Section 7.2(a)(i) and
for breach of any of the Interim Covenants until the aggregate amount of Buyer’s
Losses attributable to indemnification claims under such section exceeds
$750,000 (the “Basket Amount”); provided, however, that Seller shall be liable
only for the amount by which all Losses exceed the Basket Amount; provided,
further, that no individual claim for a breach of a representation or warranty
under Section 7.2(a)(i) or a breach of any of the Interim Covenants may be made
under Section 7.2 unless such claim is in an amount of $25,000 or greater. The
maximum liability of Seller for Losses as a result of breaches of
representations and warranties under Section 7.2(a)(i) and for breach of any of
the Interim Covenants shall not exceed $5,000,000; provided that this limitation
shall not apply to Losses arising from a breach of the representations made in
Sections 3.2, 3.3, 3.15 and 3.22 and will not apply to breaches of any covenant
or agreement (other than the Interim Covenants), including any covenant or
agreement in Article II or V (other than the Interim Covenants).

 

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Section 7.6. Indemnification Amounts/Buyer. Except for Losses arising from
breach of Sections 4.1, 4.2 and 4.4, Buyer shall not have liability for Buyer’s
breach of representations and warranties under Section 7.2(b)(i) and for breach
of any of the Interim Covenants until the aggregate amount of Seller’s Losses
attributable to indemnification claims under such section exceeds the Basket
Amount; provided, however, that the Buyer shall be liable only for the amount by
which all Losses exceed the Basket Amount.

 

Section 7.7. Losses Net of Insurance, Etc. The amount of any Loss for which
indemnification is provided under Section 7.2 shall be net of (i) any amounts
recovered by the Indemnified Party pursuant to any indemnification by or
indemnification agreement with any third party, (ii) any insurance proceeds or
other cash receipts or sources of reimbursement actually recovered in respect of
such Loss (each source named in clauses (i) and (ii), a “Collateral Source”),
(iii) an amount equal to the actual Tax benefit realized with respect to such
Loss and (iv) any specific accruals or reserves (or overstatement of liabilities
in respect of actual liability) included in the Closing Statement. Subject to
the foregoing, the parties shall take and shall cause their Affiliates to take
all commercially reasonable steps to (i) mitigate any Loss upon becoming aware
of any event that would reasonably be expected to, or does, give rise thereto
and (ii) seek recovery from all Collateral Sources. If the amount to be netted
hereunder from any payment required under Section 7.2 is determined after
payment by the Indemnifying Party of any amount otherwise required to be paid to
an Indemnified Party pursuant to this Article VII, the Indemnified Party shall
repay to the Indemnifying Party, promptly after such determination, any amount
that the Indemnifying Party would not have had to pay pursuant to this Article
VII had such determination been made at the time of such payment.

 

Section 7.8. Sole Remedy/Waiver.

 

(a) Buyer acknowledges and agrees that the remedies provided for in this
Agreement shall be Buyer’s sole and exclusive remedy vis-à-vis Seller with
respect to the subject matter of this Agreement. In furtherance of the
foregoing, except as aforesaid, Buyer hereby waives and releases, to the fullest
extent permitted by applicable law, any and all other rights, claims and causes
of action (including rights of contributions, if any) known or unknown, foreseen
or unforeseen, which exist or may arise in the future, that it may have against
Seller or any of its Affiliates, with respect to the subject matter of this
Agreement and the transactions contemplated hereby arising under or based upon
any Applicable Law (including Environmental Laws).

 

(b) Seller acknowledges and agrees that the remedies provided for in this
Agreement shall be its sole and exclusive remedy vis-à-vis Buyer with respect to
the subject matter of this Agreement and further acknowledges that it shall have
no claim against the Company for any Liability or any other matters whatsoever
arising prior to or relating to any period before Closing. In furtherance of the
foregoing, except as aforesaid, Seller hereby waives and releases, to the
fullest extent permitted by Applicable Law, any and all other rights, claims and
causes of action (including rights of contributions, if any) known or unknown,
foreseen or unforeseen, which exist or may arise in the future, that it may have
against Buyer or any of its Affiliates, with respect to the subject matter of
this Agreement and the transactions contemplated hereby arising under or based
upon any Applicable Law (including Environmental Laws).

 

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Section 7.9. No Consequential Damages. Notwithstanding anything to the contrary
contained herein, no Indemnifying Party shall be liable to or otherwise
responsible to any Indemnified Party for consequential, incidental, special,
unforeseen, exemplary or punitive damages, lost profits or for diminution in
value that arise out of or relate to this Agreement or the performance or breach
thereof or any liability retained or assumed hereunder.

 

ARTICLE VIII

 

TERMINATION

 

Section 8.1. Termination. (a) Notwithstanding anything herein or elsewhere to
the contrary, this Agreement may be terminated and the transactions contemplated
herein may be abandoned at any time prior to the Closing as follows:

 

(1) by the mutual written consent of Buyer and Seller;

 

(2) by either Seller or Buyer if an Order of a competent Governmental Authority
enjoining Seller or Buyer from consummating the transactions contemplated by
this Agreement shall have been entered; provided that such Order shall have
become final and nonappealable; provided further that a party may not terminate
this Agreement pursuant to Section 8.1(a)(2) if it or its Affiliates’ failure to
perform its obligations under this Agreement resulted in or substantially
contributed to the issuance of such Order;

 

(3) by Seller, on the one hand, or by Buyer, on the other hand, if there shall
have been a material breach of any of the covenants or agreements set forth in
this Agreement on the part of Buyer (in the case of termination by Seller) or in
this Agreement on the part of Seller (in the case of termination by Buyer),
which breach shall not have been cured within 30 days following receipt by the
breaching party of written notice of such breach from the other;

 

(4) by Seller, if Buyer has not obtained and delivered copies to Seller of the
executed Debt Commitment Letter by December 10, 2004; and

 

(5) at the election of Buyer or Seller, if the Closing Date shall not be on or
before March 15, 2005 (the “Drop Dead Date”).

 

Notwithstanding Sections 8.1(a)(2)-(5) hereof, a party who is in material breach
of any of its obligations or representations and warranties hereunder shall not
have the right to terminate this Agreement pursuant to Sections 8.1(a)(2)-(5).

 

(b) The termination of this Agreement shall be effectuated by the delivery by
the party terminating this Agreement to the other party of a written notice of
such termination. If this Agreement so terminates, it shall become null and void
and have no further force or effect, except as provided in Section 8.2.

 

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Section 8.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, this Agreement (other than Sections 5.5,
5.6 and 8.1) shall forthwith become void and have no effect.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1. Amendments; Extension; Waiver. (b) Subject to compliance with
Applicable Law, this Agreement may be amended, altered, modified or waived by
written instrument executed by each of the parties hereto, or in the case of
waiver, by the party against whom the waiver is to be effective.

 

(b) No failure or delay by any party in exercising any right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.

 

(c) To the maximum extent permitted by Law, (i) no waiver that may be given by a
party shall be applicable except in the specific instance for which it was given
and (ii) no notice to or demand on one party shall be deemed to be a waiver of
any obligation of such party or the right of the party giving such notice or
demand to take further action without notice or demand.

 

Section 9.2. Entire Agreement.

 

(a) The schedules and exhibits to this Agreement are hereby incorporated and
made a part hereof and are an integral part of this Agreement. All exhibits and
schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any schedule or any exhibit but not otherwise defined therein
shall be defined as set forth in this Agreement.

 

(b) This Agreement (including the schedules and exhibits hereto), together with
the Confidentiality Agreement, constitutes the entire understanding and
agreement of the parties hereto, except as provided herein, and supersedes all
prior agreements and understandings, written and oral, among the parties with
respect to the subject matter hereof.

 

Section 9.3. Interpretation. When a reference is made in this Agreement to a
Section, Exhibit or Schedule, such reference shall be to a Section of or Exhibit
or Schedule to this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation.” Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms
and the singular form of nouns and pronouns shall include the plural and vice
versa. The phrases “the date of this Agreement,” “the date hereof” and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to the date set forth in the first paragraph of this Agreement.

 

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Section 9.4. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

 

Section 9.5. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if (a) delivered in person, (b) transmitted by
telecopy (with written confirmation of transmission), (c) mailed by certified or
registered mail (return receipt requested and obtained) or (d) delivered by an
express courier (with written confirmation of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

 

If to Seller:   

Royster-Clark, Inc.

999 Waterside Drive

8th Floor

Norfolk, VA 23510

Attention:   G. Kenneth Moshenek, President

Facsimile:   (757) 222-9581

With a copy to:   

Dechert LLP

4000 Bell Atlantic Tower

Philadelphia, PA 19103

Attention:  Craig L. Godshall

Facsimile:  (215) 994-2222

If to Buyer:   

Rentech Development Corporation

1331 17th Street, Suite 720

Denver, CO 80202

Attention:   Loren Mall

Facsimile:   (303) 298-8010

With a copy to:   

Morgan, Lewis & Bockius LLP

300 South Grand Avenue, Suite 2200

Los Angeles, CA 90071

Attention:   Steven M. Ruskin

Facsimile:   (213) 612-2501

 

Section 9.6. Binding Effect; Persons Benefiting; No Assignment. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and the
respective successors and permitted assigns of the parties. Except as set forth
in the preceding sentence, nothing in this Agreement is intended or shall be
construed to confer upon any Person other than the parties hereto and their
successors and permitted assigns any right, remedy or claim under or by reason
of this Agreement or any part hereof. Without the prior written consent of each
of the other parties hereto, this Agreement and the rights hereunder may not be
assigned by any of the parties

 

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hereto; provided, however, that Buyer may collaterally assign this Agreement and
any or all rights hereunder to any lender to Buyer providing financing in
connection with the transactions contemplated hereby; provided, further, that
Buyer may assign this Agreement and any or all rights hereunder to a
wholly-owned subsidiary of Buyer; provided, further, that Buyer shall in each
such case remain liable for its obligations under this Agreement. Upon any such
permitted assignment, the references in this Agreement to Buyer shall also apply
to such assignee unless the context otherwise requires.

 

Section 9.7. Disclosure Schedules. Seller may provide information to Buyer with
respect to any matter hereafter arising or discovered which, if existing or
known at date of this Agreement, would have been required to be set forth in the
Company Disclosure Schedule; provided, that no such information shall constitute
an amendment of the Company Disclosure Schedule or of any statement,
representation or warranty in this Agreement; provided, further, that if Buyer
elects to proceed with the Closing, the Company Disclosure Schedule shall be
deemed amended to include such information effective upon the Closing and Buyer
shall be precluded from making any claim for damages under Article VII hereof
based on the Company Disclosure Schedule or any representation or warranty of
Seller that has been so supplemented. Inclusion of information or references to
dollar amounts in the Company Disclosure Schedule shall not be construed as an
admission that such information is material to Seller or the Buyer. To the
extent applicable, any matter set forth in the Company Disclosure Schedule which
could, based solely on the substance of the disclosure itself, reasonably be
determined to be applicable to another schedule on its face shall be deemed to
be set forth in each other schedule to which it is applicable.

 

Section 9.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same agreement, it being understood that
all of the parties need not sign the same counterpart.

 

Section 9.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The State of New York without reference to the
choice of law principles thereof. To the fullest extent permitted by applicable
law, Seller and Buyer hereby unconditionally and irrevocably waive any claim to
assert that the law of any other jurisdiction governs this Agreement. Seller and
Buyer hereby agree and consent to be subject to the exclusive jurisdiction of
the United States District Court for the Southern District of New York, and in
the absence of such Federal jurisdiction, Seller and Buyer consent to be subject
to the exclusive jurisdiction of a court of The State of New York located in
such district and hereby waive the right to assert the lack of personal or
subject matter jurisdiction or improper venue in connection with any such suit,
action or other proceeding. In furtherance of the foregoing, each of Seller and
Buyer (i) waives the defense of inconvenient forum, (ii) agrees not to commence
any suit, action or other proceeding arising out of this Agreement or any
transactions contemplated hereby other than in any such court, and (iii) agrees
that a final judgment in any such suit, action or other proceeding shall be
conclusive and may be enforced in other jurisdictions by suit or judgment or in
any other manner provided by law. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT SUCH PARTIES MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY SUIT OR ACTION ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS

 

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CONTEMPLATED HEREBY. BUYER HEREBY CERTIFIES THAT NONE OF SELLER, SENIOR
MANAGEMENT OR THEIR REPRESENTATIVES HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SELLER WOULD NOT SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL.
FURTHER, BUYER ACKNOWLEDGES THAT SELLER RELIED ON THIS WAIVER OF RIGHT TO JURY
TRIAL AS A MATERIAL INDUCEMENT TO SELLER TO ENTER INTO THIS AGREEMENT.

 

Section 9.10. Mutual Drafting. The parties hereto have been represented by
counsel who have carefully negotiated the provisions hereof. As a consequence,
the parties do not intend that the presumptions of any laws or rules relating to
the interpretation of contracts against the drafter of any particular clause
should be applied to this Agreement and therefore waive their effects.

 

Section 9.11. Certain Understandings. Each of the parties is a sophisticated
legal entity or person that was advised by experienced counsel and, to the
extent it deemed necessary, other advisors in connection with this Agreement.
Accordingly, each of the parties hereby acknowledges that (i) no party has
relied or will rely in respect of this Agreement or the transactions
contemplated hereby upon any document or written or oral information previously
furnished to or discovered by it or its representatives, other than this
Agreement (including the Company Disclosure Schedule), (ii) there are no
representations or warranties by or on behalf of any party hereto or any of its
respective affiliates or representatives other than those expressly set forth in
this Agreement, and (iii) the parties’ respective rights and obligations with
respect to this Agreement and the events giving rise thereto will be solely as
set forth in this Agreement.

 

Section 9.12. Specific Performance. Buyer and Seller each agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed by them in accordance with the terms hereof and that each
party shall be entitled to specific performance of the terms hereof, in addition
to any other remedy at law or equity.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.

 

ROYSTER-CLARK, INC.

By:

 

/s/ G. Kenneth Moshenek

--------------------------------------------------------------------------------

Name:

 

G. Kenneth Moshenek

Title:

 

President

RENTECH DEVELOPMENT CORPORATION

By:

 

/s/ Richard O. Sheppard

--------------------------------------------------------------------------------

Name:

 

Richard O. Sheppard

Title:

 

President

 

52