Exhibit
4.14


 


EXECUTION COPY


 


STOCK PURCHASE AGREEMENT


 


dated as of 


 


February 8, 2007


 


by and between


 


MAUI ACQUISITION CORPORATION


 


and


 


HOUCHENS INDUSTRIES, INC.


 


relating to the purchase and sale


 


of


 


100 percent of the Issued and Outstanding Capital Stock


 


of


 


CBHC, INC.


 


ALLEN & OVERY


 


Allen & Overy LLP


 

















 


CONTENTS


 


	
  Section

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Definitions

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
  1.1

  	
   

  	
  Definitions

  	
   

  	
  1

  	
   

  
	
  2.

  	
   

  	
  Purchase and Sale

  	
   

  	
  9 

  	
   

  
	
   

  	
   

  	
  2.1

  	
   

  	
  Purchase and Sale

  	
   

  	
  9 

  	
   

  
	
   

  	
   

  	
  2.2

  	
   

  	
  Closing

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  2.3

  	
   

  	
  Closing Deliveries

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
  2.4

  	
   

  	
  Calculation of Closing Date
  Amount

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
  2.5

  	
   

  	
  Closing Balance Sheet

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
  2.6

  	
   

  	
  Adjustment of Purchase Price

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
  2.7

  	
   

  	
  Purchase Price Allocation

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
  2.8

  	
   

  	
  Section 338(h)(10) Election

  	
   

  	
  12

  	
   

  
	
  3.

  	
   

  	
  Representations and Warranties
  Regarding Seller

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  3.1

  	
   

  	
  Organization

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  3.2

  	
   

  	
  Authority; Execution and
  Delivery; Enforceability

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  3.3

  	
   

  	
  No Conflicts; Consents

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  3.4

  	
   

  	
  Litigation

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  3.5

  	
   

  	
  Compliance with Applicable
  Law

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  3.6

  	
   

  	
  The Shares

  	
   

  	
  13

  	
   

  
	
   

  	
   

  	
  3.7

  	
   

  	
  Brokers

  	
   

  	
  14

  	
   

  
	
  4.

  	
   

  	
  Representations and Warranties
  Regarding Company and its Subsidiary

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
  4.1

  	
   

  	
  Organization; Power and
  Qualification

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
  4.2

  	
   

  	
  No Conflicts; Consents

  	
   

  	
  14

  	
   

  
	
   

  	
   

  	
  4.3

  	
   

  	
  Capitalization

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
  4.4

  	
   

  	
  Financial Statements

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
  4.5

  	
   

  	
  No Undisclosed Liabilities;
  No Off-Balance Sheet Transactions

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  4.6

  	
   

  	
  Inventory

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  4.7

  	
   

  	
  Accounts Receivable

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  4.8

  	
   

  	
  Assets Other than Real
  Property Interests

  	
   

  	
  16

  	
   

  
	
   

  	
   

  	
  4.9

  	
   

  	
  Real Properties

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
  4.10

  	
   

  	
  Intellectual Property

  	
   

  	
  18

  	
   

  
	
   

  	
   

  	
  4.11

  	
   

  	
  Absence of Certain Changes

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
  4.12

  	
   

  	
  Material Contracts

  	
   

  	
  20

  	
   

  
	
   

  	
   

  	
  4.13

  	
   

  	
  Litigation

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
  4.14

  	
   

  	
  Compliance
  with Laws and Orders; Governmental Authorizations

  	
   

  	
  22

  	
   

  
	
   

  	
   

  	
  4.15

  	
   

  	
  Insurance
  Policies

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
  4.16

  	
   

  	
  Customers
  and Suppliers

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
  4.17

  	
   

  	
  Tobacco
  Matters

  	
   

  	
  23

  	
   

  
	
   

  	
   

  	
  4.18

  	
   

  	
  Employees

  	
   

  	
  24

  	
   

  
	
   

  	
   

  	
  4.19

  	
   

  	
  Labor
  Relations; Compliance

  	
   

  	
  24

  	
   

  
	
   

  	
   

  	
  4.20

  	
   

  	
  Employee
  Benefit Plans

  	
   

  	
  25

  	
   

  
	
   

  	
   

  	
  4.21

  	
   

  	
  Environmental
  Matters

  	
   

  	
  26

  	
   

  
	
   

  	
   

  	
  4.22

  	
   

  	
  Brokers

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
  4.23

  	
   

  	
  Certain
  Payments

  	
   

  	
  27

  	
   

  
	
   

  	
   

  	
  4.24

  	
   

  	
  Books and
  Records

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
  4.25

  	
   

  	
  Related
  Party Transactions

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
  4.26

  	
   

  	
  Disclosure

  	
   

  	
  28

  	
   

  



 


ii

















 


	
  5.

  	
   

  	
  Representations
  and Warranties Regarding Purchaser

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
  5.1

  	
   

  	
  Organization

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
  5.2

  	
   

  	
  Authority;
  Execution and Delivery; Enforceability

  	
   

  	
  28

  	
   

  
	
   

  	
   

  	
  5.3

  	
   

  	
  No
  Conflicts; Consents

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  5.4

  	
   

  	
  Litigation

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  5.5

  	
   

  	
  Compliance
  with Applicable Law

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  5.6

  	
   

  	
  Availability
  of Funds

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  5.7

  	
   

  	
  Purchase for
  Investment

  	
   

  	
  29

  	
   

  
	
   

  	
   

  	
  5.8

  	
   

  	
  Brokers

  	
   

  	
  29

  	
   

  
	
  6.

  	
   

  	
  Additional
  Agreements

  	
   

  	
  30

  	
   

  
	
   

  	
   

  	
  6.1

  	
   

  	
  Covenants
  Relating to Conduct of Business

  	
   

  	
  30

  	
   

  
	
   

  	
   

  	
  6.2

  	
   

  	
  Stockholders
  Meeting; Voting of Seller Common Stock in Seller ESOP

  	
   

  	
  32

  	
   

  
	
   

  	
   

  	
  6.3

  	
   

  	
  No
  Solicitation

  	
   

  	
  32

  	
   

  
	
   

  	
   

  	
  6.4

  	
   

  	
  Access to Information

  	
   

  	
  33

  	
   

  
	
   

  	
   

  	
  6.5

  	
   

  	
  Confidentiality

  	
   

  	
  33

  	
   

  
	
   

  	
   

  	
  6.6

  	
   

  	
  Reasonable Best Efforts

  	
   

  	
  34

  	
   

  
	
   

  	
   

  	
  6.7

  	
   

  	
  Supplemental
  Disclosure

  	
   

  	
  35

  	
   

  
	
   

  	
   

  	
  6.8

  	
   

  	
  Post-Closing
  Cooperation

  	
   

  	
  35

  	
   

  
	
   

  	
   

  	
  6.9

  	
   

  	
  Publicity

  	
   

  	
  35

  	
   

  
	
   

  	
   

  	
  6.10

  	
   

  	
  Records

  	
   

  	
  35

  	
   

  
	
   

  	
   

  	
  6.11

  	
   

  	
  Certain Licenses and
  Permits

  	
   

  	
  36

  	
   

  
	
   

  	
   

  	
  6.12

  	
   

  	
  Further
  Assurances

  	
   

  	
  36

  	
   

  
	
   

  	
   

  	
  6.13

  	
   

  	
  Refinancing
  of Indebtedness

  	
   

  	
  36

  	
   

  
	
   

  	
   

  	
  6.14

  	
   

  	
  Declaration
  of Dividend

  	
   

  	
  36

  	
   

  
	
   

  	
   

  	
  6.15

  	
   

  	
  Solvency

  	
   

  	
  36

  	
   

  
	
  7.

  	
   

  	
  Employee
  Benefit Plan Matters

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
  7.1

  	
   

  	
  Past Service Credit

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
  7.2

  	
   

  	
  Continuation
  of Compensation and Benefits

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
  7.3

  	
   

  	
  Waiver of
  Limitations; Preexisting Conditions; Co-payments and Deductibles

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
  7.4

  	
   

  	
  Accrued
  Vacation, Holiday and Sick Pay

  	
   

  	
  37

  	
   

  
	
   

  	
   

  	
  7.5

  	
   

  	
  Seller
  ESOP

  	
   

  	
  37

  	
   

  
	
  8.

  	
   

  	
  Tax
  Matters

  	
   

  	
  38

  	
   

  
	
   

  	
   

  	
  8.1

  	
   

  	
  Tax Representations

  	
   

  	
  38

  	
   

  
	
   

  	
   

  	
  8.2

  	
   

  	
  Tax
  Covenants

  	
   

  	
  39

  	
   

  
	
   

  	
   

  	
  8.3

  	
   

  	
  Tax
  Sharing

  	
   

  	
  41

  	
   

  
	
   

  	
   

  	
  8.4

  	
   

  	
  Cooperation on
  Tax Matters

  	
   

  	
  41

  	
   

  
	
   

  	
   

  	
  8.5

  	
   

  	
  Indemnification
  by Seller

  	
   

  	
  41

  	
   

  
	
  9.

  	
   

  	
  Conditions Precedent

  	
   

  	
  43

  	
   

  
	
   

  	
   

  	
  9.1

  	
   

  	
  Conditions
  to Each Party’s Obligation

  	
   

  	
  43

  	
   

  
	
   

  	
   

  	
  9.2

  	
   

  	
  Conditions
  to Obligation of Purchaser

  	
   

  	
  43

  	
   

  
	
   

  	
   

  	
  9.3

  	
   

  	
  Conditions
  to Obligation of Seller

  	
   

  	
  44

  	
   

  
	
   

  	
   

  	
  9.4

  	
   

  	
  Frustration
  of Closing Conditions

  	
   

  	
  44

  	
   

  
	
  10.

  	
   

  	
  Termination

  	
   

  	
  44

  	
   

  
	
   

  	
   

  	
  10.1

  	
   

  	
  Termination

  	
   

  	
  44

  	
   

  
	
   

  	
   

  	
  10.2

  	
   

  	
  Termination Fee

  	
   

  	
  45

  	
   

  
	
   

  	
   

  	
  10.3

  	
   

  	
  Effect of
  Termination

  	
   

  	
  45

  	
   

  
	
  11.

  	
   

  	
  Survival; Indemnification

  	
   

  	
  46

  	
   

  
	
   

  	
   

  	
  11.1

  	
   

  	
  Survival

  	
   

  	
  46

  	
   

  
	
   

  	
   

  	
  11.2

  	
   

  	
  Indemnification

  	
   

  	
  46

  	
   

  
	
   

  	
   

  	
  11.3

  	
   

  	
  Third Party Claims

  	
   

  	
  47

  	
   

  



 


iii

















 


	
   

  	
   

  	
  11.4

  	
   

  	
  Procedures

  	
   

  	
  48

  	
   

  
	
   

  	
   

  	
  11.5

  	
   

  	
  Assignment of Claims

  	
   

  	
  48

  	
   

  
	
   

  	
   

  	
  11.6

  	
   

  	
  Exclusivity

  	
   

  	
  48

  	
   

  
	
  12.

  	
   

  	
  Miscellaneous

  	
   

  	
  49

  	
   

  
	
   

  	
   

  	
  12.1

  	
   

  	
  Notices

  	
   

  	
  49

  	
   

  
	
   

  	
   

  	
  12.2

  	
   

  	
  Amendments and
  Waivers

  	
   

  	
  50

  	
   

  
	
   

  	
   

  	
  12.3

  	
   

  	
  Expenses

  	
   

  	
  50

  	
   

  
	
   

  	
   

  	
  12.4

  	
   

  	
  Successors and
  Assigns

  	
   

  	
  50

  	
   

  
	
   

  	
   

  	
  12.5

  	
   

  	
  Governing
  Law

  	
   

  	
  51

  	
   

  
	
   

  	
   

  	
  12.6

  	
   

  	
  Consent to
  Jurisdiction

  	
   

  	
  51

  	
   

  
	
   

  	
   

  	
  12.7

  	
   

  	
  WAIVER OF JURY TRIAL

  	
   

  	
  51

  	
   

  
	
   

  	
   

  	
  12.8

  	
   

  	
  Counterparts;
  Third Party Beneficiaries

  	
   

  	
  51

  	
   

  
	
   

  	
   

  	
  12.9

  	
   

  	
  Severability

  	
   

  	
  52

  	
   

  
	
   

  	
   

  	
  12.10

  	
   

  	
  Entire Agreement

  	
   

  	
  52

  	
   

  
	
   

  	
   

  	
  12.11

  	
   

  	
  Headings
  and Captions; Exhibits and Schedules

  	
   

  	
  52

  	
   

  
	
   

  	
   

  	
  12.12

  	
   

  	
  Disclosure
  Schedules

  	
   

  	
  52

  	
   

  
	
   

  	
   

  	
  12.13

  	
   

  	
  Equitable Relief

  	
   

  	
  52

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  —

  	
  Form of Parent Guarantee

  	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  —

  	
  Form of Support Agreement

  	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  —

  	
  Agreed Accounting Principles

  	
   

  	
   

  	
   

  
	
  EXHIBIT D

  	
  —

  	
  Form of Opinion of Wyatt Tarrant
  & Combs LLP

  	
   

  	
   

  	
   

  



 


iv

















 


STOCK PURCHASE AGREEMENT dated as of February 8, 2007 (this Agreement) by and between MAUI
ACQUISITION CORPORATION, a corporation formed under Laws of the
State of Delaware (Purchaser),
and HOUCHENS INDUSTRIES,
INC., a corporation formed under the Laws of the Commonwealth of
Kentucky (Seller).


 


WITNESSETH:


 


WHEREAS:


 


(1)                                 Seller owns all of the issued and outstanding
capital stock of CBHC, Inc., a corporation incorporated under the Laws of the
Commonwealth of Kentucky (Company),
which issued and outstanding capital stock consists solely of
the Shares;


 


(2)                                 Purchaser desires to purchase the Shares from
Seller, and Seller desires to sell the Shares to Purchaser, upon the terms and
subject to the conditions set forth in this Agreement;


 


(3)                                 Concurrently with the execution and delivery
of this Agreement, and as a condition to Seller’s willingness to enter into
this Agreement, Imperial Tobacco Group PLC, a public limited company organized
under the Laws of England & Wales and indirect parent of Purchaser (Parent), has agreed to fully and
unconditionally guarantee the performance by Purchaser of its obligations under
this Agreement (the Parent Guarantee), substantially
in the form attached as Exhibit A; and


 


(4)                                 Concurrently with the execution and delivery
of this Agreement, and as a condition to Purchaser’s willingness to enter into
this Agreement, the ESOP Committee of the Seller ESOP (the ESOP Committee)  has entered into an
agreement with Purchaser substantially in the form attached as Exhibit B
(the Support Agreement)  pursuant
to which, among other things, the ESOP Committee has agreed to take all lawful
actions to cause the ESOP Trustees to vote all unallocated shares of Seller
Common Stock held in the Seller ESOP together with all allocated shares of
Seller Common Stock with respect to which the ESOP Trustees do not receive
direction as to how such should be voted at the Stockholders Meeting in favor
of approval of the Transactions.


 


NOW, THEREFORE, the Parties agree as follows:


 


1.                                      DEFINITIONS


 


1.1                               Definitions


 


(a)                                  The following terms, as used in this
Agreement, have the following meanings:


 


Adjusted 2006 MSA Payment Amount means the actual payments to be made by
Company and its Subsidiary pursuant to the MSA for the calendar year 2006, minus Seventeen Million Sixty-Six Thousand
Seven Hundred and Fifty-Eight U.S. Dollars (U.S.$17,066,758).


 


Adjusted Purchase Price means the Purchase Price plus the Stockholders’ Equity Adjustment
Amount plus the MSA Adjustment
Amount.


 


Adjustment Amount means (i) the amount by which the Adjusted Purchase Price exceeds the
Closing Date Amount, in which case the Adjustment Amount shall be a positive
number, or (ii) the amount by which the Closing Date Amount exceeds the
Adjusted Purchase Price, in which case the Adjustment Amount shall be a
negative number.


 


1

















 


Affected
Employee means each individual who is employed by Company or
its Subsidiary on the Closing Date, including any such individuals on approved
leave of absence (including maternity and paternity leave, vacation, sick
leave, short-term or long-term disability, military leave, jury duty and death
leave).


 


Affiliate means, with respect to any Person, any other Person (i) directly or
indirectly controlling such first Person, (ii) directly or indirectly
controlled by such first Person or (iii) under common control with such first
Person.


 


Agreed Accounting Principles means the accounting principles set forth on Exhibit
C.


 


Balance Sheet Date means September 30, 2006.


 


Business Day means any day except a Saturday, Sunday or any day on which banks are
not generally open for business in New York, New York or London, England.


 


Closing Date means the date of the Closing.


 


Closing Date Amount means the Purchase Price plus the
Estimated Closing Stockholders’ Equity Adjustment Amount plus the Estimated MSA Adjustment Amount.


 


Closing Stockholders’ Equity means the consolidated stockholders’ equity
of Company as of immediately prior to the Effective Time and without giving
effect to the Closing.


 


Closing Stockholders’ Equity Adjustment Amount means the Closing Stockholders’ Equity
Adjustment Amount as shown on the Closing Statement.


 


Code means
the United States Internal Revenue Code of 1986, as amended.


 


Common Stock means the common stock, no par value, of Company.


 


Consent means any approval, consent, authorization, waiver, notice, filing or
exemption to from or with respect to a specified action.


 


Control means, when used with respect to a specified Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by Contract or otherwise.


 


Contract means any contract, agreement, indenture, note, bond, loan, instrument,
lease, conditional sale contract, purchase or sales order, mortgage, license,
franchise, insurance policy, undertaking, commitment or other enforceable
arrangement or agreement, whether written or oral.


 


Disclosure Schedules means the Disclosure Schedules dated the date
of this Agreement (as the same may be supplemented or updated pursuant to Section
6.6) prepared by Seller and delivered to Purchaser and appended to, and
forming a part of, this Agreement.


 


Employee Plan means any employment, severance or similar Contract or arrangement
(whether or not written) or any plan, policy, fund, program or Contract or
arrangement (whether or not written) providing for compensation, bonus,
profit-sharing, stock option, or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance coverage
(including any self-insured arrangements), health or medical benefits,
disability benefits, workers’ compensation, supplemental unemployment benefits,
severance benefits and post-employment or retirement benefits


 


2

















 


(including
compensation, pension, health, medical or life insurance or other benefits)
that (i) is entered into, maintained, administered or contributed to, as the
case may be, by Company or its Subsidiary and covers any current or former
employee, officer or director of Company Subsidiary or (ii) with respect to
which Company or its Subsidiary could have any liability. For the avoidance of
doubt, the term Employee Plan shall
not include the Seller ESOP.


 


Environmental Laws means any and all Laws relating to the environment (including ambient
air, indoor air, water vapor, surface water, groundwater, wetlands, drinking
water supply, land surface or subsurface strata and biota), natural resources,
human and occupational health and safety or Hazardous Substances.


 


ERISA means
the Employee Retirement Income Security Act of 1974, as amended, and the rules
and regulations promulgated thereunder.


 


ERISA Affiliate of any Person means any other Person that, together with such Person,
is, or was at the relevant time, (i) treated as a single employer under
Section 414 of the Code or (ii) a member of the same “controlled group” as the
first entity pursuant to Section 4001(a)(14) of ERISA.


 


ESOP Trustees means Ruell Houchens, Noel Hunt and Jimmie Gipson.


 


Estimated Closing Stockholders’ Equity means an estimate of Closing Stockholders’
Equity as shown on the Estimated Closing Statement.


 


Estimated Closing Stockholders’ Equity Adjustment Amount means an estimate of the Stockholders’ Equity
Adjustment Amount as shown on the Estimated Closing Statement.


 


Estimated MSA Adjustment Amount means an estimate of the MSA Adjustment
Amount as shown on the Estimated Closing Statement.


 


Final Adjustment Amount means the Adjustment Amount (i) as shown on
the Closing Statement delivered pursuant to Section 2.5(a), if no notice
of disagreement with respect thereto is duly delivered pursuant to Section
2.5(b), or (ii) if such a notice of disagreement is delivered (A) as agreed
by Purchaser and Seller pursuant to Section 2.5(c) or (B) in the absence
of such agreement, as shown in the Independent Accountants’ calculation
delivered pursuant to Section 2.5(c).


 


Final Adjusted Purchase Price means the Adjusted Purchase Price (i) as
shown on the Closing Statement delivered pursuant to Section 2.5(a), if
no notice of disagreement with respect thereto is duly delivered pursuant to Section
2.5(b), or (ii) if such a notice of disagreement is delivered, (A) as agreed
by Purchaser and Seller pursuant to Section 2.5(c) or (B) in the absence
of such agreement, as shown in the Independent Accountants’ calculation
delivered pursuant to Section 2.5(c); provided
that in no event shall the Final Adjusted Purchase Price be less
than Purchaser’s calculation of Adjusted Purchase Price as shown on the Closing
Statement delivered pursuant to Section 2.5(a) or more than Seller’s
calculation of the Adjusted Purchase Price delivered pursuant to Section
2.5(b).


 


Final Determination shall mean (i) any final determination of liability in respect of a Tax
that, under applicable Law, is not subject to further appeal, review or
modification through proceedings or otherwise (including the expiration of a
statute of limitations or a period for the filing of claims for refunds,
amended returns or appeals from adverse determinations), including a “determination”
as defined in Section 1313(a) of the Code or execution of an Internal Revenue
Service Form 870AD or (ii) the payment of Tax by Purchaser, Seller or any of
its Affiliates, whichever is responsible for payment of such Tax under
applicable Law, with respect to any item disallowed or adjusted by a Taxing
Authority,


 


3

















 


provided that such responsible Party determines that no action should be taken
to recoup such payment and the other Party agrees.


 


GAAP means
generally accepted accounting principles in the United States of America
consistently applied, as in effect on the date of this Agreement.


 


Governmental Authority means any court, government or political
subdivision or department thereof, any governmental or regulatory body, board,
bureau, arbitrator or alternative dispute resolution body, administrative
agency or commission, securities exchange or other governmental agency or
instrumentality of competent jurisdiction.


 


Governmental Authorization means any approval, Consent, license, permit,
waiver, registration or other authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Authority or
pursuant to any applicable Law.


 


Guarantee means, as to any Person, (i) any obligation, contingent or otherwise,
of such person guaranteeing or having the economic effect of guaranteeing any
Indebtedness or other obligation payable or performable by another person (the “primary
obligor”) in any manner, whether directly or indirectly, and including any
obligation of such person, direct or indirect, (A) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or
other obligation, (B) to purchase or lease property, securities or services for
the purpose of assuring the obligee in respect of such Indebtedness or other
obligation of the payment or performance of such Indebtedness or other
obligation, (C) to maintain working capital, equity capital or any other
financial statement condition or liquidity or level of income or cash flow of
the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (D) entered into for the purpose of
assuring in any other manner the obligee in respect of such Indebtedness or
other obligation of the payment or performance thereof or to protect such
obligee against loss in respect thereof (in whole or in part), or (ii) any Lien
on any assets of such person securing any Indebtedness or other obligation of
any other person, whether or not such Indebtedness or other obligation is
assumed by such person. The amount of any Guarantee shall be deemed to be an
amount equal to the stated or determinable amount of the related primary
obligation, or portion thereof, in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the guaranteeing person in good faith.


 


Hazardous Substances means any waste, emission, material or
substance (including gases, liquids and solids) that is prohibited, limited or
regulated in any way pursuant to any Environmental Law, including asbestos,
asbestos-containing materials, radon gas, urea formaldehyde foam insulation,
polychlorinated biphenyls, radioactive materials and oil or petroleum products
and by-products.


 


Health Claims means any claims that smoking cigarettes marketed by Company or its
Subsidiary is less injurious to human health than smoking other cigarette
brands.


 


HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.


 


Indebtedness means all (i) obligations for borrowed money (including reimbursement
and all other direct or contingent obligations with respect to surety bonds,
letters of credit and bankers’ acceptances, whether or not matured), (ii)
obligations evidenced by notes, bonds, debentures or similar instruments or to
pay the deferred purchase price of property or services, (iii) indebtedness
created or arising under any conditional sale or secured by any Lien on any
property or asset owned or held by Company or its Subsidiary, whether or not
such indebtedness shall have been assumed by Company or its Subsidiary or is
limited in recourse, (iv) obligations under leases that have been or should be,
in accordance with


 


4

















 


GAAP,
recorded as capital leases of Company or its Subsidiary, (v) all interest rate
and currency swaps, collars and similar Contracts or hedging devices under
which payments are obligated to be made by Company or its Subsidiary and (vi)
all Guarantees by Company or its Subsidiary in respect of any of the foregoing;
provided, however, that
Indebtedness shall not be deemed to include trade payables and expenses
incurred in the ordinary course of business consistent with past practice or
expenses incurred in connection with the Transactions.


 


Intellectual Property Right means any trademark, service mark (including
any symbols or logos related thereto), trade name (including all associated
goodwill), domain names, mask work and other semiconductor chip rights,
invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right, including moral
rights.


 


knowledge of Seller, Seller’s knowledge or any other similar knowledge qualification
in this Agreement means the actual knowledge of any of Jimmie Gipson, Spencer
Coates, John Poling, Julie Simmons, Tim Livesay, Gary Ebert, Joe Pierce and
Quinten Marquette, together with such other knowledge any of such individuals
could reasonably have been expected to have obtained following due inquiry.


 


Law means
any international, foreign, national, federal, state, provincial or local (or
other political subdivision) statute, law (including common law), ordinance,
Order, rule, regulation or binding requirement of any Governmental Authority.


 


Lien means,
with respect to any property or asset, any mortgage, lien, pledge, charge,
security interest, encumbrance, title defect, easement, tenancy, right-of-way,
license, use restriction, claim, hypothecation, assignment, preemptive right,
option, right of first refusal, right of first offer, right of consent,
restrictive covenant or other right, title or interest of any third party, in
any such case relating to such property or asset.


 


Material Adverse Effect means a material adverse effect on the
business, results of operations or condition (financial or otherwise) of
Company and its Subsidiary, taken as a whole, except for any effects, changes,
events, circumstances or states of fact to the extent resulting from (i)
changes in U.S. or international economic, regulatory or political conditions
generally, (ii) acts of terrorism or war (whether or not pending, threatened or
declared), (iii) changes in the U.S. tobacco industry generally, including as a
result of marketplace actions taken by tobacco industry participants other than
Company and its Subsidiary, (iv) acts or omissions of, or circumstances
affecting, Purchaser and its Affiliates or (v) the execution and delivery of
this Agreement or the announcement of the Transactions, and, in the cases of
clauses (i) and (ii), that does not disproportionately adversely affect Company
and its Subsidiary relative to other similarly situated businesses.


 


MSA means
the Tobacco Master Settlement Agreement, dated November 28, 1998, as amended,
among 46 of the United States, certain territories of the United States and
certain tobacco companies.


 


MSA Adjustment Amount means (i) the amount by which One Hundred
Five Million Three Hundred Eighty-Two Thousand U.S. Dollars (U.S.$105,382,000)
exceeds one-half of the Adjusted 2006 MSA Payment Amount, in which case the MSA
Adjustment Amount shall be a positive number, or (ii) the amount by which
one-half of the Adjusted 2006 MSA Payment Amount exceeds One Hundred Five
Million Three Hundred Eighty-Two Thousand U.S. Dollars (U.S.$105,382,000), in
which case the MSA Adjustment Amount shall be a negative number.


 


Multiemployer Plan means each employee benefit plan that is a multiemployer plan, as defined
in Section 3(37) of ERISA.


 


5

















 


Order means
any award, decision, injunction, judgment, order, ruling, subpoena or verdict
entered, issued, made or rendered by any court, administrative agency or other
Governmental Authority or any arbitrator.


 


Parties means Seller and Purchaser, with each being a Party.


 


Person means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
Governmental Authority.


 


Post-Closing Tax Period means any Tax period beginning after the
Closing Date, and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period beginning
after the Closing Date.


 


Pre-Closing Tax Period means any Tax period ending on or before the
Closing Date, and, with respect to a Tax period that begins on or before the
Closing Date and ends thereafter, the portion of such Tax period ending on and
including the Closing Date.


 


Proceedings means any claim, action, arbitration, audit, hearing, investigation,
notice of violation, litigation or suit (whether civil, criminal,
administrative, investigative or informal) commenced, brought, conducted or
heard by or before, or otherwise involving, any Governmental Authority or
arbitrator.


 


Qualifying Statutes means the “qualifying statutes” that are enacted by the respective
states of the United States and the District of Columbia that are participants
in the MSA, which statutes are substantially in the form of the model statute
attached to the MSA as Exhibit T, as may be amended from time to time, and all
statutes, regulations and rules enacted in connection with such “qualifying
statutes”, including such statutes, regulations and rules providing for
contraband treatment of cigarettes for non-compliance.


 


Seller Common Stock means the common stock, no par value, of Seller.


 


Seller ESOP means the Seller employee stock ownership plan.


 


Seller Stockholder Approval means the approval of the Transactions by
holders of a majority of the outstanding shares of Seller Common Stock.


 


Share means
one share of Common Stock and Shares means
all issued and outstanding shares of Common Stock.


 


Stockholders’ Equity Adjustment Amount means (i) the amount by which the Closing
Stockholders’ Equity exceeds the Target Stockholders’ Equity, in which case the
Stockholders’ Equity Adjustment Amount shall be a positive number or (ii) the
amount by which the Target Stockholders’ Equity exceeds the Closing
Stockholders’ Equity, in which case the Stockholders’ Equity Adjustment Amount
shall be a negative number.


 


Straddle Period means any Tax period that begins before and ends after the Closing
Date.


 


Subsidiary of any Person means another Person, an amount of the voting securities,
other voting ownership or voting partnership interests of which is sufficient
to elect at least a majority of its Board of Directors or other governing body
(or, if there are no such voting interests, 50 percent or more of the equity
interests of which) is owned directly or indirectly by such first Person or by
another Subsidiary of such first Person.


 


6

















 


Target Stockholders’ Equity means Four Hundred Fourteen Million Six
Hundred Seventy Thousand U.S. Dollars (U.S.$414,670,000), which amount
represents the consolidated stockholders’ equity of Company as of September 30,
2006 plus Thirty Million U.S.
Dollars (U.S.$30 million).


 


Tax means
any tax, governmental fee or other like assessment or charge of any kind
whatsoever (including, but not limited to, withholding on amounts paid to or by
any Person), together with any interest, penalty, addition to tax or additional
amount imposed by any Taxing Authority, and including excise, customs and
similar duties on tobacco and tobacco products.


 


Tax Asset means any net operating loss, net capital loss, investment tax credit,
foreign tax credit, charitable deduction or any other credit or tax attribute
that could be carried forward or back to reduce Taxes (including deductions and
credits related to alternative minimum Taxes).


 


Taxing Authority means any Governmental Authority responsible for the imposition of any
Tax.


 


Title IV Plan means an Employee Plan subject to Title IV of ERISA or Section 412 or
4971 of the Code, other than any Multiemployer Plan.


 


Tobacco Laws means all Laws related to (i) the development, manufacture,
advertising, marketing, distribution or sale of or (ii) warnings regarding,
cigarettes and other tobacco products, including the Qualifying Statutes.


 


Transactions means the purchase and sale of the Shares and the other transactions
contemplated by this Agreement.


 


UCC means the
Uniform Commercial Code of the State of New York.


 


(b)                                 Each of the following terms is defined in the
Section set forth opposite such term:


 


	
  Term

  	
   

  	
  Section

  
	
  Accounts Receivable

  	
   

  	
  4.7

  
	
  Agreement

  	
   

  	
  Preamble

  
	
  Alternative Proposal

  	
   

  	
  6.3(a)

  
	
  Allocation Principles

  	
   

  	
  2.7

  
	
  Audited Balance Sheet

  	
   

  	
  4.4

  
	
  Audited Financial
  Statements

  	
   

  	
  4.4

  
	
  Claim

  	
   

  	
  11.3(a)

  
	
  Closing

  	
   

  	
  2.2

  
	
  Closing Balance Sheet

  	
   

  	
  2.5(a)

  
	
  Closing Statement

  	
   

  	
  2.5(a)

  
	
  Company

  	
   

  	
  Recitals

  
	
  Company Contracts

  	
   

  	
  4.12(a)

  
	
  Company Intellectual
  Property Rights

  	
   

  	
  4.10(a)

  
	
  Company Real Property

  	
   

  	
  4.9(a)

  
	
  Confidentiality Agreement

  	
   

  	
  6.5(a)

  
	
  Damages

  	
   

  	
  11.2(a)

  
	
  DOJ

  	
   

  	
  6.6(b)

  
	
  Effective Time

  	
   

  	
  2.2

  
	
  Encumbrances

  	
   

  	
  3.6

  
	
  ESOP Committee

  	
   

  	
  Recitals

  
	
  ESOP Materials

  	
   

  	
  6.2

  
	
  Estimated Closing
  Statement

  	
   

  	
  2.4

  



 


7

















 


	
  Term

  	
   

  	
  Section

  
	
  Final Allocation

  	
   

  	
  2.7

  
	
  FTC

  	
   

  	
  6.6(b)

  
	
  HSR Filing

  	
   

  	
  6.6(a)

  
	
  Indemnified Party

  	
   

  	
  11.3(a)

  
	
  Indemnifying Party

  	
   

  	
  11.3(a)

  
	
  Independent Accountants

  	
   

  	
  2.5(c)

  
	
  Initial Allocation

  	
   

  	
  2.7

  
	
  Interim Balance Sheet

  	
   

  	
  4.4

  
	
  Interim Financial
  Statements

  	
   

  	
  4.4

  
	
  Inventory

  	
   

  	
  4.6

  
	
  Leased Real Property

  	
   

  	
  4.9(a)

  
	
  Leases

  	
   

  	
  4.9(c)

  
	
  Multiple Employer Plan

  	
   

  	
  4.20(g)

  
	
  Objection Notice

  	
   

  	
  2.7

  
	
  Other Plans

  	
   

  	
  4.20(a)

  
	
  Owned Real Property

  	
   

  	
  4.9(a)

  
	
  Parent

  	
   

  	
  Recitals

  
	
  Parent Guarantee

  	
   

  	
  Recitals

  
	
  Permitted Liens

  	
   

  	
  4.8(a)

  
	
  Potential Contributor

  	
   

  	
  11.5

  
	
  Prime Rate

  	
   

  	
  2.6(b)

  
	
  Proposed Allocation

  	
   

  	
  2.7

  
	
  Purchase Price

  	
   

  	
  2.1

  
	
  Purchaser

  	
   

  	
  Preamble

  
	
  Purchaser Welfare Plans

  	
   

  	
  7.3

  
	
  Records

  	
   

  	
  6.10

  
	
  Requested Information

  	
   

  	
  6.6(a)

  
	
  Representatives

  	
   

  	
  6.3(a)

  
	
  Returns

  	
   

  	
  8.1(a)

  
	
  Section 338(h)(10)
  Election

  	
   

  	
  2.8

  
	
  Seller

  	
   

  	
  Preamble

  
	
  Seller’s Financial Advisor

  	
   

  	
  3.7

  
	
  Stockholders Meeting

  	
   

  	
  6.2

  
	
  Superior Proposal

  	
   

  	
  6.3(b)

  
	
  Support Agreement

  	
   

  	
  Recitals

  
	
  Tax Benefit

  	
   

  	
  8.5(c)

  
	
  Tax Proceeding

  	
   

  	
  8.5(e)

  
	
  Third Party Claim

  	
   

  	
  11.3(b)

  
	
  Voting Company Debt

  	
   

  	
  4.3(a)

  



 


(c)                                 Except as otherwise provided or if the
context requires otherwise, whenever used in this Agreement (i) any noun or
pronoun shall be deemed to include the plural and the singular (including as
may apply to any definition contained in this Agreement), (ii) the terms “include”
and “including” shall be deemed to be followed by the phrase “without
limitation” and (iii) the word “or” shall be inclusive and not exclusive.


 


8

















 


2.                                      PURCHASE AND SALE


 


2.1                               Purchase and Sale


 


Upon
the terms and subject to the conditions of this Agreement, at the Closing,
Seller shall sell to Purchaser, and Purchaser shall purchase from Seller, the
Shares. The purchase price for the Shares shall be One Billion Three Hundred
Eighty-Six Million Eight Hundred Forty-Three Thousand U.S. Dollars
(U.S.$1,386,843,000) (the Purchase Price). The Purchase Price shall be paid as
provided in Section 2.3 and shall be subject to adjustment as provided
in Section 2.5.


 


2.2                               Closing


 


The
closing (the Closing)  of
the Transactions shall take place at the offices of Allen & Overy LLP, 1221
Avenue of the Americas, New York, New York 10020, as soon as reasonably
practicable, but in no event later than five (5) Business Days following the
satisfaction (or, to the extent permitted, the waiver) of all conditions
precedent to the obligations of the Parties set forth in Article 9
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions), or at
such other time and date as shall be agreed between Seller and Purchaser. The
Closing shall be deemed to be effective as of 11:59 p.m. New York City time on
the Closing Date (the Effective Time).


 


2.3                               Closing Deliveries


 


At
the Closing:


 


(a)                                 Purchaser shall deliver to Seller the Closing
Date Amount in U.S. dollars by wire transfer of immediately available funds to
an account of Seller as shall have been designated by Seller to Purchaser not
later than five (5) Business Days prior to the Closing (or if not so
designated, then by certified or official bank check payable to the order of
Seller in such amount) and Seller shall deliver to Purchaser a duly executed
receipt for such amount.


 


(b)                                Purchaser shall deliver to Seller a certificate duly executed on behalf
of Purchaser as described in Sections 9.3(a) and 9.3(b).


 


(c)                                 Seller shall deliver to Purchaser a
certificate or certificates for the Shares, duly endorsed in blank for transfer
or accompanied by stock powers duly endorsed in blank for transfer, with any
required transfer stamps affixed thereto.


 


(d)                                Seller shall deliver to Purchaser a certificate duly executed on behalf
of Seller as described in Sections 9.2(a) and 9.2(b).


 


(e)                                 Seller shall deliver to Purchaser a
certificate duly executed on behalf of Seller as described in Section 9.2(d).


 


(f)                                   Seller shall deliver to Purchaser the legal
opinion as described in Section 9.2(e).


 


(g)                                Seller shall deliver or cause to be delivered to Purchaser the
resignations, effective as of the Effective Time, of Spencer Coates and each
director of Company or its Subsidiary.


 


(h)                                Each Party shall deliver to the other Party such other certificates and
documents as such other Party may reasonably request in connection with the
Closing.


 


9

















 


2.4                               Calculation of Closing Date
Amount


 


At
least five (5) Business Days prior to the Closing, Seller shall prepare and
deliver to Purchaser a statement (the Estimated
Closing Statement)  setting forth in reasonable detail
(a) an estimated consolidated balance sheet of Company as of immediately prior
to the Effective Time and without giving effect to the Closing, which shall
include a calculation of the Estimated Stockholders’ Equity and the Estimated
Closing Stockholders’ Equity Adjustment Amount, (b) a calculation of the
Estimated MSA Adjustment Amount and (c) based on the information described in
clauses (a) and (b), a calculation of the Closing Date Amount. The Estimated
Closing Statement shall (i) be prepared by Seller in good faith in accordance
with the Agreed Accounting Principles with the intention of fairly presenting,
in all material respects, the consolidated financial position of Company as of
immediately prior to the Effective Time and without giving effect to the
Closing or the declaration or payment of the dividend contemplated by Section
6.14, the Estimated MSA Adjustment Amount and the Closing Date Amount and
(ii) include line items substantially consistent with those on the Audited
Balance Sheet and the other information described in clauses (b) and (c) of
this Section 2.4.


 


2.5                               Closing Balance Sheet


 


(a)                                  As promptly as practicable, but no later than
ninety (90) days after the Closing Date, Purchaser shall cause to be prepared
and delivered to Seller a statement (the Closing
Statement)  setting forth in reasonable detail
(i) a consolidated balance sheet of Company as of immediately prior to the
Effective Time and without giving effect to the Closing (the Closing Balance Sheet), which shall include a calculation
of the Closing Stockholders’ Equity, (ii) a calculation of the MSA Adjustment
Amount and (iii) based on the information described in clauses (i) and (ii), a
calculation of the Adjusted Purchase Price and the Adjustment Amount. The
Closing Statement shall (A) be prepared by Purchaser in good faith in
accordance with the Agreed Accounting Principles, (B) fairly present, in all
material respects, the consolidated financial position of Company as of
immediately prior to the Effective Time and without giving effect to the
Closing or the declaration or payment of the dividend contemplated by Section
6.14, the MSA Adjustment Amount and the Adjusted Purchase Price and (C)
include line items substantially consistent with those on the Audited Balance
Sheet and the other information described in clauses (ii) and (iii) of this Section
2.5(a).


 


(b)                                 If Seller disagrees with Purchaser’s
calculation of the Adjusted Purchase Price and the Adjustment Amount as set
forth on the Closing Statement delivered pursuant to Section 2.5(a),
Seller may, within thirty (30) days after delivery of the Closing Statement
delivered pursuant to Section 2.5(a), deliver a notice to Purchaser
stating such disagreement and setting forth Seller’s calculation of the
Adjusted Purchase Price and the Adjustment Amount, together with a detailed
description of the nature of and basis for each of the disagreements. Seller
may dispute items reflected on the Closing Statement only on the basis that
such amounts were not determined in conformity with the provisions of this
Agreement or the Agreed Accounting Principles or contain arithmetic error. Any
such notice of disagreement shall specify those items or amounts as to which
Seller disagrees, and Seller shall be deemed to have agreed with all other
items and amounts contained in the Closing Statement and the calculation of the
Adjusted Purchase Price and the Adjustment Amount delivered pursuant to Section 2.5(a).


 


(c)                                  If a notice of disagreement shall be duly
delivered pursuant to Section 2.5(b), Purchaser and Seller shall, during
the fifteen (15) days following such delivery, use their best efforts to reach
agreement on the disputed items or amounts in order to determine, as may be
required, the Adjusted Purchase Price and the Adjustment Amount; provided that the Adjusted Purchase Price
shall not be less than that shown in Purchaser’s calculations delivered
pursuant to Section 2.5(a) or more than that shown in Seller’s calculation
delivered pursuant to Section 2.5(b). If, during such period, Purchaser
and Seller are unable to reach such agreement, they shall promptly thereafter
cause Deloitte & Touche LLP or such other


 


10

















 


independent
accountants of internationally recognized standing as Purchaser and Seller may
mutually agree (the Independent Accountants), promptly to review this Agreement
and the disputed items or amounts for the purpose of calculating the Adjusted
Purchase Price and the Adjustment Amount. In making such calculation, the
Independent Accountants shall consider only those items or amounts on the
Closing Statement delivered pursuant to Section 2.5(a) that have been
disputed by Seller pursuant to Section 2.5(b). Such Independent
Accountants shall, as promptly as practicable but in any event within thirty
(30) days, deliver to Purchaser and Seller a report setting forth such
calculation. Such report shall be final and binding upon Purchaser and Seller.
The cost of such review and report shall be borne by Purchaser and Seller in
proportion to the relative differences between the Adjusted Purchase Price that
would have resulted from their respective calculations thereof.


 


(d)                                 Purchaser and Seller agree that they will,
and agree to cause their respective independent accountants and Company and its
Subsidiary to, cooperate and assist in the preparation of the Closing Statement
and the calculation of the Adjusted Purchase Price and the Adjustment Amount
and in the conduct of the reviews referred to in this Section 2.5,
including making available during normal business hours, to the extent
necessary, books, records, work papers and personnel.


 


2.6          Adjustment of Purchase Price


 


(a)                                  Subject to Section 2.6(c), (i) if the
Final Adjustment Amount is a positive number, Purchaser shall pay to Seller, as
an adjustment to the Purchase Price and in the manner and with interest as
provided in Section 2.6(b), such Final Adjustment Amount (provided, however, that in no event shall
such amount exceed One Billion U.S. Dollars (U.S.$1,000,000,000)) or (ii) if
the Final Adjustment Amount is a negative number, Seller shall pay to
Purchaser, as an adjustment to the Purchase Price and in the manner and with
interest as provided in Section 2.6(b), the absolute value of such Final
Adjustment Amount.


 


(b)                                 Any payment pursuant to Section 2.6(a)
shall be made within five (5) Business Days after the Final Adjustment Amount
has been determined (i) if such payment is to be made by Purchaser to Seller to
an account of Seller as shall have been designated by Seller to Purchaser not
later than two (2) Business Days after the Final Adjustment Amount has been
determined (or if not so designated, then by certified or official bank check
payable to the order of Seller in such amount) or (ii) if such payment is to be
made by Seller to Purchaser to an account of Purchaser as shall have been
designated by Purchaser to Seller not later than two (2) Business Days after
the Final Adjustment Amount has been determined (or if not so designated, then
by certified or official bank check payable to the order of Purchaser in such
amount). The amount of any payment to be made pursuant to this Section 2.6
shall bear interest from and including the Closing Date to but excluding the
date of payment at a rate per annum equal to the Prime Rate as published in the
Wall Street Journal, Eastern Edition (the Prime
Rate) in effect from
time to time during the period from the Closing Date to the date of payment.
Such interest shall be payable at the same time as the payment to which it
relates and shall be calculated daily on the basis of a year of 365 days and
the actual number of days elapsed.


 


(c)                                  Notwithstanding the foregoing provisions of
this Section 2.6, no adjustment to the Purchase Price pursuant to this Section
2.6 shall be made unless the amount of such adjustment would exceed One Million
U.S. Dollars (U.S.$1,000,000), and, if the adjustment would exceed One Million
U.S. Dollars (U.S.$1,000,000), then the full amount of the adjustment shall be
made.


 


2.7                               Purchase Price Allocation


 


In
order to meet certain of Seller’s regulatory and Tax filing deadlines,
Purchaser shall deliver to Seller within thirty (30) days after Closing an
initial proposed allocation of the Purchase Price and other relevant items
among the assets of Company and its Subsidiary (the Initial Allocation) in
a manner


 


11

















 


consistent
with Section 1060 of the Code and the Treasury regulations thereunder (the Allocation Principles). Seller acknowledges and agrees that
the Initial Allocation is an estimate only, which is being prepared for Seller’s
benefit, and that the Proposed Allocation may include material differences from
such Initial Allocation. Purchaser shall deliver to Seller within ninety (90)
days after Closing a proposed allocation of the Purchase Price and other
relevant items among the assets of Company and its Subsidiary in a manner
consistent with the Allocation Principles (the Proposed Allocation). If
Seller does not deliver a written notice to Purchaser within thirty (30) days
of receipt of the Proposed Allocation specifying in reasonable detail the
nature of any objection it may have to the Proposed Allocation (an Objection Notice), the Proposed Allocation shall be the final allocation of the
Purchase Price (the Final Allocation). If Seller does deliver an Objection
Notice, Purchaser and Seller shall attempt to resolve any differences
identified in the Objection Notice within fifteen (15) days in a manner
consistent with the Allocation Principles, and, if they are able to resolve all
such differences, the allocation agreed shall be the Final Allocation. If
Purchaser and Seller are unable to resolve all such differences, any remaining
disagreed items shall be submitted to the Independent Accountants for
resolution within fifteen (15) days in a manner consistent with the Allocation
Principles. The allocation resulting from the decision of the Independent
Accountants shall be the Final Allocation. Any allocation that becomes the
Final Allocation pursuant to this Section 2.7 shall be final and binding
as between Seller, Purchaser and their Affiliates and none of Seller, Purchaser
or any of their Affiliates shall take any position on any Tax Return that is
inconsistent with the Final Allocation. The fees and expenses of the
Independent Accountants shall be borne by Purchaser and Seller in proportion to
the relative differences between their respective calculations of the
allocation and the Final Allocation selected by the Independent Accountants.


 


2.8                               Section 338(h)(10) Election


 


At
the request of Purchaser, Seller shall join with Purchaser in making an
election under Section 338(h)(10) of the Code and/or any analogous provision of
state, local or non-U.S. Law (each such election, a Section 338(h)(10) Election) with respect to the purchase and sale of the Shares under this
Agreement. Seller shall include any income, gain, loss, deduction or other Tax
item resulting from a Section 338(h)(10) Election on its Returns to the extent
required by applicable Law. Each of Seller and Purchaser agrees to characterize
the purchase and sale of Shares for all Tax purposes in a manner consistent
with the Section 338(h)(10) Election.


 


3.                                      REPRESENTATIONS AND WARRANTIES
REGARDING SELLER


 


Seller
represents and warrants to Purchaser that, as of the date of this Agreement and
as of the Closing Date, and except as set forth in the corresponding Section of
the Disclosure Schedules:


 


3.1                               Organization


 


Seller
is duly incorporated, validly existing and in good standing under the Laws of
the Commonwealth of Kentucky, has the requisite power and authority to own,
operate and lease its properties and to carry on its business as it is now
being conducted. Seller is duly qualified to do business in each jurisdiction
in which the nature of its business or the properties owned, operated or leased
by it makes such qualification necessary, except where any such failures to be
so qualified would not, individually or in the aggregate, materially adversely
affect the ability of Seller to perform its obligations under this Agreement.


 


3.2                               Authority; Execution and
Delivery; Enforceability


 


Seller
has all necessary corporate power and authority to enter into this Agreement
and, subject to receipt of the Seller Stockholder Approval, to perform its
obligations under this Agreement and to


 


12

















 


complete
the Transactions. Other than receipt of the Seller Stockholder Approval, the
execution, delivery and performance by Seller of this Agreement and the
completion of the Transactions have been duly authorized and all necessary
corporate proceedings on the part of Seller have been taken. This Agreement has
been duly executed and delivered by Seller, and assuming the due authorization,
execution and delivery by each other party, constitutes a legal, valid and
binding obligation of Seller, enforceable in accordance with its terms.


 


3.3                               No Conflicts; Consents


 


(a)                                  The execution, delivery and performance of
this Agreement by Seller do not, and the completion of the Transactions will
not, (i) conflict with or violate the articles of incorporation, bylaws or
other organizational document of Seller, (ii) conflict with or violate any
applicable Law or Order applicable to Seller or (iii) breach or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in any loss of any benefit under, or
the creation of a Lien on any of Seller’s assets pursuant to, any Contract or
other instrument or obligation to which Seller is a party, except in the case
of this clause (iii) as would not, individually or in the aggregate, materially
adversely affect the ability of Seller to perform its obligations under this
Agreement.


 


(b)                                 Other than compliance with and any filings
required under the HSR Act, the execution, delivery and performance by Seller
of this Agreement do not, and the completion of the Transactions will not,
require any Governmental Authorization to be obtained by Seller or any filing
with any Governmental Authority to be made by Seller.


 


3.4                               Litigation


 


There
are not any (a) Proceedings pending or, to the knowledge of Seller, threatened
against or affecting Seller or any of its Affiliates or (b) investigations by
any Governmental Authority that are pending or, to the knowledge of Seller,
threatened against or affecting Seller or any of its Affiliates that, in either
case, would, individually or in the aggregate, materially adversely affect the
ability of Seller to perform its obligations under this Agreement.


 


3.5                               Compliance with Applicable
Law


 


Seller
has complied with and is in compliance with all applicable Laws, except for
instances of noncompliance as would not, individually or in the aggregate,
materially adversely affect the ability of Seller to perform its obligations
under this Agreement.


 


3.6                               The Shares


 


Seller
owns the Shares free of any “adverse claim” (within the meaning of Section
8-102(1) of the UCC). Without limitation of the foregoing, (a) the Shares are
not subject to any Liens, claims, charges, mortgages, security interests,
pledges, reversions or other property interests in favor of Persons other than
Purchaser and (b) the Shares are not subject to, and Seller is not party to or
otherwise bound by, any options, voting proxies, other voting arrangements,
arrangements to sell, assign or transfer, preemptive, subscription, call, put
or other similar rights relating to the Shares that purport to (i) prohibit
Seller from transferring the Shares to Purchaser as contemplated by this
Agreement or (ii) affect the Shares or Purchaser after such transfer (such
rights described in clauses (a) and (b), Encumbrances).


 


13

















 


3.7                               Brokers


 


Except
for Lehman Brothers, Inc. (Seller’s Financial Advisor), no
Person has or will have, as a result of the Transactions, any right, interest
or valid claim against or upon any party for any commission, fee or other
compensation as a finder or broker because of any act or omission by Seller or
any of its representatives.


 


4.                                      REPRESENTATIONS AND
WARRANTIES REGARDING COMPANY AND ITS SUBSIDIARY


 


Seller
represents and warrants to Purchaser that, as of the date of this Agreement and
as of the Closing Date, and except as set forth in the corresponding Section of
the Disclosure Schedules:


 


4.1                               Organization; Power and
Qualification


 


(a)                                 Each of Company and its Subsidiary has been
duly incorporated, is validly existing and is in good standing under the Laws
of the Commonwealth of Kentucky and has all corporate power and authority to
enable it to own, operate, lease or otherwise hold the properties and assets
now owned, operated, leased or otherwise held by it and to carry on its
businesses as they have been and are presently conducted. Each of Company and
its Subsidiary is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which the conduct or nature of its
business or the ownership, operation, leasing or holding of its properties
makes such licensing or qualification necessary, except such jurisdictions
where the failure to be so qualified, licensed or in good standing,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. Section 4.1(a) of the
Disclosure Schedules lists the jurisdictions in which each of Company and its
Subsidiary is so qualified.


 


(b)                                Company has delivered to Purchaser true and complete copies of the
articles of incorporation and bylaws, each as amended to date, of each of
Company and its Subsidiary. Section 4.1(b) of the Disclosure Schedules
lists the names, addresses and titles of the directors and officers of each of
Company and its Subsidiary.


 


4.2                               No Conflicts; Consents


 


(a)                                 The execution and delivery by Seller of this
Agreement do not and the completion of the Transactions, will not conflict
with, or result in any material violation of or material default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to any
material loss of a benefit under, or to any material increased, additional,
accelerated or guaranteed rights or entitlements of any Person under, or result
in the creation of any material Lien or Encumbrance upon any of the properties
or assets of Company or its Subsidiary under, any provision of (i) the articles
of incorporation or bylaws of Company or its Subsidiary, (ii) any material
Contract to which Company or its Subsidiary is a party or by which any of their
respective material properties or assets is bound or (iii) any material Order
or Law applicable to Company or its Subsidiary or their respective properties or
assets.


 


(b)                                Other than compliance with and any filings required under the HSR Act,
no Governmental Authorization is required to be obtained or made and no filing
with any Governmental Authority is required, in each case, by or with respect
to Company or its Subsidiary in connection with (i) the execution, delivery and
performance of this Agreement or the completion of the Transactions or (ii) the
ownership by Purchaser of Company following the Closing.


 


14

















 


4.3                               Capitalization


 


(a)                                 The authorized capital stock of Company
consists of 1,000 shares of Common Stock, of which 100 shares, constituting the
Shares, are issued and outstanding. Except for the Shares, there are no shares
of capital stock or other equity securities of Company issued, reserved for
issuance, held by Company as treasury stock or outstanding. Section 4.3(a)  of the Disclosure Schedules lists, for the
Company’s Subsidiary, the amount and classification of its authorized capital
stock, the amount and classification of its outstanding capital stock and the
record and beneficial owners thereof. The Shares are duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, warrant, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision
of the Kentucky Business Corporation Act, the articles of incorporation or
bylaws of Company or any Contract to which Company or Seller is a party or
otherwise bound. Company has good and valid title to all the outstanding shares
of capital stock of its Subsidiary, free and clear of all Encumbrances. All the
outstanding shares of capital stock of Company’s Subsidiary have been duly
authorized and validly issued and are fully paid and nonassessable. There are
not any bonds, debentures, notes or other Indebtedness of Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which holders of Shares may vote (Voting
Company Debt). Except as set forth above, there are not any
options, warrants, rights, convertible or exchangeable securities, “phantom”
stock rights, stock appreciation rights, stock-based performance units,
commitments, Contracts, arrangements or undertakings of any kind to which
Company or its Subsidiary is a party or by which any of them is bound (i)
obligating Company or its Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for or exchangeable
into any capital stock of or other equity interest in, Company or of its
Subsidiary or any Voting Company Debt, (ii) obligating Company or its Subsidiary
to issue, grant, extend or enter into any such option, warrant, call, right,
security, commitment, Contract, arrangement or undertaking or (iii) that give
any Person the right to receive any economic benefit or right similar to or
derived from the economic benefits and rights accruing to holders of Shares.
There are not any outstanding contractual obligations of Company or its
Subsidiary to repurchase, redeem or otherwise acquire any shares of capital
stock of Company.


 


(b)                                Except for its interests in its Subsidiary, which is listed in Section
4.3(b) of the Disclosure Schedules, Company does not own, directly or
indirectly, any capital stock, membership interest, partnership interest, joint
venture interest or other equity interest in any Person.


 


4.4                               Financial Statements


 


Section
4.4 of the Disclosure
Schedules contains true, correct and complete copies of (i) an audited
consolidated balance sheet of Company, as of the Balance Sheet Date (the Audited Balance Sheet) and the related audited consolidated
statements of income and cash flows for the fiscal year ended as of the Balance
Sheet Date (collectively with the Audited Balance Sheet, the Audited Financial Statements) and (ii) the unaudited consolidated
balance sheet as of December 31, 2006 (the Interim
Balance Sheet) and
the related unaudited consolidated statements of income and cash flows of
Company for the three months ended December 31, 2006 (collectively with the
Interim Balance Sheet, the Interim Financial
Statements). Each of
the Audited Financial Statements and the Interim Financial Statements has been
prepared by Company in accordance with GAAP consistently applied and presents
fairly, in all material respects, as applicable, the consolidated financial
position, results of operations and cash flows of Company as at the dates and
for the periods indicated, subject, in the case of the Interim Financial
Statements, to normal year-end adjustments and the absence of footnotes.


 


15

















 


4.5                               No Undisclosed Liabilities;
No Off-Balance Sheet Transactions


 


(a)                                 To the knowledge of Seller, there are no
liabilities or obligations of Company or its Subsidiary of any kind or nature
whatsoever (whether known or unknown and whether absolute, accrued, contingent
or otherwise), other than (a) liabilities reserved against on the Audited
Balance Sheet, (b) liabilities arising under this Agreement, (c) liabilities
incurred in the ordinary course of business consistent with past practice since
the Balance Sheet Date, other than any uninsured obligation or liability or
liability resulting from any Proceeding, or (d) immaterial contractual and
other liabilities arising in the ordinary course of business consistent with
past practice that are not required by GAAP to be reflected on a consolidated
balance sheet.


 


(b)                                To the knowledge of Seller, neither Company nor its Subsidiary is a
party to, or has any commitment to become a party to, any joint venture,
partnership or similar contract or arrangement, including any special purpose
or limited purpose entity or Person, or any other off-balance sheet
arrangement, where the result, purpose or effect is to avoid inclusion of any
material liabilities of Company or its Subsidiary on a consolidated balance
sheet prepared in accordance with GAAP.


 


4.6                               Inventory


 


To
the knowledge of Seller, all inventory of Company and its Subsidiary that is
reflected on the Interim Balance Sheet or the accounting records of Company and
its Subsidiary (the Inventory)
consists of raw materials and supplies, manufactured and purchased products,
goods in process and finished goods, all of which is merchantable and fit for
the purpose for which it was procured or manufactured, and none of which is
slow-moving, obsolete, damaged or defective, subject only to such reserves as
are set forth on the Interim Balance Sheet.


 


4.7                               Accounts Receivable


 


To
the knowledge of Seller, (a) all accounts receivable of Company and its
Subsidiary that are reflected on the Interim Balance Sheet or the accounting
records of Company and its Subsidiary (the Accounts Receivable)
represent or will represent valid obligations arising from sales actually made
or services actually performed by Company or its Subsidiary, (b) the Accounts
Receivable are current and collectible net of the reserves shown on the Interim
Balance Sheet or on the accounting records of Company and its Subsidiary (which
reserves are adequate and calculated in accordance with GAAP), and (c) subject
to such reserves, there is no material contest, claim or right of set-off under
any Contract with any obligor of an Account Receivable relating to the amount
or validity of such Account Receivable.


 


4.8                               Assets Other than Real
Property Interests


 


(a)                                  Company and its Subsidiary have good and
marketable title to, or valid and sufficient leaseholds in, all material assets
(x) necessary or used for the conduct of its business as currently conducted
and (y) reflected on the Interim Balance Sheet or thereafter acquired, other
than those disposed of since the date of the Interim Balance Sheet in the
ordinary course of business consistent with past practice and not in violation
of this Agreement, in each case free and clear of all Liens, except:


 


(i)                                    mechanics’, materialmen’s, carriers’, workmen’s,
repairmen’s or other like Liens arising from or incurred in the ordinary course
of business consistent with past practice, Liens arising under original
purchase price conditional sales contracts and equipment leases with third
parties entered into in the ordinary course of business consistent with past
practice and Liens for Taxes that are not due and payable or that may
thereafter be paid without penalty;


 


16

















 


(ii)                                Liens that secure Indebtedness that is reflected as a liability on the
Interim Balance Sheet or Liens the existence of which are referred to in the
notes to the Interim Balance Sheet; and


 


(iii)                             other imperfections of title or Encumbrances, if any, that,
individually or in the aggregate, do not materially impair, and would not be
expected to materially impair, the continued ownership, use and operation of
the assets to which they relate in the conduct of the business of Company and
Subsidiary as presently conducted (the Liens described in clauses (i), (ii) and
(iii) above, together with the Liens referred to in clauses (i) through (iv) of
Section 4.9(a), are referred to collectively as Permitted Liens).


 


(b)                                 To the knowledge of Seller, (i) the assets
reflected in the Financial Statements comprise all assets and services required
for the continued conduct by Purchaser of the business of Company and its
Subsidiary as now being conducted, (ii) such assets, taken as a whole,
constitute all properties and assets relating to or used or held for use in
connection with the business of Company and its Subsidiary during the past
twelve months (except assets disposed of or replaced by equivalent or superior
assets, in each case in the ordinary course of business consistent with past
practice), (iii) there are no assets or properties used in the operation of the
business of Company and its Subsidiary and owned by any Person other than
Company or its Subsidiary that will not be leased or licensed to Purchaser
under valid, current leases or license arrangements, (iv) the assets of Company
and its Subsidiary are in all material respects adequate for the purposes for
which such assets are currently used or are held for use, and are in reasonably
good repair and operating condition (subject to normal wear and tear) and (v)
there are no facts or conditions affecting such assets that could, individually
or in the aggregate, interfere in any material respect with the use, occupancy
or operation thereof as currently used, occupied or operated, or their adequacy
for such use.


 


4.9                                 Real Properties


 


(a)                                  Section 4.9 of the Disclosure Schedules lists all real property and interests in
real property owned in fee by Company or its Subsidiary (individually, Owned Real Property). Section 4.9 of the Disclosure Schedules also lists all
real property and interests in real property leased by Company or its
Subsidiary as a lessee (individually, Leased  Real Property). Company or its Subsidiary has marketable fee title to all Owned
Real Property and valid title to the leasehold estates in all Leased Real
Property (Owned Real Property or Leased Real Property being sometimes referred
to, individually, as Company Real Property), in each case free and clear of all
Liens, except:


 


(i)                                    Liens that secure Indebtedness that is
reflected on the Interim Balance Sheet;


 


(ii)                                 leases, subleases and similar agreements
relating to Company Real Property disclosed in Section 4.9 of the
Disclosure Schedules;


 


(iii)                             zoning, building and other generally applicable land use restrictions;
and


 


(iv)                             Liens that have been placed by a third party on the fee title of real
property constituting Leased Real Property or property over which Company or
its Subsidiary has easement rights, and subordination or similar agreements
relating thereto.


 


(b)                                 Seller has made available to Purchaser, in
each case to the knowledge of Seller in the possession of Seller, Company or
its Subsidiary, (i) a copy of each deed by which Company or its Subsidiary
acquired title to or its interest in Owned Real Property, (ii) a copy of all
title insurance policies and most recent surveys Company or its Subsidiary has
for such Owned Real Property and (iii) a copy of all certificates of occupancy
for improvements on such Owned Real Property and a copy of any zoning or land
use variance granted with respect to such Owned Real Property.


 


17

















 


(c)                                 Seller has made available to Purchaser true
and complete copies of all leases and subleases (including all amendments or
modifications thereof, all side letters or other instruments affecting the
obligations of any party thereunder, and all assignments or subleases relating
thereto) of the Leased Real Property under which Company or its Subsidiary is a
lessee, sublessee or sublessor (Leases). To the
knowledge of Seller, (i) all such Leases are in full force and effect and are
enforceable in accordance with their respective terms and the lessee under each
Lease is now in possession of the applicable Leased Property and, to the
knowledge of Seller, no third party has any possessory rights thereto, (ii) no
notices of default under any such Lease have been sent or received by Company
or its Subsidiary and neither Company nor its Subsidiary has any knowledge of
any fact or circumstance that, with the giving of notice or the expiration of
time (or both), would constitute a material default under any such Lease, (iii)
there is no pending or, threatened Proceeding that might interfere with the
quiet enjoyment by Company or its Subsidiary of any Leased Property, (iv)
Company has exercised within the time prescribed in each Lease any option
provided therein to extend or renew the term thereof and (v) the Leased
Property either is not subject to any Lien that has priority over any Lease,
or, if it is subject to any such Lien, the holder of such Lien has entered into
a customary nondisturbance agreement in favor of Company or its Subsidiary
pursuant to which the Lease is protected against being extinguished or
terminated by reason of any foreclosure or other acquisition of title by such
holder.


 


(d)                                To the knowledge of Seller, the Company Real Properties and all
buildings, structures, improvements and fixtures located on, under, over or
within the Company Real Properties consist of or have sufficient land, parking
areas or parking rights, access to public roads and sidewalks and other
improvements to permit the continued use of such facilities in the manner and
for the purposes to which they are presently devoted.


 


(e)                                 To the knowledge of Seller, neither Company
nor its Subsidiary has received any written notice from any Governmental
Authority asserting any material violation or alleged material violation of
applicable Laws with respect to any Company Real Property.


 


(f)                                   To the knowledge of Seller, (i) Company and
its Subsidiary hold all material Governmental Authorizations necessary for the
current use, occupancy and operation of each Company Real Property, (ii) all
such Governmental Authorizations have been validly issued by the appropriate
Governmental Authority and are in full force and effect, (iii) the Transactions
will not violate or invalidate any such Governmental Authorization, (iv)
Company and its Subsidiary have fully complied with any and all conditions and
requirements of all such Governmental Authorizations and (v) no default or
violation, or matter, fact or circumstance that with the lapse of time or
giving of notice, or both, would become a default or violation, has occurred in
the due observance of, or compliance with, any such Governmental Authorization.


 


4.10        Intellectual Property


 


(a)                                  Section 4.10(a) of the Disclosure Schedules lists all
material Intellectual Property Rights owned, filed, used or held for use by or
assigned or licensed to Company or its Subsidiary (Company Intellectual Property Rights).
With respect to all Company Intellectual Property that is registered or
subject to an application for registration, Section 4.10(a) of the
Disclosure Schedules lists all jurisdictions in which such Company Intellectual
Property is registered or registrations have been applied for and all
registration and application numbers. Section 4.10(a) of the Disclosure
Schedules further lists any Company Intellectual Property Rights jointly owned
with any third party, identifying such joint owner and listing any material
agreements relating thereto.


 


(b)                                 Section 4.10(b) of the Disclosure Schedules lists all
material licenses, sublicenses and other Contracts with respect to Company
Intellectual Property Rights to which Company or its Subsidiary is a party. To


 


18

















 


the
knowledge of Seller, the licenses listed in Section 4.10(b) of the
Disclosure Schedules are in full force and effect, Company and its Subsidiary
are not in default under any such license and no Person that is a party to any
such license has exercised any termination rights or provided notice with
respect to any breach of or violation with respect to such license.


 


(c)                                 To the knowledge of Seller, (i) all Company
Intellectual Property Rights have been duly registered, filed with or issued by
the appropriate Governmental Authority where such registration, filing or
issuance is necessary or appropriate for the conduct of the business of Company
or its Subsidiary as presently conducted and (ii) Company and its Subsidiary
have taken all actions necessary to protect and maintain the Company
Intellectual Property Rights, including by duly maintaining the filings,
registrations and applications for the Company Intellectual Property Rights,
which filings, registrations and applications are valid and enforceable in all
material respects and have not been cancelled, abandoned or expired.


 


(d)                                To the knowledge of Seller, (i) Company or its Subsidiary is the sole
and exclusive owner of, free and clear of all Liens, or has the right to use
pursuant to a written license in full force and effect, and Company and its
Subsidiary have the right to use, execute, reproduce, display, perform, modify,
enhance, distribute, prepare derivative works of and sublicense, without
payment to any other Person, all Company Intellectual Property and the completion
of the Transactions will not conflict with, alter or impair any such rights,
(ii) no Person is violating, infringing or misappropriating any Intellectual
Property owned or used by Company or its Subsidiary, (iii) no Company
Intellectual Property Right is subject to any outstanding Order or Contract
restricting the use thereof by Company or restricting the licensing thereof by
Company or its Subsidiary to any Person and (iv) all Company Intellectual
Property Rights are valid and enforceable.


 


(e)                                 To the knowledge of Seller, (i) the conduct
of the businesses of Company and its Subsidiary does not violate,
misappropriate, conflict with or infringe upon the Intellectual Property Rights
of any other Person, (ii) no material Proceedings are pending or threatened
against Company or its Subsidiary by any Person with respect to the ownership,
validity, enforceability, effectiveness or use in the business of Company and
its Subsidiary of any Intellectual Property, (iii) none of Seller, Company or
its Subsidiary has received any written or oral communication alleging that
Company or its Subsidiary violated, infringed or misappropriated any rights
relating to Intellectual Property Rights of any Person and (iv) no claims with
respect to any Company Intellectual Property are currently pending or, to the
knowledge of Seller, are threatened by any Person.


 


(f)                                   To the knowledge of Seller, the Company
Intellectual Property Rights are sufficient and adequate to conduct the
businesses of Company and its Subsidiary as they are currently conducted in all
material respects.


 


(g)                                To the knowledge of Seller, neither Company nor its Subsidiary is and
will as a result of the completion of the Transactions be in violation of any
licenses, sublicenses and other Contracts with respect to Intellectual Property
Rights.


 


(h)                                To the knowledge of Seller, Company and its
Subsidiary have taken reasonable steps to protect their respective rights in,
and the secrecy and confidentiality of, confidential information and trade
secrets.


 


(i)                                    Section 4.10(i) of the Disclosure Schedules lists all
material software owned by Company and its Subsidiary.


 


4.11                        Absence of Certain Changes


 


Since
the Balance Sheet Date, except as contemplated by this Agreement, (a) the
businesses of Company and its Subsidiary has been conducted in the ordinary
course consistent with past practices, (b) neither


 


19

















 


Company
nor its Subsidiary has taken any action that, if such had been taken after the
date of this Agreement, would have been prohibited by Section 6.1(a),
(c) there has not been any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting any material asset of Company or its
Subsidiary or (d) there has not been any event, occurrence or development
(whether described in one or more sections of this Article 4 or
otherwise) that, individually or in the aggregate, has had or that could
reasonably be expected to have a Material Adverse Effect.


 


4.12                        Material Contracts


 


(a)                                  Except as contemplated by this Agreement, to
the knowledge of Seller, neither Company nor its Subsidiary is a party to or
bound by any:


 


	
  (i)

  	
  employment agreement or
  employment contract with any officer or director of Company or its Subsidiary
  that has an annual base salary in excess of U.S.$150,000;

  
	
   

  	
   

  
	
  (ii)

  	
  collective bargaining
  agreement or other contract with any labor organization, union or
  association;

  
	
   

  	
   

  
	
  (iii)

  	
  covenant not to compete or
  other covenant restricting the development, manufacture, marketing or
  distribution of the products and services of Company or its Subsidiary;

  
	
   

  	
   

  
	
  (iv)

  	
  Contract with (A) Seller
  or any affiliate of Seller (other than Company or its Subsidiary) or (B) any
  current or former officer, director or employee of Company or its Subsidiary,
  Seller or any of its Affiliates;

  
	
   

  	
   

  
	
  (v)

  	
  lease, sublease or similar
  Contract with any Person under which Company or its Subsidiary is a lessor or
  sublessor of, or makes available for use to any Person, (A) any Company Real
  Property or (B) any portion of any premises otherwise occupied by Company or
  its Subsidiary;

  
	
   

  	
   

  
	
  (vi)

  	
  lease, sublease or similar
  Contract with any Person under which (A) Company or its Subsidiary is lessee
  of, or holds or uses, any machinery, equipment, vehicle or other tangible
  personal property owned by any Person other than Company or its Subsidiary or
  (B) Company or its Subsidiary is a lessor or sub-lessor of, or makes
  available for use by any Person, any tangible personal property owned or
  leased by Company or its Subsidiary, in any such case that has an aggregate
  future liability or receivable, as the case may be, in excess of U.S.$500,000
  and is not terminable by Company or its Subsidiary by notice of not more than
  sixty (60) days for a cost of less than U.S.$100,000;

  
	
   

  	
   

  
	
  (vii)

  	
  (A) continuing Contract
  for the future purchase of materials, supplies or equipment (other than
  purchase contracts and orders for inventory in the ordinary course of
  business consistent with past practice), (B) management, service, consulting
  or other similar Contract or (C) advertising agreement or arrangement, in any
  such case, that has an aggregate future liability to any Person in excess of
  U.S.$500,000 and is not terminable by Company or its Subsidiary by notice of
  not more than sixty (60) days for a cost of less than U.S.$100,000;

  
	
   

  	
   

  
	
  (viii)

  	
  material license,
  sublicense, option or other agreement relating in whole or in part to Company
  Intellectual Property (including any license or other agreement under which
  Company or its Subsidiary is licensee or licensor of any Intellectual
  Property);

  
	
   

  	
   

  
	
  (ix)

  	
  Contract with respect to
  any Indebtedness or any Guarantee;

  



 


20
















 


	
  (x)

  	
  Contract under which
  Company or its Subsidiary has, directly or indirectly, made any advance,
  loan, extension of credit or capital contribution to, or other investment in,
  any Person (other than extensions of trade credit in the ordinary course of
  business consistent with past practice), in any such case, that,
  individually, is in excess of U.S.$500,000;

  
	
   

  	
   

  
	
  (xi)

  	
  Contract providing for
  indemnification of any Person with respect to liabilities relating to any
  current or former business of Company or its Subsidiary or any predecessor
  thereto;

  
	
   

  	
   

  
	
  (xii)

  	
  Contract not made in the
  ordinary course of business consistent with past practice;

  
	
   

  	
   

  
	
  (xiii)

  	
  Contract (including a
  purchase order) involving payment by Company or its Subsidiary of more than
  U.S.$750,000 or extending for a term more than one hundred eighty (180) days
  from the date of this Agreement (unless terminable without payment or penalty
  upon no more than sixty (60) days’ notice), other than purchase orders
  entered into in the ordinary course of business consistent with past practice
  after the date of this Agreement and not in violation of this Agreement;

  
	
   

  	
   

  
	
  (xiv)

  	
  Contract (including a
  sales order), involving the obligation of Company or its Subsidiary to
  deliver products or services for payment of more than U.S.$750,000 or
  extending for a term more than one hundred eighty (180) days from the date of
  this Agreement (unless terminable without payment or penalty upon no more
  than sixty (60) days’ notice), other than sales orders entered into in the ordinary
  course of business consistent with past practice after the date of this
  Agreement and not in violation of this Agreement;

  
	
   

  	
   

  
	
  (xv)

  	
  Contract for the sale of
  any asset of Company or its Subsidiary (other than inventory sales in the
  ordinary course of business consistent with past practice) or the grant of
  any preferential rights to purchase any such asset or requiring the consent
  of any party to the transfer thereof, other than any such Contract entered
  into in the ordinary course of business consistent with past practice after
  the date of this Agreement and not in violation of this Agreement;

  
	
   

  	
   

  
	
  (xvi)

  	
  Contract with by or from
  any Governmental Authority;

  
	
   

  	
   

  
	
  (xvii)

  	
  currency exchange,
  interest rate exchange, commodity exchange, derivative or similar Contract;

  
	
   

  	
   

  
	
  (xviii)

  	
  Contract for any joint
  venture, partnership or similar arrangement;

  
	
   

  	
   

  
	
  (xix)

  	
  Contract providing for the
  services of any dealer, distributor, sales representative, franchisee or
  similar representative involving the payment or receipt over the life of such
  Contract in excess of U.S.$250,000 by Company or its Subsidiary;

  
	
   

  	
   

  
	
  (xx)

  	
  Contract providing for the
  provision of advertising services (other than printing expenses in connection
  with printing or manufacture of point-of-sale advertising materials) and
  involving the payment or receipt over the life of such Contract in excess of
  U.S.$50,000 by Company or its Subsidiary; or

  
	
   

  	
   

  
	
  (xxi)

  	
  Contract other than as set
  forth above to which Company or a Subsidiary is a party or by which it or any
  of its assets or businesses is bound or subject that is material to the
  business of Company and its Subsidiary or the use or operation of their
  assets

  



 


Section
4.12(a) of the
Disclosure Schedules lists each Contract required to be set forth thereon (the Company Contracts), including the parties thereto.


 


21

















 


(b)                                To the knowledge of Seller, (i) all Company Contracts are valid,
binding and in full force and effect and are enforceable by Company or its
Subsidiary in accordance with their terms, (ii) no Company Contract contains
any “change of control” or similar provision that would be triggered by the
completion of the Transactions, (iii) Company and its Subsidiary have performed
in all material respects all obligations required to be performed by them to
date under Company Contracts, and are not (with or without the lapse of time or
the giving of notice, or both) in breach or default in any material respect
thereunder and no other party to any Company Contract is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder and (iv) neither Company nor its Subsidiary has
received any notice of the intention of any party to terminate any Company
Contract or to accelerate or modify in a manner materially adverse to Company
or its Subsidiary any of Company’s or its Subsidiary’s obligations or rights
under any Company Contract. Complete and correct copies of all Company
Contracts, together with all modifications and amendments thereto, have been
made available to Purchaser.


 


4.13                        Litigation


 


Section
4.13 of the
Disclosure Schedule lists each material pending or, to the knowledge of Seller,
threatened Proceeding, or claim with respect to which Company or its Subsidiary
has been contacted in writing by counsel for the plaintiff or claimant, against
or affecting Company or its Subsidiary or any of their assets, properties,
operations or businesses. Neither Company nor its Subsidiary is a party or
subject to or in default in any material respect under any Order. There is not
any material Proceeding or claim by Company or its Subsidiary pending, or that
Company or its Subsidiary intends to initiate, against any other Person. To the
knowledge of Seller, there are no facts, circumstances or conditions that could
reasonably be expected to form the basis of a Proceeding or claim against or
affecting Company or its Subsidiary or any of their assets, properties,
operations or businesses that could reasonably be expected to have a Material
Adverse Effect.


 


4.14                        Compliance with Laws and
Orders; Governmental Authorizations


 


(a)                                 Company and its Subsidiary are and have been
in full compliance in all material respects with all applicable Laws relating
to the conduct or operation of their respective business or the ownership or
use of any of their respective assets. To the knowledge of Seller, no event has
occurred or circumstance exists that (with or without notice or lapse of time
or both) (i) would constitute or result in a material violation by Company or
its Subsidiary of, or a failure on the part of Company or its Subsidiary to
comply in any material respect with, any applicable Law, (ii) may give rise to
any obligation on the part of Company or its Subsidiary to undertake, or to
bear all or any portion of the cost of, any material remedial action of any
nature and (iii) neither Company nor its Subsidiary has received any notice or
other communication (whether oral or written) from any Governmental Authority
or any other Person regarding (A) any actual, alleged, possible, or potential
material violation of, or failure to comply in any material respect with, any
applicable Law, or (B) any actual, alleged, possible, or potential obligation
on the part of Company or its Subsidiary to undertake, or to bear all or any
portion of the cost of, any material remedial action of any nature.


 


(b)                                Section 4.14(b) of the Disclosure Schedules lists each
material Governmental Authorization that is held by Company or its Subsidiary
or that otherwise relates to the business of, or to any of the assets owned or
used by, Company or its Subsidiary. Each Governmental Authorization listed or
required to be listed in Section 4.14(b) of the Disclosure Schedules is
valid and in full force and effect.


 


(c)                                 Each of Company and its Subsidiary is and has
been, in full compliance in all material respects with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Section 4.14(b) of the Disclosure Schedules. To the
knowledge of Seller, no event has occurred or


 


22

















 


circumstance
exists that may (with or without notice or lapse of time or both) (i)
constitute or result directly or indirectly in a material violation of or a
failure to comply in any material respect with any term or requirement of any
Governmental Authorization listed or required to be listed in Section
4.14(b) of the Disclosure Schedules, or (ii) result directly or indirectly
in the revocation, withdrawal, suspension, cancellation, or termination of, or
any modification to, any Governmental Authorization listed or required to be
listed in Section 4.14(b) of the Disclosure Schedules. Neither Company
nor its Subsidiary has received any notice or other communication (whether oral
or written) from any Governmental Authority or any other Person regarding (A)
any actual, alleged, possible, or potential material violation of or failure to
comply in any material respect with any term or requirement of any Governmental
Authorization or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or modification to any
Governmental Authorization listed or required to be listed in Section
4.14(b)  of the Disclosure
Schedules. All applications required to have been filed for the renewal of the
Governmental Authorizations listed or required to be listed in Section
4.14(b) of the Disclosure Schedules have been duly filed on a timely basis
with the appropriate Governmental Authorities, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Authorities.


 


(d)                                To the knowledge of Seller, the Governmental Authorizations listed in Section
4.14(b) of the Disclosure Schedules collectively constitute all of the
Governmental Authorizations necessary to permit Company and its Subsidiary to
lawfully conduct and operate their respective businesses in all material respects
in the manner they currently conduct and operate such businesses and to permit
Company and its Subsidiary to own and use their respective assets in all
material respects in the manner in which they currently own and use such
assets.


 


4.15                        Insurance Policies


 


Section
4.15 of the
Disclosure Schedule lists, to the knowledge of Seller, the insurance policies
maintained with respect to Company and its Subsidiary and their respective
assets and properties. All such policies are in full force and effect, all
premiums due and payable thereon have been paid, and no notice of cancellation
or termination has been received with respect to any such policy that has not
been replaced on substantially similar terms prior to the date of such
cancellation or termination.


 


4.16                        Customers and Suppliers


 


Section
4.16 of the
Disclosure Schedules lists, to the knowledge of Seller, (a) the ten (10)
largest customers of Company and its Subsidiary, taken as a whole, and the
aggregate amount of revenues received by Company and its Subsidiary from such
customers and (b) the ten (10) largest suppliers of Company and its Subsidiary,
taken as a whole, and the aggregate amount paid by Company and its Subsidiary
to such suppliers, in each case, during the two (2) most recent fiscal years.
To the knowledge of Seller, (i) no customer or supplier that is not listed on Section
4.16 of the Disclosure Schedules accounted for in excess of three percent
(3%) of the revenues or purchases of Company and its Subsidiary, taken as a
whole, in the two (2) most recent fiscal years and (ii) no customer or supplier
listed in Section 4.16 of the Disclosure Schedules has cancelled or
otherwise terminated its relationship with Company or its Subsidiary or
materially decreased or limited it purchases from or sales to Company or its
Subsidiary.


 


4.17                        Tobacco Matters


 


(a)                                 To the knowledge of Seller, (i) the
Governmental Authorizations listed in Section 4.17 of the Disclosure
Schedules constitute all Governmental Authorizations that are required under
any Tobacco Laws necessary to permit Company and its Subsidiary to conduct
their respective businesses, as currently


 


23

















 


conducted
in all material respects and (ii) the Governmental Authorizations listed in Section
4.17 of the Disclosure Schedules are in full force and effect in all
material respects.


 


(b)                                To the knowledge of Seller, (i) no written notices of any violation or
alleged violation of any Tobacco Law relating to the operations or properties
of Company or its Subsidiary have been received by Company or its Subsidiary,
(ii) Company and its Subsidiary are in compliance with all Tobacco Laws, (iii)
there are no Orders outstanding, or any material Proceedings or investigations
pending or threatened, against Company or its Subsidiary and (iv) there are no
disputes involving Company or its Subsidiary, relating to compliance with any
Tobacco Laws.


 


(c)                                 To the knowledge of Seller, there is no
pending or threatened Proceeding or claim with respect to which Company or its
Subsidiary has been contacted in writing by counsel for the plaintiff or
claimant, against or affecting Company or its Subsidiary or any of their
assets, properties, operations or businesses that relates to the alleged health
effects of tobacco products or the reimbursement of costs of health care for
such alleged effects.


 


(d)                                To the knowledge of Seller, neither Company nor its Subsidiary has (i)
made any written Health Claims in or on any packaging, label, marketing or
promotional materials used or held for use by Company or its Subsidiary in
marketing cigarettes, (ii) made any public statement that would reasonably be
considered to materially adversely affect its position in any pending
Proceeding that relates to the alleged health effects of tobacco products,
(iii) conducted any research and development activities into the alleged health
effects of tobacco products, (iv) ever belonged to the Tobacco Institute, Inc.,
the Council for Tobacco Research-U.S.A. or the Center for Indoor Air Research,
Inc.) or (v) publicly advertised its products (other than at the point-of-sale,
in wholesale trade journals and in company signage).


 


(e)                                 To the knowledge of Seller, the products
designed, manufactured, distributed, marketed or sold by Company and its
Subsidiary, the components thereof (including additives) and the manner of
their production, distribution, supply, marketing, advertising and sale comply
with all Tobacco Laws and the MSA.


 


(f)                                   There has not been any product recall
conducted with respect to any product designed, manufactured or sold by Company
or its Subsidiary.


 


4.18                        Employees


 


Section
4.18 of the
Disclosure Schedules lists, to the knowledge of Seller, the names of all
current directors, officers and employees (with base compensation in excess of
U.S.$150,000 in 2006) of Company and its Subsidiary, as well as the following
information for each such officer or employee: name; date of hire; job title;
and salary, bonus, commission, equity compensation, profit sharing and any
other remuneration paid or awarded in 2006.


 


4.19                        Labor Relations; Compliance


 


Neither
Company nor its Subsidiary is a party to any collective bargaining or other
labor Contract. To the knowledge of Seller, (a) no labor organization or group
of employees of Company or its Subsidiary has made any demand for recognition
or certification, and there are no representation or certification proceedings
or petitions seeking a representation proceeding presently pending or
threatened to be brought or filed with the National Labor Relations Board or
any other labor relations tribunal or authority, (b) there are no organizing
activities, strikes, work stoppages, slowdowns, lockouts, arbitrations or
grievances, or other labor disputes pending or threatened against or involving
Company or its Subsidiary and (c) Company and its Subsidiary are in compliance
in all material respects with all


 


24

















 


applicable
Laws respecting employment and employment practices, terms and conditions of
employment, wages and hours and occupational safety and health.


 


4.20                        Employee Benefit Plans


 


(a)                                 Section 4.20(a) of the Disclosure Schedules lists each
material Employee Plan and each other employee benefit plan within the meaning
of Section 3(3) of ERISA in which employees of Company and its Subsidiary
participate (each, an Other Plan). Seller has delivered to Purchaser
true, correct and complete copies of each Employee Plan and each Other Plan
(and, if applicable, related trust agreements), current summary plan
descriptions (if any), any modifications or amendments thereto, together with
the most recent annual report (Form 5500 including, if applicable, Schedule B
thereto) and the most recent actuarial valuation report prepared in connection
with any Employee Plan or Other Plan. Each Employee Plan is sponsored and
maintained solely by Company or its Subsidiary. Section 4.20(a) of the
Disclosure Schedules identifies each Employee Plan and each Other Plan that is
(i) maintained in connection with any trust described in Section 501(c)(9) of
the Code or (ii) intended to be qualified under Section 401(a) of the Code.


 


(b)                                To the knowledge of Seller, neither Company, its Subsidiary nor any
ERISA Affiliate of Company nor any predecessor thereof sponsors, maintains or
contributes to, or has in the past sponsored, maintained or contributed to, or
has any current or contingent liabilities under any plan subject to Title IV of
ERISA.


 


(c)                                 To the knowledge of Seller, neither Company,
its Subsidiary nor any ERISA Affiliate of Company has (i) engaged in, or is a
successor or parent corporation to any entity that has engaged in, a
transaction described in Section 4069, 4204 or 4212(c) of ERISA that could
become a liability of Company, its Subsidiary or Purchaser or any of their
respective ERISA Affiliates.


 


(d)                                To the knowledge of Seller, each Employee Plan that is intended to be a
tax-qualified plan has been the subject of a favorable notification letter from
the Internal Revenue Service on which such Employee Plan may rely that such
Employee Plan and related trust is qualified and exempt from federal income
Taxes under Sections 401(a) and 501(a), respectively, of the Code; no such
notification letter has been revoked, and revocation has not been threatened;
no event has occurred and no circumstances exist that would adversely affect
the tax-qualification of such Employee Plan; and such Employee Plan has not
been amended since the effective date of its most recent notification letter in
any respect that might adversely affect its qualification, materially increase
its cost or require security under Section 307 of ERISA. Company has delivered
to Purchaser a copy of the most recent notification letter received with
respect to each Employee Plan for which such a letter has been issued, as well
as a copy of any pending application for a determination letter. Company also
has provided to Purchaser a list of all Employee Plan amendments as to which a
favorable determination letter has not yet been received.


 


(e)                                 No employee or former employee of Company or
its Subsidiary will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced or accelerated such benefit as a result
of the Transactions.


 


(f)                                   To the knowledge of Seller, there is no
Contract, plan or arrangement, written or otherwise, covering any employee or
former employee of Company or its Subsidiary that, individually or
collectively, as a result of the Transactions, could give rise to the payment
of any amount that would not be deductible by Company or its Subsidiary under
Section 280G of the Code.


 


(g)                                None of the Employee Plans is (i) a plan that has two (2) or more
contributing sponsors at least two (2) of which are not under common control,
within the meaning of Section 4063 of ERISA (a Multiple Employer Plan)
or (ii) a Multiemployer Plan. To the knowledge of Seller, neither
Company, its


 


25

















 


Subsidiary
nor any ERISA Affiliate of Company has at any time during the last six years,
contributed to or been obligated to contribute to any Multiemployer Plan or
Multiple Employer Plan.


 


(h)                                To the knowledge of Seller, neither Company nor its Subsidiary has any
current or projected liability in respect of postretirement health or life
insurance benefits for retired, former or current employees of Company or its
Subsidiary, except as required to avoid excise tax under Section 4980B of the
Code.


 


(i)                                    To the knowledge of Seller, neither Company,
its Subsidiary nor any other Person, including any fiduciary, has engaged in
any “prohibited transaction” (as defined in Section 4975 of the Code or Section
406 of ERISA) that could subject any of the Employee Plans or their related
trusts, Company, its Subsidiary or any Person that Company or its Subsidiary
has an obligation to indemnify, to any material tax or penalty imposed under
Section 4975 of the Code or Section 502 of ERISA.


 


(j)                                    To the knowledge of Seller, there are no
pending or threatened Proceedings or claims (other than routine claims in the
ordinary course of the Employee Plan) that have been asserted or instituted,
and, to the knowledge of Seller, no set of circumstances exists that could
reasonably be expected to give rise to a material Proceeding or claim, against
any Employee Plan, any fiduciaries thereof with respect to their duties to any
such Employee Plan or the assets of any of the trusts under any of such plans
that could result in any liability of Company or its Subsidiary to the Pension
Benefit Guaranty Corporation, the Department of Treasury, the Department of Labor,
any Employee Plan, any participant in any Employee Plan or any other party.


 


(k)                                 To the knowledge of Seller, each Employee
Plan that is a “nonqualified deferred compensation plan” (as defined under
Section 409A(d)(1) of the Code) has been operated and administered in good
faith compliance with Section 409A since January 1, 2005 and has not been
modified since October 2, 2004. Any amounts paid or payable pursuant to each
Employee Plan that is a “nonqualified deferred compensation plan” (as defined
under Section 409A(d)(1) of the Code) is not, or would not be, prior to payment
to a service provider (within the meaning of IRS Notice 2005-1) of such
amounts, includible in the gross income of a service recipient (within the
meaning of IRS Notice 2005-1) and will not be subject to material interest or
the additional tax imposed by Section 409A(a)(1)(B) of the Code. To the
knowledge of Seller, all bonus, incentive, profit sharing or other payments
paid by Company and its Subsidiary are paid within 2-1/2 months after the end
of the taxable year in which the relevant services required for the payment
were performed and will not be considered a “nonqualified deferred compensation
plan” (as defined under Section 409A(d)(1) of the Code).


 


(l)                                    To the knowledge of Seller, except as would
not be material to Company and its Subsidiary taken as a whole, each individual
who renders services to Company or its Subsidiary who is classified by Company
and its Subsidiary as having the status of an independent contractor or other
non-employee status for any purpose (including for purposes of taxation and tax
reporting and under Employee Plans) is properly so characterized.


 


4.21                        Environmental Matters


 


(a)                                 To the knowledge of Seller, Company, its
Subsidiary and the Company Real Properties are and have been operated in
compliance in all material respects with all applicable Environmental Laws.


 


(b)                                To the knowledge of Seller, Company and its Subsidiary possess all
material Governmental Authorizations required for their respective business,
operations and the Company Real Properties pursuant to applicable Environmental
Laws, and Company, its Subsidiary and their respective business, operations and
the Company Real Properties are and have been operated in compliance in all
material respects with all such Governmental Authorizations.


 


26

















 


(c)                                 To the knowledge of Seller, there are no
pending or threatened, Proceedings against or affecting Company, its Subsidiary
or any of the Company Real Properties that allege a violation of, or liability
or obligation under, any Environmental Law.


 


(d)                                To the knowledge of Seller, none of Company, its Subsidiary and the
Company Real Properties are subject or party to any Orders, or any agreements
with any Person, imposed under or otherwise relating to Environmental Laws, and
neither Company nor its Subsidiary is conducting any investigation or
remediation activities, or required to conduct any such activities, at any
location in connection with any actual or suspected noncompliance with
Environmental Laws or presence of any Hazardous Substances.


 


(e)                                 To the knowledge of Seller, there are no
Hazardous Substances present at any of the Company Real Properties that could
reasonably be expected to require investigation, cleanup or other remediation
activities, and, to the knowledge of Seller, there are no Hazardous Substances
present at any other location in connection with or as the result of activities
of or relating to Company or its Subsidiary or any of their respective
predecessors or any Company Real Properties that could reasonably be expected
to subject Company or its Subsidiary to any liability.


 


(f)                                   To the knowledge of Seller, neither Company
nor its Subsidiary has assumed or retained any liabilities or obligations under
Environmental Laws in connection with any formerly owned or operated
properties, any prior businesses or operations, or any closed, sold or acquired
businesses or operations.


 


(g)                                Seller has delivered to Purchaser true and correct copies of all
written environmental audits, reports, surveys or evaluations in Company’s, its
Subsidiary’s or Seller’s possession relating to the Company Real Properties.


 


(h)                                To the knowledge of Seller, none of the Company Real Properties are
subject to any Lien in favor of any Governmental Authority or other Person for
any liability or obligation imposed under or in connection with any
Environmental Law, including any Lien in connection with any actual or
suspected presence of Hazardous Substances or the restoration, reclamation or
preservation of the environment or natural resources.


 


(i)                                    To the knowledge of Seller, neither Company
nor its Subsidiary has manufactured, sold, distributed, or otherwise used
asbestos or asbestos-containing materials in any products or operations at any
location.


 


(j)                                    To the knowledge of Seller, there are no
facts, circumstances or conditions that could reasonably be expected to form
the basis of a Proceeding under Environmental Laws in connection with Company,
its Subsidiary or their respective predecessors, any Company Real Property or
any properties formerly owned or operated by Company, its Subsidiary or their
respective predecessors, or its predecessors that could reasonably be expected
to have a Material Adverse Effect.


 


4.22                        Brokers


 


Except
for Seller’s Financial Advisor, the fees of which will be paid by Seller, there
is no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Seller, Company or its
Subsidiary and that might be entitled to any fee or commission in connection
with the Transactions.


 


4.23                        Certain Payments


 


To
the knowledge of Seller, neither Company, its Subsidiary nor any director,
officer, employee or agent of Company or its Subsidiary, nor any Person associated
with or acting for on or behalf of Company or its Subsidiary, has, directly or
indirectly, (a) made any contribution, gift, bribe, rebate, payoff, influence


 


27

















 


payment,
kickback or other payment to any Person, public or private, regardless of form,
whether in money, property or services to (i) obtain favorable treatment in
securing business, (ii) to pay for favorable treatment of business secured,
(iii) to obtain special concessions of for special concessions already obtained
or (iv) in violation of any Law or (b) established or maintained any fund or
asset that have not been recorded in the books and records of Company or its
Subsidiary.


 


4.24                        Books and Records


 


The
books of account, minute books, stock record books and other records of Company
and its Subsidiary, all of which have been made available to Purchaser, are to
the knowledge of Seller, true, correct and complete in all material respects,
and have been maintained in accordance with sound business practices. All such
books and records are in the possession of Company or its Subsidiary.


 


4.25                        Related Party Transactions


 


No
Contract between Company or its Subsidiary, on the one hand, and Seller or any
of its Affiliates, on the other hand, shall continue to be in effect after the
Closing.


 


4.26                        Disclosure


 


The
representations and warranties contained in this Article 4 do not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements contained in this Article 4 not
misleading.


 


5.                                      REPRESENTATIONS AND
WARRANTIES REGARDING PURCHASER


 


Purchaser
represents and warrants to Seller that, as of the date of this Agreement and as
of the Closing Date:


 


5.1                               Organization


 


Purchaser
is a corporation duly incorporated, validly existing and in good standing under
the Laws of the State of Delaware, has the requisite power and authority to
own, operate and lease its properties and to carry on its business as it is now
being conducted. Purchaser is duly qualified to do business in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification necessary, except where any
such failures to be so qualified would not, individually or in the aggregate,
materially adversely affect the ability of Purchaser to perform its obligations
under this Agreement.


 


5.2                               Authority; Execution and
Delivery; Enforceability


 


Purchaser
has all necessary corporate power and authority to enter into this Agreement
and to perform its obligations under this Agreement and to complete the
Transactions. The execution, delivery and performance by Purchaser of this
Agreement and the completion of the Transactions have been duly authorized and
all necessary corporate proceedings on the part of Purchaser have been taken.
This Agreement has been duly executed and delivered by Purchaser, and assuming
the due authorization, execution and delivery by each other party, constitutes
a legal, valid and binding obligation of Purchaser, enforceable in accordance
with its terms.


 


28

















 


5.3                               No Conflicts; Consents


 


(a)                                 The execution, delivery and performance of
this Agreement by Purchaser do not, and the completion of the Transactions will
not, (i) conflict with or violate the certificate of incorporation, bylaws or
other organizational document of Purchaser, (ii) conflict with or violate
any applicable Law or Order applicable to Purchaser or (iii) breach or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in any loss of any
benefit under, or the creation of a Lien on any of Purchaser’s assets pursuant
to, any Contract or other instrument or obligation to which Purchaser is a
party, except in the case of this clause (iii) as would not materially
adversely affect the ability of Purchaser to perform its obligations under this
Agreement.


 


(b)                                Other than compliance with and any filings required under the HSR Act,
the execution, delivery and performance by Purchaser of this Agreement do not,
and the completion of the Transactions will not, require any Governmental
Authorization to be obtained by Purchaser or any filing with any Governmental
Authority to be made by Purchaser.


 


5.4                               Litigation


 


There
are not any (a) Proceedings pending or, to the knowledge of Purchaser,
threatened against or affecting Purchaser or any of its Affiliates or (b)
investigations by any Governmental Authority that are pending or, to the
knowledge of Purchaser, threatened against or affecting Purchaser or any of its
Affiliates that, in either case, would, individually or in the aggregate,
materially adversely affect the ability of Purchaser to perform its obligations
under this Agreement.


 


5.5                               Compliance with Applicable
Law


 


Purchaser
has complied with and is compliance with all applicable Laws, except for
instances of non-compliance as would not, individually or in the aggregate,
materially adversely affect the ability of Purchaser to perform its obligations
under this Agreement.


 


5.6                               Availability of Funds


 


Purchaser
will have as of the Closing sufficient cash available or borrowing facilities
that together are sufficient to enable it to complete the Transactions.


 


5.7                               Purchase for Investment


 


Purchaser
is purchasing the Shares for investment for its own account and not with a view
to, or for sale in connection with, any distribution thereof.


 


5.8                               Brokers


 


Except
for Citigroup, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Purchaser or its Affiliates and that might be entitled to any fee or commission
in connection with the Transactions.


 


29

















 


6.                                      ADDITIONAL AGREEMENTS


 


6.1                               Covenants Relating to
Conduct of Business


 


(a)                                  Except for matters set forth in Section
6.1(a) of the Disclosure Schedules or otherwise expressly permitted by the
terms of this Agreement, from the date of this Agreement to the Closing, Seller
shall cause the businesses of Company and its Subsidiary to be conducted in the
usual, regular and ordinary course in substantially the same manner as
previously conducted and, to the extent consistent therewith, use reasonable
best efforts to keep intact their respective businesses, keep available the
services of their current employees and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others with whom
they deal to the end that their respective businesses shall be unimpaired at
the Closing; provided that Seller
shall not be obligated to, directly or indirectly, provide any funds to Company
or its Subsidiary. Seller shall not, and shall not permit Company or its
Subsidiary to, take any action that would, or that could reasonably be expected
to, result in any of the conditions set forth in Article 9 not being
satisfied. In addition (and without limiting the generality of the foregoing),
except as set forth in Section 6.1(a) of the Disclosure Schedules or
otherwise expressly permitted or required by the terms of this Agreement,
Seller shall not permit Company or its Subsidiary to:


 


	
  (i)

  	
  amend its articles of
  incorporation or bylaws;

  
	
   

  	
   

  
	
  (ii)

  	
  redeem or otherwise acquire
  any shares of its capital stock or issue any capital stock or any option,
  warrant or right relating thereto or any securities convertible into or
  exchangeable for any shares of capital stock;

  
	
   

  	
   

  
	
  (iii)

  	
  adopt or amend in any
  material respect any Employee Plan (or any plan that would be an Employee
  Plan if adopted) or enter into, adopt, extend (beyond the Closing Date),
  renew or amend any collective bargaining agreement or other Contract with any
  labor organization, union or association, except in each case as required by
  applicable Law after providing written notice to Purchaser;

  
	
   

  	
   

  
	
  (iv)

  	
  grant to any director,
  executive officer or employee any increase in compensation or benefits,
  except (A) as may be required under existing agreements, (B) for any increases
  for which Seller shall be solely obligated and (C) for increases to employees
  (other than officers) in the ordinary course of business consistent with past
  practice;

  
	
   

  	
   

  
	
  (v)

  	
  hire, or terminate the
  employment of, any employees except in the ordinary course of business
  consistent with past practice;

  
	
   

  	
   

  
	
  (vi)

  	
  incur or assume any
  liabilities, obligations or Indebtedness or Guarantee any such liabilities,
  obligations or Indebtedness, other than in the ordinary course of business
  consistent with past practice;

  
	
   

  	
   

  
	
  (vii)

  	
  other than in the ordinary
  course of business consistent with past practice, permit, allow or suffer any
  of its assets to become subjected to any Lien or Encumbrance of any nature
  whatsoever;

  
	
   

  	
   

  
	
  (viii)

  	
  cancel any material
  Indebtedness (individually or in the aggregate) or waive any claims or rights
  of substantial value;

  
	
   

  	
   

  
	
  (ix)

  	
  pay, loan or advance any
  amount to, or sell, transfer or lease any of its assets to, or enter into any
  agreement or arrangement with, Seller or any of its Affiliates, except for
  (A) transactions among

  



 


30

















 


Company
and its Subsidiary, (B) dividends and distributions permitted under clause (ii)
above and (C) intercompany transactions in the ordinary course of business
consistent with past practice;


 


	
  (x)

  	
  settle or compromise (A)
  any pending or threatened Proceeding or claim related to alleged health
  effects from use of tobacco products or the regulation of the production,
  sale or distribution of tobacco products or (B) any other pending or
  threatened Proceeding or claim (1) in which the amount involved is greater
  than U.S.$250,000, (2) that is material to Company and its Subsidiary or (3)
  that relates to the Transactions;

  
	
   

  	
   

  
	
  (xi)

  	
  make any change in any
  method of accounting or accounting practice or policy other than those
  required by GAAP;

  
	
   

  	
   

  
	
  (xii)

  	
  make, change or rescind
  any material Tax election not required by Law, file any amended Tax Return
  not required by Law, enter into any closing agreement relating to Taxes,
  waive or extend the statute of limitations in respect of Taxes (other than
  pursuant to extensions of time to file Tax Returns obtained in the ordinary
  course of business), or settle or compromise any material Tax liability other
  than in the ordinary course of business consistent with past practice, or
  surrender any right or claim for a Tax refund;

  
	
   

  	
   

  
	
  (xiii)

  	
  acquire by merging or
  consolidating with, or by purchasing a substantial portion of the assets of,
  or by any other manner, any business or any corporation, partnership,
  association or other business organization or division thereof or otherwise
  acquire any assets (other than inventory) that are material;

  
	
   

  	
   

  
	
  (xiv)

  	
  make or incur any capital
  expenditure that is not currently approved in writing or budgeted and that,
  individually, is in excess of U.S.$500,000 or make or incur any such
  expenditures that, in the aggregate, are in excess of U.S.$1,000,000;

  
	
   

  	
   

  
	
  (xv)

  	
  sell, lease, license or
  otherwise dispose of any of its material assets, except inventory and
  obsolete or excess equipment sold in the ordinary course of business
  consistent with past practice;

  
	
   

  	
   

  
	
  (xvi)

  	
  enter into any lease of
  real property, except any renewals of existing property in the ordinary
  course of business consistent with past practice;

  
	
   

  	
   

  
	
  (xvii)

  	
  modify, amend, terminate,
  renew or permit the lapse of any lease of, or reciprocal easement agreement,
  operating agreement or other material agreement relating to, Owned Real
  Property or Leased Real Property (except modifications or amendments
  associated with renewals of existing leases); or

  
	
   

  	
   

  
	
  (xviii)

  	
  authorize any of, or
  commit or agree, whether in writing or otherwise, to take or to do any of the
  foregoing actions.

  



 


(b)                                 Seller shall promptly advise Purchaser in
writing of the occurrence of any matter or event that has had or could
reasonably be expected to have a Material Adverse Effect.


 


(c)                                  In connection with the continuing operation
of the businesses of Company and its Subsidiary between the date of this
Agreement and the Closing, Seller shall use its reasonable best efforts to
consult in good faith on a regular and frequent basis with the representatives
of Purchaser to report all material operational developments and the general
status of ongoing operations pursuant to procedures requested by Purchaser or
such representatives. Seller acknowledges that any such consultation shall not


 


31

















 


constitute
a waiver by Purchaser of any rights it may have under this Agreement and that
Purchaser shall not have any liability or responsibility for any actions of
Seller or any of its officers or directors with respect to matters that are the
subject of such consultations.


 


(d)                                 Seller shall keep, or cause to be kept, in
full force and effect through the close of business on the Closing Date, all
insurance policies listed in Section 4.15 of the Disclosure Schedules.
As of the Closing, Seller shall assign to Purchaser any and all assignable
rights that Seller may have under such insurance policies covering claims
relating to the period on or prior to the Closing Date.


 


6.2                               Stockholders Meeting; Voting
of Seller Common Stock in Seller ESOP


 


As
soon as reasonably practicable following the date of this Agreement, but in no
event later than March 2, 2007, Seller, acting through its Board of Directors,
shall (a) duly call, give notice of, convene and hold a meeting of its
stockholders for the purpose of obtaining the Seller Stockholder Approval (the Stockholders Meeting), (b) provide the participants in the Seller ESOP with such
information and materials (the ESOP Materials) as may be required in connection
with the Stockholders Meeting by the terms and provisions of the Seller ESOP
and by ERISA and all applicable Laws and (c) (i) include in the notice of such
Stockholders Meeting and the ESOP Materials the recommendation of the Board of
Directors of Seller that the stockholders of Seller vote in favor of and that
each participant in the Seller ESOP direct the ESOP Trustees to vote all shares
of Seller Common Stock allocated to such participant in favor of approval of
the Transactions {provided that
the Board of Directors of Seller may fail to make or may withdraw, modify or
change such recommendation if it shall have determined in good faith, after
consultation with outside and inside counsel to Seller and Seller’s Financial
Advisor, that such action is required in order for the Board of Directors of
Seller to comply with its fiduciary duties under applicable Law) and (ii) take
all lawful actions to solicit and obtain the Seller Stockholder Approval as
contemplated by this Agreement.


 


6.3                               No Solicitation


 


(a)                                  Seller agrees that (i) it and its executive
officers and directors shall not, (ii) its Subsidiary and its executive
officers and directors shall not and (iii) it shall cause its and its
Subsidiary’s agents and representatives (including any investment banker,
attorney or accountant) (Representatives)  to not, (A) directly or indirectly, initiate, solicit,
encourage or facilitate any inquiries or the making of any proposal or offer
with respect to, or that could reasonably expected to lead to, an offer to
purchase, proposal for a merger, consolidation, share exchange, reorganization,
recapitalization, business combination or other similar transaction involving
Company or its Subsidiary or any proposal or offer to acquire in any manner an
equity interest in, or a portion of the businesses or assets of, Company or its
Subsidiary, other than the Transactions (any such proposal or offer being to as
an Alternative Proposal) or (B) directly or indirectly,
engage in any negotiations or discussions concerning, or provide access to its
properties, books, records, employees or any confidential information or data
to, any person in connection with or relating to an Alternative Proposal,
otherwise knowingly encourage or facilitate any effort to make or implement any
Alternative Proposal, execute or enter into any agreement, understanding,
letter of intent or arrangement in connection with or with respect to any
Alternative Proposal or resolve or authorize to do any of the foregoing. Seller
shall take the necessary steps to promptly inform its Representatives and those
of its Subsidiary of Seller’s obligations under this Section 6.3


 


(b)                                 Notwithstanding Section 6.3(a),
nothing contained in this Agreement shall prevent Seller or its Board of Directors
from, prior to receipt of the Seller Stockholder Approval, (i) providing access
to its properties, books and records and providing information or data in
response to a request therefor by a Person that has made an unsolicited bona fide written Alternative Proposal, if
the Board of Directors of Seller receives from the Person so requesting such
information an executed confidentiality agreement on terms 


 


32

















 


substantially
similar to those contained in the Confidentiality Agreement (except for such
changes specifically necessary in order for Seller to be able to comply with
its obligations under this Agreement), (ii) engaging in any negotiations or
discussions with any Person who has made an unsolicited bona fide written Alternative Proposal or
(iii) withdrawing, or modifying or, changing or qualifying in any adverse
manner its approval or recommendation of the Transactions (which shall be
permitted only to the extent permitted by Section 6.2(a)); provided, in the case of clauses (i) and
(ii) above, the Board of Directors of Seller shall have determined in good
faith, after consultation with its outside and inside legal counsel and Seller’s
Financial Advisor that such actions would reasonably be expected to result in
an Alternative Proposal, which (A) is reasonably capable of being completed
expeditiously, taking into account legal, financial, regulatory, timing and
similar aspects of the Alternative Proposal and the identity and
characteristics of the Person making the Alternative Proposal, including the
likelihood of such Person obtaining financing, (B) would not be subject to
greater conditionality than that contained in this Agreement and (C) would, if
completed, result in a transaction more favorable to Seller from a financial
point of view than the Transactions, taking into account any changes proposed
to be made to this Agreement by Purchaser (any such more favorable Alternative
Proposal (which must also involve not less than all of the equity, assets,
revenues or earnings of Company) being referred to in this Agreement as a Superior Proposal).


 


(c)                                  Except as set forth in Section 6.3(c)
of the Disclosure Schedules, Seller acknowledges that it has not conducted any
activities, discussions or negotiations with any Persons with respect to any
Alternative Proposal within the year preceding the date of this Agreement.
Seller shall also promptly notify Purchaser (and in any event within 24 hours)
of the receipt of any Alternative Proposal, which notice shall include the
identity of the Person making such Alternative Proposal and the material terms
thereof. Seller shall thereafter keep Purchaser informed on a current basis of
any changes in the status or terms of any such Alternative Proposal, including
whether such Alternative Proposal has been withdrawn or rejected. Seller also
agrees to provide Purchaser any information that it provides to any Person
under this Section 6.3 at substantially the same time as it provides it
to such other Person and that it will promptly request any Person that has
heretofore executed a confidentiality agreement in connection with the
consideration of a transaction involving Company or its Subsidiary to return or
destroy all confidential information furnished prior to the execution of this
Agreement to or for the benefit of such Person by or on behalf of Seller or its
Affiliates.


 


6.4                               Access to Information


 


Seller
shall, and shall cause Company and its Subsidiary to, afford to Purchaser and
its accountants, counsel and other representatives reasonable access, upon
reasonable notice during normal business hours during the period prior to the
Closing, to any and all of the properties, assets, books, contracts,
commitments, Tax Returns, records and other documents of Company and its
Subsidiary, and, during such period shall furnish promptly to Purchaser any
information concerning Company and its Subsidiary as Purchaser may request; provided, however, that such access does
not reasonably disrupt the normal operations of Company and its Subsidiary.


 


6.5                               Confidentiality


 


(a)                                  Purchaser acknowledges that the information
being provided to it in connection with the Transactions is subject to the
terms of a confidentiality agreement between Purchaser and Seller, dated
December 13, 2006 (the Confidentiality Agreement),
the terms of which are incorporated into this Agreement by reference. Effective
upon, and only upon, the Closing, the Confidentiality Agreement shall terminate
with respect to information relating solely to Company and its Subsidiary; provided, however, that Purchaser
acknowledges that any and all other information provided to it by Seller shall
remain subject to the terms and conditions of the Confidentiality Agreement
after the Closing Date.


 


33

















 


(b)                                 Seller shall keep confidential, and cause its
Affiliates and its and their officers, directors, employees and advisors to
keep confidential, all information relating to Company and its Subsidiary.
Purchaser shall be free to use and disclose all or any of such proprietary
information and trade secrets that (i) were already in Purchaser’s possession
at the time of disclosure to Purchaser, (ii) are a matter of public knowledge,
(iii) have been or are hereafter published other than through Purchaser or (iv)
are lawfully obtained by Purchaser from a third Person without restrictions of
confidentiality.


 


(c)                                  Seller hereby assigns, effective at the
Closing, to Purchaser its rights under all confidentiality agreements entered
into by Seller with any Person in connection with the proposed sale of Company
to the extent such rights relate to Company and its Subsidiary. Copies of such
confidentiality agreements shall be provided to Purchaser on the Closing Date.


 


6.6                               Reasonable Best Efforts


 


(a)                                  On the terms and subject to the conditions of
this Agreement, each Party shall use its reasonable best efforts to cause the
Closing to occur, including taking all actions necessary to comply promptly
with all legal requirements that may be imposed on it or any of its Affiliates
with respect to the Closing.


 


(b)                                 Each of Seller and Purchaser shall as
promptly as possible, but in no event later than February 16, 2007, file with
the United States Federal Trade Commission (the FTC)
and the United States Department of Justice (the DOJ)
the notification and report form required for the Transactions pursuant to the
HSR Act (HSR Filing). Any supplemental information requested by
the FTC or DOJ in connection with any such HSR Filing (Requested Information) shall
also be provided as promptly as practicable. Seller and Purchase shall request
early termination of waiting period under the HSR Act relating to the
Transactions by so indicating in the HSR Filing. Any such HSR Filing and provision
of Requested Information shall be in substantial compliance with the
requirements of the HSR Act. Each of Seller and Purchaser shall furnish to the
other such necessary information and reasonable assistance as the other may
request in connection with its preparation of any such HSR Filing or the
provision of any Requested Information. Seller and Purchaser shall keep each
other apprised of the status of any communications with, and any inquiries or
requests for additional information from, the FTC or the DOJ. Each Party shall
use its reasonable best efforts to obtain clearance required under the HSR Act
for the completion of the Transactions.


 


(c)                                  Each of Seller and Purchaser shall (i) as
promptly as practicable make all filings with any Governmental Authority
required by it under any antitrust Laws (other than the HSR Act) with respect
to the Transactions and (ii) comply at the earliest practical date with any
request for supplemental information received from any Governmental Authority
in respect of such filings or the Transactions. Each of Seller and Purchaser
shall furnish to the other such necessary information and reasonable assistance
as the other may request in connection with its preparation of any such filings
or supplemental information. Seller and Purchaser shall keep each other
apprised of the status of any communications with, and any inquiries or
requests for additional information from, any Governmental Authority in respect
of such filings or the Transactions. Each Party shall use its reasonable best
efforts to obtain any clearance required under any antitrust Laws for the
completion of the Transactions.


 


(d)                                 Prior to the Closing and as may be reasonably
requested thereafter, each Party shall, and shall cause its Affiliates to, use
its reasonable best efforts to obtain, and to cooperate in obtaining, all
consents from third parties necessary or appropriate to permit the completion
of the Transactions; provided, however, that
the Parties shall not be required to pay or commit to pay any amount to (or
incur any obligation in favor of) any Person from whom any such consent may be
required (other than nominal filing or application fees).


 


34

















 


6.7                               Supplemental Disclosure


 


Seller
shall have the continuing right and obligation until the Closing promptly to
supplement or amend the Disclosure Schedules with respect to any matter
hereafter that comes to the knowledge of Seller that, if existing or known at
the date of this Agreement, would have been required to be set forth or
described in the Disclosure Schedules; provided,
however, that no supplement or amendment to the Disclosure Schedules
relating to matters arising prior to the date of this Agreement shall be
considered as an exception to any representation or warranty for purposes of
determining whether Purchaser is entitled to indemnification under Article
11 for breach thereof (it being understood and agreed that any such
supplement or amendment to the Disclosure Schedules relating to matters arising
after the date of this Agreement shall be considered as an exception to any
representation or warranty for purposes of determining whether Purchaser is
entitled to indemnification under Article 11 for breach thereof).


 


6.8                               Post-Closing Cooperation


 


(a)                                  Seller and Purchaser shall cooperate with
each other, and shall cause their officers, employees, agents, auditors and
representatives to cooperate with each other, for a period of sixty (60) days
after the Closing to ensure the orderly transition of Company and its
Subsidiary from Seller to Purchaser and to minimize any disruption to Company
and its Subsidiary and the other respective businesses of Seller and Purchaser
that might result from the Transactions. After the Closing, upon reasonable
written notice, Seller and Purchaser shall furnish or cause to be furnished to
each other and their Affiliates and their respective employees, counsel,
auditors and representatives access, during normal business hours, to such
information and assistance relating to Company and its Subsidiary (to the
extent within the control of such Party) as is reasonably necessary for
financial reporting and accounting matters.


 


(b)                                 Each Party shall reimburse the other for
reasonable out-of-pocket costs and expenses incurred in assisting the other
pursuant to this Section 6.8. Neither Party shall be required by this Section
6.8 to take any action that would unreasonably interfere with the conduct
of its business or unreasonably disrupt its normal operations (or, in the case
of Purchaser, those of Company or its Subsidiary). Any information relating to
Company and its Subsidiary received by Seller pursuant to this Section 6.8
shall be subject to Section 6.5(b).


 


6.9                               Publicity


 


From
the date of this Agreement through the Closing Date, no public release or
announcement concerning this Agreement or the Transactions shall be issued by
either Party without the prior consent of the other Party (which consent shall
not be unreasonably withheld), except as such release or announcement may be
required by Law or the rules or regulations of any United States or foreign
securities exchange, in which case the Party required to make the release or
announcement shall allow the other Party reasonable time to comment on such
release or announcement in advance of such issuance; provided, however, that (a) each of Seller and Purchaser may
make internal announcements to their respective employees that are consistent
with the Parties’ prior public disclosures regarding the Transactions after
reasonable prior notice to and consultation with the other Party and (b) Seller
may make such communications to the participants to in the Seller ESOP as are
necessary to obtain the Seller Stockholder Approval (copies of which shall be
provided to Purchaser reasonably in advance of distribution).


 


6.10                        Records


 


On
the Closing Date, Seller shall deliver or cause to be delivered to Purchaser
all material agreements, documents, books, records and files (collectively, Records),  if any, in the
possession of Seller relating to


 


35

















 


the
business and operations of Company or its Subsidiary to the extent not then in
the possession of Company and its Subsidiary, subject to the following
exceptions:


 


(a)                                  Purchaser recognizes that certain Records may
contain incidental information relating to Company and its Subsidiary or may
relate primarily to Subsidiaries, divisions or businesses of Seller other than
Company and its Subsidiary, and that Seller may retain such Records and shall
provide copies of the relevant portions thereof to Purchaser; and


 


(b)                                 Seller may retain any Tax Returns, and
Purchaser shall be provided with copies of such Tax Returns that relate to
Company’s and its Subsidiary’s separate Tax Returns or separate Tax liability.


 


6.11                        Certain Licenses and Permits


 


Seller
agrees that all permits that are held in the name of any employee, officer,
director, stockholder, agent or otherwise on behalf of Company or its
Subsidiary shall be duly and validly transferred to Company or its Subsidiary
without consideration prior to the Closing and that the warranties,
representations, covenants and conditions contained in this Agreement shall
apply to the same as if held by Company or its Subsidiary as of the date of
this Agreement.


 


6.12                        Further Assurances


 


From
time to time, as and when reasonably requested by either Party, the other Party
shall execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such
further or other actions, as such other Party may reasonably deem necessary or
desirable to complete the Transactions.


 


6.13                        Refinancing of Indebtedness


 


Seller
shall, and shall cause Company and its Subsidiary, to take all actions as may
be necessary to permit Purchaser to, and shall cooperate with Purchaser to,
cause any outstanding borrowings (including any letters of credit) under
Company’s credit facility to be repaid or prepaid with funds as may be arranged
by Purchaser, as the case may be, including by providing any required
prepayment or similar notices, and any and all Liens on any assets or
properties of Company or its Subsidiary relating to such borrowings to be
released, in each case, at and as of the Closing.


 


6.14                        Declaration of Dividend


 


Prior
to Closing and subject to applicable Law, Seller shall cause Company and its
Subsidiary to declare a dividend in accordance with the Kentucky Business
Corporation Act on the Shares (or the shares of its Subsidiary, as the case may
be) in such amounts and such forms as may be reasonably requested by Purchaser
not fewer than ten (10) Business Days prior to Closing, which dividends shall
be settled at and as of Closing, by payment by Purchaser to Seller of the
Purchase Price.


 


6.15                        Solvency


 


At
and as of the Closing, Purchaser shall adequately capitalize Company and its
Subsidiary such that immediately following the Closing each shall be able to
pay its debts as same become due in the usual course of business.


 


36

















 


7.                                      EMPLOYEE BENEFIT PLAN
MATTERS


 


7.1                               Past Service Credit


 


On
and after the Closing Date, Purchaser shall give the Affected Employees credit
for service with Seller, Company, its Subsidiary and ERISA Affiliates under any
employee benefit plans or arrangements maintained by Purchaser for purposes of
eligibility to participate and vesting of benefits, but not for purposes of
benefit accrual under any pension or retirement plans or arrangements.


 


7.2                               Continuation of Compensation
and Benefits


 


Until
the first anniversary of the Closing Date, Purchaser shall, or shall cause its
Subsidiaries to, provide (a) each Affected Employee with salary and bonus
opportunities that are no less favorable to such Affected Employee than those
in effect immediately prior to the Closing Date and (b) Affected Employees with
employee benefit plans and arrangements (other than salary and bonus
opportunities, other than equity or equity-based programs, including the Seller
ESOP) that are, except as otherwise specifically provided in this Section
7.2, substantially similar in the aggregate to those provided to the Affected
Employees immediately prior to the Closing Date.


 


7.3                               Waiver of Limitations;
Preexisting Conditions; Co-payments and Deductibles


 


Purchaser
shall (a) waive all limitations as to preexisting conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Affected Employees under any welfare benefit plans of
Purchaser and its Subsidiary (Purchaser Welfare Plans) in which
the Affected Employees and their dependents may be eligible to participate
after the Closing Date to the extent waived under the applicable corresponding
Employee Plan immediately prior to the Closing Date and (b) provide each
Affected Employee with credit for any co-payments and deductibles paid prior to
the Closing Date in the calendar year in which the Closing Date occurs (or, if
later, in the calendar year in which Affected Employees and their dependents
commence participation in the applicable Purchaser Welfare Plan) for purposes
of satisfying any applicable deductible or out-of-pocket requirements under any
Purchaser Welfare Plans in which the Affected Employees are eligible to
participate after the Closing Date.


 


7.4                               Accrued Vacation, Holiday
and Sick Pay


 


Purchaser
shall honor all vacation days, holiday and sick pay accrued by each Affected
Employee as of the Closing Date.


 


7.5                               Seller ESOP


 


(a)                                  At or prior to the Closing, Seller shall
amend the Seller ESOP such that (i) Affected Employees will be provided with a
one time opportunity to elect to receive a distribution of their entire vested
account balance in a single lump sum of cash during a sixty (60) day period
commencing on or about May 20, 2008, based on the value of Seller Common Stock
as of September 29, 2007 and (ii) Affected Employees who do not elect to
receive their entire vested account balance in a single lump sum of cash during
this sixty (60) day period will be eligible to receive their distributions in
accordance with the rules applying to other participants in the Seller ESOP who
terminate employment.


 


(b)                                 Promptly after the completion of (i) the
allocation of employer contributions and earnings for the Seller ESOP plan year
ending September 29, 2007, (ii) the audit of the Seller ESOP for the Seller
ESOP plan year ending September 29, 2007 and (iii) the independent appraisal of
the Seller ESOP as of September 29, 2007, all of which are anticipated to be
completed by approximately the end of May, 2008, Seller


 


37

















 


shall
provide to Purchaser the following information for each Affected Employee who
is a participant in the Seller ESOP and is less than one hundred percent (100%)
vested in his/her Seller ESOP account as of September 29, 2007:  (A) a schedule listing the value of the Seller
ESOP account balances as of September 29, 2007 for each such Affected Employee,
and (B) the Seller ESOP vesting percentage as of September 29, 2007 for each
such Affected Employee.


 


8.                                      TAX MATTERS


 


8.1                               Tax Representations


 


Seller
represents and warrants to Purchaser that, as of the date of this Agreement and
as of the Closing Date:


 


	
  (a)

  	
  all Tax returns,
  statements, reports and forms (collectively, the Returns) that
  are required to be filed with any Taxing Authority on or before the Closing
  Date with respect to any Pre-Closing Tax Period by, or with respect to,
  Company and its Subsidiary have been, or will be, timely filed with the
  appropriate Taxing Authority on or before the Closing Date;

  
	
   

  	
   

  
	
  (b)

  	
  Company and its Subsidiary
  have timely paid all Taxes shown as due and payable on the Returns that have
  been filed;

  
	
   

  	
   

  
	
  (c)

  	
  the Returns that have been
  filed are true, correct and complete in all material respects;

  
	
   

  	
   

  
	
  (d)

  	
  the charges, accruals and
  reserves for Taxes in respect of Company and its Subsidiary reflected on the
  books of Company and its Subsidiary are adequate to cover tax liabilities
  accruing through the end of the last period for which Company and its
  Subsidiary ordinarily record items on their books;

  
	
   

  	
   

  
	
  (e)

  	
  there is no Proceeding or
  audit now proposed or pending against or with respect to Company or its
  Subsidiary in respect of any Tax;

  
	
   

  	
   

  
	
  (f)

  	
  neither Company nor its
  Subsidiary will be required to include any item of income in, or exclude any
  item of deduction from, taxable income for any Post-Closing Tax Period as a
  result of any (i) change in method of accounting for a Pre-Closing Tax Period
  under Section 481 of the Code (or any corresponding or similar provision of
  state, local or non-U.S. income Tax Law), (ii) “closing agreement” as
  described in Section 7121 of the Code (or any corresponding or similar
  provision of state, local or non-U.S. income Tax Law), (iii) installment sale
  or open transaction disposition made on or prior to the Closing Date, (iv)
  prepaid amount received on or prior to the Closing Date, or (v) deferred
  intercompany gain or excess loss account described in Section 1502 of the
  Code (or any corresponding or similar provision of state, local or non-U.S.
  Law;

  
	
   

  	
   

  
	
  (g)

  	
  each of Company and its
  Subsidiary has been a validly electing S corporation or qualifying subchapter
  S subsidiary within the meaning of Section 1361 and 1362 of the Code at all
  times during its existence;

  
	
   

  	
   

  
	
  (h)

  	
  neither Company nor its
  Subsidiary shall be liable for any Tax under Section 1374 of the Code in
  connection with the deemed sale of Company’s and its Subsidiary’s assets
  pursuant to Treas. Reg. Section 1.1361-5(b);

  
	
   

  	
   

  
	
  (i)

  	
  neither Company nor its
  Subsidiary, in the past ten (10) years, acquired assets from another
  corporation in a transaction in which Company’s or its Subsidiary’s tax basis
  of the acquired

  



 


38

















 


	
   

  	
  assets was determined, in
  whole or in part, by reference to the Tax basis of the acquired assets (or
  any other property) in the hands of the transferor;

  
	
   

  	
   

  
	
  (j)

  	
  neither Company nor its
  Subsidiary has been party to, or a material advisor to, any reportable
  transaction within the meaning of Treas. Reg. Sec. 1.6011-4 or any
  predecessor provision;

  
	
   

  	
   

  
	
  (k)

  	
  neither Company nor its
  Subsidiary has waived any statute of limitations in respect of Taxes or
  agreed to any extension of time with respect to a Tax assessment or
  deficiency, which waiver or extension is currently in effect;

  
	
   

  	
   

  
	
  (1)

  	
  there are no Liens for
  Taxes (other than for Taxes not yet due and payable) upon any of the assets
  of Company or its Subsidiary;

  
	
   

  	
   

  
	
  (m)

  	
  all Taxes that Company or
  its Subsidiary have been or are required by Law to withhold or to collect for
  payment have been duly withheld and collected, and have been paid over to the
  appropriate Taxing Authority or accrued, reserved against and entered on the
  books and records of Company or its Subsidiary;

  
	
   

  	
   

  
	
  (n)

  	
  neither Company nor its
  Subsidiary has granted to any person any power of attorney that is currently
  in force with respect to any Tax matter relating to Company or its
  Subsidiary;

  
	
   

  	
   

  
	
  (o)

  	
  neither Company nor its
  Subsidiary is a party to, bound by, or obligated under, any Tax sharing
  agreement pursuant to which it will have any obligation to make any payments to
  any person after the Closing; and

  
	
   

  	
   

  
	
  (p)

  	
  neither Company nor its
  Subsidiary is a “United States real property holding corporation,” as defined
  in Section 897(c)(2) of the Code.

  



 


8.2                               Tax Covenants


 


(a)                                 Purchaser covenants that it will not cause or
(in the case of clause (ii) and (iii)) permit Company, its Subsidiary or any
Affiliate of Purchaser to make or change any Tax election for the Pre-Closing
Tax Period, amend any Return for the Pre-Closing Tax Period or take any Tax
position on any Return for the Pre-Closing Tax Period that results in any
increased Tax liability or reduction of any Tax Asset of Company or its
Subsidiary in respect of any Pre-Closing Tax Period. Purchaser agrees that
(except to the extent appropriate to reflect the relative fault of Seller, on
the one hand, and Purchaser, on the other hand) Seller is to have no liability
for any Tax resulting from any action, referred to in the preceding sentence,
of Company, its Subsidiary, Purchaser or any Affiliate of Purchaser, and agrees
to indemnify and hold harmless Seller and its Affiliates against (i) any such
Tax (together with any interest, penalty, addition to Tax or additional
amount), (ii) any liabilities, costs, expense (including reasonable expenses of
investigation and attorney’s fees and expenses), losses, damages, assessments,
settlements or judgments arising out of or incident to the imposition,
assessment or assertion of any such Tax, and (iii) any Tax or damages incurred
or suffered by Seller or any of its Affiliates, arising out of a breach of any
other covenant or agreement contained in this Article 8, but only to the
extent appropriate to reflect the relative fault of Purchaser, on the one hand,
and Seller, on the other hand. Notwithstanding the foregoing, Purchaser shall
not indemnify and hold harmless Seller and its Affiliates against any liability
for Taxes to the extent attributable (under a relative fault standard) to a
breach by Seller or its Affiliates under this Agreement. Seller agrees to give
prompt notice to Purchaser of the assertion of any claim, or the commencement
of any action or proceeding, in respect of which indemnity may be sought under
this Section 8.2(a). Purchaser


 


39

















 


may
participate in any such suit, action or proceeding at its own expense and the
Parties shall cooperate in the defense or prosecution thereof.


 


(b)                                Purchaser shall promptly pay or cause to be paid to Seller all refunds
of Taxes (except for refunds relating to Taxes reflected on the Closing Balance
Sheet and except for refunds resulting from a carryback to the Pre-Closing Tax
Period of any loss, credit or deduction arising in the Post-Closing Tax Period,
all of which refund shall be for the account of Purchaser and shall be paid by
Seller to Purchaser or its Affiliates reasonably promptly after receipt thereof
by Seller or its Affiliates) and interest thereon received by Purchaser, any
Affiliate of Purchaser or Company or its Subsidiary attributable to Taxes paid
by Seller or Company or its Subsidiary (or any predecessor of Affiliate of
Seller) with respect to any Pre-Closing Tax Period.


 


(c)                                  All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest and costs and expenses relating to such Taxes) incurred in connection
with the Transactions (including any real property transfer Tax and any similar
Tax) shall be borne by the Party required by Law to pay such Taxes and fees.


 


(d)                                 All Returns required to be filed by Seller
after the Closing Date with respect to Company or its Subsidiary with respect
to any Pre-Closing Tax Period will be filed by Seller when due (taking into
account any extension of a required filing date). Any such Return shall be
prepared in a manner consistent with past practice and without a change of any
election or any accounting method and shall be submitted by Seller to Purchaser
(together with schedules, statements and, to the extent requested by Purchaser,
supporting documentation) at least forty-five (45) days prior to the due date
(including extensions) of such Return. Purchaser shall have the right to review
all work papers and procedures used to prepare any such Return. If Purchaser,
within ten (10) Business Days after delivery of such Return, notifies Seller in
writing that it objects to any items in such Return, the disputed items shall
be resolved (within a reasonable time, taking into account the deadline for
filing such Return) by a nationally recognized independent accounting firm
chosen and mutually acceptable to both Purchaser and Seller. Upon resolution of
all such items, the relevant Return shall be adjusted to reflect such
resolution and shall be binding upon the Parties without further adjustment.
The costs, fees and expenses of such accounting firm shall be borne equally by
Purchaser and Seller. Seller shall not file any amended Return with respect to
Company or its Subsidiary without the prior written consent of Purchaser.


 


(e)                                 Purchaser shall prepare, or cause to be
prepared, Returns required to be filed by Company or its Subsidiary with
respect to any Post-Closing Tax Period. Purchaser shall timely file or cause to
be timely filed, all such Returns. Any such Return shall be prepared in a
manner consistent with past practice and without a change of any election or
any accounting method and shall be submitted by Purchaser to Seller (together
with schedules, statements and, to the extent requested by Seller, supporting
documentation) at least forty-five (45) days prior to the due date (including
extensions) of such Return. Seller shall have the right to review all work
papers and procedures used to prepare any such Return. If Seller, within ten
(10) Business Days after delivery of any such Return, notifies Purchaser in
writing that it objects to any items in such Return, the disputed items shall
be resolved (within a reasonable time, taking into account the deadline for
filing such Return) by a nationally recognized independent accounting firm
chosen and mutually acceptable to both Purchaser and Seller. Upon resolution of
all such items, the relevant Return shall be adjusted to reflect such
resolution and shall be binding upon the Parties without further adjustment.
The costs, fees and expenses of such accounting firm shall be borne equally by
Purchaser and Seller.


 


40

















 


8.3                               Tax Sharing


 


Neither
Company nor its Subsidiary is a party to any Tax sharing agreement. This
Agreement shall be the sole Tax sharing agreement relating to Company and its
Subsidiary for all Pre-Closing Tax Periods.


 


8.4                               Cooperation on Tax Matters


 


Purchaser
and Seller agree to furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including access to
books and records) and assistance relating to Company and its Subsidiary as is
reasonably necessary for the filing of any return (including any report
required pursuant to Section 6043 of the Code and all Treasury Regulations
promulgated thereunder), for the preparation for any audit, and for the
prosecution or defense of any claim, suit or proceeding relating to any
proposed adjustment. Purchaser and Seller agree to retain or cause to be
retained all books and records pertinent to Company and its Subsidiary until
the applicable period for assessment under applicable Law (giving effect to any
and all extensions or waivers) has expired, and to abide by or cause the
abidance with all record retention agreements entered into with any Taxing
Authority. Purchaser agrees to cause Company and its Subsidiary to give Seller
reasonable notice prior to transferring, discarding or destroying any such
books and records relating to Tax matters and, if Seller so requests, Company
and its Subsidiary shall allow Seller to take possession of such books and records.
Purchaser and Seller shall cooperate with each other in the conduct of any
audit or other proceedings involving Company or its Subsidiary for any Tax
purposes and each shall execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this Section 8.4.


 


8.5                               Indemnification by Seller


 


(a)                                  Seller hereby indemnifies Purchaser from and
against and agrees to hold it harmless from any (i) Tax of Company or its
Subsidiary relating to a Pre-Closing Tax Period, (ii) Tax imposed upon or
relating to Seller for any period, including any such Tax for which Company of
its Subsidiary may be liable under Treasury Regulation Section 1.1502-6 (or any
corresponding or similar provision of state, local or non-U.S. Law), as a transferee
or successor, by contract or otherwise, (iii) Tax resulting from a breach of
any representation or warranty contained in Section 8.1, (iv) Tax for
which Seller is responsible pursuant to Section 8.2(d), (v) any Tax or
Damages incurred or suffered by Purchaser or any of its Affiliates (including
Company or its Subsidiary) arising out of a breach of any covenant or agreement
contained in this Article 8 (but only to the extent appropriate to
reflect the relative fault of Purchaser, on the one hand, and Seller, on the
other hand), and (vi) liabilities, costs, expenses (including reasonable
expenses of investigation and attorneys’ fees and expenses), arising out of or
incident to the imposition, assessment or assertion of any such foregoing Tax,
including those incurred in the contest in good faith in appropriate
proceedings relating to the imposition, assessment or assertion of any such
Tax, in each case incurred or suffered by Purchaser, any of its Affiliates or,
effective upon the Closing, Company and its Subsidiary; provided, however, that Seller shall have
no liability for the payment of any loss attributable to or resulting from any
action described in Section 8.2(a) (except to the extent appropriate to
reflect the relative fault of Seller and Purchaser).


 


(b)                                 For purposes of this Section 8.5, in
the case of any Taxes that are imposed on a periodic basis and are payable for
a Taxable period that includes (but does not end on) the Closing Date, the
portion of such Tax related to the portion of such Taxable period ending on the
Closing Date shall (i) in the case of any Taxes other than Taxes based upon or
related to income, be deemed to be the amount of such Tax for the entire
Taxable period 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 number of days in the entire Taxable period and (ii) in the case
of any Tax based upon or related to income be deemed equal to the amount that
would be payable if the relevant Taxable period ended on the Closing Date under
an


 


41

















 


interim
closing of the books. Any credits relating to a Taxable period that begins
before and ends after the Closing Date shall be taken into account as though
the relevant Taxable period ended on the Closing Date. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practices of Company and its Subsidiary.


 


(c)                                  If Seller’s indemnification obligation under
this Section 8.5 arises in respect of an adjustment that makes allowable
to Purchaser, any of its Affiliates or, effective upon the Closing, Company or
its Subsidiary any deduction, amortization, exclusion from income or other
allowance (a Tax Benefit) that would not, but for such
adjustment, be allowable, and Purchaser reasonably expects that such Tax
Benefit could be actually realized in cash within two (2) years of the Final
Determination with respect to the Tax giving rise to Seller’s indemnification
obligation, then any payment by Seller to Purchaser shall be an amount equal to
(i) the amount otherwise due but for this subsection (c), minus (ii) the present value of the Tax
Benefit multiplied by the federal or state, as the case may be, corporate Tax
rate reasonably expected by Purchaser to apply (taking into account the
deductibility of any such Taxes) at the time such Tax Benefit is expected to be
actually realized. The present value referred to in the preceding sentence shall
be determined using a discount rate equal to the federal underpayment rate in
effect at the time the relevant adjustment is made and assuming that the Tax
Benefit will be actually realized in cash at the earliest date or dates
reasonably expected by Purchaser.


 


(d)                                 Any payment by Seller pursuant to this Section
8.5 shall be made in immediately available funds not later than two (2)
Business Days before the date payment of the Taxes to which such payment
relates is due, or, if no Tax is payable, within fifteen (15) days after
receipt by Seller of written notice from Purchaser stating that any loss has
been paid by Purchaser, any of its Affiliates or, effective upon the Closing,
Company and the amount thereof and of the indemnity payment requested.


 


(e)                                  If any claim or demand for Taxes in respect
of which indemnity may be sought pursuant to this Section 8.5 is
asserted in writing against Purchaser, any of its Affiliates or, effective upon
the Closing, Company or its Subsidiary, Purchaser shall notify Seller of such
claim or demand within ten (10) days of receipt thereof, or such earlier time
that would allow Seller to timely respond to such claim or demand, and shall
give Seller such information with respect thereto as Seller may reasonably
request. Seller may, at its own expense, participate in and, upon timely notice
to Purchaser, assume and control the conduct of any audit or examination by, or
contest or litigation against, any Taxing Authority (a Tax Proceeding) (i) relating solely to a taxable period ending on or before the
Closing Date or (ii) relating to any Straddle Period in which the claim of the
applicable Taxing Authority in connection with such Tax Proceeding for which
Seller would be liable under this Agreement exceeds the claim of the applicable
Taxing Authority in connection with such Tax Proceeding for which Purchaser
would be liable under this Agreement; provided,
however, that Seller shall (A) provide Purchaser with a timely and
reasonably detailed account of each stage of such Tax Proceeding, (B) consult
with Purchaser before taking any significant action in connection with such Tax
Proceeding, (C) consult with Purchaser and offer Purchaser an opportunity to
comment before submitting any written materials prepared or furnished in connection
with such Tax Proceeding, (D) defend such Tax Proceeding diligently and in good
faith as if the taxpayer whose Return is at issue were the only party in
interest in connection with such Tax Proceeding and (E) not settle, compromise
or abandon any such Tax Proceeding without obtaining the prior written consent
of Purchaser if such settlement, compromise or abandonment could have an adverse
impact on Purchaser, Company or its Subsidiary. Purchaser shall have the right
to control any other Tax Proceeding.


 


(f)                                    Any claim that may be brought by Purchaser
against Seller pursuant to provisions of this Section 8.5 shall
terminate sixty (60) days after the applicable statute of limitations for any
such claims terminates.


 


42
















9.                                      CONDITIONS PRECEDENT


 


9.1                               Conditions to Each Party’s
Obligation


 


The
obligations of each of Purchaser and Seller to complete the Closing is subject
to the satisfaction or waiver on or prior to the Closing of the following
conditions:


 


(a)                                 The Seller Stockholder Approval shall have
been received.


 


(b)                                Any applicable waiting period under the HSR Act relating to the
Transactions shall have expired or been terminated.


 


(c)                                 No applicable Law or Order enacted, entered,
promulgated, enforced or issued by any Governmental Authority or other legal
restraint or prohibition preventing the completion of the Transactions shall be
in effect.


 


(d)                                There shall not be pending or threatened before any Governmental
Authority any Proceeding challenging or seeking to restrain or prohibit the
Transactions or seeking to obtain from Purchaser or any of its Affiliates any
material damages in connection therewith.


 


9.2                               Conditions to Obligation of
Purchaser


 


The
obligations of Purchaser to complete the Closing is subject to the satisfaction
or waiver on or prior to the Closing of the following conditions:


 


(a)                                 The representations and warranties of Seller
in this Agreement shall be true and correct as of the Closing Date as though
made as of such time, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct on and as of such earlier date), in each
case except for breaches as to matters that, individually or in the aggregate,
could not be expected to have a Material Adverse Effect. Purchaser shall have
received a certificate signed by an authorized officer of Seller to such
effect.


 


(b)                                Seller shall have performed or complied in all material respects with
all obligations and covenants required by this Agreement to be performed or
complied with by Seller by the time of the Closing, and Purchaser shall have
received a certificate signed by an authorized officer of Seller to such
effect.


 


(c)                                 From the date of this Agreement to the
Closing, there has not been any event, occurrence or development that,
individually or in the aggregate, has had or that could reasonably be expected
to have, a Material Adverse Effect.


 


(d)                                Seller shall have delivered to Purchaser at the Closing a certificate,
in form and substance satisfactory to Purchaser, certifying that the
Transactions are exempt from withholding pursuant to the Foreign Investment in
Real Property Tax Act.


 


(e)                                 Purchaser shall have received the opinion of
Wyatt, Tarrant & Combs, LLP, counsel to Seller, substantially in the form
of Exhibit D.


 


(f)                                   Purchaser shall not have received any
communication from the National Association of Attorneys General, any
representative thereof or any other Governmental Authority that would
reasonably cause Purchaser to believe that the completion of the Transactions
will affect the


 


43

















 


status
of the Company’s Subsidiary as a “subsequent participating manufacturer” under,
or otherwise materially affect the rights, liabilities and obligations of
Company’s Subsidiary under, the MSA.


 


9.3                               Conditions to Obligation of
Seller


 


The
obligation of Seller to sell is subject to the satisfaction (or waiver by
Seller) on or prior to the Closing Date of the following conditions:


 


(a)                                 The representations and warranties of
Purchaser made in this Agreement shall be true and correct as of the Closing
Date as though made as of such time, except to the extent such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties qualified as to materiality shall be true and
correct on and as of such earlier date). Seller shall have received a
certificate signed by an authorized officer of Purchaser to such effect.


 


(b)                                Purchaser shall have performed or complied in all material respects
with all obligations and covenants required by this Agreement to be performed
or complied with by Purchaser by the time of the Closing, and Seller shall have
received a certificate signed by an authorized officer of Purchaser to such
effect.


 


9.4                               Frustration of Closing
Conditions


 


Neither
Purchaser nor Seller may rely on the failure of any condition set forth in this
Article 9 to be satisfied if such failure was caused by such Party’s
failure to act in good faith or to use its reasonable best efforts to cause the
Closing to occur, as required by Section 6.5.


 


10.                               TERMINATION


 


10.1                        Termination


 


(a)                                  This Agreement may be terminated at any time
prior to the Closing:


 


	
  (i)

  	
  by mutual written
  agreement of Seller and Purchaser;

  
	
   

  	
   

  
	
  (ii)

  	
  by Seller or Purchaser, if
  the Closing does not occur on or prior to May 31, 2007; provided, however, that the right to
  terminate this Agreement under this Section l0.l(a)(ii) shall not be
  available to any Party whose failure to fulfill any obligation under this
  Agreement shall have been the cause of, or shall have resulted in, the
  failure of the Closing to occur on or prior to such date;

  
	
   

  	
   

  
	
  (iii)

  	
  by Seller or Purchaser, if
  the Seller Stockholder Approval shall not have been received at the
  Stockholders Meeting;

  
	
   

  	
   

  
	
  (iv)

  	
  by Seller, if any of the
  conditions set forth in Sections 9.1 or 9.3  shall
  have become incapable of fulfillment, and shall not have been waived by
  Seller;

  
	
   

  	
   

  
	
  (v)

  	
  by Purchaser, if any of
  the conditions set forth in Sections 9.1 or 9.2  shall
  have become incapable of fulfillment and shall not have been waived by
  Purchaser;

  
	
   

  	
   

  
	
  (vi)

  	
  by Purchaser, if the
  Stockholders Meeting (including any adjournment thereof) is not held on or
  prior to March 2, 2007;

  



 


44

















 


	
  (vii)

  	
  by Purchaser, if the Board
  of Directors shall withdraw, modify or qualify its recommendation that the
  stockholders of Seller vote in favor of the Transactions; or

  
	
   

  	
   

  
	
  (viii)

  	
  by either Purchaser or
  Seller in the event that any Governmental Authority shall have issued an
  Order or taken any other action restraining, enjoining or otherwise
  prohibiting the Transactions and such Order or other action shall have become
  final and nonappealable;

  



 


provided, however, that the Party seeking termination pursuant to Sections 10.1(a)(iv),
(v) or (viii) is not then in material breach of any of its
representations, warranties, covenants or agreements contained in this
Agreement.


 


(b)                                In the event of termination by Seller or Purchaser pursuant to this Section
10.1, written notice thereof
shall forthwith be given to the other Party and the Transactions shall be
terminated, without further action by either Party.


 


10.2                        Termination Fee


 


If
this Agreement is terminated pursuant to Section 10.1(a)(iii), 10.1(a)(vi)
or l0.l(a)(vii), then (a)(i) Seller shall pay Twenty Million U.S.
Dollars (U.S.$20,000,000) to Purchaser and reimburse Purchaser and its
Affiliates for all charges and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement up to a maximum
amount of Five Million U.S. Dollars (U.S.$5,000,000), as promptly as reasonably
practicable, and in no event more than two (2) Business Days after the date of
such termination payable by wire transfer of immediately available funds to
such account or accounts as Purchaser may designate and (ii) Purchaser’s
obligations under the ninth paragraph of the Confidentiality Agreement
(relating to non-solicitation of employees) shall terminate and be without
further force or effect and (b) if, within eighteen (18) months following such
termination of this Agreement, Seller shall complete any Alternative Proposal,
Seller shall pay Purchaser an additional Fifty-Five Million U.S. Dollars
(U.S.$55,000,000), as promptly as reasonably practicable, and in no event more
than two (2) Business Days after the date of completion of such Alternative
Proposal payable by wire transfer of immediately available funds to such
account or accounts as Purchaser may designate. Seller acknowledges that the
agreements contained in this Section 10.2 are an integral part of the
Transactions and that, without these agreements, Purchaser would not enter into
this Agreement. Accordingly, if Seller fails promptly to pay any amount due
pursuant to this Section 10.2 and, in order to obtain such payment,
Purchaser commences a suit which results in a judgment against Seller for the
fee set forth in this Section 10.2, Seller shall pay to Purchaser its
costs and expenses (including reasonable attorneys’ fees and expenses) in
connection with such suit, together with interest on the amount of the fee at
the Prime Rate in effect on the date such payment was required to be made. The
payment of the fees contemplated by this Section 10.2 shall be in
addition to, and not in limitation of, any other remedies or damages to which
Purchaser shall be entitled in equity or law as a result of any willful breach
by Seller of its covenants under this Agreement.


 


10.3                        Effect of Termination


 


If
this Agreement is terminated as provided in Section 10.1, this Agreement
shall become null and void and of no further force and effect, except for the
provisions of Sections 10.2, 12.3, 12.5, 12.6, 12.7
and 12.12. Nothing in this Section 10.3 shall be deemed to
release any Party from any liability for any breach by such Party of the terms
and provisions of this Agreement prior to such termination or to impair the
right of any party to compel specific performance by any other Party of its
obligations under this Agreement.


 


45

















 


11.                               SURVIVAL; INDEMNIFICATION


 


11.1                        Survival


 


(a)                                  The representations and warranties of the
Parties contained in this Agreement or in any certificate or other writing
delivered pursuant to this Agreement or in connection with this Agreement shall
survive the Closing until the date that is eighteen months following the
Closing Date; provided that the
representations and warranties contained in Sections 3.1, 3.2, 3.6,
4.1, 4.2,  4.3,  5.1  and 5.2  shall
survive indefinitely. Notwithstanding the preceding sentence, any
representation or warranty in respect of which indemnity may be sought under
this Agreement shall survive the time at which it would otherwise terminate
pursuant to the preceding sentence, if the Party seeking indemnification with
respect thereto has delivered notice of an indemnification claim for breach of
such representation or warranty (in accordance with the provisions of this Article
11) to the Party against whom such indemnity may be sought prior to such
time. Subject to the preceding sentence, after the termination of a
representation and warranty in accordance with this Section 11.1(a), no
Party shall have any indemnification obligation under this Article 11
with respect to such representation and warranty.


 


(b)                                 The obligations of the Parties under this
Agreement that by their terms contemplate performance after the Closing
(including those set forth in this Article 11) shall survive the Closing
Date until the performance thereof.


 


11.2                        Indemnification


 


(a)                                  Seller hereby indemnifies Purchaser and its
Affiliates (including Company and its Subsidiary) from and against and agrees
to hold each of them harmless from any and all damage, loss, liability and
expense (including reasonable expenses of investigation and attorneys’ fees and
expenses in connection with any Proceeding) (Damages)  incurred or suffered by Purchaser
or any of its Affiliates arising out of any breach of representation, warranty
or covenant made or to be performed by Seller pursuant to this Agreement (other
than pursuant to Article 8 and without giving any effect to any
qualification as to “material”, “in all material respects” or “Material Adverse
Effect” therein); provided that
(i) Seller shall not be liable under this Section 11.2(a) unless the
aggregate amount of Damages with respect to all matters covered by this Section
11.2(a) exceeds Seven Million Five Hundred Thousand U.S. Dollars
(U.S.$7,500,000) (and then only to the extent of such excess) and (ii) Seller’s
maximum liability under this Section 11.2(a) shall not exceed One
Hundred Seventy-Five Million U.S. Dollars (U.S.$175,000,000); provided, however, that the limitations
set forth in the immediately preceding proviso shall not apply to any
indemnification obligation of Seller in respect of Damages incurred or suffered
by Purchaser or any of its Affiliates arising out of any breach of
representation or warranty contained in Sections 3.1,  3.2, 3.6, 4.1, 4.2 or 4.3
or arising out of any breach of any covenant made or to be performed by
Seller pursuant to this Agreement.


 


(b)                                 Purchaser hereby indemnifies Seller and its
Affiliates from and against and agrees to hold each of them harmless from any
and all Damages incurred or suffered by Seller or any of its Affiliates arising
out of any breach of representation, warranty or covenant made or to be
performed by Purchaser pursuant to this Agreement (other than pursuant to Article
8 and without giving any effect to any qualification as to “material” or “in
all material respects” therein); provided that
(i) Purchaser shall not be liable under this Section 11.2(b) unless the
aggregate amount of Damages with respect to all matters covered by this Section
11.2(b) exceeds Seven Million Five Hundred Thousand U.S. Dollars
(U.S.$7,500,000) (but then only to the extent of such excess) and (ii)
Purchaser’s maximum liability under this Section 11.2(b) shall not
exceed One Hundred Seventy-Five Million U.S. Dollars (U.S.$175,000,000); provided, however, that the limitations
set forth in the immediately preceding proviso shall not apply to any
indemnification obligation of Purchaser in respect of Damages incurred or
suffered by Seller or any of its Affiliates


 


46

















 


arising
out of any breach of representation or warranty contained in Sections 5.1
or 5.2 or arising out of any breach of any
covenant made or to be performed by Purchaser pursuant to this Agreement.


 


(c)                                  This Section 11.2 shall not apply to
indemnification for Taxes, which shall be governed by Article 8.


 


11.3                        Third Party Claims


 


(a)                                  The Party seeking indemnification under Section
11.2 (the Indemnified Party) agrees to give reasonably prompt
notice to the Party against whom indemnity is sought (the Indemnifying Party) of the assertion of any claim, or the commencement of any
Proceeding (Claim) in respect of which indemnity may be sought
under Section 11.2 and to provide the Indemnifying Party such
information with respect thereto that the Indemnifying Party may reasonably
request. The failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any of its obligations under this Agreement, except to
the extent that the Indemnifying Party demonstrates that such failure shall
have actually materially adversely prejudiced the Indemnifying Party.


 


(b)                                 The Indemnifying Party shall be entitled to
participate in the defense of any Claim asserted by any third party (Third
Party Claim)  and,
unless the Indemnifying Party is also a party to such Proceeding and the
Indemnified Party determines that joint representation would be inappropriate
and subject to the limitations set forth in this Section 11.3, shall be
entitled to control and appoint lead counsel for such defense, which counsel
must be reasonably satisfactory to the Indemnified Party, in each case at its
expense. Within ten (10) days following the receipt of notice by the
Indemnifying Party of any Third Party Claim, the Indemnifying Party shall
provide notice to the Indemnified Party of its election to assume control of the
defense of such Third Party Claim in accordance with the provisions of this Section
11.3. Notwithstanding the foregoing, if an Indemnified Party reasonably
determines that there is a reasonable probability that a Third Party Claim may
adversely affect it or its Affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this Article
11, the Indemnified Party may, by notice to the Indemnifying Party, assume
the exclusive right to defend, compromise or settle such Third Party Claim.


 


(c)                                  If the Indemnifying Party shall assume the
control of the defense of any Third Party Claim in accordance with the
provisions of this Section 11.3, (i) it will be conclusively established
for purposes of this Agreement that such Third Party Claim are within the scope
of and subject to indemnification under this Article 11, (ii) the
Indemnifying Party shall obtain the prior written consent of the Indemnified
Party before entering into any settlement of such Third Party Claim, if (A) the
settlement does not fully, completely and unconditionally release the
Indemnified Party from all liabilities and obligations with respect to such
Third Party Claim, (B) the settlement contains any admission of liability or
wrongdoing on the part of the Indemnified Party or (C) the settlement imposes
any injunctive or other equitable relief against the Indemnified Party and
(iii) the Indemnified Party shall be entitled to participate in the defense
of such Third Party Claim and to employ separate counsel of its choice for such
purpose at its own expense; provided,
however, that the Indemnified Party shall have the right to employ,
at the Indemnifying Party’s expense, one counsel of its choice in each
applicable jurisdiction (if more than one jurisdiction is involved) to
represent the Indemnified Party if, in the Indemnified Party’s reasonable judgment,
there exists an actual or potential conflict of interest between the
Indemnified Party and the Indemnifying Party or if the Indemnifying Party (A)
elects not to defend, compromise or settle a Third-Party Claim, (B) fails to
notify the Indemnified Party within the required time period of its election as
provided in Section 11.3(b),  or
(C) having timely elected to defend a Third-Party Claim, fails, in the reasonable
judgment of the Indemnified Party, after at least ten (10) days’ notice to the
Indemnifying Party, to adequately prosecute or pursue such defense, and in each
such case the Indemnified Party may defend such Third-Party Claim on behalf of
and for the account and risk of the Indemnifying Party.


 


47

















 


(d)                                Each party shall cooperate, and cause their respective Affiliates to
cooperate, in the defense or prosecution of any Third Party Claim and shall
furnish or cause to be furnished such records, information and testimony, and
attend such conferences, discovery proceedings, hearings, trials or appeals, as
may be reasonably requested in connection therewith.


 


(e)                                 Any indemnification required by Section
11.2  shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense as and when bills are received or Damages are incurred.


 


(f)                                   Each party hereby consents to the
non-exclusive jurisdiction of any court in which a Third Party Claim is brought
against any Indemnified Person for purposes of any claim that such Indemnified
Person may have under this Agreement with respect to such Third Party Claim or
the matters alleged thereby and agree that process with respect to such a claim
may be served on such party with respect to such claim anywhere in the world.


 


(g)                                The above provisions of Section 11.3 shall not apply to
indemnification for Taxes, which shall be governed by Article 8.


 


11.4                        Procedures


 


In
the event any Indemnified Party should have a claim against any Indemnifying
Party under Section 11.2 that does not involve a Third Party Claim being
asserted against or sought to be collected from such Indemnified Party, the
Indemnified Party shall deliver notice of such claim with reasonable promptness
to the Indemnifying Party. The failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any of its obligations under this
Agreement, except to the extent that the Indemnifying Party demonstrates that such
failure shall have materially adversely prejudiced the Indemnifying Party. If
the Indemnifying Party does not notify the Indemnified Party within thirty (30)
days following its receipt of such notice that the Indemnifying Party disputes
its liability to the Indemnified Party under Section 11.2, such claim
specified by the indemnified party in such notice shall be conclusively deemed
a liability of the Indemnifying Party under Section 11.2 and the
Indemnifying Party shall pay the amount of such liability to the Indemnified
Party on demand or, in the case of any notice in which the amount of the claim
(or any portion thereof) is estimated, on such later date when the amount of
such claim (or such portion thereof) becomes finally determined. If the Indemnifying
Party has timely disputed its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute and, it not resolved through
negotiations, such dispute shall be resolved by litigation in accordance with Sections
12.6 and 12.7.


 


11.5                        Assignment of Claims


 


If
the Indemnified Party receives any payment from an Indemnifying Party in
respect of any Damages pursuant to Section 11.2 and the Indemnified
Party could have recovered all or a part of such Damages from a third party (a Potential Contributor)  based
on the underlying claim asserted against the Indemnifying Party, the
Indemnified Party shall assign such of its rights to proceed against the
Potential Contributor as are necessary to permit the Indemnifying Party to
recover from the Potential Contributor the amount of such payment.


 


11.6                        Exclusivity


 


Except
with respect to any claims for common law fraud or willful or intentional
misrepresentation, after the Closing, Section 11.2 will provide the
exclusive monetary remedy for any claim arising as a result of or in connection
with any breach of any representation, warranty or covenant contained in this
Agreement. For the avoidance of doubt, Seller shall have no liability to
Purchaser or its Affiliates for Damages arising from or relating to any alleged
health effects of tobacco products of Company or its


 


48

















 


Subsidiary
other than under Section 11.2 for any claim arising as a result of or in
connection with any breach of any representation or warranty set forth in Section
4.17.


 


12.                               MISCELLANEOUS


 


12.1                        Notices


 


All
notices, requests, claims, demands and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
delivered by hand, sent by facsimile or sent, postage prepaid, return receipt
requested, by registered, certified or express mail or overnight courier
service and shall be deemed given when so delivered by hand or facsimile (if
received prior to 5 p.m. in the place of receipt and such day is a Business Day
in the place of receipt, otherwise, any such notice, request or communication
shall be deemed not to have been received until the next succeeding Business
Day in the place of receipt), or if mailed, three days after mailing (one
Business Day in the case of express mail or overnight courier service), the
respective Parties at the following addresses (or at such other address for a
Party as shall be specified in a notice given in accordance with this Section
12.1):


 


if
to Purchaser, to:


 


Maui
Acquisition Corporation 


c/o
Imperial Tobacco Group 


PO
Box 244 


Upton
Road 


Bristol
BS99 7UJ 


United
Kingdom 


Attention:
Ken Hill


Conrad
Tate


Adrian
Welsh 


Telephone:
+44 (0)117 963 6633 


Facsimile:
+44 (0)117 966 7405


 


with
copies to:


 


Allen
& Overy LLP 


One
Bishops Square 


London
El 6AO 


United
Kingdom 


Attention:
Jeremy Parr


Telephone:
+44 (0)20 3088 0000 


Facsimile:
+44 (0)20 3088 0088


 


and


 


Allen
& Overy LLP 


1221
Avenue of the Americas 


New
York, New York 10020 


Attention:
Michael Gilligan 


Telephone:
(212) 610-6300 


Facsimile:
(212) 610-6399


 


49

















 


if
to Seller, to:


 


Houchens
Industries, Inc.


700
Church Street


Bowling
Green, Kentucky 42101-9009


Attention:
President


Telephone:
(270) 843-3252


Facsimile:
(270)780-2893


 


with
a copy to:


 


Wyatt,
Tarrant & Combs, LLP 


2800
PNC Plaza 


Louisville,
Kentucky 40202 


Attention:
Franklin K. Jelsma 


Telephone:
(502) 589-5235 


Facsimile:
(502) 589-0309


 


12.2                        Amendments and Waivers


 


(a)                                 Any provision of this Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing and
is signed, in the case of an amendment, by each Party, or in the case of a
waiver, by the Party against whom the waiver is to be effective.


 


(b)                                Any waiver of any term or condition of this Agreement shall not be
construed as a waiver of any subsequent breach, or a subsequent waiver of the
same term or condition or a waiver of any other term or condition, of this
Agreement. The failure of either Party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights. No failure or delay by
either Party in exercising any right, power or privilege under this Agreement
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. The rights and remedies provided in this
Agreement shall be cumulative and not exclusive of any rights or remedies
provided by Law.


 


12.3                        Expenses


 


All
costs and expenses (including fees and disbursement of its counsel, accountants
and other advisors) incurred in connection with the preparation, negotiation,
execution, delivery or performance of this Agreement and the completion of the
Transactions shall be paid by the Party incurring such cost or expense; provided, however, that all expenses
incurred by Company or its Subsidiary in connection with this Agreement shall
be borne by Seller or paid prior to the Closing. Notwithstanding the foregoing,
a Party in breach of this Agreement shall, on demand, indemnify and hold
harmless the other Party for and against all reasonable out-of-pocket expenses,
including legal fees, incurred by such other Party by reason of the enforcement
and protection of its rights under this Agreement. The payment of such expenses
is in addition to any other relief to which such other Party may be entitled.


 


12.4                        Successors and Assigns


 


The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted assigns; provided that neither Party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other Party. Notwithstanding the
foregoing, (a) Purchaser may assign its right to purchase the Shares to a
Subsidiary or an affiliate of Purchaser without the prior written consent of
Seller, and (b) Purchaser may assign its rights under this Agreement by way of
security and such secured party may assign such rights


 


50

















 


by
way of exercise of remedies; provided,
however, that no assignment shall limit or affect the assignor’s
obligations hereunder. Any attempted assignment in violation of this Section
12.4 shall be void.


 


12.5                        Governing Law


 


This
Agreement (and any claims or disputes arising out of or related to this
Agreement or to the Transactions or to the inducement of either Party to enter
into this Agreement, whether for breach of contract, tortious conduct or
otherwise and whether predicated on common law, statute or otherwise) shall in
all respects be governed by and construed in accordance with the Laws of the
State of New York, including all matters of construction, validity and
performance, in each case without reference to any conflict of law rules that
might lead to the application of the Laws of any other jurisdiction. Each Party
further agrees that the Laws of the State of New York bear a reasonable
relationship to this Agreement and irrevocably and unconditionally waives,
pursuant to Section 5-1401 of the New York General Obligations Law, any
objection to the application of the Laws of the State of New York to any
action, suit or proceeding arising out of this Agreement or the Transactions
and further irrevocably and unconditionally waives and agrees not to plead or
claim that any such action, suit or proceeding should not be governed by the
Laws of the State of New York.


 


12.6                        Consent to Jurisdiction


 


Each
Party irrevocably and unconditionally submits to the exclusive jurisdiction of
the United States District Court for the Southern District of New York, or if
such federal court is unavailable, state courts located in New York County, for
the purposes of any suit, action or other proceeding arising out of this
Agreement or the Transactions. Each Party hereby waives formal service of
process and agrees that service of any process, summons, notice or document by
U.S. registered mail to such Party’s respective address set forth above shall
be effective service of process for any action, suit or proceeding in New York
with respect to any matters to which it has submitted to jurisdiction in this Section
12.6. Each Party irrevocably and unconditionally waives, pursuant to the
provisions of Section 5-1402 of the New York General Obligations Law, any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the Transactions in such courts and hereby and thereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.


 


12.7                        WAIVER OF JURY TRIAL


 


EACH
PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) DIRECTLY OR INDIRECTLY RELATING TO ANY DISPUTE ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS. Each Party (i)
certifies that no representative, agent or attorney of the other Party has
represented, expressly or otherwise, that such other Party would not, in the
event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges
that it and the other Party have been induced to enter into this Agreement by,
among other things, the mutual waivers and certifications in this Section
12.7.


 


12.8                        Counterparts; Third Party
Beneficiaries


 


This
Agreement may be signed in any number of counterparts (including by facsimile
signature), each of which shall be an original, with the same effect as if the
signatures were upon the same instrument. This Agreement shall become effective
when each Party shall have received a counterpart of this Agreement signed by
each other Party. This Agreement is for the sole benefit of the Parties and
their successors and


 


51

















 


permitted
assigns and nothing express or implied in this Agreement is intended or shall
be construed to confer upon any Person other than the Parties any legal or
equitable rights or remedies under this Agreement.


 


12.9                        Severability


 


If
any provision of this Agreement (or any portion thereof) or the application of
any such provision (or any portion thereof) to any Person or circumstance shall
be held invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement (or the remaining portion
thereof) or the application of such provision to any other Person or
circumstances.


 


12.10                 Entire Agreement


 


This
Agreement constitutes the entire agreement and understanding between the
Parties with respect to the subject matter of this Agreement and supersedes all
prior agreements and understandings, both oral and written, between Purchaser
and Seller with respect to the subject matter of this Agreement, including the
letter agreement dated January 4, 2007. The Exhibits and Schedules are an
integral part of this Agreement and are incorporated by reference into this
Agreement for all purposes.


 


12.11                 Headings and Captions;
Exhibits and Schedules


 


The
headings and captions in this Agreement and in the table of contents are
included for convenience of reference only and shall be ignored in the
construction or interpretation of this Agreement. All Exhibits and Schedules
annexed to or referred to in this Agreement are incorporated in and made a part
of this Agreement as if set forth in full. Any capitalized terms used in any
Schedule or Exhibit but not otherwise defined therein, shall have the meaning
as defined in this Agreement. All references to Sections, Articles or Exhibits
contained in this Agreement shall be to Sections, Articles or Exhibits of or to
this Agreement unless otherwise stated.


 


12.12                 Disclosure Schedules


 


Disclosure
of any fact, matter or item in any Section of the Disclosure Schedules in connection
with a particular Section of this Agreement shall be deemed to have been
disclosed with respect to another Section of this Agreement if, and only if,
such disclosure is sufficient such that the relevance of such disclosure to
such other Section of this Agreement would be reasonably apparent to a reader
of such disclosure.


 


12.13                 Equitable Relief


 


The
Parties agree that any of them may pursue equitable relief in the form of a
temporary restraining order or injunction, or such other equitable relief as
may be otherwise contemplated by this Agreement.


 


[SIGNATURE PAGE FOLLOWS]


 


52

















 


IN
WITNESS WHEREOF, the
Parties have caused this Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.


 


	
   

  	
  MAUI ACQUISITION CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ KENNETH HILL

  	
   

  
	
   

  	
   

  	
  Name: KENNETH HILL

  
	
   

  	
   

  	
  Title: PRESIDENT

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOUCHENS INDUSTRIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Jimmie Gipson

  	
   

  
	
   

  	
   

  	
  Name: Jimmie Gipson

  
	
   

  	
   

  	
  Title: President and CEO

  



 


 


[SIGNATURE
PAGE TO STOCK PURCHASE AGREEMENT, DATED AS OF FEBRUARY 8, 2007]


 

















 


EXHIBIT A


 


FORM OF PARENT GUARANTEE


 


IMPERIAL TOBACCO GROUP PLC, a public limited company organized under the
laws of England & Wales (Parent)  irrevocably
guarantees each and every representation, warranty, covenant, agreement and
other obligation of Maui Acquisition Corporation, a Delaware corporation (Purchaser), and any of its permitted assigns,
under the Stock Purchase Agreement, dated as of February 8, 2007 (the Agreement), by and between
Purchaser and Houchens Industries, Inc., a Kentucky corporation (Seller), and the full and timely
performance of Purchaser’s obligations under the provisions of the Agreement.
This is a guarantee of payment and performance, and not of collection, and
Parent acknowledges and agrees that this guarantee is full and unconditional,
and no release or extinguishment of Purchaser’s obligations or liabilities
(other than in accordance with the terms of the foregoing Agreement), whether
by decree in any bankruptcy proceeding or otherwise, shall affect the
continuing validity and enforceability of this guarantee, as well as any
provision requiring or contemplating performance by Purchaser.


 


Parent hereby waives, for
the benefit of Seller, (1) any right to require Seller, as a condition of
payment or performance by Parent, to proceed against Purchaser or pursue any
other remedy whatsoever and (2) to the fullest extent permitted by law, any
defenses or benefits that may be derived from or afforded by law that limit the
liability of or exonerate guarantors or sureties, except to the extent that any
such defense is available to Purchaser.


 


Without limiting in any way
the foregoing guarantee, Parent covenants and agrees to take all actions to
enable Purchaser to adhere to each provision of the Agreement that requires an
act or omission on the part of Parent.


 


The provisions of Article
12 of the Agreement are incorporated herein, mutatis mutandis, except that notices and other
communications hereunder to Parent shall be delivered to:


 


Imperial
Tobacco Group PLC


PO
Box 244


Upton
Road


Bristol
BS99 7UJ


United
Kingdom


Telephone
Number: +44 (0)117 963 6636


Facsimile
Number:   +44 (0)117 966 7405


 


Attention:
Ken Hill


Conrad
Tate 


Adrian
Welsh


 


Parent understands that
Seller is relying on this guarantee in entering into the Agreement and may
enforce this guarantee as if Parent were a party to the Agreement.


 


[SIGNATURE PAGE FOLLOWS]


 


A-1

















 


IN WITNESS WHEREOF, Parent has duly executed this Guarantee as of this 8th day
of February, 2007.


 


	
   

  	
  IMPERIAL
  TOBACCO GROUP PLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  
	
   

  	
   

  	
  Title: 

  



 


[SIGNATURE PAGE TO GUARANTEE, DATED AS OF FEBRUARY 8,
2007]


 


A-2

















 


EXHIBIT B


 


FORM OF SUPPORT AGREEMENT


 


February
8, 2007


 


Maui Acquisition Corporation



c/o Imperial Tobacco Group 


PO Box 244 


Upton Road 


Bristol BS99 7UJ 


United Kingdom


 


Ladies and Gentlemen:


 


The undersigned, who
collectively constitute all members of the ESOP Committee of the Houchens
Industries, Inc. Employee Stock Ownership Plan (the ESOP) understands
that Houchens Industries, Inc., a Kentucky corporation (Seller)  and Maui Acquisition Corporation, a
Delaware corporation (Purchaser),
propose to enter into a Stock Purchase Agreement, dated as of
February 8, 2007 (the Stock Purchase
Agreement), providing
for, among other things, the sale and purchase of all of the issued and
outstanding capital stock of CBHC, Inc., a Kentucky corporation. Capitalized
terms used without definition in this letter agreement shall have the meanings
ascribed thereto in the Stock Purchase Agreement.


 


The undersigned are entering
into this letter agreement in consideration of, and as a condition to,
Purchaser’s willingness to enter into the Stock Purchase Agreement and to
consummate the transactions contemplated thereby (the Transactions).


 


The undersigned hereby agree
as follows:


 


1.                                      In connection with every meeting of the
stockholders of Seller called, and at every postponement or adjournment
thereof, and in connection with every action or approval by written consent of
the stockholders of Seller, the undersigned agree to take all lawful actions to
cause the trustee of the Seller ESOP to vote all unallocated shares of Seller
Common Stock held in the Seller ESOP together with all allocated shares of
Seller Common Stock with respect to which the ESOP Trustees do not receive
direction from the relevant ESOP participant as to how such should be voted at
the Stockholders Meeting (a) in favor of approval of the Transactions and (b)
against (i) any proposal made in opposition to the Transactions or in
competition or inconsistent with the Transactions, (ii) any Alternative
Proposal and (iii) any action or agreement that would result in a breach of any
representation, warranty, covenant or agreement or any other obligation of
Seller under the Stock Purchase Agreement. Notwithstanding the foregoing, the
undersigned may fail to take such actions (or refrain from taking such actions)
if they shall have determined in good faith, after consultation with outside
and inside counsel to Seller and Seller’s Financial Advisor, that such action
is required in order for the undersigned to comply with their fiduciary duties
under applicable Law.


 


2.                                      The undersigned represent and warrant that
they have all necessary power and authority to enter into this letter
agreement, and that this letter agreement is the legal, valid and binding
agreement of the undersigned and is enforceable against the undersigned in accordance
with its terms.


 


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3.                                      This letter agreement shall terminate upon
the termination of the Stock Purchase Agreement in accordance with its terms.


 


4.                                      This agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Kentucky, without
giving effect to principles of conflict of laws.


 


5.                                      The undersigned recognize and acknowledge
that a breach by them of any covenants or agreements contained in this letter
agreement will cause Purchaser to sustain damages for which it would not have
an adequate remedy at law for money damages, and therefore the undersigned
agree that in the event of any such breach, Purchaser shall be entitled to
specific performance of such covenants and agreements and injunctive and other
equitable relief in addition to any other remedy to which it may be entitled,
at law or in equity; provided, however, that
the undersigned shall incur no personal liability whatsoever to Purchaser in
connection with this letter agreement.


 


6.                                      The effectiveness of this letter agreement
shall be conditioned upon the execution and delivery of the Stock Purchase
Agreement by each of the parties thereto.


 


[SIGNATURE PAGE FOLLOWS]


 


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Please confirm that the
foregoing correctly states the understanding between us and you by signing and
returning to us a counterpart hereof.


 


	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Ruell Houchens

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Noel Hunt

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Jimmie Gipson

  
	
   

  
	
  Confirmed
  as of the date

  
	
  first
  above written:

  
	
   

  
	
  MAUI
  ACQUISITION CORPORATION

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					



 


[SIGNATURE
PAGE TO SUPPORT AGREEMENT, DATED AS OF FEBRUARY 8, 2007]


 


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EXHIBIT C


 


AGREED ACCOUNTING PRINCIPLES


 


This schedule includes
significant accounting policies and procedures to be used in determining the
Closing Statement. Generally, it is expected that the Closing Statement will be
determined in conformity with (a) the accounting principles specified below,
(b) with respect to any matters not addressed below, such matters shall be
determined using the same accounting principles, policies, procedures and
methods as were employed in connection with the preparation of the Company’s
Audited Financial Statement and (c) with respect to any matters not addressed
by (a) or (b) above, such matters shall be in a manner consistent with US GAAP
as in effect on September 30, 2006.


 


1.                                      Estimates. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates. For significant estimates including but not
limited to estimates described below, Purchaser has reviewed the Company’s methodology
and assumptions for making such estimates as of the Balance Sheet Date and
believes such methodologies and assumptions are reasonable. Further, Purchaser
agrees that the same methodology and assumptions will be used in making
estimates as of the Closing Date.


 


2.                                      Revenue Recognition. Revenues from the sale of the Company’s
products will be generally recognized as products are delivered to customers.
The Company’s policy has and will continue to be to invoice customers and
recognize sales revenue the day following the day a customer’s order is
shipped; and, in most cases, the products are shipped to and received by
customers a day after receiving the order.


 


3.                                      Accounts Receivable. Accounts receivable will be stated at the
amount billed to customers. The Company will provide an allowance for doubtful
accounts, which is based upon a review of outstanding receivables and
historical collection information. Domestic customers primarily participate in
the Company’s EFT program with terms available of two, seven and 10 days.
Government account terms are 12 days. Accounts past due more than 28 days will
be considered delinquent. Delinquent receivables will be written off based on
individual credit evaluation and specific circumstances of the customer.


 


4.                                      Inventory Pricing. Inventories will be stated at the lower of
cost (first-in, first-out method) or market. The Company currently does not
have a reserve for obsolete inventory as management does not believe any
reserve would be material. This policy will continue in preparing the closing
financial statements.


 


5.                                      Property and Equipment. The Company will capitalize property and
equipment with a cost greater than or equal to $10,000. Property and equipment
will be depreciated over the estimated useful life of each asset. Annual
depreciation is computed using the straight-line method. Management does not
currently believe any of the property and equipment is impaired.


 


6.                                      Parts Inventory. Parts inventory will be stated at its
original cost. The Company currently does not have a reserve for obsolete parts
inventory as management does not believe any reserve would be material.


 


7.                                      Deferred Financing Costs. Deferred financing costs will be amortized on
a straight-line basis over the life of the related debt. For purposes of determining
the Closing Statement, deferred financing costs will not be written off due to
any impairment that may result from the Closing.


 


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8.                                      Goodwill and Brand
Trademarks. For purposes of
determining the Closing Statement, no evaluation for impairment will be
performed and no impairment will be deemed to exist. As a result, no adjustment
will be made to the amounts reflected as of the Balance Sheet Date related to
Goodwill and Brand Trademarks.


 


9.                                      Promotional Programs. The Company accrues costs associated with
promotional programs used to create product awareness in the marketplace. These
programs include buydowns, coupons and volume rebates. Costs associated with
these promotional programs will be included in accrued expenses based on
estimated carton sales, whether the customer is a retailer or wholesaler and an
estimated percentage or rebate earned that will be paid to the retailer or
wholesaler.


 


10.                                Sales Returns and
Allowances. An estimated
allowance for returned product is recorded when the Company’s products are
sold. The allowance is based on the rolling twelve months sales level
multiplied by the Company’s estimated return rate. The amount is calculated net
of the benefit from refund of related federal excise taxes.


 


11.                                MSA Liability. The Company uses estimates to determine the
MSA liability and related expense on a monthly basis. These estimates are based
on published information regarding market share of the various participants in
the cigarette industry, the estimated change in the overall industry market
share for the year in question, the expected consumer price index change as
measured by the MSA requirements, and other factors that affect the MSA
liability allocation.


 


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EXHIBIT D


 


FORM OF OPINION OF WYATT TARRANT & COMBS LLP


 


March
[    ], 2007


 


Maui Acquisition Corporation



c/o Imperial Tobacco Group 


PO Box 244 


Upton Road 


Bristol BS99 7UJ 


United Kingdom


 


Ladies and Gentlemen:


 


We have acted as counsel to
Houchens Industries, Inc., a Kentucky corporation (“Houchens”), in connection
with the Stock Purchase Agreement dated as of February 8, 2007 (the “Stock
Purchase Agreement”) between Maui Acquisition Corporation (“Purchaser”) and
Houchens relating to the purchase by Purchaser from Houchens of all of the
issued and outstanding stock (the “CBHC Stock”) of CBHC, Inc., a Kentucky
corporation (“CBHC”), and related documents. We are providing this opinion (“Opinion”)
to Purchaser at the request of Houchens and pursuant to Section 9.2(e) of the
Stock Purchase Agreement.


 


In connection with this
Opinion, we have reviewed (i) the Asset Purchase Agreement dated as of July 24,
1996 among Brown & Williamson Tobacco Corporation (“B&W”), Commonwealth
Brands, Inc. (“Commonwealth”) and Commonwealth Tobacco, LLC (“Tobacco”), as
amended by the Agreement at Closing dated November 1, 1996 among the same
parties (the “B&W Agreement”) pursuant to which B&W (a) sold to Tobacco
certain brands of cigarettes and assets related thereto, (b) granted to Tobacco
certain rights to indemnification against certain third party claims (such
rights to indemnification, as defined in Section 10 of the B&W Agreement,
are hereinafter referred to as the “Indemnification Rights”), and (c) consented
to the assignment by Tobacco to Commonwealth of its rights under the B&W
Agreement, including the Indemnification Rights; and (ii) the Share Exchange
Agreement (formerly designated as Stock Purchase Agreement) dated as of July 19,
2001 (the “CBHC Agreement”) among CBHC, Brad M. Kelley and Frank Kelley as
Custodian under the Uniform Transfers to Minors Act, pursuant to which CBHC
acquired all of the issued and outstanding stock of Commonwealth (the “Commonwealth
Stock”) from the owners thereof. The transactions described in the preceding
clauses (i) and (ii) are hereinafter referred to as the “Prior Transactions.”
The agreements, documents and instruments evidencing the Prior Transactions are
hereinafter referred to as the “Prior Transaction Agreements.”


 


For the purpose of rendering
this Opinion, we have examined such questions of law as we have deemed
appropriate. As to certain questions of fact, we have relied without
independent investigation (unless expressly otherwise indicated herein) on, and
we have assumed the accuracy and validity of, statements and certificates of
certain officers and directors of Houchens and certificates of certain public
officials. However, except for the documents described above we have not,
unless expressly otherwise indicated herein, reviewed any other documents or
conducted any other examination of any public records, and this Opinion is
limited accordingly.


 


For the purpose of rendering
this Opinion, we have assumed that (i) the copy of each Prior Transaction
Agreement that we have examined in connection with the preparation of this
Opinion is authentic, complete and conforms to the original, (ii) all required
consents to the execution, delivery and performance of each Prior


 


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Transaction Agreement were
obtained, (iii) all signatures contained in each Prior Transaction Agreement
are genuine, (iv) each of the Prior Transactions was consummated in accordance
with the applicable Prior Transaction Agreement, (v) each Prior Transaction
Agreement constitutes the legal, valid and binding obligations of the parties
thereto, enforceable in accordance with its terms, (vi) no action has been
taken which amends, modifies or revokes any of the Prior Transaction Documents,
(vii) after the completion of the transaction contemplated by the Stock
Purchase Agreement, Purchaser will continue to own the CBHC Stock and CBHC will
continue to own the Commonwealth Stock, (viii) any action seeking a judicial
determination with respect to the Indemnification Rights would be filed in a
Kentucky court, and (ix) a Kentucky court, in any such action, would (a) hold,
in accordance with Section 25 of the B&W Agreement, that the B&W
Agreement shall be governed by and construed in accordance with Kentucky law,
without regard to the principles of conflict of laws, and (b) enforce the
B&W Agreement in accordance with its terms.


 


Based upon the foregoing,
and subject to the assumptions, qualifications and limitations set forth
herein, we are of the opinion that the acquisition of the CBHC Stock by
Purchaser in accordance with the terms of the Stock Purchase Agreement will not
alter or impair Commonwealth’s right to enforce the Indemnification Rights
against B&W in accordance with, and subject to the conditions set forth in,
Section 10 of the B&W Agreement.


 


We call your attention to
the fact that the acquisition of the Commonwealth Stock by CBHC under the CBHC
Agreement resulted in the occurrence of a Change in Control or Bankruptcy Event
(“Event”) as defined in Section 10 of the B&W Agreement. However, Section
10(f) of the B&W Agreement provides that the occurrence of an Event only
relieves B&W of the obligation, but not the right, to defend or to continue
the defense of any and all Third Party Claims, as defined in the B&W
Agreement, of the type described in Section 10(c)(iii) of the B&W
Agreement. Notwithstanding the occurrence of such Event, Commonwealth remains
entitled to indemnification from B&W with respect to Third Party Claims of the
type described in Sections 10(a)(ii) and (iii) of the B&W Agreement.


 


The foregoing opinions are
subject to and expressly limited by the following qualifications and
limitations, in addition to those previously set forth:


 


A.                                   This Opinion is limited to the law, excluding
the principles of conflict of laws, of the State of Kentucky, and we do not
express any opinion concerning any other law.


 


B.                                     This Opinion is furnished for the benefit of
Purchaser only, in connection with the execution and delivery of the Stock
Purchase Agreement only, and may not be relied upon by any other person or
entity, or in any other context, without our prior written consent. We
expressly disclaim any responsibility for advising you of any change occurring
hereafter in circumstances concerning the matters which are the subject of this
Opinion, including any changes in the law or in factual matters occurring after
the date of this Opinion.


 


Very truly yours,


 


 


WYATT, TARRANT & COMBS,
LLP


 


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