UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
For quarterly period ended March 29, 2008
 
 
Commission file number 1-4119
 
 
NUCOR CORPORATION
(Exact name of registrant as specified in its charter)
 
     
Delaware
 
13-1860817
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
 
 
 
1915 Rexford Road, Charlotte, North Carolina
 
28211
(Address of principal executive offices)
 
(Zip Code)
     
 
(704) 366-7000
(Registrant's telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x  Accelerated filer o  Non-accelerated filer o Smaller reporting company o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o  No x
 
288,559,893 shares of common stock were outstanding at March 29, 2008.
 

 
Nucor Corporation
Form 10-Q
March 29, 2008
 
INDEX
               
Page
Part I
Financial Information
 
                 
 
Item 1
Financial Statements (unaudited)
 
                 
   
Condensed Consolidated Statements of Earnings -
 
   
Three Months (13 Weeks) Ended March 29, 2008 and March 31, 2007
3
                 
   
Condensed Consolidated Balance Sheets - March 29, 2008 and
 
   
December 31, 2007
4
                 
   
Condensed Consolidated Statements of Cash Flows -
 
   
Three Months (13 Weeks) Ended March 29, 2008 and March 31, 2007
5
                 
   
Notes to Condensed Consolidated Financial Statements
6
                 
 
Item 2
Management's Discussion and Analysis of Financial Condition and
 
   
Results of Operations
16
                 
 
Item 3
Quantitative and Qualitative Disclosures About Market Risk
20
                 
 
Item 4
Controls and Procedures
21
                 
Part II
Other Information
 
                 
 
Item 1A
Risk Factors
22
                 
 
Item 6
Exhibits
22
                 
Signatures
22
                 
List of Exhibits to Form 10-Q
23
 

PART I. FINANCIAL INFORMATION

 
Item 1. Financial Statements
 
Nucor Corporation Condensed Consolidated Statements of Earnings (Unaudited)
(In thousands, except per share amounts)
 
   
Three Months (13 Weeks) Ended
 
 
 
March 29, 2008
 
March 31, 2007
 
           
Net sales
 
$
4,974,269
 
$
3,768,885
 
Costs, expenses and other:
             
Cost of products sold 
   
4,071,592
   
2,991,598
 
Marketing, administrative and other expenses  
   
169,714
   
136,210
 
Interest expense (income), net 
   
18,345
   
(9,162
)
Minority interests 
   
91,771
   
60,572
 
     
4,351,422
   
3,179,218
 
               
Earnings before income taxes
   
622,847
   
589,667
 
Provision for income taxes  
   
213,093
   
208,638
 
 Net earnings
 
$
409,754
 
$
381,029
 
               
Net earnings per share:
             
Basic 
 
$
1.42
 
$
1.27
 
Diluted  
 
$
1.41
 
$
1.26
 
               
Average shares outstanding:
             
Basic 
   
288,208
   
301,034
 
Diluted 
   
290,201
   
303,482
 
               
Dividends declared per share
 
$
0.52
 
$
0.61
 

 
See notes to condensed consolidated financial statements.
 
3


Nucor Corporation Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

   
March 29, 2008
 
Dec. 31, 2007
 
Assets
         
           
Current assets:
             
Cash and cash equivalents 
 
$
733,995
 
$
1,393,943
 
Short-term investments  
   
-
   
182,450
 
Accounts receivable, net 
   
1,965,002
   
1,611,844
 
Inventories 
   
1,877,371
   
1,601,600
 
Other current assets 
   
298,274
   
283,412
 
 Total current assets
   
4,874,642
   
5,073,249
 
               
Property, plant and equipment, net
   
3,631,792
   
3,232,998
 
               
Goodwill
   
1,698,168
   
847,887
 
               
Other intangible assets, net
   
894,617
   
469,936
 
               
Other assets
   
241,302
   
202,052
 
               
 Total assets
 
$
11,340,521
 
$
9,826,122
 
               
Liabilities and stockholders' equity
             
               
Current liabilities:
             
Short-term debt 
 
$
12,367
 
$
22,868
 
Long-term debt due within one year 
   
175,000
   
-
 
Accounts payable 
   
1,345,322
   
691,668
 
Federal income taxes payable 
   
131,151
   
-
 
Salaries, wages and related accruals 
   
284,611
   
436,352
 
Accrued expenses and other current liabilities 
   
421,194
   
431,148
 
 Total current liabilities
   
2,369,645
   
1,582,036
 
               
Long-term debt due after one year
   
2,491,600
   
2,250,300
 
               
Deferred credits and other liabilities
   
766,401
   
593,423
 
 
             
Minority interests
   
287,181
   
287,446
 
               
Stockholders' equity:
             
Common stock 
   
149,430
   
149,302
 
Additional paid-in capital 
   
280,981
   
256,406
 
Retained earnings 
   
6,880,580
   
6,621,646
 
Accumulated other comprehensive income, 
             
 net of income taxes
   
186,496
   
163,362
 
     
7,497,487
   
7,190,716
 
               
Treasury stock 
   
(2,071,793
)
 
(2,077,799
)
               
 Total stockholders' equity
   
5,425,694
   
5,112,917
 
               
 Total liabilities and stockholders' equity
 
$
11,340,521
 
$
9,826,122
 
 
See notes to condensed consolidated financial statements.
 
4

 
Nucor Corporation Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
 
   
Three Months (13 Weeks) Ended
 
   
March 29, 2008
 
March 31, 2007
 
           
Operating activities:
             
Net earnings
 
$
409,754
 
$
381,029
 
Adjustments:
             
Depreciation 
   
109,662
   
98,402
 
Amortization 
   
13,411
   
2,005
 
Stock-based compensation 
   
9,635
   
7,649
 
Deferred income taxes 
   
(8,663
)
 
(16,946
)
Minority interests 
   
91,769
   
60,572
 
Settlement of derivative hedges 
   
(283
)
 
(1,584
)
Changes in assets and liabilities (exclusive of acquisitions): 
             
 Accounts receivable
   
33,005
   
(122,598
)
 Inventories
   
8,014
   
(5,314
)
 Accounts payable
   
16,245
   
220,207
 
 Federal income taxes
   
189,411
   
204,993
 
 Salaries, wages and related accruals
   
(162,496
)
 
(232,499
)
 Other
   
(41,985
)
 
(30,406
)
               
Cash provided by operating activities
   
667,479
   
565,510
 
               
Investing activities:
             
Capital expenditures
   
(226,238
)
 
(91,349
)
Sale of interest in affiliates
   
-
   
29,500
 
Investment in affiliates
   
(17,118
)
 
(8,761
)
Disposition of plant and equipment
   
1,250
   
178
 
Acquisitions (net of cash acquired)
   
(1,402,179
)
 
(1,060,080
)
Purchases of investments
   
(209,605
)
 
(74,265
)
Proceeds from the sale of investments
   
392,055
   
997,433
 
Proceeds from currency derivative contracts
   
-
   
517,241
 
Settlement of currency derivative contracts
   
-
   
(511,394
)
               
Cash used in investing activities
   
(1,461,835
)
 
(201,497
)
               
Financing activities:
             
Net change in short-term debt
   
(10,501
)
 
6,096
 
Proceeds from the issuance of long-term debt
   
400,000
   
-
 
Issuance of common stock
   
6,158
   
6,601
 
Excess tax benefits from stock-based compensation
   
7,300
   
6,000
 
Distributions to minority interests
   
(91,993
)
 
(105,600
)
Cash dividends
   
(176,556
)
 
(181,155
)
               
Cash provided by (used in) financing activities
   
134,408
   
(268,058
)
               
Increase (decrease) in cash and cash equivalents
   
(659,948
)
 
95,955
 
               
Cash and cash equivalents - beginning of year
   
1,393,943
   
785,651
 
               
Cash and cash equivalents - end of three months
 
$
733,995
 
$
881,606
 
 
See notes to condensed consolidated financial statements.
 
5

 
Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited)

1.
BASIS OF INTERIM PRESENTATION: The information furnished in Item I reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods and are of a normal and recurring nature. The information furnished has not been audited; however, the December 31, 2007 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in Nucor’s annual report for the fiscal year ended December 31, 2007. Certain amounts for the prior year have been reclassified to conform to the 2008 presentation.

Accounting Pronouncements Recently Adopted - Effective January 1, 2008, Nucor adopted FASB Statement No. 157, “Fair Value Measurements” (“SFAS 157”), as it applies to financial assets and liabilities, which defines fair value, establishes a framework for measuring fair value and expands disclosures. The adoption of SFAS 157 for financial assets and liabilities did not have a material impact on our consolidated financial statements. See Note 9 for additional information regarding the adoption of this standard.

Recent Accounting Pronouncements - In March 2008, the FASB issued Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (SFAS 161), which is effective for Nucor in 2009. SFAS 161 amends SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” and requires enhanced disclosures about a company’s derivative and hedging activities. This standard is not expected to have a material impact on Nucor’s consolidated financial statements.

2.
ACQUISITION: On February 29, 2008, Nucor completed the acquisition of the stock of SHV North America Corporation, which owns 100% of The David J. Joseph Company (“DJJ”) and related affiliates, for a purchase price of approximately $1.44 billion. DJJ has been the broker of ferrous scrap for Nucor since 1969. In addition to its scrap processing and brokerage operations, DJJ owns over 2,000 scrap-related railcars and provides complete fleet management and logistics services to third parties.

Since scrap is Nucor’s largest single cost, the acquisition of DJJ provides an ideal growth platform for Nucor to expand our direct ownership in the steel scrap supply chain and further our raw materials strategy. The acquisition of DJJ’s scrap processing assets provide a partial hedge to our steel mills against scrap market volatility.

We have preliminarily allocated the purchase price to the individual assets acquired and liabilities assumed. Our valuations are subject to adjustment as additional information is obtained; however, these adjustments are not expected to be material. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed of DJJ as of the date of acquisition (in thousands):
 
6

 
Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued
 
Current assets
 
$
742,168
 
Property, plant and equipment
   
286,947
 
Goodwill
   
856,074
 
Other intangible assets
   
444,367
 
Other assets
   
6,211
 
Total assets acquired
   
2,335,767
 
         
Current liabilities
   
(695,520
)
Long-term debt
   
(16,300
)
Deferred credits and other liabilities
   
(180,340
)
Total liabilities assumed
   
(892,160
)
         
Net assets acquired
 
$
1,443,607
 
 
The preliminary purchase price allocation to the identifiable intangible assets is as follows (in thousands, except years):
 
       
Weighted -
Average Life
 
Customer relationships
 
$
384,500
   
20 years
 
Trade names
   
56,100
   
20 years
 
Other
   
3,767
   
18 years
 
   
$
444,367
   
20 years
 

The goodwill has been preliminarily allocated to the raw materials segment (see Note 5).

The results of DJJ have been included in the consolidated financial statements from the date of acquisition. Unaudited pro forma operating results for Nucor, assuming the acquisition of DJJ occurred at the beginning of each period are as follows (in thousands, except per share data):
 
   
Three Months (13 Weeks) Ended
 
 
 
March 29, 2008
 
March 31, 2007
 
           
Net sales
 
$
5,423,256
 
$
4,289,631
 
Net earnings
   
421,515
   
395,550
 
Net earnings per share:
             
Basic
 
$
1.46
 
$
1.31
 
Diluted
 
$
1.45
 
$
1.30
 

3.
INVENTORIES: Inventories consist of approximately 47% raw materials and supplies and 53% finished and semi-finished products at March 29, 2008 (43% and 57%, respectively, at December 31, 2007). Nucor’s manufacturing process consists of a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined.

Inventories valued using the last-in, first-out (LIFO) method of accounting represent approximately 37% of total inventories as of March 29, 2008 (46% as of December 31, 2007). If the first-in, first-out (FIFO) method of accounting had been used, inventories would have been $650.5 million higher at March 29, 2008 ($581.5 million higher at December 31, 2007). The percentage of inventories valued using the LIFO method of accounting has decreased since, in general, the cost of

7

Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued

inventories carried by subsidiaries that Nucor has acquired is valued using the FIFO method of accounting.

4.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is recorded net of accumulated depreciation of $4.03 billion at March 29, 2008 ($3.92 billion at December 31, 2007).

5.
GOODWILL AND OTHER INTANGIBLE ASSETS: The change in the net carrying amount of goodwill for the quarter ended March 29, 2008 by segment is as follows (in thousands):
 
   
Steel Mills
 
Steel Products
 
Raw Materials
 
All Other
 
Total
 
Balance at December 31, 2007
 
$
2,007
 
$
786,491
 
$
-
 
$
59,389
 
$
847,887
 
                                 
Acquisitions
   
-
   
444
   
856,074
   
-
   
856,518
 
                                 
Purchase price adjustments of previous
   
-
   
2,316
   
-
   
-
   
2,316
 
acquisitions
                               
                                 
Translation
   
-
   
(8,553
)
 
-
   
-
   
(8,553
)
                                 
Balance at March 29, 2008
 
$
2,007
 
$
780,698
 
$
856,074
 
$
59,389
 
$
1,698,168
 

Goodwill resulting from the acquisition of DJJ accounts for the majority of the increase in goodwill in the current period and is presented based upon Nucor’s preliminary purchase price allocation. The majority of goodwill is not tax deductible.

Intangible assets with estimated useful lives of two to 22 years are comprised of the following (in thousands):
 
 
 
March 29, 2008
 
December 31, 2007
 
 
 
Gross Amount
 
Accumulated
Amortization
 
Gross Amount
 
Accumulated
Amortization
 
Customer relationships
 
$
793,434
 
$
31,573
 
$
414,514
 
$
20,042
 
Trademarks and trade names
   
114,837
   
2,723
   
59,431
   
1,746
 
Other
   
27,868
   
7,226
   
24,102
   
6,323
 
   
$
936,139
 
$
41,522
 
$
498,047
 
$
28,111
 

Intangible asset amortization expense for the first quarter of 2008 and 2007 was $13.4 million and $2.0 million, respectively. Annual amortization expense is estimated to be $66.4 million in 2008; $67.6 million in 2009; $63.3 million in 2010; $59.5 million in 2011; and $56.1 million in 2012.

6.
CURRENT LIABILITIES: Dividends payable, included in accrued expenses and other current liabilities in the balance sheet, was $150.8 million at March 29, 2008 ($176.5 million at December 31, 2007). Book overdrafts, included in accounts payable in the balance sheet, were $157.8 million at March 29, 2008 (none at December 31, 2007).

7.
DEBT AND OTHER FINANCING ARRANGEMENTS: During the first quarter of 2008, Nucor issued $400 million of commercial paper. Nucor’s $1 billion revolving credit facility, which matures in November 2012, provides the ability to refinance this short-term obligation on a long-term basis. Accordingly, the commercial paper is classified as long-term debt. The current average interest rate on Nucor’s commercial paper is 2.865%.
 
8

Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued 

8.
DERIVATIVES: Nucor uses derivative financial instruments from time-to-time primarily to partially manage its exposure to price risk related to natural gas purchases used in the production process as well as copper and aluminum purchased for resale to its customers. In addition, Nucor uses derivatives from time-to-time to partially manage its exposure to changes in interest rates on outstanding debt instruments and uses forward foreign exchange contracts to hedge cash flows associated with certain assets and liabilities, firm commitments and anticipated transactions.

Nucor recognizes all derivative instruments in the condensed consolidated balance sheets at fair value. Any resulting changes in fair value would be recorded as adjustments to other comprehensive income (loss), net of tax, or recognized in net earnings, as appropriate.

In January 2008, the Company entered into forward foreign currency contracts in order to mitigate the risk of currency fluctuation on the anticipated joint venture with the Duferco Group. These contracts have a notional value of €200 million and mature in the second quarter of 2008.

Of the total $55.0 million fair value of commodity contracts at March 29, 2008, $38.4 million is recorded in other current assets, $23.7 million is recorded in other assets and $7.1 million is recorded in accrued expenses and other current liabilities. Of the total fair value of $10.2 million of foreign currency and interest rate derivative contracts at March 29, 2008, $11.8 million is recorded in other current assets and $1.6 million is recorded in accrued expenses and other current liabilities. Of the total $6.1 million fair value of commodity contracts at December 31, 2007, $10.5 million is included in other assets and $4.4 million is recorded in accrued expenses and other current liabilities.

9.
FAIR VALUE MEASUREMENTS: Effective January 1, 2008, Nucor adopted SFAS 157 as described in Note 1. SFAS 157 is effective for Nucor in 2008 for financial assets and liabilities and effective for non-financial assets and liabilities in 2009. The implementation of SFAS 157 for financial assets and liabilities did not have a material impact on our consolidated financial statements. Management has not yet determined the impact from the adoption of SFAS 157 as it pertains to non-financial assets and liabilities.
 
The following table summarizes information regarding Nucor’s financial assets and financial liabilities that are measured at fair value as of March 29, 2008 (in thousands):
 
       
Fair Value Measurements at Reporting Date Using
 
   
 
             
   
Carrying
Amount in
Consolidated
 
Quoted Prices
in Active
Markets for
Identical
Assets
 
 
Significant
Other
Observable
Inputs
 
Significant
Unobservable
Inputs
 
Description
 
Balance Sheet
 
(Level 1)
 
(Level 2)
 
(Level 3)
 
                   
Derivatives
 
$
65,180
 
$
-
 
$
65,180
 
$
-
 
 
Nucor uses derivatives from time to time to mitigate the effect of natural gas cost fluctuations, foreign currency fluctuations, interest rate movements, and price fluctuations of aluminum and copper purchased for resale to its customers. Fair value measurements for Nucor’s derivatives are classified under Level 2 because such measurements are based on published market prices for similar assets or are estimated based on observable inputs such as interest rates, yield curves, spot and future commodity prices and spot and future exchange rates.

10.
CONTINGENCIES: Nucor is subject to environmental laws and regulations established by federal, state and local authorities and, accordingly, makes provision for the estimated costs of compliance. Of the undiscounted total $28.9 million of accrued environmental costs at March 29, 2008 ($19.9 million at December 31, 2007), $14.9 million was classified in accrued expenses and other current liabilities ($16.6 million at December 31, 2007) and $14.0 million was classified in deferred credits and other liabilities ($3.3 million at December 31, 2007).
 
9

 
Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued
 
Other contingent liabilities with respect to product warranties, legal proceedings and other matters arise in the normal course of business. In the opinion of management, no such matters exist that would have a material effect on the consolidated financial statements.

11.
STOCK-BASED COMPENSATION: Stock Options - A summary of activity under Nucor’s stock option plans for the quarter ended March 29, 2008 is as follows (in thousands, except year and per share amounts):
 
 
 
 
 
Weighted -
 
Weighted -
 
 
 
 
 
 
 
Average
 
Average
 
Aggregate
 
 
 
 
 
Exercise
 
Remaining
 
Intrinsic
 
 
 
Shares
 
Price
 
Contractual Life
 
Value
 
Number of shares under option:
                         
Outstanding at beginning of year
   
1,852
 
$
20.37
             
Exercised
   
(317
)
 
19.41
       
$
15,511
 
Canceled
   
-
   
-
             
Outstanding at March 29, 2008
   
1,535
 
$
20.57
   
3.1 years
 
$
74,402
 
                           
Options exercisable at March 29, 2008
   
1,535
 
$
20.57
   
3.1 years
 
$
74,402
 

As of March 1, 2006, all outstanding options were vested; therefore, no compensation expense related to stock options was recorded in the first quarters of 2008 or 2007. The amount of cash received for the exercise of stock options totaled $6.2 million and $6.6 million in the first quarter of 2008 and 2007, respectively.
 
Restricted Stock Awards - Nucor’s Senior Officers Annual Incentive Plan (the “AIP”) and Long-Term Incentive Plan (the “LTIP”) authorize the award of shares of common stock to officers subject to certain conditions and restrictions. The LTIP provides for the award of shares of restricted common stock at the end of each LTIP performance measurement period at no cost to officers if certain financial performance goals are met during the period. One-third of the LTIP restricted stock award vests upon each of the first three anniversaries of the award date or, if earlier, upon the officer’s attainment of age fifty-five while employed by Nucor. Although participants are entitled to cash dividends and may vote such awarded shares, the sale or transfer of such shares is limited during the restricted period.

The AIP provides for the payment of annual cash incentive awards. An AIP participant may elect, however, to defer payment of up to one-half of an annual incentive award. In such event, the deferred AIP award is converted into common stock units and credited with a deferral incentive, in the form of additional common stock units, equal to 25% of the number of common stock units attributable to the deferred AIP award. Common stock units attributable to deferred AIP awards are fully vested. Common stock units credited as a deferral incentive vest upon the AIP participant’s attainment of age fifty-five while employed by Nucor. Vested common stock units are paid to AIP participants in the form of shares of common stock following their termination of employment with Nucor.

10

 
Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued

A summary of Nucor’s restricted stock activity under the AIP and LTIP for the first quarter of 2008 is as follows (shares in thousands):
 
       
Grant Date
 
 
 
Shares
 
Fair Value
 
Restricted stock awards and units:
             
Unvested at beginning of year
   
479
 
$
51.93
 
Granted
   
280
   
67.33
 
Vested
   
(379
)
 
53.85
 
Canceled
   
-
   
-
 
Unvested at March 29, 2008
   
380
 
$
61.37
 
               
Shares reserved for future grants
   
1,987
       

Compensation expense for common stock and common stock units awarded under the AIP and LTIP is recorded over the performance measurement and vesting periods based on the anticipated number and market value of shares of common stock and common stock units to be awarded. Compensation expense for anticipated awards based upon Nucor’s financial performance, exclusive of amounts payable in cash, was $4.3 million and $5.0 million in the first quarter of 2008 and 2007, respectively. At March 29, 2008, unrecognized compensation expense related to unvested restricted stock was $7.9 million, which is expected to be recognized over a weighted-average period of two years.

Restricted Stock Units - Nucor annually grants restricted stock units (“RSUs”) to key employees, officers and non-employee directors. The RSUs typically vest and are converted to common stock in three equal installments on each of the first three anniversaries of the grant date. A portion of the RSUs awarded to senior officers vest upon the officer’s retirement. Retirement, for purposes of vesting in these units only, means termination of employment with approval of the Compensation and Executive Development Committee after satisfying age and years of service requirements. RSUs granted to non-employee directors are fully vested on the grant date and are payable to the non-employee director in the form of common stock after the termination of the director’s service on the board of directors.

RSUs granted to employees who are eligible for retirement on the date of grant or will become retirement-eligible prior to the end of the vesting term are expensed over the period through which the employee will become retirement-eligible since these awards vest upon retirement from the Company. Compensation expense for RSUs granted to employees who are not retirement-eligible is recognized on a straight-line basis over the vesting period. Cash dividend equivalents are paid to participants each quarter. Dividend equivalents paid on units expected to vest are recognized as a reduction in retained earnings.

The fair value of the RSUs is determined based on the closing stock price of Nucor’s common stock on the day before the grant. A summary of Nucor’s restricted stock for the first quarter of 2008 is as follows (shares in thousands):

11

 
Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued
 
       
Grant Date
 
 
 
Shares
 
Fair Value
 
Restricted stock units:
             
Unvested at beginning of year
   
918
 
$
60.82
 
Granted
   
-
   
-
 
Vested
   
(3
)
 
60.67
 
Canceled
   
-
   
-
 
Unvested at March 29, 2008
   
915
 
$
60.82
 
               
Shares reserved for future grants
   
17,683
       

Compensation expense for RSUs was $5.3 million in the first quarter of 2008 ($2.6 million in the first quarter of 2007). As of March 29, 2008, there was $35.7 million of total unrecognized compensation cost related to nonvested RSUs, which is expected to be recognized over a weighted-average period of 1.6 years.

12.
EMPLOYEE BENEFIT PLAN: Nucor has a Profit Sharing and Retirement Savings Plan for qualified employees. Nucor’s expense for these benefits was $67.8 million and $62.7 million in the first quarter of 2008 and 2007, respectively.

13.
INTEREST EXPENSE (INCOME): The components of net interest expense (income) are as follows (in thousands):
 
   
Three Months (13 Weeks) Ended
 
 
 
March 29, 2008
 
March 31, 2007
 
           
Interest expense
 
$
29,784
 
$
10,491
 
Interest income
   
(11,439
)
 
(19,653
)
Interest expense (income), net
 
$
18,345
 
$
(9,162
)

14.
INCOME TAXES: The Internal Revenue Service (“IRS”) is currently examining Nucor’s 2005 and 2006 federal income tax returns.  Management believes that the Company has adequately provided for any adjustments that may arise from this audit.  Nucor has substantially concluded U.S. federal income tax matters for years through 2004.  The 2007 tax year is open to examination by the IRS.  The tax years 2003 through 2007 remain open to examination by other major taxing jurisdictions to which Nucor is subject.
 
15.
COMPREHENSIVE INCOME: The components of total comprehensive income are as follows (in thousands):
 
12

 
Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued
 
   
Three Months (13 Weeks) Ended
 
 
 
March 29, 2008
 
March 31, 2007
 
           
Net earnings
 
$
409,754
 
$
381,029
 
Net unrealized gain on hedging derivatives,
             
net of income taxes
   
35,756
   
11,916
 
Reclassification adjustment for loss on settlement
             
of hedging derivatives included in net income,
             
net of income taxes
   
183
   
984
 
Foreign currency translation gain (loss),
             
net of income taxes
   
(12,805
)
 
2,486
 
Other
   
-
   
3,208
 
Total comprehensive income
 
$
432,888
 
$
399,623
 

16.
SEGMENTS: Nucor reports its results in the following segments: steel mills, steel products and raw materials. The steel mills segment includes carbon and alloy steel in sheet, bars, structural and plate. The steel products segment includes steel joists and joist girders, steel deck, fabricated concrete reinforcing steel, cold finish steel, steel fasteners, metal building systems, light gauge steel framing, steel grating and expanded metal, and wire and wire mesh. The raw materials segment includes DJJ, the scrap broker and processor that Nucor acquired on February 29, 2008; Nu-Iron Unlimited, a facility that produces direct reduced iron used by the steel mills; and certain equity method investments. The “All other” category primarily includes Novosteel S.A., a steel trading business of which Nucor owns 75%. The segments are consistent with the way Nucor manages its business, which is primarily based upon the similarity of the types of products produced and sold by each segment.

Interest expense, minority interests, other income, profit sharing expense and changes in the LIFO reserve and environmental accruals are shown under Corporate/eliminations. Corporate assets primarily include cash and cash equivalents, short-term investments, deferred income tax assets and investments in affiliates.
 
13


Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued

The company’s results by segment were as follows (in thousands):
 
   
Three Months (13 Weeks) Ended
 
 
 
March 29, 2008
 
March 31, 2007
 
Net sales to external customers:
             
Steel mills
 
$
3,759,453
 
$
3,273,254
 
Steel products
   
885,507
   
484,032
 
Raw materials
   
235,229
   
-
 
All other
   
94,080
   
11,599
 
   
$
4,974,269
 
$
3,768,885
 
               
Intercompany sales:
             
Steel mills
 
$
486,555
 
$
255,152
 
Steel products
   
8,298
   
6,202
 
Raw materials
   
668,327
   
62,807
 
All other
   
342
   
281
 
Corporate/eliminations
   
(1,163,522
)
 
(324,442
)
 
 
$
-
 
$
-
 
               
Earnings before income taxes:
             
Steel mills
 
$
799,284
 
$
735,329
 
Steel products
   
50,186
   
49,525
 
Raw materials
   
16,576
   
1,570
 
All other
   
2,768
   
181
 
Corporate/eliminations
   
(245,967
)
 
(196,938
)
   
$
622,847
 
$
589,667
 
               
               
 
March 29, 2008
 
 Dec. 31, 2007
 
Segment assets:
             
Steel mills
 
$
5,300,298
 
$
5,134,277
 
Steel products
   
2,974,324
   
2,938,964
 
Raw materials
   
2,941,942
   
465,105
 
All other
   
179,563
   
182,840
 
Corporate/eliminations
   
(55,606
)
 
1,104,936
 
   
$
11,340,521
 
$
9,826,122
 
 
14

Nucor Corporation - Notes to Condensed Consolidated Financial Statements (Unaudited), continued

17.
EARNINGS PER SHARE: The computations of basic and diluted net earnings per share are as follows (in thousands, except per share amounts):
 
   
Three Months (13 Weeks) Ended
 
 
 
March 29, 2008
 
March 31, 2007
 
Basic net earnings per share:
             
Basic net earnings 
 
$
409,754
 
$
381,029
 
               
Average shares outstanding 
   
288,208
   
301,034
 
 
             
Basic net earnings per share 
 
$
1.42
 
$
1.27
 
               
Diluted net earnings per share:
             
Diluted net earnings 
 
$
409,754
 
$
381,029
 
               
Diluted average shares outstanding: 
             
 Basic shares outstanding
   
288,208
   
301,034
 
 Dilutive effect of stock options and other
   
1,993
   
2,448
 
     
290,201
   
303,482
 
 
             
Diluted net earnings per share 
 
$
1.41
 
$
1.26
 
 

15


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this quarterly report are forward-looking statements that involve risks and uncertainties. These forward-looking statements reflect the Company’s best judgment based on current information, and although we base these statements on circumstances that we believe to be reasonable when made, there can be no assurance that future events will not affect the accuracy of such forward-looking information. As such, the forward-looking statements are not guarantees of future performance, and actual results may vary materially from the results and expectations discussed in this report. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) the sensitivity of the results of our operations to volatility in steel prices and changes in the supply and cost of raw materials, including scrap steel; (2) availability and cost of electricity and natural gas; (3) market demand for steel products, which, in the case of many of our products, is driven by the level of non-residential construction activity in the U.S.; (4) competitive pressure on sales and pricing, including pressure from imports and substitute materials; (5) uncertainties surrounding the global economy, including excess world capacity for steel production and fluctuations in currency conversion rates; (6) U.S. and foreign trade policy affecting steel imports or exports; (7) significant changes in government regulations affecting environmental compliance; (8) the cyclical nature of the steel industry; (9) capital investments and their impact on our performance; and (10) our safety performance.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements included elsewhere in this report, as well as the audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Nucor’s Annual Report on Form 10-K for the year ended December 31, 2007.
 
Overview

Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. The steel mills segment produces carbon and alloy steel in bars, beams, sheet and plate. The steel products segment produces steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; light gauge steel framing; steel grating and expanded metal; and wire and wire mesh. The raw materials segment produces direct reduced iron used by the steel mills; brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.

In February 2008, Nucor completed its acquisition of the stock of SHV North America Corporation, which owns 100% of The David J. Joseph Company and related affiliates, for a purchase price of approximately $1.44 billion. DJJ now operates as a wholly owned subsidiary of Nucor Corporation and is headquartered in Cincinnati, Ohio. The principal activities of DJJ, which has been the broker of ferrous scrap to Nucor since 1969, include the operation of scrap recycling facilities (processing); brokerage services for scrap, ferro-alloys, pig iron and scrap substitutes; mill and industrial services; and rail and logistics services. DJJ has been included in Nucor’s raw materials segment.

Since scrap is Nucor’s largest single cost, the acquisition of DJJ provides an ideal growth platform for Nucor to expand our direct ownership in the steel scrap supply chain and further our raw materials strategy. The acquisition of DJJ’s scrap processing assets provide a partial hedge to our steel mills against scrap market volatility.
 
Operations

The first quarter of 2008 includes the results of Harris Steel, LMP Steel & Wire Company (“LMP”), Magnatrax Corporation, Nelson Steel, Inc. and other companies acquired in 2007 while the first quarter of 2007 does not.

16

Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Net sales for the first quarter of 2008 increased 32% to a record $4.97 billion, compared with $3.77 billion in the first quarter of 2007. Approximately 20% of the increase in sales is due to the acquisition of DJJ on February 29, 2008. Other factors contributing to the increase in net sales include a 15% increase in average steel sales price per ton, an 11% increase in average steel products sales price per ton, and a 65% increase in steel products shipments primarily attributable to acquisitions made in 2007.

In the first quarter of 2008, steel production was 5,831,000 tons, compared with 5,585,000 tons produced in the first quarter of 2007, an increase of 4%. Total steel shipments increased 5% to 5,951,000 tons in the first quarter of 2008, compared with 5,660,000 tons in last year’s first quarter. Both steel production and total shipments increased primarily due to increased demand for sheet and plate products. Steel sales to outside customers remained flat at 5,203,000 tons, compared with 5,229,000 tons in last year’s first quarter. In March 2007 Nucor acquired a large customer, Harris Steel, causing a shift from outside sales tons to inside sales tons. If Nucor continues to acquire downstream businesses, the percentage of our steel production sold to inside customers may continue to increase.

In the steel products segment, steel joist production during the first quarter was 132,000 tons, compared with 121,000 tons in the first quarter of 2007, an increase of 9%. Steel deck sales were 116,000 tons, compared with 106,000 tons in last year's first quarter, an increase of 9%. Cold finished steel sales increased 51% to 136,000 tons, compared with 90,000 tons in the first quarter of 2007 primarily due to the acquisitions of LMP in August 2007 and Laurel Cold Finish (part of Harris Steel) in March 2007. Sales of fabricated concrete reinforcing steel increased from 40,000 tons in the month of March 2007 (when Nucor acquired Harris Steel Group Inc.) to 179,000 tons in the first quarter of 2008.

In the raw materials segment, approximately 71% of the sales are from the brokerage operations of DJJ and approximately 26% of the sales are from the scrap processing facilities.

During the first quarter of 2008, the average utilization rates of all operating facilities in the steel mills, steel products and raw materials segments were approximately 92%, 70% and 76%, respectively, compared with 88%, 74% and 75%, respectively, in the first quarter of 2007.
 
The major component of cost of products sold is raw material costs. In the first quarter of 2008, the average price of raw materials increased 27% from the first quarter of 2007.

In the steel mills segment, the average prices of raw materials used increased approximately 28% from the first quarter of 2007. The average scrap and scrap substitute cost per ton used in our steel mills segment was $333 in the first quarter of 2008, an increase of 29% from $259 in the first quarter of 2007.

Changes in scrap prices are based on changes in the global supply and demand for scrap, which is tied to the global supply and demand for steel products. Demand for scrap and other raw materials has risen sharply in recent years in response to increased demand, both domestically and internationally, for a wide range of products made from steel without a corresponding increase in the global supply of those raw materials. Our surcharges are based upon changes in widely-available market indices for prices of scrap and other raw materials. We monitor those changes closely and make adjustments as needed, but generally on a monthly basis, to the surcharges and sometimes directly to the selling prices, for our products. Although there will always be a timing difference between changes in the prices we pay for raw materials and the adjustments we make, we believe that the surcharge mechanism, which our customers understand is a necessary response by us to the market forces of supply and demand for our raw materials, continues to be an effective means of maintaining our margins.

17

 
Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $69.0 million in the first quarter of 2008, compared with a charge of $24.5 million in the first quarter of 2007. The LIFO charges for these interim periods are based on management’s estimates of both inventory prices and quantities at year-end. These estimates will likely differ from actual amounts, and such differences may be significant.

In the steel products segment, the average price of raw materials used increased approximately 9% from the first quarter of 2007.

Total energy costs increased approximately $4 per ton from the first quarter of 2007 to the first quarter of 2008.
 
Pre-operating and start-up costs of new facilities increased to $22.9 million in the first quarter of 2008, compared with $11.2 million in the first quarter of 2007. For the first quarter of 2008, these costs primarily related to the HIsmelt project in Kwinana, Western Australia, the construction of our SBQ mill in Memphis, Tennessee, the start-up of our building systems facility in Brigham City, Utah, and the Castrip® project in Blytheville, Arkansas. For the first quarter of 2007, these costs primarily related to the Hlsmelt project and the SBQ mill in Memphis, Tennessee.

Gross margins were approximately 18% for the first quarter of 2008 compared with approximately 21% for the first quarter of 2007. The decrease in our gross margin percentage was primarily due to the escalating prices of raw materials, including scrap and energy, and the increased LIFO charge. In addition, DJJ’s business of collecting and processing ferrous and non-ferrous materials for resale typically operates at lower margins than Nucor has historically experienced as a manufacturer of steel and steel products.

The major components of marketing, administrative and other expenses are freight and profit sharing costs. Unit freight costs increased 6% from the first quarter of 2007 to the first quarter of 2008. Profit sharing costs, which are based upon and generally fluctuate with pre-tax earnings, increased 10% from the first quarter of 2007 to the first quarter of 2008. Profit sharing costs also fluctuate based on Nucor’s achievement of certain financial performance goals, including comparisons of Nucor’s financial performance to peers in the steel industry and to other high performing companies.

Nucor incurred net interest expense of $18.3 million in the first quarter of 2008 compared to net interest income of $9.2 million in the first quarter of 2007. Gross interest expense increased from $10.5 million in the first quarter of 2007 to $29.8 million in the first quarter of 2008 due to an increase of more than 150% in average debt outstanding accompanied by an increase in average interest rates from 4.5% to 5.1%. Nucor issued $1.3 billion in notes in the fourth quarter of 2007 and $400 million of commercial paper in the first quarter of 2008. The interest rates on the $1.3 billion in notes are higher than the rates on the majority of Nucor’s existing debt. Gross interest income decreased from $19.7 million in the first quarter of 2007 to $11.4 million in the first quarter of 2008 due to a 33% decrease in average investments combined with a decrease in the average interest rate earned on investments. Average investments decreased due to cash payments for acquisitions in 2007 and the first quarter of 2008 and repurchases of common stock during 2007.
 
18


Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

Minority interests represent the income attributable to the minority partners of Nucor’s joint ventures, Nucor-Yamato Steel Company (“NYS”), Novosteel S.A., and Barker Steel Company, Inc., of which Nucor owns 51%, 75% and 90%, respectively. The 52% increase in minority interests is primarily attributable to the increased earnings of NYS, which is due to the strength of the structural steel market. Under the NYS partnership agreement, the minimum amount of cash to be distributed each year to the partners is the amount needed by each partner to pay applicable U.S. federal and state income taxes. In the first quarter of 2008 and 2007, the amount of cash distributed to minority interest holders exceeded amounts allocated to minority interests based on mutual agreement of the general partners; however, the cumulative amount of cash distributed to partners was less than the cumulative net earnings of the partnership.

Nucor had an effective tax rate of 34.2% in the first quarter of 2008, compared with 35.4% in the first quarter 2007. The IRS is currently examining Nucor’s 2005 and 2006 federal income tax returns.  Management believes that the Company has adequately provided for any adjustments that may arise from this audit.   

Net earnings for the first quarter of 2008 increased 8% to $409.8 million compared to the first quarter of 2007’s net earnings of $381.0 million. Diluted net earnings per share increased 12% to $1.41 from $1.26 in the first quarter of 2007. The 12% increase in earnings per share is partially due to the reduced number of shares outstanding as a result of stock repurchases made in 2007. Net earnings as a percentage of net sales were 8.2% in the first quarter of 2008 and 10.1% in the first quarter of 2007. Return on average stockholders’ equity was 32.0% and 30.9% in the first quarter of 2008 and 2007, respectively.

The outlook for the second quarter remains positive as we expect continued strength in our sheet, plate, beam and bar businesses due to the solid global demand for steel. In our overall downstream businesses we expect conditions to continue to be good, particularly for rebar fabrication, cold finish bars, steel grating, and wire rod and mesh products. We believe our upstream raw material businesses will be accretive in the second quarter.

During the second quarter, Nucor expects to conclude a 50/50 joint venture with the Duferco Group (Lugano, Switzerland) for the production of beams in Italy and the distribution of beams in Europe and North Africa. The joint venture will encompass the Duferco Group’s Duferdofin subsidiary and associated distribution companies.

Liquidity and capital resources

The current ratio was 2.1 at the end of the first quarter of 2008 and 3.2 at year-end 2007. The percentage of long-term debt to total capital was 32% at the end of the first quarter of 2008 and 29% at year-end 2007.

Accounts receivable and inventories increased 22% and 17%, respectively, since year-end while net sales increased 13% over the fourth quarter of 2007. The increases in accounts receivable and inventories are due to higher sales prices and the rising cost of raw materials, as well as to the acquisition of DJJ in the last month of the quarter. These increases outpaced the increase in net sales because accounts receivable turn approximately monthly and inventories turn about every five to six weeks while sales prices and raw material costs continued to increase throughout the quarter. In addition, DJJ’s sales are included for only one month in the first quarter of 2008.

Capital expenditures more than doubled from $91.3 million during the first quarter of 2007 to $226.3 million in the first quarter of 2008. Capital expenditures are projected to be approximately $800 million for all of 2008.

19

 
Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued

In February 2008, Nucor’s board of directors increased the regular quarterly cash dividend on Nucor’s common stock from $0.30 per share to $0.32 per share. In addition to the $0.32 per share base dividend amount, the board of directors approved the payment of a supplemental dividend of $0.20 per share, for a total dividend of $0.52 per share, payable on May 9, 2008 to stockholders of record on March 28, 2008.
 
Existing cash and cash equivalents and short-term investments of approximately $1.44 billion funded the DJJ acquisition. During the first quarter, Nucor issued $400 million of commercial paper. Nucor’s $1.0 billion revolving credit facility provides the ability to refinance this short-term obligation on a long-term basis. Accordingly, the commercial paper is classified as long-term debt. Funds provided from operations, existing credit facilities and new borrowings are expected to be adequate to meet future capital expenditure and working capital requirements for existing operations for at least the next 24 months. Nucor believes it has the ability to raise additional funds as needed to finance acquisitions and maintain reasonable financial strength.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

In the ordinary course of business, Nucor is exposed to a variety of market risks. We continually monitor these risks and develop appropriate strategies to manage them.

Interest Rate Risk - Nucor manages interest rate risk by using a combination of variable-rate and fixed-rate debt. Nucor also makes use of interest rate swaps to manage net exposure to interest rate changes. Management does not believe that Nucor’s exposure to interest rate market risk has significantly changed since December 31, 2007.

Commodity Price Risk - In the ordinary course of business, Nucor is exposed to market risk for price fluctuations of raw materials and energy, principally scrap steel, other ferrous and nonferrous metals, alloys and natural gas. We attempt to negotiate the best prices for our raw materials and energy requirements and to obtain prices for our steel products that match market price movements in response to supply and demand. Nucor has a raw material surcharge designed to pass through the historically high cost of scrap steel and other raw materials. Our surcharge mechanism has worked effectively to reduce the normal time lag in passing through higher raw material costs so that we can maintain our gross margins.

Nucor also uses derivative financial instruments to hedge a portion of our exposure to price risk related to natural gas purchases used in the production process and to hedge a portion of our aluminum purchases and sales.  Gains and losses from derivatives designated as hedges are deferred in accumulated other comprehensive income (loss) on the condensed consolidated balance sheets and recognized into earnings in the same period as the underlying physical transaction.  At March 29, 2008, accumulated other comprehensive income (loss) includes $40.0 million in unrealized net-of-tax gains for the fair value of these derivative instruments.  Changes in the fair values of derivatives not designated as hedges are recognized in earnings each period. The following table presents the negative effect on pre-tax income of a hypothetical change in the fair value of derivative instruments outstanding at March 29, 2008, due to an assumed 10% and 25% change in the market price of each of the indicated commodities (in thousands):

 
20


Item 3. Quantitative and Qualitative Disclosures About Market Risk, continued
 
Commodity Derivative
 
10% Change
 
25% Change
 
Natural gas
 
$
38,227
 
$
95,591
 
Aluminum
   
4,412
   
12,678
 
Copper
   
435
   
1,144
 

Any resulting changes in fair value would be recorded as adjustments to other comprehensive income (loss), net of tax, or recognized in net earnings, as appropriate. These hypothetical losses would be partially offset by the benefit of lower prices paid or higher prices received for the physical commodities.

Foreign Currency Risk - Nucor is exposed to foreign currency risk through its operations in Canada and Trinidad and its joint ventures in Brazil and Australia. When the Company signed a memorandum of understanding in January 2008 to establish a joint venture with the Duferco Group of Lugano, Switzerland for the production of beams in Italy, Nucor hedged a portion of the exposure to fluctuations of the euro. These contracts have a notional value of €200 million and mature in the second quarter of 2008.


Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures - As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. During the quarter ended March 29, 2008, Nucor acquired DJJ (See Note 2 to the condensed financial statements included in Item 1). Nucor is in the process of incorporating these operations as part of our internal controls. Nucor has extended its Section 404 compliance program under the Sarbanes-Oxley Act of 2002 and the applicable rules and regulations under such Act to include DJJ. Nucor will report on its assessment of its combined operations within the time period provided by the Act and the applicable SEC rules and regulations concerning business combinations.

Changes in Internal Control Over Financial Reporting - There were no changes in our internal control over financial reporting during the quarter ended March 29, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
21

PART II. OTHER INFORMATION

Item 1A. Risk Factors

There have been no material changes in Nucor’s risk factors from those included in Nucor’s annual report on Form 10-K.

Item 6. Exhibits
 
Exhibit No.
Description of Exhibit
 
 
 
 
2
Stock Purchase Agreement by and among SHV Nederland B.V., SHV Finance B.V., Parcs, LLC, SHV Holdings N.V. and Nucor Corporation, dated as of February 7, 2008
   
10
Employment Agreement of Keith B. Grass
   
12.1
Computation of Ratio of Earnings to Fixed Charges
   
31
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.1
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
32
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
32.1
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Nucor Corporation has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
     
  NUCOR CORPORATION
 
 
 
 
 
 
  By:   /s/ Terry S. Lisenby
 
Terry S. Lisenby
  Chief Financial Officer, Treasurer
and Executive Vice President
 
Dated: May 7, 2008

22


NUCOR CORPORATION
List of Exhibits to Form 10-Q - March 29, 2008

 
Exhibit No.
Description of Exhibit

 
2
Stock Purchase Agreement by and among SHV Nederland B.V., SHV Finance B.V., Parcs, LLC, SHV Holdings N.V. and Nucor Corporation, dated as of February 7, 2008

 
10
Employment Agreement of Keith B. Grass

12.1
Computation of Ratio of Earnings to Fixed Charges
 
 
31
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
31.1
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a), as  Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 
 
32
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 

32.1
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 
 

23




 
STOCK PURCHASE AGREEMENT

BY AND AMONG

SHV NEDERLAND B.V.,

SHV FINANCE B.V.,

PARCS LLC,

SHV HOLDINGS N.V.
solely as guarantor under Section 10.15

AND

NUCOR CORPORATION
solely as guarantor under Section 10.15

Dated as of February 7, 2008
 




TABLE OF CONTENTS

     
Page
       
ARTICLE I
 
DEFINITIONS
1
Section 1.1
 
Definitions
1
Section 1.2
 
Other Definitions
8
Section 1.3
 
Construction
10
       
ARTICLE II
 
PURCHASE AND SALE
10
Section 2.1
 
The Purchase and Sale
10
Section 2.2
 
Purchase Price
10
Section 2.3
 
Closing
11
Section 2.4
 
Deliveries by Seller
11
Section 2.5
 
Deliveries by Buyer
11
Section 2.6
 
Mutual Release
11
Section 2.7
 
Calculation of the Adjustment Amount
12
       
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF SELLER
14
Section 3.1
 
Organization
14
Section 3.2
 
Authorization
14
Section 3.3
 
Capitalization
14
Section 3.4
 
Consents and Approvals; No Violations
15
Section 3.5
 
Financial Statements
16
Section 3.6
 
No Undisclosed Liabilities
16
Section 3.7
 
Absence of Certain Changes
16
Section 3.8
 
Real Property
16
Section 3.9
 
Intellectual Property
16
Section 3.10
 
Litigation
16
Section 3.11
 
Compliance with Applicable Law
17
Section 3.12
 
Company Contracts
17
Section 3.13
 
Licenses and Permits
18
Section 3.14
 
Company Benefit Plans
18
Section 3.15
 
Labor Relationships
18
Section 3.16
 
NO OTHER REPRESENTATIONS OR WARRANTIES
18
       
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF BUYER
19
Section 4.1
 
Organization
19
Section 4.2
 
Authorization
19
Section 4.3
 
Consents and Approvals; No Violations
19
Section 4.4
 
Litigation
20
Section 4.5
 
Financial Capability
20
Section 4.6
 
Independent Review
20
Section 4.7
 
Certain Fees
20


 
TABLE OF CONTENTS
     
Page
       
ARTICLE V
 
COVENANTS
21
Section 5.1
 
Conduct of the Business
21
Section 5.2
 
Access to Information
22
Section 5.3
 
Consents
23
Section 5.4
 
Reasonable Best Efforts
23
Section 5.5
 
Public Announcements
24
Section 5.6
 
Buyer Knowledge
24
Section 5.7
 
Tax Matters
24
Section 5.8
 
Preservation of Records
26
Section 5.9
 
Employees; Employee Benefits
26
Section 5.10
 
Further Assurances
27
Section 5.11
 
Non-Competition
27
Section 5.12
 
Exclusivity
29
Section 5.13
 
Transfer of Company Shares
29
Section 5.14
 
Intercompany Debt
29
Section 5.15
 
Transaction Payments
29
Section 5.16
 
Name Change
30
       
ARTICLE VI
 
CONDITIONS TO OBLIGATIONS OF THE PARTIES
30
Section 6.1
 
Conditions to Each Party’s Obligations
30
Section 6.2
 
Conditions to Obligations of Seller and Note Holder
30
Section 6.3
 
Conditions to Obligations of Buyer
31
       
ARTICLE VII
 
TERMINATION
31
Section 7.1
 
Termination
31
Section 7.2
 
Procedure and Effect of Termination
32
       
ARTICLE VIII
 
INDEMNIFICATION
32
Section 8.1
 
Indemnification Obligations of Seller
32
Section 8.2
 
Indemnification Obligations of Buyer
33
Section 8.3
 
Indemnification Procedure
33
Section 8.4
 
Claims Period
34
Section 8.5
 
Liability Limits
35
Section 8.6
 
Exclusive Remedies
37
       
ARTICLE IX
 
ENVIRONMENTAL REAL PROPERTY
37
Section 9.1
 
Buyer’s Access to Perform Environmental Site Assessments
37
Section 9.2
 
Actions Dependent Upon Findings From Phase I Environmental Site Assessments
38
Section 9.3
 
Actions Dependent Upon Findings From Phase II Environmental Site Assessments
39
Section 9.4
 
Payment for Environmental Remediation Costs
41
Section 9.5
 
Obligations of Buyer and Seller
42
       
ARTICLE X
 
MISCELLANEOUS
43
Section 10.1
 
Fees and Expenses
43
 
-ii-

 
TABLE OF CONTENTS
 
     
Page
       
Section 10.2
 
Notices
43
Section 10.3
 
Severability
44
Section 10.4
 
Binding Effect; Assignment
44
Section 10.5
 
No Third Party Beneficiaries
45
Section 10.6
 
Section Headings
45
Section 10.7
 
Dispute Resolution
45
Section 10.8
 
Entire Agreement
45
Section 10.9
 
Governing Law
45
Section 10.10
 
Consent to Jurisdiction and Service of Process
45
Section 10.11
 
Waiver of Jury Trial
46
Section 10.12
 
Specific Performance
46
Section 10.13
 
Counterparts
46
Section 10.14
 
Amendment; Modification
46
Section 10.15
 
Guarantee
46
 
-iii-


STOCK PURCHASE AGREEMENT
 
This STOCK PURCHASE AGREEMENT dated February 7, 2008 (this “Agreement”), is made and entered into by and among SHV NEDERLAND B.V., a company incorporated in the Netherlands Antilles and registered in Utrecht, The Netherlands (“Seller”), SHV FINANCE B.V., a company incorporated in the Netherlands Antilles and registered in Utrecht, The Netherlands formerly known as “NPM Finance B.V.” (“Note Holder”), PARCS LLC, a Delaware limited liability company (“Buyer”) and, solely for the purpose of Section 10.15 hereof, SHV HOLDINGS N.V., a company incorporated in the Netherlands Antilles and registered in Utrecht, The Netherlands (“Seller Guarantor”), and NUCOR CORPORATION, a Delaware corporation (“Buyer Guarantor”). Seller and Buyer are sometimes individually referred to in this Agreement as a “Party” and collectively as the “Parties”.
 
WHEREAS, Seller owns all of the issued and outstanding shares (the “Company Shares”) of capital stock of SHV North America Corporation, a Delaware corporation (the “Company”);
 
WHEREAS, the Company and its Subsidiaries (collectively, the “Acquired Companies” and individually, an “Acquired Company”) are in the business of (i) trading, brokering and processing scrap metal and (ii) recycling, transporting and marketing scrap metal and substitutes thereof (the “Business”);
 
WHEREAS, Note Holder is the lender of the Intercompany Debt (as defined herein); and
 
WHEREAS, Seller, Note Holder and Buyer desire to enter into this Agreement pursuant to which (i) Seller will sell to Buyer, and Buyer will purchase from Seller, all of the Company Shares and (ii) Note Holder will sell to Buyer, and Buyer will purchase from Note Holder, the Intercompany Debt, in each case, on the terms and subject to the conditions set forth herein.
 
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions set forth in this Agreement, and intending to be legally bound hereby, each of Seller, Note Holder and Buyer hereby agrees:
 
ARTICLE I
 
DEFINITIONS
 
Section 1.1 Definitions. The following terms, as used in this Agreement, have the following meanings:
 
Additional Cash Amount” means an amount equal to (a) One Hundred Ninety-Six Thousand Dollars ($196,000), multiplied by (b) the actual number of days elapsed from December 31, 2007 up to and including the Closing Date.



Adjustment Amount” means the amount equal to the lesser of (a) the Additional Cash Amount as reflected on the Final Closing Statement and (b) the Company Net Income as reflected on the Final Closing Statement.
 
Adjustment Amount Deficit” means the amount, if any, by which the Estimated Adjustment Amount is less than the Adjustment Amount.
 
Adjustment Amount Surplus” means the amount, if any, by which the Estimated Adjustment Amount is greater than the Adjustment Amount.
 
Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by, or under common control with, such specified Person.
 
Business Day” means any day except Saturday, Sunday or any days on which banks are generally not open for business in New York, New York.
 
Buyer Indemnified Parties” means Buyer and its Affiliates, each of their respective officers, directors, employees, agents, trustees and representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
 
Claims Period” means the period during which a claim for indemnification may be asserted hereunder by an Indemnified Party.
 
Clean Up Standards” means that standard consistent with commercial/industrial land use pursuant to which Environmental Laws as in effect on the Closing Date, or Governmental Entities implementing such Environmental Laws as of the Closing Date, determine the need for any Remedial Action.
 
Code” means the United States Internal Revenue Code of 1986, as amended.
 
Company Benefit Plan” means each Employee Benefit Plan currently sponsored or maintained by any Acquired Company or to which any Acquired Company makes, or has any obligation to make, any contributions or with respect to which any Acquired Company has any other liabilities.
 
Company Intellectual Property” means any Intellectual Property that is owned by any Acquired Company.
 
Company Net Income” means an amount equal to eighty percent (80%) of the net income of the Acquired Companies for the period from December 31, 2007 until as of 11:59 p.m. Eastern Time on the date preceding the Closing Date determined on a consolidated basis in accordance with GAAP using such assumptions and applications of GAAP as were used in preparing the Financial Statements.
 
Confidentiality Agreement” means that certain confidentiality agreement by and between Seller and Buyer dated December 7, 2007, as amended.
 
Continued Employee” means each individual who is employed by any Acquired Company at the close of business on the Closing Date (including those who are actively employed or on leave, disability or other absence from employment).

-2-


Contracts” means all written agreements, contracts, leases, subleases, purchase orders, arrangements and legally enforceable commitments, to which any Acquired Company is a party and is currently bound.
 
Debt Agreements” means the following Contracts: (a) the Contracts for the Intercompany Debt; (b) the Credit Agreement, dated October 1, 2007, by and among The David J. Joseph Company, the various lenders from time to time party thereto, and Fifth Third Bank as Administrative Agent and L/C Issuer; (c) the Amended and Restated Receivables Purchase Agreement, dated as of July 12, 2007, by and among DJJ Receivables, LLC, The David J. Joseph Company, Fifth Third Bank and the other parties thereto from time to time; and (d) the ISDA Master Agreement, dated July 21, 2006, by and between The David J. Joseph Company and Fifth Third Bank.
 
Dollar”, “Dollars” and the symbol “$” shall mean lawful money of the United States of America.
 
Employee Benefit Plan” means, with respect to any Person, each plan, fund, program, agreement, arrangement or scheme that is at any time sponsored or maintained by such Person or to which such Person makes, or has an obligation to make, contributions or to which such Person has any liability providing for employee benefits or for the remuneration of the employees, former employees, directors, managers, officers, consultants, independent contractors, contingent workers or leased employees of such Person or the dependents of any of them (whether written or oral), including (a) each deferred compensation, bonus, incentive compensation, pension, retirement, profit sharing, 401(k), stock purchase, stock option and other equity compensation plan, (b) each “welfare” plan (within the meaning of Section 3(1) of ERISA, determined without regard to whether such plan is subject to ERISA), (c) each “pension” plan (within the meaning of Section 3(2) of ERISA, determined without regard to whether such plan is subject to ERISA), (d) each severance plan or agreement, and (e) each health, vacation, summer hours, supplemental unemployment benefit, hospitalization insurance, medical, vision, dental, hospitalization, prescription drug, cafeteria, flexible benefits, short-term and long-term disability, accident and life insurance, legal and other employee benefit plan, fund, program, agreement, arrangement or scheme.
 
Environmental Laws” means any and all Laws relating to noise, or to pollution or protection of human health or the environment (including the air, surface water, ground water, wetlands, land surface or subsurface strata), including Laws relating to air and water emissions or discharges, Releases or threatened Releases of Hazardous Material, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, recycling, reporting or handling of Hazardous Material, all as in effect as of the Closing Date.
 
Environmental Permits” means all material Licenses applicable to the Business issued pursuant to Environmental Laws.
 
ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

-3-


Estimated Adjustment Amount” means the amount equal to the lesser of (a) the Estimated Additional Cash Amount and (b) the Estimated Company Net Income.
 
GAAP” means generally accepted accounting principles in the United States as in effect on any applicable date.
 
Governmental Entity” means any federal or state government (whether domestic or foreign), any political subdivision thereof or any court, administrative or regulatory agency, department, instrumentality, body or commission or other governmental authority or agency.
 
Hazardous Material” shall mean any chemicals, pollutants, contaminants, medical waste or specimens, toxic substances, petroleum or petroleum products, whether or not discarded, that are regulated by Environmental Laws or the Release or disposal of which creates or would reasonably be expected to create responsibility under Environmental Laws, including hazardous wastes, hazardous substances, extremely hazardous substances, asbestos, polychlorinated biphenyls and urea formaldehyde, and low level nuclear materials, special nuclear materials or nuclear byproduct materials.
 
HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
 
Income Tax” means all Taxes based upon, measured by, or calculated with respect to (i) net income or profits (including any capital gains, alternative minimum taxes and any Taxes on items of tax preference, but not including sales, use, real property gains, real or personal property, gross receipts, transfer or other similar Taxes) or (ii) multiple bases (including corporate franchise, doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based upon, measured by, or calculated with respect to is described in clause (i) of this definition.
 
Indemnified Party” means a Buyer Indemnified Party or Seller Indemnified Party.
 
Intellectual Property” means any or all of the following and all rights, arising out of or associated therewith: (a) all patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, (b) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know-how, technology, technical data and customer lists, and all documentation relating to any of the foregoing, (c) all works of authorship (whether copyrightable or not), all copyrights, copyright registrations and applications therefor, and all other rights corresponding thereto, (d) all industrial designs and any registrations and applications therefor, (e) all internet uniform resource locators, domain names, trade names, logos, slogans, designs, trade dress, common law trademarks and service marks, trademark and service mark and trade dress registrations and applications therefore and (f) all software, computer programs and other computer-readable instructions (in both object code and source code formats) and all other rights corresponding thereto.

-4-


Intercompany Debt” means the aggregate principal amount of Two Hundred Fifty Million Dollars ($250,000,000) outstanding pursuant to the following: (a) the Credit Facility Agreement, dated October 18, 2004, between Seller and the Company; (b) the Credit Facility Agreement, dated October 28, 2005, between Seller and the Company; (c) the Cession Agreement dated January 31, 2006 among Seller, the Company and Note Holder; (d) the Credit Facility Agreement, dated October 10, 2006, between Note Holder and the Company; (e) the Credit Agreement, dated April 2, 2007, between Note Holder and the Company; and (f) the Credit Agreement, dated September 25, 2007, between Note Holder and the Company.
 
Knowledge” with respect to Seller means all facts actually known by each of Keith Grass, Rob Angotti, Thomas Baker, Craig Feldman, Judy Smith, Jim Goetz and Chris Bedell.
 
Law” means any material statutes, rules, codes, regulations, ordinances or orders, of, or issued by, Governmental Entities.
 
Leased Real Property” means the parcels of real property currently leased by any Acquired Company, together with all fixtures and improvements thereon.
 
Licenses” means all licenses, permits (including environmental, construction and operation permits), franchises and certificates issued by any Governmental Entity.
 
Liens” means mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances.
 
Losses” means any claims, liabilities, obligations, damages, losses, costs, expenses, penalties, fines and judgments (at equity or at law, including statutory and common) and damages whenever arising or incurred (including reasonable attorneys’ fees and expenses, but not including any such fees or expenses in connection with investigating or pursuing any claim hereunder), but excluding consequential or indirect damages arising out of lost profits or revenues, and excluding punitive and exemplary damages other than punitive and exemplary damages actually paid to Persons other than a Buyer Indemnified Party or a Seller Indemnified Party.
 
-5-

 
Material Adverse Effect” means any event, change or effect that has occurred that has a material adverse effect upon the financial condition or business of the Acquired Companies, taken as a whole; provided, that none of the following shall be deemed, either individually or in the aggregate to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: any event, change, effect, condition or circumstance (a) in the financial, banking, credit, securities, or commodities markets, the economy in general or prevailing interest rates of the United States or any other jurisdiction, where the Company has operations or revenues, (b) in (i) the general economic conditions affecting the industries in which any Acquired Company operates or (ii) the prices of the commodities, products or services the Company and its Subsidiaries sell or provide, (c) arising as a result of a change in GAAP or regulatory accounting principles or interpretations thereof after the date hereof, (d) arising or resulting from the announcement of this Agreement, or the pendency of the transactions contemplated herein, (e) arising or resulting from (i) the execution of, compliance with the terms of, or the taking of any action required by this Agreement or (ii) the consummation of the transactions contemplated by this Agreement, (f) in applicable Laws or the interpretation thereof, (g) arising or resulting from changes in national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack (or, in each case, escalation thereof), (h) arising or resulting directly or indirectly from the acts or omissions of Buyer and/or its Affiliates, (i) arising or resulting from the failure of any Acquired Company to pay any Tax or (j) arising or resulting from the violation by any Acquired Company of any Environmental Laws, the breach of any Environmental Permits, or any Loss resulting from the handling, disposal or Release of any Hazardous Material; provided, however, that any Loss, occurrence, change or effect that is cured prior to the Closing Date shall not be considered a Material Adverse Effect.
 
NLRB” means the United States National Labor Relations Board.
 
Ordinary Course” means the ordinary course of business of the Acquired Companies consistent with past practice.
 
Owned Real Property” means the parcels of real property owned in fee simple by any Acquired Company (together with all fixtures and improvements thereon).
 
Permitted Liens” means (a) Liens imposed by law for Taxes not yet due and payable or that are being properly contested, (b) statutory Liens of landlords, (c) Liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen, and other Liens imposed by Law or Contract incurred in the Ordinary Course that are not overdue by more than thirty (30) days or that are being properly contested, (d) pledges and deposits made in the Ordinary Course in compliance with workers’ compensation, unemployment insurance and other social security Laws or regulations, (e) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety, indemnity and appeal bonds, performance and return-of-money and fiduciary bonds and other obligations of a like nature, in each case in the Ordinary Course, (f) easements, zoning restrictions, rights-of-way, licenses, covenants, conditions, minor defects, encroachments or irregularities in title and similar encumbrances on or affecting any Real Property that do not secure any monetary obligations and do not materially interfere with the ordinary conduct of the Business at any Real Property subject to such liens, (g) any (i) interest or title of a lessor or sublessor under any lease, (ii) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to or (iii) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (ii), (h) Liens on goods held by suppliers arising in the Ordinary Course for sums not yet delinquent or being contested in good faith, (i) with respect to any Real Property in which any Acquired Company owns a leasehold estate, any defect or encumbrance caused by or arising out of the failure to record the lease or a memorandum thereof in the applicable real property records in the jurisdiction where such Real Property is located and (j) the effect of any moratorium, eminent domain or condemnation proceedings.

-6-


Person” means any individual, partnership, joint venture, corporation, trust, limited liability company, unincorporated organization or other entity or any Governmental Entity.
 
Real Property” means the Owned Real Property and the Leased Real Property.
 
Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment of any Hazardous Material other than that which is in compliance with Environmental Laws.
 
Remedial Action” means any action, to the extent required by Environmental Laws, to remediate, investigate, clean up, remove, treat, or otherwise mitigate a Release of Hazardous Material or to complete post-remedial investigations, monitoring, operation and maintenance, or other care with respect thereto.
 
Seller Indemnified Parties” means Seller and its Affiliates, each of their respective officers, directors, employees, agents, trustees and representatives and each of the heirs, executors, successors and assigns of any of the foregoing.
 
Subsidiary” or “Subsidiaries” means, with respect to a Person, any other Person of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions, or a majority of the outstanding voting securities of which, are at the time owned directly or indirectly by such Person.
 
Taxes” means all federal, state, local or non-U.S. taxes, assessments, charges, duties, fees, levies or other governmental charges, including income, franchise, capital stock, real property, personal property, tangible, withholding, employment, payroll, social security, social contribution, unemployment compensation, disability, stamp, transfer, registration, sales, use, excise, gross receipts, value-added and all other taxes of any kind, whether disputed or not, and any charges, interest or penalties imposed by any Governmental Entity with respect to any taxes.
 
Tax Return” means any report, return, declaration, claim for refund or information return or statement or other information required to be supplied to a Governmental Entity in connection with Taxes, including estimated returns and reports with respect to Taxes.

-7-


Transaction Expenses” means each of the following without duplication: (a) the aggregate amount required to be paid pursuant to any applicable agreement or other governing document or policy (including, “success fees” or bonuses, or severance payments) by any Acquired Company to any third party (including any current or former shareholders, directors, officers or employees of Seller or any of its Affiliates (other than Seller itself pursuant to this Agreement)) solely as a result of the consummation of the transactions contemplated by this Agreement and without any action on the part of Buyer (other than consummating the transactions contemplated by this Agreement); provided, however, that “Transaction Expenses” shall not include any amounts paid by an Acquired Company pursuant to Section 5.15; (b) any fees and expenses of any legal, financial or accounting advisors incurred by an Acquired Company with respect to the transactions contemplated by this Agreement; and (c) any fees and expenses of any broker, finder, investment banker or other intermediary incurred by an Acquired Company in connection with the transactions contemplated by this Agreement, in each case not paid prior to the Closing Date; provided, however, that “Transaction Expenses” shall not include (i) any interest or principal with respect or related to indebtedness of the Acquired Companies for borrowed money, debt or capitalized lease obligations; or (ii) any prepayment premiums, termination, acceleration, breakage, contingent or similar fees or penalties of any kind or nature related to the repayment or termination of any indebtedness of the Acquired Companies for borrowed money, debt, or capitalized lease obligations (including but not limited to the Debt Agreements), to the extent the repayment, termination or default resulting in such premiums or fees is other than solely as a result of the consummation of the transactions provided for herein; provided that Buyer shall use commercially reasonable efforts to obtain any necessary consents or waivers in order to minimize or eliminate any such fees or penalties.
 
Treasury Regulations” means the Income Tax Regulations promulgated under the Code.
 
Section 1.2 Other Definitions. Each of the following terms is defined in the Section set forth opposite such term:
 
Term
 
Section
     
2007 Accrued Interest
 
2.2
Acquired Company
 
Recitals
Acquired Companies
 
Recitals
Acquisition Proposal
 
5.12
Agreement
 
Preamble
Business
 
Recitals
Buyer
 
Preamble
Buyer Cap
 
8.5(b)
Buyer Deductible
 
8.5(a)
Buyer Guarantor
 
Preamble
Buyer Losses
 
8.1
Buyer’s Environmental Consultant
 
9.3(b)(i)
Buyer’s Remediation Plan
 
9.3(b)(i)
Cash Purchase Price
 
2.2
Claims
 
2.6(a)
Closing
 
2.3
Closing Date
 
2.3
Closing Date Deadline
 
7.1(d)
Company
 
Preamble

-8-



 
 
3.3(a)
Company Contracts
 
3.12(a)
Company Releasee(s)
 
2.6(a)
Company Shares
 
Recitals
Covenant
 
5.11(a)
Designated Locations
 
9.1(a)
Environmental Basket
 
9.4
Environmental Cap
 
9.4
Environmental Remediation Costs
 
9.4
Environmental Site Assessment Period
 
9.2(b)
Estimated Additional Cash Amount
 
2.7(a)
Estimated Closing Statement
 
2.7(a)
Estimated Company Net Income
 
2.7(a)
Final Closing Statement
 
2.7(d)
Financial Statements
 
3.5
Fundamental Representations
 
8.4(a)
Indemnifying Party
 
8.3(a)
Independent Accountant
 
2.7(e)(ii)
Intercompany Debt Consideration
 
2.2
Parties
 
Preamble
Party
 
Preamble
Phase I Environmental Site Assessment
 
9.1(a)
Phase I Standard
 
9.1(a)
Phase II Environmental Site Assessment
 
9.1(b)
Pre-Closing Period
 
5.1
Proposed Closing Statement
 
2.7(b)
Purchase Price
 
2.2
Restricted Territory
 
5.11(e)
Seller
 
Preamble
Seller Guarantor
 
Preamble
Seller Losses
 
8.2
Seller Releasee(s)
 
2.6(b)
Seller’s Environmental Consultant
 
9.3(b)(iii)
Seller’s Remediation Plan
 
9.3(b)(iii)
Supporting Documentation
 
5.7(c)
Term
 
5.11(b)
Termination Date
 
7.1
Third Consultant
 
9.3(b)(v)
Third Remediation Plan
 
9.3(b)(v)
Transferee
 
5.13
 
8.5(a)
 
-9-

 
Section 1.3 Construction.
 
(a) Unless the context of this Agreement otherwise clearly requires, (i) references to the plural include the singular, and references to the singular include the plural, (ii) references to one gender include the other gender, (iii) the words “include,” “includes” and “including ” do not limit the preceding terms or words and shall be deemed to be followed by the words “without limitation”, (iv) the terms “hereof”, “herein”, “hereunder”, “hereto” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement, (v) the terms “day” and “days” mean and refer to calendar day(s), (vi) the terms “year” and “years” mean and refer to calendar year(s) and (vii) unless set forth specifically otherwise, the settlement of all payments hereunder shall be made in Dollars.
 
(b) Unless otherwise set forth in this Agreement, references in this Agreement to any document, instrument or agreement (including this Agreement) (i) includes and incorporates all exhibits, schedules and other attachments thereto, (ii) includes all documents, instruments or agreements issued or executed in replacement thereof and (iii) means such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified or supplemented from time to time in accordance with its terms and in effect at any given time. All Article and Section references herein are to Articles and Sections of this Agreement, unless otherwise specified.
 
(c) This Agreement shall not be construed as if prepared by one of the Parties, but rather according to its fair meaning as a whole, as if all Parties had prepared it.
 
ARTICLE II
 
PURCHASE AND SALE
 
Section 2.1 The Purchase and Sale. Subject to the terms and conditions of this Agreement, at the Closing, (a) Seller will sell, transfer and deliver to Buyer, and Buyer will purchase and acquire from Seller, all of the Company Shares and (b) Note Holder will sell, transfer and deliver to Buyer, and Buyer will purchase and acquire from Note Holder, the Intercompany Debt, in the case of each (a) and (b), free and clear of all Liens.
 
Section 2.2 Purchase Price. Subject to Section 2.7, the aggregate purchase price to be paid by Buyer at the Closing for the Company Shares and the Intercompany Debt (the “Purchase Price”) shall be an amount equal to (a) One Billion Four Hundred Thirty-Four Million Seven Hundred Fifty Thousand Dollars ($1,434,750,000) (the “Cash Purchase Price”), plus (b) the Estimated Adjustment Amount, minus (c) Two Million Nine Hundred and Two Thousand Eight Hundred Seventeen Dollars ($2,902,817) (the “2007 Accrued Interest”). The Purchase Price shall be allocated between Seller and Note Holder as follows: (a) first, that portion of the Purchase Price equal to the fair market value of the Intercompany Debt (not to be less than the principal balance due), as of the Closing Date, shall be paid to Note Holder as consideration for the Intercompany Debt (the “Intercompany Debt Consideration”); and (b) an amount equal to (i) the Purchase Price, minus (ii) the Intercompany Debt Consideration shall be paid to Seller as consideration for the Company Shares.
 
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Section 2.3 Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the “Closing”) shall occur as promptly as possible, and in any event no later than three (3) Business Days following the satisfaction or waiver of the conditions to the obligations of the parties set forth in Article VI (other than those conditions that by their nature are to be fulfilled at Closing, but subject to the satisfaction or waiver of such conditions) or on such other date as Seller and Buyer may agree in writing. The date of the Closing shall be referred to herein as the “Closing Date”. The Closing shall take place at the offices of King & Spalding LLP located at 1180 Peachtree Street, N.E., Atlanta, Georgia 30309, at 10:00 a.m. Atlanta, Georgia time, or at such other place or at such other time as Seller and Buyer may agree in writing.
 
Section 2.4 Deliveries by Seller. At the Closing, Seller will deliver or cause to be delivered to Buyer (unless delivered previously) the following:
 
(a) all stock certificates representing the Company Shares and accompanying stock powers or other appropriate instruments of assignment and transfer in a form reasonably satisfactory to Buyer duly executed by Seller, evidencing the transfer of the Company Shares to Buyer;
 
(b) (i) evidence reasonably satisfactory to Buyer of the completion by Note Holder of the transactions described in Section 5.14, and (ii) any note, loan agreement or other evidence of Intercompany Debt accompanied by appropriate instruments of assignment and transfer in a form reasonably satisfactory to Buyer duly executed by Note Holder, evidencing the transfer of the Intercompany Debt to Buyer;
 
(c) a certificate, prepared in accordance with Sections 1.897-2(h) and 1.1445-2(c)(3) of the Treasury Regulations, to the effect that the Company Shares do not constitute United States real property interests for purposes of Sections 897 and 1445 of the Code;
 
(d) a certificate executed by Seller and dated as of the Closing Date certifying as to the satisfaction of the conditions contained in Section 6.3; and
 
(e) an IRS Form W-8BEN, executed by each of Seller and Note Holder, to establish the foreign status of Seller and Note Holder and to establish (together with the certificate described in Section 2.4(c) above) that Seller and Note Holder are exempt from any U.S. Tax withholding requirements with respect to amounts to be received by them hereunder.
 
Section 2.5 Deliveries by Buyer. At the Closing, Buyer shall (a) pay to Seller and Note Holder the Purchase Price by wire transfer in immediately available funds to the account or accounts designated to Buyer in writing by Seller at least two (2) Business Days prior to the Closing Date and (b) deliver or cause to be delivered to Seller a certificate executed by Buyer and dated as of the Closing Date certifying as to the satisfaction of the conditions contained in Section 6.2.
 
Section 2.6 Mutual Release. Effective immediately subsequent to the Closing, and subject to and in consideration of Buyer’s payment of the Purchaser Price to Seller and Note Holder and the effective transfer of the Company Shares and Intercompany Debt by Seller and Note Holder, respectively, to Buyer:
 
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(a) Each of Seller and Note Holder hereby releases and forever discharges the Acquired Companies and their respective individual, joint or mutual, past and present officers, employees, agents or directors (individually a “Company Releasee” and collectively, the “Company Releasees”) from any and all claims, causes of action, demands, suits, debts, obligations, liabilities, damages, losses, costs, and expenses (including attorneys' fees) of every kind or nature whatsoever, known or unknown, actual or potential, suspected or unsuspected, fixed or contingent (collectively, “Claims”), which Seller or Note Holder now has, has ever had or may hereafter have or discover against the respective Company Releasees arising contemporaneously with or prior to the Closing or on account of or arising out of any matter, cause or event on or prior to the Closing; provided, however, that nothing contained herein shall operate to release any obligation of (i) Buyer or Buyer Guarantor arising under this Agreement or (ii) the Acquired Companies under any Contracts related to the operation of the Business in the Ordinary Course between any Acquired Company, on the one hand, and Seller, Note Holder or any Affiliate of Seller or Note Holder on the other hand.
 
(b) Buyer does hereby on behalf of each Acquired Company, and shall cause each Acquired Company to, release and forever discharges Seller and Note Holder and their respective individual, joint or mutual, past and present officers, employees, agents or directors (individually a “Seller Releasee” and collectively, the “Seller Releasees”) from any and all Claims, which such Acquired Company now has, has ever had or may hereafter have or discover against the respective Seller Releasees arising contemporaneously with or prior to the Closing or on account of or arising out of any matter, cause or event on or prior to the Closing; provided, however, that nothing contained herein shall operate to release any obligation of (i) Seller, Note Holder or Seller Guarantor arising under this Agreement or (ii) Seller, Note Holder or any Affiliate of Seller or Note Holder under any Contracts related to the operation of the Business in the Ordinary Course between any Acquired Company, on the one hand, and Seller, Note Holder or any Affiliate of Seller or Note Holder on the other hand.
 
Section 2.7 Calculation of the Adjustment Amount.
 
(a) No later than three (3) days prior to the Closing Date, Seller shall cause to be prepared and delivered to Buyer an estimated closing statement of the Acquired Companies as of the Closing Date (the “Estimated Closing Statement”), which shall include a calculation of the estimated Additional Cash Amount (the “Estimated Additional Cash Amount”) and the estimated Company Net Income (the “Estimated Company Net Income”).
 
(b) No later than thirty (30) days following the Closing Date, Buyer shall prepare and deliver to Seller the draft closing statement of the Acquired Companies as of the Closing Date (the “Proposed Closing Statement”), which shall include a calculation of each of the Additional Cash Amount, the Company Net Income, the Adjustment Amount Surplus, if any, and the Adjustment Amount Deficit, if any. Buyer shall cause the Acquired Companies to provide Seller and its representatives with access to Acquired Company employees and advisors and such books and records as may be reasonably requested by them to verify the information contained in the Proposed Closing Statement.
 
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(c) Seller shall have thirty (30) days following receipt of the Proposed Closing Statement during which to notify Buyer of any dispute of any item contained in the Proposed Closing Statement, which notice shall set forth in reasonable detail the basis for such dispute. At any time within such thirty (30)-day period, Seller shall be entitled to agree with any or all of the items set forth in the Proposed Closing Statement.
 
(d) If Seller does not notify Buyer of any such dispute within such thirty (30)-day period, or notifies Buyer of its agreement with the adjustments in the Proposed Closing Statement prior to the expiration of the thirty (30)-day period, the Proposed Closing Statement prepared by Buyer shall be deemed to be the “Final Closing Statement”.
 
(e) If Seller does notify Buyer of any such dispute within such thirty (30)-day period, the Final Closing Statement shall be resolved as follows:
 
(i) The Parties shall cooperate in good faith to resolve any such dispute as promptly as possible.
 
(ii) In the event the Parties are unable to resolve any such dispute within fifteen (15) days (or such longer period as the Parties shall mutually agree in writing) of notice of such dispute, such dispute and each Party’s work papers related thereto shall be submitted to, and all issues having a bearing on such dispute shall be resolved by PricewaterhouseCoopers or another independent internationally recognized accounting firm agreed to by the Parties (the “Independent Accountant”). Such resolution shall be final and binding on the Parties, be based on presentations of the Parties and on the Independent Accountant’s review, and shall be limited to only those matters in dispute; provided, however, the resolution determined by the Independent Accountant shall not be greater than the higher value, nor lower than the lower value, of the applicable number as calculated by Seller or Buyer and submitted to the Independent Accountant. The Parties shall use commercially reasonable efforts to cause the Independent Accountant to complete its work within thirty (30) days following its engagement. The fees, costs and expenses of the Independent Account shall be paid one-half by Seller and one-half by Buyer.
 
(f) The Parties jointly shall revise the Proposed Closing Statement and the calculation of the Additional Cash Amount, the Company Net Income, the Adjustment Amount Surplus, if any, and the Adjustment Amount Deficit, if any, as appropriate to reflect the resolution of Seller’s objections (as agreed upon by the Parties or as determined by the Independent Accountant) and deliver it to Seller within ten (10) days after the resolution of such objections. Such revised balance sheet shall be the “Final Closing Statement”.
 
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(g) (i) To the extent there is an Adjustment Amount Deficit on the Final Closing Statement, Buyer shall pay Seller the amount of the Adjustment Amount Deficit by wire transfer of immediately available funds within five (5) Business Days after Buyer’s delivery of the Final Closing Statement to Seller to an account or accounts designated by Seller and (ii) to the extent there is an Adjustment Amount Surplus on the Final Closing Statement, Seller shall pay Buyer the amount of the Adjustment Amount Surplus by wire transfer of immediately available funds within five (5) Business Days after Buyer’s delivery of the Final Closing Statement to Seller to an account or accounts designated by Buyer.
 
ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF SELLER
 
Subject to the terms, conditions and limitations set forth in this Agreement and except as has been booked, accrued or otherwise reflected in the Financial Statements or reflected in the notes thereto (other than with respect to the representations and warranties set forth in Sections 3.1, 3.2 and 3.3, which such representations and warranties shall not be subject to any qualifications beyond those set forth in such representations and warranties), Seller hereby represents and warrants to Buyer as of the date hereof as follows:
 
Section 3.1 Organization. The Acquired Companies are corporations duly organized, validly existing and in good standing under the Laws of their respective jurisdictions of organization, and each Acquired Company has all requisite corporate power and authority to own, lease and operate their respective properties and to carry on in all material respects their respective businesses as conducted on the date hereof. Each Acquired Company is duly qualified or registered as a foreign corporation to transact business under the Laws of each jurisdiction where the character of its activities or the location of the properties owned or leased by it requires such qualification or registration, except where the failure of such qualification or registration would not, individually or in the aggregate, have a Material Adverse Effect.
 
Section 3.2 Authorization. Seller has the requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by Seller and does, when duly executed by all Parties and delivered by Seller, constitute the valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.

Section 3.3 Capitalization.
 
(a) The authorized capital stock of the Company consists of 120,000 shares of common stock, par value $100.00 per share (the “Company Common Stock”). As of the date hereof, there are 116,000 shares of Company Common Stock issued and outstanding and owned beneficially and of record by Seller free and clear of all Liens. None of the issued and outstanding shares of Company Common Stock was issued in violation of any preemptive rights. There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the Company Common Stock or obligating either Seller or the Company to issue or sell any shares of Company Common Stock, or any other interest in, the Company. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of Company Common Stock.
 
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(b) All the outstanding shares of capital stock of each Subsidiary are validly issued, fully paid, nonassessable and free of preemptive rights and are owned by the Company, whether directly or indirectly, free and clear of all Liens (other than Liens securing indebtedness reflected on the balance sheet included in the Financial Statements). There are no options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of any Subsidiary of the Company or obligating Seller or any Acquired Company to issue or sell any shares of capital stock of, or any other interest in, any Subsidiary of the Company. There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any shares of capital stock of or any other interests in any Subsidiary.
 
(c) Except for title to Owned Real Property, with respect to which representations and warranties are made solely under Section 3.8 hereof, each Acquired Company holds good and valid title to all of its material assets, free and clear of all Liens (other than Permitted Liens or Liens securing indebtedness, debt for borrowed money or capitalized lease obligations of any Acquired Company), except where the failure to do so would not, individually or in the aggregate, have a Material Adverse Effect.
 
(d) There are no outstanding contractual obligations of any Acquired Company to make any investment (in the form of a loan, capital contribution or otherwise) in any other Person, except such contractual obligations that would not, individually or in the aggregate, have a Material Adverse Effect.
 
Section 3.4 Consents and Approvals; No Violations. Except for applicable requirements of the HSR Act and the Debt Agreements, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated by this Agreement will (a) conflict with or result in any breach of any provision of the certificates of incorporation or bylaws of Seller or any Acquired Company; (b) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any Governmental Entity; (c) violate, conflict with or result in a default under, or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any note, mortgage, other evidence of indebtedness, guarantee, license, agreement, lease to which any Acquired Company is a party; or (d) violate any Law, order, injunction or decree applicable to any Acquired Company; excluding from the foregoing clauses (b), (c) and (d) such requirements, violations, conflicts, defaults or rights (i) which would not, individually or in the aggregate, have a Material Adverse Effect, or (ii) which become applicable as a result of the business or activities in which Buyer is or proposes to be engaged or as a result of any acts or omissions by, or the status of or any facts pertaining to, Buyer.
 
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Section 3.5 Financial Statements. Seller has provided Buyer copies of the audited consolidated balance sheet of the Acquired Companies for the fiscal year ended December 31, 2007, and the related audited consolidated statements of income, retained earnings, stockholders’ equity and cash flows of the Acquired Companies, together with all related notes and schedules thereto, accompanied by the reports thereon of the Company’s independent auditors (collectively referred to as the “Financial Statements”). The Financial Statements (a) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and (b) fairly present, in all material respects, the consolidated financial position, results of operations and cash flows of the Acquired Companies taken as a whole as at the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein.
 
Section 3.6 No Undisclosed Liabilities. The Company and its Subsidiaries do not have any liabilities required to be shown in, or disclosed in the notes to, the Financial Statements in accordance with GAAP that are not shown or disclosed, except (a) those liabilities shown in or arising under this Agreement, (b) those liabilities incurred in the Ordinary Course since the date of the Financial Statements, (c) those liabilities not required under GAAP to be reflected in the Financial Statements, (d)  those liabilities arising from actions not in violation of Section 5.1, and (e) any liability or obligation (or related liabilities or obligations arising out of the same individual fact, event or circumstance) which in any individual case does not exceed Five Hundred Thousand Dollars ($500,000).
 
Section 3.7 Absence of Certain Changes. Since January 1, 2008 and through the date hereof there has been no Material Adverse Effect.
 
Section 3.8 Real Property. Except as would not, individually or in the aggregate, have a Material Adverse Effect:
 
(a) As of the date hereof an Acquired Company has good and marketable title to all of the Owned Real Property free and clear of any Liens other than Permitted Liens;
 
(b) As of the date hereof an Acquired Company has a valid leasehold interest in the Leased Real Property, free and clear of any Liens other than Permitted Liens;
 
(c) Except in the Ordinary Course, there are no condemnation or appropriation or similar proceedings pending or, to the Knowledge of Seller, threatened against any of the Real Property or the improvements thereon; and
 
(d) All applicable permits, licenses and other evidences of compliance that are required for the occupancy, operation and use of the Owned Real Property have been obtained and complied with.
 
Section 3.9 Intellectual Property. An Acquired Company has good and valid title to or possesses the rights to use the material Company Intellectual Property, free and clear of all Liens, other than Permitted Liens, and has paid all material maintenance fees, renewals or expenses related to such material Company Intellectual Property, except where such failure would not, individually or in the aggregate, have a Material Adverse Effect.
 
Section 3.10 Litigation. As of the date hereof, there is no action, suit or proceeding pending or, to the Knowledge of Seller, threatened against any Acquired Company by or before any Governmental Entity, other than those that would not, individually or in the aggregate, have a Material Adverse Effect. As of the date of this Agreement, no Acquired Company is subject to any outstanding order, writ, judgment, award, injunction or decree of any Governmental Entity of competent jurisdiction or any arbitrator or arbitrators, other than those that would not, individually or in the aggregate, have a Material Adverse Effect.
 
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Section 3.11 Compliance with Applicable Law. Each Acquired Company is in compliance with all applicable Laws, except where the results of any such noncompliance would not, individually or in the aggregate, have a Material Adverse Effect.
 
Section 3.12 Company Contracts.
 
(a) For purposes of this Section 3.12, “Company Contracts” means:
 
(i) all Contracts with suppliers under which the Acquired Companies, collectively make payments in excess of $10,000,000 on an annual basis;
 
(ii) all Contracts that individually involve payments to or from the Acquired Companies, collectively, in excess of $10,000,000 on an annual basis;
 
(iii) all bonds, debentures, notes, loans, credit or loan agreements or loan commitments, mortgages, indentures, guarantees or other contracts relating to the borrowing of money;
 
(iv) all leases relating to the Leased Real Property or other leases or licenses involving any properties or assets (whether real, personal or mixed, tangible or intangible) involving an annual commitment or payment of more than $5,000,000 individually by any Acquired Company; and
 
(v) all Contracts not made in the Ordinary Course that individually involve annual payments to or from the Company or any Subsidiary in excess of $10,000,000.
 
(b) All Company Contracts are in full force and effect in all material respects and, to the Knowledge of Seller assuming the due authorization, execution and delivery by any other party thereto, are currently enforceable in all material respects against the applicable Acquired Company and, as of the Closing will be, if not previously terminated or expired, enforceable in all material respects against the other party thereto in accordance with the express terms thereof, subject to bankruptcy, insolvency, reorganization, moratorium and similar Laws of general applicability relating to or affecting creditors’ rights and to general principles of equity, except for such failures that would not, individually or in the aggregate, have a Material Adverse Effect. To the Knowledge of Seller, there does not exist under any Company Contract any event of default or event or condition that, after notice or lapse of time or both, would constitute a violation, breach or event of default thereunder as of the date hereof on the part of any Acquired Company, except for such violations, breaches, defaults, events or conditions that would not, individually or in the aggregate, have a Material Adverse Effect.
 
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Section 3.13 Licenses and Permits. Each of the Acquired Companies own or possess all Licenses that are necessary to enable it to carry on their respective operations as presently conducted, except, in each case, where the failure to have a particular license or permit would not, individually or in the aggregate, have a Material Adverse Effect.
 
Section 3.14 Company Benefit Plans. Except as would not, individually or in the aggregate, have a Material Adverse Effect:
 
(a) No Company Benefit Plan is or was, within the last five years, a “multiemployer pension plan” (as defined in Sections 3(37) or 4001(a)(3) of ERISA) or a “multiple employer plan” described in Section 413(c) of the Code, and no Acquired Company has, within the last five years, contributed to, been required to contribute to, or otherwise had any obligation or liability in connection with any such “multiemployer plan” or “multiple employer plan;”
 
(b) To the Knowledge of Seller, each Company Benefit Plan has been established and administered in all material respects in accordance with its terms and in compliance with applicable Laws, including ERISA and the Code;
 
(c) There is no pending or, to the Knowledge of Seller, threatened claim (other than a routine claim for benefits), proceeding, examination, audit, investigation or other proceeding with respect to any Company Benefit Plan; and
 
(d) The execution, delivery and performance of, and consummation of the transactions contemplated by, this Agreement will not (i) entitle any Person to any additional benefits, including severance pay, unemployment compensation or any other payment, or (ii) accelerate the time of payment or vesting of any benefits under any Company Benefit Plan, or increase the amount of compensation due any such individual. No Acquired Company is obligated or will become obligated in connection with the transactions contemplated by this Agreement to make a payment that will not be deductible under Section 280G of the Code.
 
Section 3.15 Labor Relationships. Except as would not, individually or in the aggregate, have a Material Adverse Effect:
 
(a) None of the Company’s or its Subsidiaries’ employees are represented by a labor organization or group that was either voluntarily recognized or certified by any labor relations board (including the NLRB) or by any other Governmental Entity;
 
(b) No Acquired Company is a signatory to a collective bargaining agreement with any trade union, labor organization or group; and
 
(c) No labor dispute, walk out, strike, hand billing, picketing, or work stoppage involving the employees of any Acquired Company has occurred, is in progress or, to the Knowledge of Seller, has been threatened in the last two years.
 
SECTION 3.16 NO OTHER REPRESENTATIONS OR WARRANTIES. NOTWITHSTANDING ANY OTHERWISE EXPRESS REPRESENTATIONS AND WARRANTIES MADE BY SELLER IN THIS AGREEMENT, NEITHER SELLER, THE COMPANY, NOR ANY SUBSIDIARY MAKES ANY REPRESENTATION OR WARRANTY TO BUYER WITH RESPECT TO:
 
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(A) ANY PROJECTIONS, ESTIMATES OR BUDGETS HERETOFORE DELIVERED TO OR MADE AVAILABLE TO BUYER OR ANY FUTURE REVENUES, EXPENSES OR EXPENDITURES OR FUTURE RESULTS OF OPERATIONS OF THE COMPANY OR ANY SUBSIDIARY; OR
 
(B) EXCEPT AS EXPRESSLY COVERED BY A REPRESENTATION AND WARRANTY CONTAINED IN THIS ARTICLE III, ANY OTHER INFORMATION OR DOCUMENTS (FINANCIAL OR OTHERWISE) MADE AVAILABLE TO BUYER OR ITS COUNSEL, ACCOUNTANTS OR ADVISERS WITH RESPECT TO THE COMPANY, THE SUBSIDIARIES OR THE BUSINESS.
 
EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS ARTICLE III, NONE OF THE COMPANY, ITS SUBSIDIARIES OR SELLER MAKES ANY REPRESENTATIONS OR WARRANTIES IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF BUYER
 
Buyer hereby represents and warrants to Seller as of the date hereof as follows:

Section 4.1 Organization. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of its jurisdiction of organization, and has the requisite power and authority to own, lease and operate its properties and assets and to carry on its business as now being conducted.
 
Section 4.2 Authorization. Buyer has the requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by Buyer and does, when duly executed by all Parties and delivered by Buyer, constitute the valid and binding agreement of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency and other similar Laws affecting the enforceability of creditors’ rights generally, general equitable principles and the discretion of courts in granting equitable remedies.
 
Section 4.3 Consents and Approvals; No Violations. Except for applicable requirements of the HSR Act, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) conflict with or result in any breach of any provision of the organizational documents of Buyer; (b) require any filing with, or the obtaining of any permit, authorization, consent or approval of, any Governmental Entity; (c) violate, conflict with or result in a default (or any event which, with notice or lapse of time or both, would constitute a default) under, or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any note, mortgage, other evidence of indebtedness, guarantee, license, agreement, lease or other contract, instrument or obligation to which Buyer is a party or by which Buyer or any of its assets may be bound; or (d) violate any Law, order, injunction or decree applicable to Buyer, excluding from the foregoing clauses (b), (c) and (d) such requirements, violations, conflicts, defaults or rights (i) which would not adversely affect the ability of Buyer to consummate the transactions contemplated by this Agreement or (ii) which become applicable as a result of any acts or omissions by, or the status of or any facts pertaining to, Seller.
 
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Section 4.4 Litigation. There is no claim, action, suit, proceeding or governmental investigation pending or, to the knowledge of Buyer, threatened against Buyer, by or before any Governmental Entity or by any third party which challenges the validity of this Agreement or which would be reasonably likely to adversely affect or restrict Buyer’s ability to consummate the transactions contemplated by this Agreement.
 
Section 4.5 Financial Capability. Buyer has funds available, which taken together with available borrowing capacity under its existing revolving credit agreements, are sufficient to permit Buyer to consummate the transactions contemplated by this Agreement. Notwithstanding anything to the contrary contained herein, the Parties acknowledge and agree that it shall not be a condition to the obligations of Buyer to consummate the transactions contemplated by this Agreement that Buyer have sufficient funds for payment of the Purchase Price.
 
Section 4.6 Independent Review.
 
(a) Buyer has conducted its own independent review and analysis of the Acquired Companies and their respective condition, cash flow and prospects. In entering this Agreement, Buyer has relied exclusively upon the representations and warranties contained herein.
 
(b) Buyer acknowledges that neither the Company, its Subsidiaries nor any of their respective directors, officers, employees, Affiliates, agents or representatives make any representation or warranty, either express or implied, as to the accuracy or completeness of any of the information provided or made available to Buyer or its agents or representatives prior to the execution of this Agreement.
 
(c)  Buyer agrees, to the fullest extent permitted by Law, that neither the Company, its Subsidiaries nor any of their respective directors, officers, employees, Affiliates, agents or representatives shall have any liability or responsibility whatsoever to Buyer on any basis (including in contract or tort, under federal or state securities laws or otherwise) based upon any information provided or made available, or statements made, to Buyer prior to the execution of this Agreement.
 
Section 4.7 Certain Fees. Buyer has not employed any broker, finder, investment banker, or other intermediary or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees, finders’ fees, or other similar fees in connection with this Agreement or the transactions contemplated hereby.
 
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ARTICLE V
 
COVENANTS
 
Section 5.1 Conduct of the Business. Seller agrees that, during the period from the date of this Agreement to the earlier of (x) the Closing Date and (y) the date on which this Agreement is terminated in accordance with Article VII (such period, the “Pre-Closing Period”), except as otherwise contemplated by this Agreement, or as consented to in writing by Buyer, either prior to or following the date hereof (which consent shall not be unreasonably withheld, conditioned or delayed), Seller will cause the Acquired Companies to:
 
(a) not amend their respective certificates or articles of incorporation or bylaws;
 
(b) not authorize for issuance, issue, sell, pledge, encumber or deliver or agree or commit to issue, sell, pledge, encumber or deliver any shares of its capital stock, or not issue any securities convertible into, exchangeable for or representing a right to purchase or receive, or not enter into any contract with respect to the issuance of, shares of their capital stock;
 
(c) not split, combine or reclassify any shares of its capital stock; not declare, set aside or pay any cash or stock dividend or other stock distribution in respect of their capital stock; or not redeem or otherwise acquire any of their securities;
 
(d) use commercially reasonable efforts to conduct the Business substantially in the Ordinary Course;
 
(e) use commercially reasonable efforts to maintain, preserve and retain relationships with their suppliers;
 
(f) not sell or dispose of any material asset, except in the Ordinary Course;
 
(g) not mortgage, pledge or subject to any material Lien (other than Permitted Liens) any material asset, except in the Ordinary Course;
 
(h) except in the Ordinary Course, not enter into or amend any employment, bonus, severance or retirement contract or arrangement, or increase any salary or other form of compensation payable or to become payable to any of their executives, stockholders, affiliates, or employees, enter into or amend any contract or arrangement of any affiliates, or employees nor pay any special bonus to their executives, stockholders, affiliates, directors or employees, except for payments under those Contracts and arrangements for increases in salaries made in the Ordinary Course;
 
(i) not sell, lease, license or otherwise dispose of or agree to sell, lease, license or otherwise dispose of any of their assets, properties, rights or claims, except in the Ordinary Course;
 
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(j) not cancel or terminate any existing lease agreement, except in the Ordinary Course;
 
(k) not adopt, modify, amend, cancel or terminate any Company Benefit Plan, except in the Ordinary Course or as required by applicable Law;
 
(l) not modify, amend, cancel or terminate any existing agreement or arrangement involving any obligation with a value in excess of $10,000,000 and not otherwise expressly provided for in this Section 5.1, except in the Ordinary Course;
 
(m) not make or authorize any individual capital expenditure, capital commitment, or addition to property, plant or equipment other than in accordance with the Ordinary Course or otherwise in accordance with the Acquired Companies’ capital expenditure plan in effect as of the date hereof;
 
(n) not incur any indebtedness for borrowed money other than borrowings under the Acquired Companies’ revolving credit facility in the Ordinary Course;
 
(o) not incur or pay any management or director fees;
 
(p) not make or change any Tax election or settle or compromise any liability in respect of Taxes, change in any respect any accounting method in respect of Taxes, file any amendment to a Tax Return, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the limitation period applicable to any claim or assessment in respect of Taxes; and
 
(q) not agree in writing, or otherwise, to take any action described in this Section 5.1.
 
Section 5.2 Access to Information. Except with respect to access for the purposes of the provisions of Article IX which shall be governed solely by Article IX:
 
(a) Subject to the restrictions of any applicable Law or contractual undertaking, during the Pre-Closing Period, Seller shall cause the Company to (i) give Buyer and its authorized representatives reasonable access to the books, records, work papers, offices and other facilities and properties of the Acquired Companies, (ii) permit Buyer to make such inspections thereof as Buyer may reasonably request and (iii) cause the officers of Acquired Companies to furnish Buyer with such financial and operations data and other information with respect to the Acquired Companies as Buyer may reasonably request; provided, however, that any such investigation shall be conducted during normal business hours under the supervision of the Company’s personnel and in such a manner as to maintain the confidentiality of this Agreement and the transactions contemplated by this Agreement and not interfere unreasonably with the business operations of the Acquired Companies.
 
(b) All information furnished or provided by Seller, Acquired Companies or any of their respective Affiliates or representatives to Buyer or its representatives (whether furnished before or after the date of this Agreement) shall be held subject to the Confidentiality Agreement.
 
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(c) Following the Closing and subject to the restrictions of any applicable Law or contractual undertaking, Buyer agrees to make personnel of Buyer or its Affiliates available to Seller to the extent such access is reasonably necessary for Seller to comply with the terms of this Agreement or any applicable Law; provided, however, that any such access shall be provided only after receipt of reasonable advance notice from Seller and during normal business hours of Buyer’s personnel or the personnel of such Affiliate of Buyer.
 
(d) Buyer shall provide Seller with such documentation as Seller may reasonably request to permit Seller to conduct a reasonable due diligence investigation concerning the financial capability, resources, condition and creditworthiness of Buyer.
 
Section 5.3 Consents.
 
(a) Each Party will promptly after execution of this Agreement, and in no event later than five (5) Business Days from the date hereof, make all filings or submissions as are required under the HSR Act. Each Party will promptly furnish to the other such necessary information and reasonable assistance as the other may request in connection with its preparation of any filing or submission that is necessary under the HSR Act. Each Party will promptly provide the other with copies of all written communications (and memoranda setting forth the substance of all oral communications) between each of them, any of their Affiliates or any of its or their representatives, on the one hand, and any Governmental Entity, on the other hand, with respect to this Agreement or the transactions contemplated hereby. Without limiting the generality of the foregoing, each Party will promptly notify the other of the receipt and content of any inquiries or requests for additional information made by any Governmental Entity in connection therewith and will promptly (i) comply with any such inquiry or request and (ii) provide the other with a description of the information provided to any Governmental Entity with respect to any such inquiry or request. In addition, each Party will keep the other apprised of the status of any such inquiry or request.
 
(b) No party hereto shall, and each shall cause their respective Affiliates not to, take any action that could reasonably be expected to adversely affect or delay the approval of any Governmental Entity of any of the aforementioned filings.
 
Section 5.4 Reasonable Best Efforts. Each Party shall cooperate, and use its reasonable best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable Laws to consummate the transactions contemplated by this Agreement as promptly as practicable after the date hereof, including using reasonable best efforts to obtain approval of the transactions contemplated by this Agreement from all Governmental Entities. The Parties further covenant and agree, with respect to a threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of the Parties to consummate the transactions contemplated hereby, to use their reasonable best efforts to prevent or lift the entry, enactment or promulgation thereof, as the case may be.
 
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Section 5.5 Public Announcements. Except as otherwise agreed to by the Parties, the Parties shall not issue any report, statement or press release or otherwise make any public statements with respect to this Agreement and the transactions contemplated hereby, except as in the reasonable judgment of a Party may be required by Law or by the rules of a national securities exchange, and in any event a Party shall use its reasonable best efforts to consult with the other Party a reasonable time in advance of such required disclosure.
 
Section 5.6 Buyer Knowledge. Buyer has, as a result of its receipt of information provided by Seller to Buyer pursuant to Buyer’s due diligence, no actual knowledge as of the date hereof of any breach by Seller of any representation or warranty set forth in Article III. Should, prior to the Closing, Buyer obtain actual knowledge of a breach by Seller of any representation or warranty set forth in Article III as a result of its receipt of information provided by Seller to Buyer following the date hereof, then Buyer promptly shall notify Seller in writing of the existence of such breach.
 
Section 5.7 Tax Matters.
 
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall, at its own expense, prepare or cause to be prepared and timely file or cause to be timely filed all Tax Returns of the Acquired Companies for all periods ending on or prior to the Closing Date that have not yet been filed and are required to be filed after the Closing Date. Provided that Buyer has complied with the procedures outlined in Section 5.7(c) hereof, Buyer shall be reimbursed by Seller for Taxes of the Acquired Companies required to be paid (less any prepayment of Taxes and any Taxes attributable to the period from January 1, 2008 until the Closing Date) as shown on the Tax Returns described in the preceding sentence within fifteen (15) days after receipt by Seller of notice from Buyer stating that payment by Buyer or the applicable Acquired Company of such Taxes has been made.
 
(b) Tax Periods Beginning Before and Ending After the Closing Date. Buyer shall, at its own expense, prepare or cause to be prepared and timely file or cause timely to be filed any Tax Returns of the Acquired Companies for Tax periods that begin before the Closing Date and end after the Closing Date. Provided Buyer has complied with the procedures outlined in Section 5.7(c) hereof, Buyer shall be reimbursed by Seller for an amount equal to the portion of the Taxes (less any prepayment of Taxes) shown as due on such Tax Returns that relate to the portion of such Taxable period ending on December 31, 2007 within fifteen (15) days after receipt by Seller of notice from Buyer that payment by Buyer or the applicable Acquired Company of such Taxes has been made. For purposes of this Section 5.7(b) and Section 8.1(d), in the case of any Income Taxes that are imposed on a periodic basis and are payable for a Taxable period that includes (but does not end on) December 31, 2007, the portion of such Income Tax that relates to the portion of such Taxable period ending on December 31, 2007 shall be deemed equal to the amount which would be payable if the relevant Taxable period ended on December 31, 2007. The portion of any Taxes other than Income Tax that relates to the period ending on December 31, 2007 shall be determined on a daily pro rata basis. Any credits or estimated tax payments relating to a Taxable period that begins before and ends after December 31, 2007 shall be taken into account as though the relevant Taxable period ended on December 31, 2007. All determinations necessary to give effect to the foregoing allocations shall be made in a manner consistent with prior practice of the applicable Acquired Company.
 
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(c) Preparation of Tax Returns. Buyer shall provide Seller with copies of any Tax Returns to be filed pursuant to this Section 5.7, along with all schedules, statements, workpapers and supporting documentation (the “Supporting Documentation”), prior to the filing of any such Tax Return and at least sixty (60) days prior to the due date thereof (giving effect to any extensions thereto). Seller shall have the right to review any such Tax Return and Supporting Documentation prior to the filing of such Tax Return. If Seller disputes any item(s) shown on any such Tax Return, Buyer and Seller shall negotiate in good faith and use commercially reasonable efforts to resolve any issues arising as a result of the review of such Tax Return and to mutually consent to the filing as promptly as possible of such Tax Return. If such Parties are unable to resolve any dispute within thirty (30) days after the receipt by Seller of the Tax Return proposed to be filed, such dispute shall be resolved by the Independent Accountant, which shall resolve any issue in dispute as promptly as practicable. If the Independent Accountant is unable to make a determination with respect to any disputed issue prior to the due date (including any extensions) for the filing of the Tax Return in question, (i) Buyer shall file, or shall cause to be filed, such Tax Return without such determination having been made and (ii) Seller shall pay to Buyer an amount equal to the amount of Taxes not in dispute with respect to such Tax Return in accordance with Section 5.7(a) or 5.7(b), as the case may be. Upon the Independent Accountant’s delivery of its determination to Buyer and Seller, appropriate adjustments shall be made to the amount paid in accordance with Section 5.7(a) or 5.7(b), as the case may be, in order to reflect the Independent Accountant’s determination. If such determination reflects an overpayment by Seller pursuant to Section 5.7(a) or 5.7(b), Buyer shall promptly pay, or shall cause the applicable Acquired Company to promptly pay to Seller such overpayment amount. The determination by the Independent Accountant shall be final, conclusive and binding on the Parties. The fees and expenses of the Independent Accountant shall be shared equally by Buyer and Seller. Each such Party shall indemnify the other for any interest or penalties imposed by any taxing authority resulting from a Party’s failure to deliver Tax Returns in a timely manner as provided in this Section.
 
(d) Certain Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by Buyer when due, and Buyer will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other such Taxes and fees, and, if required by applicable Law, Seller will, and will cause their Affiliates to, join in the execution of any such Tax Returns and other documentation.
 
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(e) Refunds and Tax Benefits. Any Tax refunds that are received by Buyer or any Acquired Company, and any amounts credited against Tax to which Buyer or any Acquired Company becomes entitled (including any interest paid or credited with respect thereto), that relate to Tax periods or portions thereof ending on or before December 31, 2007 shall be for the account of Seller, and Buyer shall pay over to Seller any such refund or amount of any such credit within fifteen (15) days after receipt or entitlement thereto. Any such refunds or credits relating to Tax periods or portions thereof beginning before and ending after December 31, 2007 shall be equitably apportioned between Buyer and Seller.
 
(f) Amendments to Returns; Refund Claims. Following the Closing, Buyer shall not file an amended Tax Return with respect to Taxes of any Acquired Company for a Tax period ending on or before the Closing Date without compliance with the disclosure, review and dispute resolution procedures set out in Section 5.7(c) hereof. Upon written request of Seller, Buyer shall, at Seller’s expense, cause the relevant entity to file for, and use commercially reasonable efforts to obtain and expedite the receipt of, any refund to which any Acquired Company may be entitled with respect to Tax periods or portions thereof ending on or before December 31, 2007.
 
(g) Purchase Price Adjustment. Any amount paid pursuant to this Section 5.7 shall be treated as an adjustment to the Purchase Price for U.S. federal income Tax purposes.
 
Section 5.8 Preservation of Records. Except as otherwise provided in this Agreement, Buyer agrees that it shall, and it shall cause the Acquired Companies to, (a) preserve and keep the records (including all Tax and accounting records) of the Acquired Companies for a period of seven years from the Closing, or for any longer periods as may be required by any Governmental Entity or ongoing litigation, and (b) make such records available to Seller, during normal business hours and under the supervision of Buyer personnel, as may be reasonably required by Seller. If Buyer or an Acquired Company wishes to destroy such records after the time specified above, Buyer shall first give sixty (60) days’ prior written notice to Seller and Seller shall have the right at its option and expense, upon prior written notice given to Buyer within that sixty (60)-day period, to take possession of the records within ninety (90) days after the date of Seller’s notice to Buyer.
 
Section 5.9 Employees; Employee Benefits.
 
(a) Effective as of the Closing Date and for a period of two (2) years following the Closing Date, Buyer shall (i) provide to substantially all Continued Employees compensation and benefits that are substantially comparable, in the aggregate, to the aggregate compensation and benefits that were provided to such Continued Employees on the Closing Date and (ii) not terminate in the aggregate during such period more than ten percent (10%) of the aggregate workforce of the Acquired Companies.
 
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(b) If Buyer does not continue the Company Benefit Plans after the Closing Date, (i) Buyer will cause the benefit plans applicable to the Continued Employees to recognize all previous service with the Company, a Subsidiary or any of their respective Affiliates for the purpose of determining eligibility for and entitlement to succeeding benefits, including vesting (provided that service with the Company, a Subsidiary or any of their respective Affiliates shall not be counted for purposes of benefit accrual under any pension plan of Buyer); (ii) Buyer shall cause its group health plan to recognize all deductibles and coinsurance payments accrued by the Continued Employees prior to the Closing Date and to waive any preexisting condition limitations for the Continued Employees; (iii) for the remainder of the calendar year in which the Closing occurs and for the succeeding year, the vacation, paid time off and holiday plan offered to Continued Employees shall be substantially comparable to and in place of what an Acquired Company or any of its respective Affiliates, as applicable, would have provided the Continued Employees had they remained employees of the Company, a Subsidiary or any of their respective Affiliates; (iv) Buyer shall maintain for at least two years starting on the Closing Date substantially comparable severance arrangements applicable to the Continued Employees that were in effect immediately before the Closing Date; and (v) after the second anniversary of the Closing Date, subject to applicable Law, Buyer shall provide Continued Employees with base salary and overall benefits (including retiree benefits) that are no less favorable, in the aggregate, than those then provided to similarly-situated employees of Buyer.
 
(c) If Buyer does not continue the Company Benefit Plans after the Closing Date, Buyer shall credit each Continued Employee with such number of unused vacation days and other paid time off accrued by such employee with the applicable Acquired Company or any of its Affiliates prior to the Closing Date in accordance with the personnel policies of the Company, a Subsidiary or any of their respective Affiliates applicable to such employees on the date hereof.
 
Section 5.10 Further Assurances. Each of the Parties hereto shall use all commercially reasonable efforts to take, or cause to be taken, all appropriate action, do or cause to be done all things necessary, proper or advisable under applicable Law, and to execute and deliver such documents and other papers, as may be required to carry out the provisions of this Agreement and consummate and make effective the transactions contemplated by this Agreement.
 
Section 5.11 Non-Competition.
 
(a) Covenant. For and in consideration of receipt of the Purchase Price, Seller hereby grants to Buyer a covenant not to compete (the “Covenant”) on the terms and conditions set forth in this Section 5.11. The parties recognize and agree that Buyer would not be willing to enter into this Agreement nor consummate the transactions contemplated hereby without Seller entering into the Covenant and that Seller’s performance and observance of this Section 5.11 is valuable consideration for Buyer and Buyer’s willingness to enter into this Agreement and pay the Purchase Price to Seller. 
 
(b) Non-Competition. Seller covenants and agrees that, for and during the period of time commencing on the Closing Date and expiring five (5) years thereafter (the “Term”), Seller shall not, directly or indirectly, whether individually or in partnership or association with any one or more persons or entities, or as a principal, partner, shareholder, agent, employee, consultant, or contractor, or in any other capacity, engage in or carry on in the Restricted Territory (as defined below) the Business; provided, however, that an ownership interest of less than five percent (5%) of the outstanding stock of any publicly traded corporation that is engaged in the Business shall not be deemed to violate this Section 5.11(b), so long as no officer or director of such Seller or any of its Affiliates is a member of the board of directors (or other similar governing body) of such publicly traded corporation.
 
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(c) No Interference with an Acquired Company. Seller covenants and agrees that, for and during the three (3) year period commencing on the Closing Date, Seller shall not, directly or indirectly: (i) in connection with the Business solicit or otherwise interfere with any relationship between any Acquired Company, on the one hand, and any supplier or customer of an Acquired Company, on the other hand; (ii) solicit for employment (or assist anyone in soliciting the employment) any individual employed by an Acquired Company as of the Closing Date; or (iii) induce, or assist anyone in inducing, any individual employed by an Acquired Company as of the Closing Date to resign or sever employment, or to terminate or breach any employment agreement, with an Acquired Company; provided, however that such restrictions shall only apply to the relationships of the Acquired Companies, existing in connection with the Business as engaged in by the Acquired Companies prior to or on the Closing Date; provided, further, that general advertisement or solicitation programs conducted by or on behalf of Seller or its Affiliates that are not specifically directed toward the employees of the Acquired Companies shall not be deemed to violate this Section 5.11(c).
 
(d) No Financing of a Competing Business. Seller further covenants and agrees that, for and during the Term of the Covenant, Seller shall not, directly or indirectly, lend money to any Person engaged, directly or indirectly, in the Business in the Restricted Territory.
 
(e) Geographic Coverage. The geographic coverage of the Covenant shall include: (i) North America, (ii) the United States of America, Canada and Mexico, (iii) the United States of America, (iv) Canada, (v) Mexico, (vi) each state of the United States of America in which any Acquired Company conducted business up through and including the Closing Date, (vii) each state or territory of Mexico in which any Acquired Company conducted business up through and including the Closing Date, and (viii) each province of Canada in which any Acquired Company conducted business up through and including the Closing Date, which geographic coverage is referred to hereinafter collectively as the “Restricted Territory.”
 
(f) No Violation of Public Policy.  The Parties expressly agree and acknowledge the terms of this Section 5.11 are reasonable in scope, time and territory, and are necessary to protect the value of the Company Shares and related assets and Business purchased by Buyer. The Parties further acknowledge and agree that it is not their intention that the Covenant violate any public policy or statutory or common law. If a court of competent jurisdiction renders a ruling (sustained on appeal, if any) holding that any one or more of the provisions of the Covenant, including the Restricted Territory or stated term of the Covenant, constitute an unreasonable restriction, then the Parties specifically agree that the Covenant shall not be rendered void but shall apply to such extent and as to such time period and Restricted Territory as such court may determine constitutes a reasonable restriction under the circumstances.
 
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Section 5.12 Exclusivity. During the Pre-Closing Period, Seller shall not, and shall cause the Acquired Companies and each of its and their respective Affiliates, officers, directors, employees or agents, or anyone acting on their behalf or with their consent, to not, directly or indirectly (a) initiate, solicit, negotiate, accept or discuss with any Person (other than Buyer), directly or indirectly, any proposal or offer (an “Acquisition Proposal”), to acquire all or any substantial part of an Acquired Company, whether by merger, recapitalization, arrangement, amalgamation, purchase of equity securities, purchase of assets or otherwise, (b) provide any information to any Person (other than Buyer) in connection with an Acquisition Proposal or (c) permit an Acquired Company to enter into any joint venture, partnership or other similar commercial relationship with any Person which would cause Seller to abandon, terminate or fail to consummate, or prevent or prohibit Seller from consummating the transactions contemplated by this Agreement. If during the Pre-Closing Period Seller or any of its Affiliates shall receive an Acquisition Proposal, Seller shall notify Buyer within two (2) Business Days after Seller’s or such Affiliate’s receipt of such Acquisition Proposal.
 
Section 5.13 Transfer of Company Shares. Notwithstanding anything to the contrary in this Agreement, Seller may, prior to the Closing, transfer to one or more of its Affiliates (each a “Transferee”) all of Seller’s right, title and interest in and to the Company Shares; provided, that Seller (a) notifies Buyer of any such transfer in writing and (b) provides all documentation to Buyer effecting such transfer, in each case at least three (3) Business Days prior to the Closing Date and each such Transferee assumes all of Seller’s rights and obligations under this Agreement in accordance with Section 10.4.
 
Section 5.14 Intercompany Debt.
 
(a) Prior to the Closing, Note Holder shall cause the applicable Acquired Company to pay to Note Holder, or its designee, the 2007 Accrued Interest.
 
(b) Prior to the Closing, Note Holder shall waive (i) any requirement for any Acquired Company to pay Note Holder any accrued interest on the Intercompany Debt for the period from January 1, 2008 through and including the Closing Date and (ii) the acceleration of any Acquired Company’s obligation to repay the Intercompany Debt and all accrued but unpaid interest thereon solely as a result of the consummation of the transactions contemplated by this Agreement.
 
Section 5.15 Transaction Payments. Prior to the Closing, Seller may cause an Acquired Company to pay employees of such Acquired Company, or any other Acquired Company, bonus payments in contemplation of the transactions contemplated by this Agreement; provided, that, prior to the Closing, Seller shall make a capital contribution to the Acquired Company making any such bonus payments in an amount equal to the net after-Tax cost to such Acquired Company of making such bonus payments (determined by properly taking into account any Tax deduction to which the Acquired Company may be entitled as a result of making such bonus payments).
 
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Section 5.16 Name Change. As soon as practicable following the Closing Date, and in no event later than thirty (30) days thereafter, Buyer shall cause each Acquired Company with “SHV” in its corporate name to (a) change its corporate name to remove any reference to “SHV” and provide Seller evidence of such name change as Seller may reasonably request, and (b) file in all jurisdictions in which such Acquired Company is qualified to do business any documents necessary to reflect such change of name or to terminate its qualification therein.
 
ARTICLE VI
 
CONDITIONS TO OBLIGATIONS OF THE PARTIES
 
Section 6.1 Conditions to Each Party’s Obligations. The respective obligation of each of Seller, Note Holder and Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction (or written waiver by such Party) at or prior to the Closing of the following conditions: